Benenden Community Shop

Transcription

1 Business Plan Benenden Community Shop Benenden Community Shop Limited Registered in England No 7086 Registered Office: Oakdale, The Green, Benenden, Kent. TN17 4DT

2 BENENDEN COMMUNITY SHOP BUSINESS PLAN DRAFT 4 Aims of the Community Shop The aims of the Community Shop are to: - maintain broadly the product range of the current shop, including general groceries and essential household goods, but with more locally-sourced fresh produce; - provide a home delivery service, in particular for the elderly; - maintain essential Post Office services; - operate a café (in the window area facing the street with seating for up to 20 people); - provide a welcoming community hub for the village, to reduce social isolation (especially for the elderly) and give general support e.g. use of the internet, display/sale of work by local artists; - enable Benenden School pupils to display work and gain commercial experience. There are over 300 community shops in the UK and they provide considerable benefits to the villages they serve, not just in terms of enabling people to shop locally and preserving essential Post Office services, but in encouraging wider community engagement. People can be involved in a variety of ways, whether simply through using the services of the shop and café, or volunteering to work in them, utilising their existing skills and learning new ones. Ownership by the community is key to the success of community shops and the opportunity for everyone both to purchase shares in the venture and to elect a Management Committee provides this. In addition, the intention is that when Benenden Community Shop is trading well, surpluses generated will be used to benefit the community as a whole. The hope is that as many people as possible in the Benenden community will support this venture and get involved in some way. The community shop model is resilient. The five-year survival rate for community shops is 99%, which is much greater than for UK businesses as a whole. Structure and Governance The Community Shop will take a long-term lease of the shop portion of The Poplars, The Street, Benenden, from Benenden School (Kent) Ltd, which is in the process of acquiring the freehold of the premises and which will use the accommodation portion of the building for teaching staff and families. The legal entity for the new venture is Benenden Community Shop Limited (BCSL), which was registered with the Financial Conduct Authority on 5 March 2015 as a Community Benefit Society under the terms of the Co-operative and Community Benefit Societies Act 2014 (registration number 7086). BCSL has adopted the model rules provided by the Plunkett Foundation, which supports community enterprises. 2

3 Local people will be invited to become Members of BCSL by subscribing to a Community Share Issue. Each Member will subscribe for one or more shares, priced at 10 each, but will only have one vote. The typical community shop with a structure similar to the one adopted here has nearly 200 Members and we would hope this can be achieved in Benenden. The planning for, and initial operation of, the community shop is being managed by a Start-up committee (see Appendix 1). Once the community shop has started trading and is operating normally, probably in late autumn 2015, the members of the start-up committee will stand down and Members will be asked to elect the Management Committee. Shop Operations and Management The shop, café and Post Office will be run by a full-time paid manager and two part-time assistant managers. The manager will be responsible to the Management Committee for the successful operation of the business, but will have considerable day-to-day autonomy. The planned opening hours are currently 7.30 am to 5.30 pm during the week and 9 am to 12 midday on Sundays. It is intended that there will be a member of the management team in the shop at all times during opening hours, and the provisional staffing pattern provides for this, together with some hours for the manager to plan, deal with inventory management, liaise with suppliers etc. A group of unpaid volunteers will be recruited to help in the shop and run the café. The average community shop has thirty volunteers, typically working on a rota with two-hourly slots. In the survey carried out in Benenden for the parish plan, 69 people said they would be willing to help with a community shop and there have already been a number of expressions of interest. Our aim would be to recruit at least forty volunteers to provide sufficient cover for the hours we intend to operate and to allow for holidays. It is currently intended that the café will serve drinks and snacks, together with light lunches, but will not have a full kitchen which would enable the provision of a full meal service. This is principally because of space constraints. Post Office The Post Office will become a Post Office Local operating from the shop counter, rather than from a secure area (the current fortress ), and will only be operated by trained management staff. Negotiations are taking place with the Post Office about the proposed transition from the current sub-post Office to the Post Office Local format. An application has been submitted and we are expecting to make a formal presentation in due course. They are sending a surveyor to assess whether the proposals for the new layout meet their operational and security requirements. The Post Office have made it clear that they want the change to take place, as part of their network transformation programme, and we are confident that they will work with us to ensure its success. The community shops we have visited at Hurst Green and Ide Hill operate the Post Office Local format successfully. 3

4 Financial projections Set out below is a simplified pro forma profit and loss account for the initial operations, followed by notes explaining the basis of the assumptions made. In subsequent years it is expected that the rate of increase in turnover and margin, especially from the café, would exceed the rate of increase in costs. The figures shown have been rounded up or down to the nearest 1,000 but collectively the gross income, cost and net income figures tie back to our more detailed numbers. Shop and café turnover (i) 300,000 Cost of sales (ii) (237,000) Gross Profit (ii) 63,000 21% gross margin Post Office income (iii) 6,000 Total gross income 69,000 Less Expenses: Salary costs incl NI (iv) ( 40,000) Premises: Rent (v) ( 5,000) Energy, water, rates (vi) ( 7,000) Telephone, Internet (vi) ( 1,000) Insurance (vi) ( 1,000) Repairs, services (vi) ( 3,000) Depreciation (vii) ( 2,000) TOTAL ( 19,000) Legal, professional, admin (viii) ( 3,000) Credit card charges (ix) ( 2,000) Total costs before financing ( 64,000) Net income before financing costs (x) 5,000 4

5 Notes to the pro forma P&L (i) Turnover The estimated first year turnover for the community shop and café combined is 300k, which is slightly lower than the 2013 turnover for the current shop. It is assumed that in its first full year the shop turns over at least 270k, which is not untypical for comparable community shops with publicly available accounts (e.g. Radley and Brockweir). The café is assumed to turn over at least 30k (i.e. 600 per week/ 100 per day.) This is conservative with typical spend of 2 on a cup of coffee, plus cakes, sandwiches and light lunches, it would require on average people per day to achieve this target. Our visits to other community shops have shown that a well-run café can turn over significant amounts and be the key contributor to viability and profitability. (ii) Cost of sales and gross margin The average community shop gross margin is 23%, according to the Plunkett Foundation, but individual shops will vary, depending in particular on the product mix. For the purposes of the pro forma P&L a conservative initial margin of 21% has been assumed. The gross margin for the café should be considerably in excess of this, so if café sales were lower in the first year than estimated the higher margin would still produce the required gross profit contribution. To gauge likely opening stock value (i.e. acquisition of existing stock and new purchases) a useful community shop comparator is Radley with 10k of opening and closing stock on a turnover of 260k (an annual stock turn of 26 times.) (iii) Post Office income Based on the existing level of activity, but moving to a Local format as opposed to the current sub- Post Office, the Post Office estimate that commission income would be 6,300 per annum. (iv) Salary costs 40k has been allowed for the employment of a full-time manager and one assistant manager (or two job sharers). The balance of staffing in the shop and café would be by unpaid volunteers. The salary cost figure has been derived by taking the hours we need to cover in the shop and Post Office, then allowing for handovers between managers, then adding several hours away from the counter for the manager. It is higher than our initial estimate, because we are now intending to run the Post Office ourselves in the Local format and we need to ensure that a paid and trained member of staff is in the shop at all times. Also we have learnt from other community shops that the manager needs dedicated time for planning, scheduling, ordering etc. (v) Rent 5

6 The rent agreed with Benenden School is 5k per annum for the first five years, with a review in 2020 on an agreed basis. The first year from completion of the purchase will be rent free (which means that there is more headroom in the first year than appears in the pro forma P&L.) (vi) Premises costs These are based on current costs for the shop, but take account of the fact that a major refurbishment of the building should reduce some on-going maintenance costs. (vii) Depreciation Depreciation policies have yet to be finalised, but the figure allowed is typical for community shops. (viii) Legal, Professional, Admin This line item does not cover the set-up costs, which would come out of the initial funding. It is hoped that the basic accounting would be covered by volunteer labour but there would be a need for some on-going professional advice. In addition we have allowed for postage, promotion, travel and computer support. (ix) Credit card charges We have made a calculation based on the assumption that half the transactions would be made using a credit or debit card, under the charging structure operated by our supplier of merchant services, World Pay. Going forward, the aim would be to reduce credit card charges, for example through the introduction of the Benenden Pound. (x) Net income before financing At this stage we do not know how much will be raised through the Community Share Issue and therefore how much we might need to borrow to meet our initial funding requirements. Therefore it is entirely possible that in the early years much of the projected net income shown would be required to finance loans. (For example, if we had to borrow 30,000 at 5% per annum, the annual interest charges and capital repayments would be about 4,500 over ten years and 7,500 over five.) In summary, the assumptions and projections for initial trading err on the side of caution. They make no allowance for the impact of changes to the product offering in the shop, nor for the real potential of a café in the centre of Benenden village. The profitability is highly sensitive to the gross margin percentage achieved, since for every 1% addition to gross margin 3,000 flows to the bottom line. We are confident that by the third year at least the average margin for community shops of 23% can be achieved. Set out below is an illustration of the three-year trading position, assuming that over the period: - gross margin increases from 21% in year 1 to 22% in year 2 and to 23% in year 3; - turnover increases by 5% per annum; - most costs increase by 3% per annum. 6

7 BENENDEN COMMUNITY SHOP - THREE YEAR PROJECTED TRADING ILLUSTRATION (EX VAT) Year 1 Year 2 Year 3 Shop and café turnover 300, , ,750 Cost of sales - 237, , ,678 Gross Profit 63,000 69,300 76,073 Post Office income 6,000 6,000 6,000 Total gross income 69,000 75,300 82,073 Less expenses: Salary costs incl NI - 40,000-41,200-42,436 Premises: Rent 0-5,000-5,000 Energy, water, rates ,210-7,426 Telephone, internet ,030-1,061 Insurance ,030-1,061 Repairs, services ,090-3,183 Depreciation ,000-2,000 TOTAL - 14,000-19,360-19,731 Legal, professional, admin - 3,000-3,090-3,183 Credit card charges - 2,000-2,100-2,205 Total costs before financing - 59,000-65,750-67,555 Net income before financing 10,000 9,550 14,518 7

8 Start-up costs Our initial estimate of minimum start-up costs was of the order of 50,000, but this is very tight. It provides no funding cushion or contingency for the unexpected, so our fund-raising target needs to be higher. In particular, the estimate assumes that the shop area will be delivered in a condition after refurbishment ready just to install the new counters, shelving, chillers etc. A breakdown of the estimated minimum start-up costs (ex VAT) is as follows: Legal expenses 4,000 Includes FCA registration, shop lease costs Fit out 16,000 Items purchased from existing shop plus new items Stock 10,000 Items purchased from existing shop plus new items EPOS and credit 6,000 Includes EPOS/ inventory system, merchant set up Accounting, valuation 1,000 Communications 2,000 Includes website, , printing, computer, phone Working capital 10,000 TOTAL 49,000 These figures do not include the costs of moving to the Post Office Local format, such as new safes and systems, but these should be covered by funding of up to 10,000 from the Post Office itself. Funding The fund-raising options for community shops include donations, grants, loans and shares (through a Community Share Issue). Many community shops have raised significant sums - for example Hurst Green raised over 0.5m, including some large grants, and Ide Hill raised over 100,000 in a Community Share Issue. Our fund-raising target has to be a minimum of 60,000 to cover set-up costs and provide a small contingency. If we could raise between 60,000 and 100,000 this would provide a cash reserve, to ensure we are not struggling with cashflow, and give us some funds for enhancements to the fit out. The aim is to use trading surpluses after reinvestment principally for the benefit of the community rather than to build up sizeable reserves through retained profits. In the medium term we will also want to be in a position to be able to respond to requests for withdrawal of share capital. 8

9 The Start-up committee has decided that we should aim to raise as much of the funding as possible through a Community Share Issue (see Offer Document). Our target for the share issue is a minimum of 30,000, which we believe is achievable. We are exploring the availability of grants, but these are less plentiful than for earlier community shops and many are not available on the timescale to which we have to work. To meet any shortfall from the Community Share Issue we will rely on loan funding from, for example, Kent Big Society, a KCC social enterprise fund; and we are exploring the possibility of support from the Harmsworth Trust, a Benenden charity. Kent Big Society can lend up to 100,000 at 5% per annum and allows flexible drawdown and repayment. So, for example, if we raised 30,000 from the Community Share Issue, and were unable to access any grant funding, in order to meet our minimum funding level of 60,000 we would borrow 30,000 and pay the capital and interest costs out of trading surpluses. Balance Sheet and Liquidity The Community Share Issue terms are explained in the Offer Document and they include provision for withdrawal of share capital on certain conditions after a minimum period of three years. In order to give a very broad indication of the prospects for liquidity at the end of the third year and thereafter illustrative balance sheets have been drawn up, based on a number of assumptions. The assumptions include: - total funding of 70,000 raised - 40,000 raised from the Community Share Issue - 30,000 raised in loans (interest rate 5% per annum, term 5 years, capital repayable in 5 equal annual tranches); - no significant capital expenditure beyond the estimated set-up costs; - no donations to charitable causes; - no significant variation from the 3 year illustrative projections; - working capital broadly in line with current operation. These are all significant assumptions and therefore no reliance should be placed on the illustrative balance sheet when deciding whether to invest. 9

10 BENENDEN COMMUNITY SHOP ILLUSTRATIVE 3 YEAR BALANCE SHEETS Assuming 40k share capital + 30k loan at 5% pa repayable over 5 years Year 1 Year 2 Year 3 FIXED ASSETS 30,000 30,000 30,000 CURRENT ASSETS Stock 10,000 10,000 10,000 Debtors 6,000 6,000 6,000 Cash 35,000 37,000 44,000 TOTAL 51,000 53,000 60,000 CURRENT LIABILITIES Trade creditors 9,000 9,000 9,000 Loan 7,000 7,000 7,000 TOTAL 16,000 16,000 16,000 NET CURRENT ASSETS 35,000 37,000 44,000 TOTAL ASSETS LESS CURENT LIABILITIES 65,000 67,000 74,000 CREDITORS DUE > 1 year 18,000 12,000 6,000 NET ASSETS 47,000 55,000 68,000 REPRESENTED BY: Reserves 7,000 15,000 28,000 Share Capital 40,000 40,000 40,000 TOTAL 47,000 55,000 68,000 10

11 Community Engagement As discussed in the opening section, the hope is that as many people as possible in the Benenden community will support this venture and get involved in some way. The project stems from the Local Business element of the Benenden Parish Plan, which researched the various needs of businesses in the community and tried to identify areas where people and organisations could be helped, and help each other. One of the most important findings in the Parish Plan survey was that 95% of people thought it important to maintain a village shop, with 90% also saying that a Post Office in the village is indispensable. We are responding to this expressed need. The launch meeting for the Community Shop on 29 April 2015 comes after several months of sustained work by the Start-up Committee. In preparation for the launch a branding exercise has been undertaken and the shop will trade under the name Benenden s i.e. belonging to the village. Graphic design around the brand is largely complete. Initially an address was set up to respond to offers of help or requests for information; and our website is now up and running, with further content to be added as the project progresses. The launch meeting is to explain the concept of community shops, how we plan to operate in Benenden, what will happen about the Post Office, and how we plan to fund the venture. The Community Share Issue will be launched at this meeting and we will be asking people to volunteer to work in the shop, if they have not already done so. Publicity for the meeting has already generated considerable interest. We regard the Community Share Issue as crucial not just for gaining financial support, but to obtain commitment from the village generally. We want as many people as possible to become Members, however much they contribute. Our target is 200 Members, which should be achievable in a village of Benenden s size (with 1700 people in the parish) and the surrounding area. The minimum target for the Community Share Issue is 30,000 and we believe from initial indications that this is achievable, given the nature of the community and experience elsewhere. With 200 Members and a minimum target of 30,000, this would mean an average share purchase of 150. Around this average we expect some people just to buy just a few shares, but we are also aware that a few individuals plan to make much more significant contributions. With the maximum amount to be raised through the Offer set at 100,000, the maximum value of shares available to any one individual has been fixed at 10,000. In terms of the wider social dividend, any surpluses not needed for the development of the business will be used for the benefit of the people of the Benenden area through community projects and charitable donations. 24 April

12 Appendix 1 Members of the Start-up Committee John Burbage has lived in the village for 27 years and has 40 years experience as a commercial Chartered Surveyor in retail property. Tracy Claridge is a wine merchant and serves as churchwarden of St George s as well as chairman of the village fete committee. Robin Dalton Holmes was a director in the pub business, bursar at Benenden School, chairman of St Ronan s School, governor of Benenden primary school, and more recently chairman of the Parish Plan Steering Committee. Sheila Hume - has lived in the village for over 30 years and was a member of the Parish Plan Steering Committee. Deborah Jenkins is clerk to Benenden Almshouse Charities, clerk to Frittenden Parish Council, and assistant clerk to Staplehurst Parish Council. Paul Leek has lived in Iden Green and Benenden for 25 years, was responsible for customer contracts, marketing communications and business planning and strategy for significant elements of BT s global business, and managed the Communications work stream for the Parish Plan. Grant Matthews has lived in Benenden for over 20 years and believes the village shop is a vital piece of the jigsaw that makes Benenden a special place to live. Martin Pexton has lived in the Benenden area for over 20 years and, after a business career based mainly in London, now works as a non-executive company director. Alan Pickett was a Flying Officer navigator, factory superintendent, editor and publisher, conference organiser, tea producer and psychotherapist; and set up the Save Our Shop campaign. Steve Simmonds has worked in the building industry, is now a building project manager and designer, involved with many local properties, and has lived in Benenden since Paul Tolhurst spent over 30 years working in Royal Mail Group, trained Post Office clerks and Sub Postmasters in his early career, moved in 2010 to Benenden and is a member of the Cricket Club. 12