PP Business Plan

L U X U R Y M E N ‘ S A P P A R E L

2 0 1 4

E X E C U T I V E S U M M A R Y

www.paolopoffandi.com

CONTENT

INTRODUCTION i

BRANDING 1

THE COMPETITION 2

THE POFFANDI BRAND 13

THE CUFF BAR 14

THE MARKET PLACE 16

MARKETING 18

OPERATIONS 20

ORGANIZATIONAL CHART 21

TEAM 22

FINANCIALS 23

INVESTMENT 30

CONCLUSION 31

APPENDIX A 32

Launching a men’s luxury fashion line is this man’s dream.

Who is Paolo Poffandi? His origins are from Corfu, and further back from Italy. He has lived in nine countries and describes himself simply as tanned and tonned. He likes to play ten-minute chess and can speak French, Greek and Italian. No one can guess his age.

Eight years as a stockbroker and ten years in project finance have given him insights into the world of finance. He understands the importance of “quality”.

The Paolo Poffandi Brand targets the super-affluent. It will manufacture its apparel and accessories in Italy ensuring that “quantity” does not take precedence over “quality”. It plans to open storefronts in Dubai, Beverly Hills, Milan, New York, London, Paris, Moscow, Shanghai, Beijing, Macau, and Monte-Carlo over the course of seven years.

Apart from storefronts, we will also market on the Internet, through a direct sales force, and high end retailers. The apparel will be ready to wear, as well as custom fitted.

The average suit will retail for $3,500. Accessories, like the signature piece “Cuff Bar” made of diamonds and 23Kt gold will retail for $90,000.

In keeping with the “exclusive and scarce” formula, the patterns and brand will not be licensed. In fact patterns for ties and accessories will be destroyed after limited production has been accomplished.

INTRODUCTIONi

There are two possible approaches to launch the brand: Fast Track, and Slow Track.

Fast track will require an initial investment of $2,000,000 secured by inventory and store improvements, and company equity. This will ensure the opening of a storefront along with the deployment of other marketing strategies.

The Slow Track will require an investment of $100,000 to produce inventory which once sold to select retailers and clients will form a test case by which to plan further growth.

The financials presented in this plan reflect only the Fast Track approach.

INTRODUCTIONii

Apart from the sophisticated logo and stylish clothing, how does the Poffandi brand distinguish itself from the competition? Let’s review the competition.

Below, and in no particular order, featured are suits by Fendi, Burberry, Louis Vuitton, Canali, Dolce & Gabbana, Calvin Klein, Gucci, Armani and Hugo Boss. Which one is the Armani suit?*

It appears that if we did nothing else but imitate the competition, we would still be able to carve a niche in the marketplace. But, that would be too simple.

BRANDING

* The second suit from the right

1

We really have only one competitor

Stefano Ricci

Armani

Brioni

Brunello Cucinelli

Burberry

Calvin Klein

Canali

Corneliani

Fendi

Givenchy

Hugo Boss

Isaia

Jacob Cohen

Just Cavalli

Kiton

Maison Martin Margiela

Ralph Lauren

Stefano Ricci

Tommy Hilfiger

Valentino

THE COMPETITION2

THE COMPETITION3

In order to fully appreciate the Stefano Ricci Brand,

we devoted a few pages to his impeccable good taste in clothing, storefronts, and web site.

4 THE COMPETITION

5 THE COMPETITION

6 THE COMPETITION

7 THE COMPETITION

8 THE COMPETITION

Steffano Ricci Apparel

9 THE COMPETITION

10 THE COMPETITION

Steffano Ricci Apparel

Steffano Ricci Pen

11 THE COMPETITION

Steffano Ricci web sitehttp://www.stefanoricci.it

12 THE COMPETITION

THE POFFANDI BRAND

Key to Branding is innovation. The creation of the Cuff Bar and Pocket Bar by Master Jewelers, are never before seen innovations created exclusively for the Paolo Poffandi Brand.

Diamond Studded Cuff Bar and Buttons

Diamond Studded Cuff Bar - Replacing Buttons Diamond Studded Cuff Bar and Pocket Bar

13

THE CUFF BAR

3.5 inches

1.5 inches

5/8 inches

.25 Kt Diamonds

24 Kt Gold Cuff Bar

24 Kt Gold Buttons

Cuff Bar : 1/8 inch thickButton: 1/4 inch thick

Space between Cuff Bar and Button: 1/8 inch

1.5 inches

Stem: 1/8 inch thick

See Through View

Shirt Sleeve

Cross Section View

Jacket Sleeve

14

15 THE CUFF BAR

The Cuff Bar is a signature Paolo Poffandi accessory. Made of 9 ounces of 24 kt gold with 10 AGS certified Flawless Diamonds, it will cost an average $35,000 per pair to make and will add in excess of $90,000 to a suit’s or jacket’s retail value.

It will set the Poffandi Brand apart as an innovator in men’s top luxury clothing.

Cuff Bars will be considered more of an objet d’art than an accessory, making the suit an irreplaceable investment. The Cuff Bar may also be made of Platinum, Palladium, White Gold, Emeralds, Sapphires, Rubys, Peridot set in combination with other precious stones or as solitaires to compliment various fabrics.

We are conservatively estimating 100 pairs of Cuff Bars to be sold in Year 1 at an average price point of $90,000 for an additional $5.2 Million in profit.

The retail experience for Luxury goods is evolving. The luxury consumer expects craftmanship and ease of purchase, as has always been the case.

1. From a Forbes article(a) :

“Gucci for example has made Amazon.com their official authorized online retailer.

Why? Again, because people look to these services more and more to make purchases rather than purchase decisions. They are learning about products elsewhere such as via advertising, social media, and more traditional media. The comfort and sophistication of buying via the internet’s largest retailers is both trusted by and appealing to consumers. In the end consumers are looking for an easy way to get the things they want. The hassle of the traditional luxury buying experience is the industry’s biggest threat.

Today successful luxury brands have taken responsibility over manufacturing, creating retail demand, and finally fulfilling the demand by selling direct to consumers. The value of the middle-man third party retailer is quickly evaporating.

Conclusion: Online marketing should be an integral compoment of the marketing mix.

2. From a Business of Fashion (BOF) article(b) :

“One of the most exciting findings is that by 2018, in the next five years, based on our predictions and based on how fast the region is growing, Asia Pacific will be the biggest region in the world for luxury goods,” Fflur Roberts, the head of luxury goods research at Euromonitor, told BoF. “This is predominantly due to China, but also the emerging Asian markets like Malaysia and Indonesia. India is also a major contributor.”

THE MARKET PLACE16

Since the start of the firm’s luxury goods research practice back in 2004, Western Europe has been the “clear leader” in luxury consumption and has accounted for more than 33 percent of all luxury spending in the past year. However, with luxury consumption in Asia Pacific expected to grow 170 percent over the next five years, the region is set to dethrone Western Europe as early as 2018.”

Conclusion: Penetrate the Asia Pacific market.

3. From a Sphere article(c) :

“Rebecca Robins and Manfredi Ricca, directors at brand consultancy Interbrand, and co-authors of 2012’s Meta-Luxury: Brands and the Culture of Excellence argue that Luxury as a term has become bloated, overused and meaningless.

They call for a refocusing on true luxury, luxury as a pursuit of painstaking craftsmanship, quality and excellence, to maintain consumer confidence and impress today’s discerning connoisseurs who aren’t fooled by luxury that isn’t credible. They argue that true luxury brands such as Hermès and perfumer Francis Kurkdijan put excellence and product first, and let business follow, and are still a commercial success because people believe in them.

“It makes the brand irreplaceable, rather than disposable. Something truly unique. Consumers today are looking for something with meaning and longevity and this is the way to achieve that,” explains Robins.”

Conclusion: Put excellence and product first, and let business follow. Become irreplaceable.

THE MARKET PLACE17

MARKETING

The marketing mix will incorporate advertising campaigns to complement direct in-home sales, an Internet portal, corporate storefronts, and affiliated retail chains. The Public Relations effort will consist of sponsoring artists, white paper research, TED Talk participation, social media curators, interviews on magazines and television, and fashion shows. There will be four primary sales channels:

40%

20%

20%

20%

Internet Storefront Direct Retail

Sales Revenue By Channel

18

MARKETING

Integrating a central manufacturing hub with the internet is a matter of necessity, not choice. The internet experience must also be multi-lingual. Traffic will be directed to the web site through advertising and public relations campaigns. Internet marketing provides the most lucrative profit margins.

Internet

StorefrontFor those consumers who are not as adept with the internet, there is the storefront experience (and in-home direct sales). We are projecting opening one store per year in the first five years. The assumption is that it will cost $100,000 to furnish a store and $200,000 per year to operate.

Storefronts are capital-intensive and must be located in the most prestigious locations in order to succeed. The interior design must border on palatial. Profit Margins are expected to be the least generous. Potential cities for storefronts include Beverly Hills, Paris, Dubai, Abu Dhabi, New York, Beijing, Monaco and London.

Direct (In-Home)Equipped with a laptop, a catalog, a tape measure and swatches, direct sales reps can visit their clients in their homes or offices. A laptop will serve to transmit the client’s order directly to the manufacturing center. Profit margins are expected to be greater than those derived from Storefronts but not as great as the Internet portal.

RetailThis entails establishing relationships with luxury retailers such as Harrod’s of London. The profit margins are expected to be modest, even though revenues from this channel are expected to be double that of other marketing channels. We expect retailers to command a 200% markup on our apparel, and a 100% markup on accessories. If our suits cost $250 to make, and we wholesale them for $1,000, the retail price will be somewhere around $3,000. For accessories such as a pair of Cuff Bars, which may cost $30,000 to manufacture, the wholesale price is expected to come at $45,000, and retail at $90,000.

19

OPERATIONS

An Operations Manager centered in Italy will coordinate the manufacturing of clothing and accessories. He will report to the President in Year 1.

The VP Operations position will be created in Year 2. He will direct the Operations Manager and Store Managers.

The Store Manager will manage commissioned Sales Associates in storefronts and report to the President in Year 1, and to the VP Operations as of Year 2.

The VP Marketing will coordinate Retail Chain sales, overlook Advertising with the President, coordinate with the Webmaster and direct the Sales Director.

An in-house Webmaster will coordinate Internet sales who will report to the VP Marketing.

The Sales Director will oversee a commissioned direct sales force. New territories will be added every 6-12 months in major cities worldwide as storefronts open.

The VP Finance will plan financing strategies, This position will be created in Year 2. He will have oversight of Accounting and Investors.

The President will have oversight of Designers, Store Managers, the Operations Manager, Public Relations, Investor Relations, and Human Resources.

An Administrative Assistant will be retained in Year 2 to assist the President and VP’s.

20

MANUFACTURING

In keeping with the exclusivity of this luxury Brand, designing, fabric purchases and manufacturing will be done in Italy.

PERSONNEL

ORGANIZATIONAL CHART

PRESIDENT

VP MARKETINGVP OPERATIONS

SALESDIRECTOR

DIRECT SALESASSOCIATE

DIRECT SALESASSOCIATE

WEBMASTEROPERATIONSMANAGER

STOREMANAGER RETAIL CHAINS

SALESASSOCIATEMANUFACTURERS

VP FINANCE

21

Year 1

Year 2

ADMIN ASSISTANT

FINANCIALS

5 Year Personnel Salaries ($000)5 Year Personnel Salaries ($000)5 Year Personnel Salaries ($000)5 Year Personnel Salaries ($000)5 Year Personnel Salaries ($000)5 Year Personnel Salaries ($000)

Year 1 Year 2 Year 3 Year 4 Year 5

President 120 140 180 220 300

VP Marketing 100 120 150 200 250

VP Operations n/a 100 120 140 160

VP Finance n/a 100 120 140 160

Operations Manager 100 150 200 225 250

Store Manager 80 160 240 320 400

Webmaster 75 90 120 150 150

Director of Sales 50 160 170 230 290

Admin. Assistants n/a 120 120 120 120

Total 525 1,140 1,420 1,745 2,080

23

5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)5 YEAR SALES PROJECTIONS ($000)

Item/Year Year 1Year 1Year 1Year 1 Year 2Year 2Year 2Year 2 Year 3Year 3Year 3Year 3 Year 4Year 4Year 4Year 4 Year 5Year 5Year 5Year 5

Channel Retail Internet Direct Store Retail Internet Direct Store Retail Internet Direct Store Retail Internet Direct Store Retail Internet Direct Store

Suits 200 100 100 100 400 200 200 200 600 300 300 300 800 400 400 400 1000 500 500 500

$3,500 R$1000 W

$200 $350 $350 $350 $400 $700 $700 $700 $600 $1,050 $1,050 $1,050 $800 $1,400 $1,400 $1,400 $1,000 $1,750 $1,750 $1,750

Shirts 400 200 200 200 800 400 400 400 1200 600 600 600 1600 800 800 800 2000 1000 1000 1000

$400 R$100 W

$40 $80 $80 $80 $80 $160 $160 $160 $1,200 $2,400 $2,400 $2,400 $1,600 $3,200 $3,200 $3,200 $2,000 $4,000 $4,000 $4,000

Jackets 80 40 40 40 120 60 60 60 160 80 80 80 200 100 100 100 240 120 120 120

$800 R$200 W

$16 $64 $64 $64 $24 $48 $48 $48 $32 $64 $64 $64 $40 $80 $80 $80 $48 $96 $96 $96

Cuff Bars 40 20 20 20 60 30 30 30 80 40 40 40 100 50 50 50 120 60 60 60

$90,000 R$45,000 W $1,800 $1,800 $1,800 $1,800 $2,700 $2,700 $2,700 $2,700 $3,600 $3,600 $3,600 $3,600 $4,500 $4,500 $4,500 $4,500 $5,400 $5,400 $5,400 $5,400

Other* $100 $50 $50 $50 $200 $100 $100 $100 $300 $150 $150 $150 $400 $200 $200 $200 $500 $250 $250 $250

Total $2,156 $2,344 $2,344 $2,344 $3,304 $3,708 $3,708 $3,708 $5,732 $7,264 $7,264 $7,264 $7,340 $9,380 $9,380 $9,380 $8,948 $11,496 $11,496 $11,496

Total $9,188$9,188$9,188$9,188 $14,428$14,428$14,428$14,428 $27,524$27,524$27,524$27,524 $35,480$35,480$35,480$35,480 $43,436$43,436$43,436$43,436

* Other items include belts, shoes, fragrances, socks, cufflinks, watches, sweaters, pants and ties.

R = Retail PriceW = Wholesale Price, represents the price Retail channels pay to purchase our products

FINANCIALS24

5 YEAR COST OF GOODS SOLD PROJECTIONS ($000)5 YEAR COST OF GOODS SOLD PROJECTIONS ($000)5 YEAR COST OF GOODS SOLD PROJECTIONS ($000)5 YEAR COST OF GOODS SOLD PROJECTIONS ($000)5 YEAR COST OF GOODS SOLD PROJECTIONS ($000)5 YEAR COST OF GOODS SOLD PROJECTIONS ($000)

Item/Year Year 1 Year 2 Year 3 Year 4 Year 5

Suits 500 1000 1500 2000 2500

$300 per $150 $300 $450 $600 $750

Shirts 1000 2000 3000 4000 5000

$40 per $40 $80 $120 $160 $200

Jackets 200 300 400 500 600

$100 per $200 $300 $400 $500 $600

Cuff Bars 100 150 200 250 300

$35,000 a pair $3,500 $5,250 $7,000 $8,750 $10,500

Other* $100 $200 $300 $400 $500

Total $3,990 $6,130 $8,270 $10,410 $12,550

FINANCIALS25

5 YEAR P&L ($000)5 YEAR P&L ($000)5 YEAR P&L ($000)5 YEAR P&L ($000)5 YEAR P&L ($000)5 YEAR P&L ($000)

Year 1 Year 2 Year 3 Year 4 Year 5

Revenue $9,188 $14,428 $27,524 $35,480 $43,436

COGS $3,990 $6,130 $8,270 $10,410 $12,550

Gross Profit $5,198 $8,298 $19,254 $25,070 $30,886

Retired Debt* 150 150 150 150 1,650

Accounting/Legal 200 200 200 200 200

Storefront Overhead 300 500 700 900 1,100

Personnel** 222 443 690 938 1,185

Personnel 525 1,140 1,420 1,745 2,080

Advertising/PR 600 1,200 2,000 2,000 2,000

Total Operating Expenses $1,997 $3,633 $5,160 $5,933 $8,215

Net Profit Before Tax $3,201 $4,665 $14,094 $19,137 $22,671

* Debt represents a $1.5 Million obligation to investors, repaid with interest only payments at 10% p.a. and the principal in one balloon payment at the end of the 5th year** 20% commissions paid to sales associates involved in Storefront and Direct Sales, which collectively make up 40% of Gross Revenues

FINANCIALS26

27 FINANCIALS

YEAR 1- CASH FLOW PROJECTIONS (BEST CASE - $000)YEAR 1- CASH FLOW PROJECTIONS (BEST CASE - $000)YEAR 1- CASH FLOW PROJECTIONS (BEST CASE - $000)YEAR 1- CASH FLOW PROJECTIONS (BEST CASE - $000)YEAR 1- CASH FLOW PROJECTIONS (BEST CASE - $000)YEAR 1- CASH FLOW PROJECTIONS (BEST CASE - $000)

Q1 Q2 Q3 Q4 Cash at Beginning of Year

$1,500

OperationsOperationsOperationsOperationsOperationsOperations

Cash Receipt from Clients $200 $900 $2,700 $5,300 $9,100

Cash Paid for

Inventory -$460 -$810 -$810 -$1,890 -$3,970

Wage Expenses -$187 -$187 -$187 -$187 -$748

General & Administrative -$50 -$50 -$50 -$50 -$200

Advertising / PR -$150 -$150 -$150 -$150 -$600

Interest -$150 -$150

Net Cash Flow from Operations -$647 -297 $1,503 $2,873 $3,432

Investing Activities

Cash paid for Storefront -$150 -$50 -$50 -$150 -$400

Net Increase in Cash -$797 -$347 $1,453 $2,723 $3,032

* Estimated time to remodel a store is 3 months at a cost of $100,000

We are looking for an initial investment of $2,000,000 in the form of equity or an interest bearing note secured by inventory and store improvements with an interest rate of ten (10%) percent per annum. Interest only payments to be paid quarterly over the first five years. The principal to be repaid in its entirety at the end of the fifth year.

INVESTMENT30

FAST TRACK

or

SLOW TRACK

We are looking for an initial investment of $100,000 in the form of equity or an interest bearing note secured by inventory with an interest rate of ten (10%) percent per annum. Interest only payments to be paid quarterly over the first 2 years. The principal to be repaid in its entirety at the end of the second year.

The climate for luxury goods is always good, and improving in parts of the world where affluence never goes out of style. Above all, quality and personalized service trumps any other consideration.

The Paolo Poffandi Brand is inherently a strong brand that can easily be associated with superbly crafted luxury goods made in Italy.

The competition has a proven business model which has weathered the test of time and which can be replicated given the right capital, creativity, and commercialization.

In addition, the Paolo Poffandi Brand offers innovative signature accessories which will go far in distinguishing the Brand as an innovator in the luxury men’s fashion industry.

Finally, at the heart of the Brand is it’s creator, an unorthodox irreverent iconoclastic visionary. Not many sixty-one year olds can walk down a runway looking in this shape. From a PR perspective, Paolo Poffandi was made for the fashion industry.

CONCLUSION31

References:

(a) http://www.forbes.com/sites/arieladams/2013/05/23/luxury-consumers-value-products-not-buying-experiences/

(b) http://www.businessoffashion.com/2013/10/euromonitor-coach-michael-kors-louis-vuitton-versace-fflur-roberts.html

(c) http://www.spherelife.com/future-trends/

APPENDIX A32

L U X U R Y M E N ‘ S A P P A R E L

www.paolopoffandi.com