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Partnership is not an option since there is only one principle. A corporation is too complicated a structure, since it necessitates directors, agents and shareholders. The company is essentially just one person.
Sole proprietorship has some advantages. It is the cheapest and easiest type of company to set up. There are many disadvantages, however. These include the fact that the owner's personal assets are on the table if the business incurs losses. The owner is also personally liable for legal matters, even if conducted strictly on company business. In that sense, there is little separation between the company and the individual.
That is not worth the ease of setting up that business. The limited liability company, however, provides the opportunity to capture the benefits of both partnerships and corporations. The LLC provides that the owner's personal assets are protected from use to pay company bills. This provides me with insulation in case the circumstances result in the business failure. The LLC also allows favorable tax status as well, making it the best of both worlds.
For this business, it will essentially be run by one person, but with employees, a physical space and inventory it is clear that the business is an entirely separate entity from the owner. However, because the owner captures all of the profits the tax setup of the LLC is both logical and advantageous.
Organization, Management and Staffing Plan
Cornerstone will be organized with me at the helm, as CEO of the company. I will probably choose a less intimidating title, however. The company will build a strong culture that promotes making Cornerstone a fun place to work, and an enjoyable place to shop. This will allow the store to attract quality staff. It is expected that there will be 5-6 staff overall.
These staff members will all work directly under me. Their activities will be loosely management once they have established their trustworthiness. I plan to be very active in the running of the business, at least for the first several months. At that point, I hope that a senior staff member will have emerged. This senior staff member will be handed additional responsibilities, pay and a full-time job as assistant manager, or similar title. They will represent the only management layer and will have little functional authority except in my absence.
The staff will be drawn largely from the local youth population. Youth unemployment is high in the area, so I feel confident about finding suitable candidates. Indeed, I have looked into workforce programs and grants designed to stimulate employment and I feel confident that one or possibly two FTEs can be covered by such programs, at least on a temporary basis. If the application is successful, the costs of hiring workers will be substantially reduced.
Retail is a difficult business. Stores that succeed typically do so by one of three means. The first is low cost structure, for example Wal-Mart. The second is high differentiation -- a high fashion boutique for instance. The third is to have another offering that is difficult to match. In the case of Cornerstone, there is limited competition, and no direct competition in town.
The bulk of the competition is in other towns in the form of Wal-Mart, Borders and other outlets. These stores are able to sell at lower prices than Cornerstone and in the case of Borders will have larger selections. These stores are far away, however, so Cornerstone has a significant convenience advantage. Additionally, Cornerstone faces some competition from Amazon.com. A survey of potential customers reveals that most purchase their books, music and gifts through Amazon. It was also indicated, however, that many locals have misgivings about this, and would switch to a local bricks and mortar store if one was available. The same survey indicated that most would eschew far-flung competitors if a local store was available.
The lack of competition means that the industry conditions for Cornerstone are favorable. We will be able to set prices to a certain degree with our customers and build the business based on service. We will also be able to gain the sales volume required. Typically, small stores in this industry do not survive, mainly because they lose market share when larger stores enter the area. In our case, there is little likelihood of that happening and no such competitors have showed any interest. Online shopping is still a threat, but we feel that our service will help mitigate this threat. If it becomes apparent that customers are not switching to us, we have a contingency plan to institute deliveries within the area, giving our customers a level of convenience they cannot refuse.
The project's financing is likely of interest. I will be financing the opening and launch phase of Cornerstone. I had enough capital saved to operate for two years before turning a profit, an amount often recommended by small business consultants. There is also additional financing from family members available if an opportunity should arise that would require further capital investment.
Another consideration is the flexibility of the business model. I understand that a book, music and gift store is a risky venture in this day and age. However, the business model is highly flexible. There are many different models that I studied before arriving at what I feel is the ideal. There is also the potential, for example, to add a small coffee shop in order to better drive traffic. There is the potential for kiosks to be made available to download goods as well. The mix of products is not set in stone. I feel that the current model is the best possible, but am smart enough to know that reality may show otherwise.
The final consideration is that of growth opportunities. I think this model can be replicated. Remember that Wal-Mart began as a five and dime in a store that Sam Walton's employers felt was too small. He knew that the market was not too small and pursued that market with vigor. This concept is strong, and there are other towns like ours that may be unable or unwilling to support box stores but will be perfectly willing to move forward with a small,…[continue]
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