Risk Analysis
Like every new business, Hidden Treasure Records L.C. faces risks. I believe I can overcome each risk with the actions discussed below, and Hidden Treasure can thrive for many years.
Here are the major risks I anticipate and how I plan to deal with them:
- Thin Capitalization
The primary risk we face is thin capitalization. This meaning our inventory may have to turn over more than the average record store. This will be compensated by the specialized nature of new products. This creates a sense of urgency to purchase goods before they go out of print and become unavailable to our consumer. A second problem with thin capitalization lies with sales volume projections. If these are not met for the first year, the small working capital reserves may be inadequate. On the positive side, we believe our sales projects are very conservative and we will have little trouble meeting and exceeding them. Also, we have had several potential customers express an interest in specifically shopping at our store. In addition, by starting with relatively modest capital, our loan payments will be smaller. - Slow Times
A secondary risk is slow times. The proposed site experiences very slow times during the first few months of the year. Having worked in the area before, I am aware of this and will set aside money from profitable months to cushion against such down time. Also by keeping overhead low, primarilyin the number of employees, I should be able to reduce the effect of slow times. - Competition
There is a slight risk with competition, two records stores within downtown Northbrook. However, most of what Hidden Treasure will carry is unavailable at these other shops. Proper pre-opening promotion and regular advertising, along with a helpful, knowledgeable, and friendly staff will attract our target customers. A similar store, Replay Records, thrived at this location for six years, confirming a large existing market. - Owner's Ability
I have never operated an independent business before, however, I have managed a similar store with an absentee owner. I can see no insurmountable problems resulting from being on my own. I already have an accountant, lawyer, and the advice of a retired family member who built a million dollar business. I have taken steps toward my goal by filing Hidden Treasure Records L.C. as a business, opening accounts with distributors, and achieving profits through a small customer base.
In short, I believe that I have addressed the major risks facing my business and have demonstrated that those risks are manageable.
