Amplified; the Headphones Store – A Portable Audio Gear Specialist

Amplified; the Headphones Store – A Portable Audio Gear Specialist

Current Status Revenue Generating, Pre-Profit
Amount Invested RM150,000
Funding Required RM300,000 or less
Description Simply put, AMPLIFIED is a headphones store. A niche business that sells portable audio gear to audio enthusiast and discerning music listeners.
With a growing demand for music portability worldwide, our Malaysian market is fast developing as the new arena for headphone and portable amplifier Brands.Therefore, with superior customer service and great product selection in a compelling retail store, AMPLIFIED is well placed to capitalize on this promising business model. The Company opened its first AMPLIFIED retail outlet at ‘The School’ in Jaya One, Petaling Jaya on 23rd December 2013.

AMPLIFIED’s management team has a strong retail experience that will ensure sound investment and the overall success of the venture. AMPLIFIED is projected for steady growth and has the potential to expand exponentially as the portable audio gear market continues to thrive in the region.

Business Opportunity AMPLIFIED stocks traditional headphone and earphone models, though the product mix is a little different from other audio-visual gadget stores.

We used our 12 months of eCommerce trading history to develop the right product mix for AMPLIFIED – to maximise the available square footage and profits.

We also offer AMPLIFIED loyalty points to customers – to encourage their patronage by giving away privileges such as free gifts, cash rebates and/or introductory discounts.

Our market analysis looked at local potential customers and their potential demand needs. We explored the portable multimedia device market and the digital audio availability. We concluded that with vast ready users of ‘smart’ devices with existing digital content providers, we were poised to serve the demand for portable audio gear i.e. headphones, earphones etc. Amplified; the Headphones Store is testament to that.

Revenue / Business Model Financial Highlights:

The business start-up capital was not an exuberant one but it did give a fair indication of the plans ahead. A good portion of the capital funds was secured through outsourced investment and personal monies from business owner(s). However, we are also looking at SME government grants to substantiate the operating expenditure for the first year.

Sales were expected to start conservatively in year one but increase steadily through to the fifth year of operations. We forecast that operating income will pay back the start-up funds over a five year amortization.

The inventory turnover ratios are kept around 5.0 (2 months’ supply) to ease up cash rather than tie it down with dead stocks. To do that, AMPLIFIED is required to purchase smartly and drive sales consistently.

Cash will also be retained in the business to cover cash operating needs as well as future expansion of AMPLIFIED’s business. We also intend to pay dividends to shareholders as early as end of the first financial year. We were also extremely conservative in the budgeting estimates in relation to a very realistic sales forecast.

Business Overview:

Headphones, portable amplifiers and multimedia speakers have revolutionized the personalized audio listening arena – redefining how we perceive vocal, music and other aural productions. Traditionally, good quality headphones and earphones remained out of the hands of most consumers in Malaysia due to their relative scarcity in local retail districts.

As a result, authorized Brand distributors with the urging of the Brand principals have invested time and resources into finding ways to give these audio gears higher local visibility, lower the retail cost, make them accessible (and fashionable too) to Malaysian consumers.

Due to this impetus and the growing social media network from which much of the publicity is gained, the local demand for headphones and other portable audio gear are on the up and starting to develop into large-scale consumer products.

Today, these items are truly consumer electronics devices with millions of users worldwide and Malaysia is no exception. Beats by Dr Dre is one very visible example of clever marketing that in itself has helped vast collection of other Brands approach the local market positively. This is further evidence that headphones (as a benchmark) are consumer products and are in good demand. High priced earphones/headphones have ceased to be an exclusive status symbol of audiophiles and are now in the hands of millions of regular music loving consumer like you and I.

Thus, AMPLIFIED, is taking advantage of an opportunity to become a highly distinguished and recognized retailer of portable audio gear. It is the goal of our Company to become established as the leading retailer of portable audio gears in the Klang Valley with concrete plans to expand into neighbouring states and possibly to the South East Asian region.

In order to achieve this goal, AMPLIFIEDs’ critical success factors is to identify emerging best sellers of brand models, integrate smart inventory management systems, streamline our retail operations and respond quickly to customer buying patterns. In addition, we will provide high-quality service, pursue cost effective methods in marketing/advertising and stay ahead of the “audio gear retail curve.”

The Company warrants that, AMPLIFIED is at the verge of capitalizing the growing Malaysian market for portable audio gear. Based on the current sales performances; we can spearhead the operations in a more dedicated and focused way.

Business History:

Over the past 3 years, we made significant strides, developing the business. Gross and operating margins have steadily improved and the business has continued to invest in inventory, advertising and marketing.

Sales grew due to good partnerships with reputable distributors, like IMS Distribution (AKG, Harman Kardon & JBL), Hwee Seng Electronics (Beats by Dr Dre & Monster), GrandTech (Shure), TEG (Bowers & Wilkins), Jaben Audio (Audio Technica, Beyerdynamic, Goldring, Final Audio Design), Event One (FiiO, AiAiAi) and TJM Products (Parrot Zik & Accutone). They readily referred customers and supplied stocks fast and efficiently that enabled AMPLIFIED to continue the good service reputation garnered in the market.

E-Commerce specialists WebShaper also contributed tremendously with their dedicated e-commerce templates with which we run our online shop i.e. shop.amplifiedhead.com. Our eShop is SEO optimized; that improved our search engine ranking and driven steady traffic of over 5,000 unique visitors per month. Our online shop accounted for 20% of sales to date.

The remaining sales came from our continued marketing and advertising efforts into our Facebook page and from direct walk-ins to our retail shop. Customers come after seeing flyers, posters or advertisement boards in and around Jaya One complex and neighbouring colleges as well.

Management Team AMPLIFIED is managed by Joseph Prabagar as Founder cum General Manager. Prabagar has extensive retail operations experience in luxury fashion, jewelry, mail order and loyalty membership retail businesses.

Prabagar will head sales strategy for the AMPLIFIED’s business and oversee the business operations and finances. In the interim, all human resources (hiring and training) would be handled by him also but as the business grows a HR Manager will be hired.

AMPLIFIED projects two more headcount to help operate the retail shop as Sales Consultants. These are sales persons who will be stationed at the front end point of sale i.e. retail shop and will report to the GM initially before a Store Manager is recruited at some stage. Their duties incorporate customer handling, stocking, security, cashiering and other relevant retail operational responsibilities.

We will hire a Product Manager to manage inventory and logistics at an appropriate stage later in the business. The Product Manager will oversee stock procurement and inventory management. At the moment all these responsibilities are with Joseph Prabagar.

Company Background Amplified Armature Sdn Bhd was incorporated on 10th May 2013. With an initial paid up capital on RM88,000 involving 4 shareholders.

We started business operations on 1st June 2013. First year revenue were RM249,820 (audited). 2nd year revenue were RM683,404 (audited). We have not made profits as yet but our losses have reduced from RM85,270 for financial year ending 31 May 2014 to RM51,927 (31 May 2015). In March 2016, we raised our working capital to RM150,000. We are in the midst of closing our 3rd year finances and the un-audited revenue reported at RM707,000++ (31 May 2016).

Funding Milestone The business required an estimated RM200,000 in cash for the initial start-up expenses and to sustain the business for the first year. We required these monies for new store fit-out, rental security deposits, inventory purchases and the cash-on-hand backing to meet 6 to 12 months payroll, rent and other fixed operating expenditure. We raised 50% the projected funds via owners’ personal investment but now seek balance funds from venture capitalist, government grant and/or angel funds.

Subsequently, Amplified started the business with a paid up capital of RM88,000 from owners and current shareholders in July’13. In March 2016 we revised our paid up capital to RM150,000 with funds from existing shareholder.

The business opened with ready inventory of RM85,000 in cost value (retail value approximated at RM112,000). This opening inventory was taken as stock purchases on credit and the Company sought the balance of the aforementioned RM200,000 to facilitate operating expenses as explained in paragraph one.

Use of Funds:

The ready financing covered the Company’s costs in the start-up phase, and year 2 shop expansion that included:
• Insurance premiums covering both general liability and product liability
• Retail store rental security deposits (Year 1)
• New e-commerce website set up (Year 1)
• New store’s renovation and fit-out in 2013 and further investment on store expansion in 2015
• Marketing activirties and online advertisements
• Normal legal expenses for consultation and permitting
• Additional inventory to supplement the bigger retail space

The required funds will also include office and store furniture/fixtures, wall shelving, computers, phone cum broadband accounts, point-of-sale system, cashier machine, accounting software, window display props, backroom racks, security systems and additional investments for on-going improvements to the retail store.

% Equity Allocation 40%
Expected ROI 5% to 8% per annum
Risks and Mitigation Risks:

The business is a traditional retail operations. Whereby, physical inventory needs to be procured always. Thus, this ties up cash and affect cash flow when sales are slow. Or the wrong inventory is procured and become unsaleable.

In addition, Amplified deals with audio equipment that isn’t a ‘need’ product. It is more of an enthusiast niche and ‘an indulgent’. When the potential customers’ have substantial disposal income in a strong local economy, then the business thrives. Hence the risk; if we head into an economic climate that is less desirable.

Mitigation:

Buy the right product and keep the inventory ‘lean’. When possible pay upfront; if that’s not feasible, procure inventory at the very minimum per model based on cash flow and sales history.

Exit Strategies We are open to suggestions on this part as we are rather inexperienced on this matter.
Company Name Amplified Armature Sdn Bhd
Website/Facebook http://shop.amplifiedhead.com20www.facebook.com/AmplifiedArmature
Business Address Lot 100-P1.019, Level P1, The School, Jaya One, Jalan Universiti, 46200, Petaling Jaya, Selangor
Contact Person Joseph Prabagar
CAPITAL.MY