Operations

Jump to section

• Overview & contents
• i. Important Notice and Basis of Preparation
• 1. Executive Summary
• 2. The Business
• 3. Market Analysis
• 4. Location Strategy
• 5. Products and Merchandise Strategy
• 6. SWOT and Competitive Position
• 7. Marketing and Sales
• 8. Operations
• 9. People, Compliance and Controls
• 10. Implementation Plan
• 11. Financial Plan
• 12. Break-Even
• 13. Working Capital and Debt Service
• 14. Returns
• 15. Sensitivity and Scenarios
• 16. Risk Management
• 17. Trigger Points and Management Response
• 18. Key Performance Indicators
• 19. Key Assumptions
• 20. Conclusion
• A. Appendix A: Consolidated Financial Summary
• B. Appendix B: Capital and Pre-Opening Schedules
• C. Appendix C: Funding and Debt Schedules
• D. Appendix D: Risk Register
• E. Appendix E: Glossary

8.1 Trading model

The store trades seven days a week, 30 days a month, for approximately 62 trading hours a week. Seven-day trading is what a community centre lease normally requires and what the customer expects, but it is expensive: it is the principal reason payroll excluding the owner runs at 12 to 14 per cent of sales rather than the 10 to 12 per cent a six-day store would achieve.

Sales per full-time equivalent is R525 412 in Year 1 and R652 244 by Year 5. Fashion retail benchmarks sit closer to R600 000 to R900 000 per full-time equivalent, so the store is below par on labour productivity throughout. This is a structural consequence of seven-day trading in a small footprint, not a management failing — two people must be on the floor whenever the doors are open, regardless of how few customers are in the store on a Tuesday morning. Reducing Sunday hours is the single largest payroll lever available and should be revisited at the first lease renewal.

8.2 Seasonality

Seasonality is severe and is modelled explicitly. December is indexed at 1.55 against an annual average of 1.00, and January at 0.72. The store earns 21.4 per cent of its first-year revenue in November and December combined. A weak festive season is not a bad quarter for this business; it is a bad year, and there is no subsequent period in which to recover it.

8.3 Systems and controls

Management accounts by the tenth working day are treated as a covenant-grade obligation in this plan, not an accounting nicety. The trigger points in Section 17 are meaningless without timely numbers, and the difference between a store that recovers from a bad quarter and one that does not is almost always how quickly the owner knew.

8.4 Shrinkage control

The model assumes shrinkage of 1.6 per cent of sales in Year 1, improving to 0.9 per cent by Year 5. At Year 3 revenue, each 0.5 percentage point of shrinkage is worth R12 676 — more than the annual cost of the security and alarm subscription several times over. The capital budget carries R38 000 for CCTV, alarm, electronic article surveillance pedestals and tags on that basis.

• Every garment above R150 retail carries an electronic article surveillance tag, removed only at the point of sale.
• Fitting rooms are controlled by garment count in and out, with a staff member present at the entrance.
• Weekly cycle counts on the twenty highest-value styles; full counts twice a year.
• Shrinkage is reported monthly by category. Unexplained variance above 1.5 per cent triggers an immediate full count.