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Supermarket Business Plan

This document provides a business plan for a proposed supermarket in Lusaka, Zambia. The plan outlines the supermarket's mission to maintain integrity, grow to meet customer demands, be competitive, develop supplier and customer relationships, and improve employee welfare. The objectives are to offer quality products and services, maximize sales and profits, increase customer traffic, and build customer loyalty. Startup costs are estimated at $28,250 and first year sales are projected to reach $360,000, with the potential for good net profits. Regulations and licensing requirements are also addressed.

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Dennis Mbale
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100% found this document useful (4 votes)
3K views74 pages

Supermarket Business Plan

This document provides a business plan for a proposed supermarket in Lusaka, Zambia. The plan outlines the supermarket's mission to maintain integrity, grow to meet customer demands, be competitive, develop supplier and customer relationships, and improve employee welfare. The objectives are to offer quality products and services, maximize sales and profits, increase customer traffic, and build customer loyalty. Startup costs are estimated at $28,250 and first year sales are projected to reach $360,000, with the potential for good net profits. Regulations and licensing requirements are also addressed.

Uploaded by

Dennis Mbale
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 74

SUPERMARKET BUSINESS PLAN

Table of Contents
Executive Plan.............................................................................................................................................3
Mission, Objectives and Keys to success.....................................................................................................4
Mission....................................................................................................................................................4
Vision.......................................................................................................................................................4
Objectives................................................................................................................................................4
Core Values..............................................................................................................................................5
Keys to Success........................................................................................................................................6
Company Summary.....................................................................................................................................8
Business Description................................................................................................................................8
Company Location...................................................................................................................................8
Potential Products.................................................................................................................................10
Ownership.............................................................................................................................................13
Company Structure................................................................................................................................16
Operational Requirements........................................................................................................................20
Government Regulations.......................................................................................................................23
ZRA Registration....................................................................................................................................24
Operating Strategy....................................................................................................................................29
Tips for running a supermarket business...................................................................................................31
Marketing Strategies.................................................................................................................................40
Sales Strategy........................................................................................................................................43
Market Analysis.........................................................................................................................................44
Demand.................................................................................................................................................44
Market segmentation............................................................................................................................44
Competition and Buying Patterns..........................................................................................................46
Our competitive advantage...................................................................................................................46
Profitability of Supermarket business....................................................................................................48
Industry Analysis........................................................................................................................................49
Players in the Industry...........................................................................................................................49
SWOT Analysis...........................................................................................................................................52

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SUPERMARKET BUSINESS PLAN

PEST Analysis.............................................................................................................................................54
Financial Statements.................................................................................................................................56
Start-up Costs........................................................................................................................................56
Pro Forma Income Statement................................................................................................................58
Monthly Cash Flow................................................................................................................................61
Pro Forma Annual Cash Flow.................................................................................................................65
Pro Forma Balance Sheet.......................................................................................................................66
Breakeven Analysis................................................................................................................................67
Risk analysis...............................................................................................................................................68
Potential Sources of Finance.....................................................................................................................71
Equity Financing....................................................................................................................................71
Debt Financing.......................................................................................................................................72
Top reasons why supermarkets fail in Zambia...........................................................................................76

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Executive Plan

Our company is a supermarket business that will be operating in Lusaka. Our supermarket will
be a self-service shop offering a wide variety of products and services. The groceries that we will
sell include dry groceries, meat, takeaway food, bakery goods, and fruits and vegetables.

The service will be relaxed, very friendly and correct. Employee welfare will be equally
important to our success. We will hire the best people available, training, motivating and
encouraging them, and thereby retaining the friendliest, most efficient staff possible.

Most important to us is our financial success and we believe this will be achieved by offering
superior customer service. We have created financial projections based on our experience and
knowledge of the area. With a start-up expenditure of $28,250, we can generate $360,000 in
sales by the end of the first year and produce good net profits.

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Mission, Objectives and Keys to success

Mission

We aim to maintain integrity in everything we do, continue to grow and expand to meet the
demands of our customers, be competitive, surpass expectations, and develop long-lasting
relationships with suppliers and customers to sustain growth.

We strive to satisfy our customers through the highest quality of service; delivered with a sense
of warmth, friendliness, individual pride, passion, and company spirit.

We aim to improve the profitability of our business by creating a vibrant environment to promote
productivity at work place, taking part in local community activities and complying with
government regulations.

We are committed to the development and welfare of our employees.

Vision

To be a self-sufficient, innovative and sustainable supermarket in which customers are able to


choose from a wide range of goods at reasonable prices.

Objectives
We are committed to excel in each of the below listed key areas, in order to effectively and
efficiently operate the company, while delivering the best value for money to our clients.

Quality Products

We will ensure that our systems, processes, products and standards are appropriate to the task,
which will be delivered with quality and excellence. We will sell undamaged and quality
commodities to our customers.

Sales and Profits

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The major objective of most supermarkets is to sell products and earn the highest profits
possible. Our aim is to always deliver sustainable growth and maximize our shareholders value,
through high rate of turnover and increases in operating profits, accompanied by strong cash
flow.

Increasing Customer Traffic

Customer traffic is important whether the customers visiting our shop are buying or not. We aim
to increase customer traffic every month.

Building Customer Loyalty

We are committed to understand and meet the needs of our customers, while maintaining a
customer-focused culture, to deliver a high level of customer satisfaction. We strive to build a
loyal customer base.

Core Values

Community Consciousness

We stay engaged by supporting the local community with events and causes that reflect our
mission and lead to positive change.

Respect for Employees

Diversity, equality, and ethical treatment of employees is of utmost importance at our


supermarket. We value team spirit where everyone is important and their contribution is
appreciated and recognized.

Commitment and Accountability

We are passionate in what we do and are accountable to our stake holders.

Quality Service

Our customers get the best of our dedicated and efficient service.

Professionalism
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We strive for the best in whatever we do, maintaining professional ethics and business acumen.

Honesty and Integrity

All our dealings are conducted within the framework of a strict and consistent moral and ethical
code no matter the circumstances or personal costs involved.

Team spirit

Our approach to serving our customers is focused on a cooperative effort by the members of our
team which result in the achievement of a shared vision and mission. Create an atmosphere
where each person can work as a team member, with clear goals and high standards that profit
everyone.

Keys to Success

The keys to success are:

 Quality products and friendly service.

 Maintaining existing loyal customer base.

 Creating a positive relationship within the community.

 Control costs at all times, in all areas and implement a conservative approach to growth.

 Provide 100% satisfaction to our customers and maintaining the level of excellent
services.

 Encourage the two most important values in supermarket business: brand and image, as
these two ingredients are a couple of main drivers in marketing communications.

 Promote good values of company culture and business philosophy.

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 Repeat business. Every customer who comes in once should want to return, and
recommend us. Word-of-mouth marketing is a powerful ally.

 Hiring the best people available, training, motivating and encouraging them, and thereby
retaining the friendliest, most efficient staff possible.

 Consider uniforms or matching outfits so customers can easily identify employees, and
for safety acquire nonslip shoes.

 Commitment to maintain safety and hygiene as our number one priority and ensure
quality control throughout the value chain.

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Company Summary
Business Description
Our company is a supermarket business that will be operating in Lusaka. Our supermarket will
be a self-service shop offering a wide variety of products and services. Our supermarket will be a
self-service shop offering a wide variety of products and services. The groceries that we will sell
include dry groceries, meat, takeaway food, bakery goods, and fruits and vegetables.

Our supermarket will be built upon a heritage of providing customers with quality products as
well as friendly, accountable service. We will strive to be a strong competitor on the Lusaka
market and continue to go from strength to strength, building on ethos that always puts the
customer first. The company prides itself on its customer service. Our company’s competitive
advantage is its visibility, accessibility and location.

Company Location
The location of a supermarket business plays a vital role in the success of the business as it
directly affects the sales volumes and profitability. The location must be a busy place, visible and
easily accessible to facilitate easy purchasing of goods by the consumers. A well placed store has
a lifetime of cheaper customer retention and acquisition costs to enjoy. But a badly-located store
will need to pursue this strategy for the entirety of its existence.

Supermarkets are best located in urban centres, shopping malls, growth points and both low and
high density areas where there is high human traffic. Location is a critical matter in
supermarket’s attractiveness to customers. Customers always consider location when choosing to
buy from a store and location provides the firm with strategic advantages.

When making the analysis of potential sites take into account the following factors:
Who are your potential guests? What are their needs and purchasing possibilities? What is the
environment of the potential location for your supermarket business? Location also determines
the range of products that you need to sell. 

You should think also about accessibility, number of parking places, visibility and traffic around
your supermarket business. These are all questions that you need to bear in mind when choosing

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a location for supermarket business. If you settle for an area, it is also vital to start looking for a
business premises that is within your budget.

Practicalities of renting premises

Before renting a location it is critical that you consult the experts. A lawyer will be able to advise
you on legal points arising from the lease, the legal agreement between you and the landlord.
Think carefully before signing any agreement. Do not sign anything unless you completely
understand it and agree with it. Here are some of the things you will need to think about:

The rent ‐ Not only what it will be when the lease begins, but how much it could go up by.

The length of the lease: How long you want to commit yourself to renting the premises.
Remember that unless your landlord agrees that you can give up your lease or transfer it to
someone else; you will have to pay rent for the whole period of the lease, even if your income
dries up. Leases typically have agreements of between 6 months and 10 years. Don’t lock
yourself into a long lease, at least not the first few years that you are in business. If your
supermarket fails you don’t want to be locked into four more years of rent that you cannot pay.

Quitting ‐ How easily could you give up renting if you no longer need your premises or run into
financial difficulties? Will you be able to transfer the premises to someone else? Will the
landlord allow you to give up? Do you have the opportunity to ‘break’ (end the lease) at certain
intervals – this would allow you to choose whether or not to continue renting the property;

Insurance ‐ The landlord may expect you to insure the premises yourself, or to pay for the
insurance if the landlord takes it out.

Repairs ‐Are building repairs included in the rent. If you make significant repairs to the
plumbing or heating, then ask if they can be deducted from your regular rent. Most landlords
would rather give free or reduced rent one month than shell out cash to make repairs.

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Guarantees ‐ The landlord may ask you for a financial guarantee, or may ask you to provide a
guarantee or anyone who takes over your lease. If things go wrong, a personal guarantee could
bankrupt you and make you homeless.

Protection when the lease ends ‐ Will you have the right to renew the lease when it comes to an
end?

The landlord ‐ Is he or she someone you want to have a working relationship with?

The History of the property ‐ Find out the history of the property and whether any other
businesses have failed there and why. Was the property used for supermarket services before?
Ask neighbouring tenants for their input.

Will the space work for a supermarket business. – Is there suitable ventilation, services, power
etc? Finally before renting a property, make sure you can get planning permission to make any
changes you need to the property.

Potential Products

Potential products to sell in your supermarket business include groceries such as sugar, drinks,
bread and other non-food items such as kitchenware, household cleaners etc. The important thing
is to provide a variety of products for customers to choose from. It is of great importance to
consider the profit margins of your products, as this is a business and it has to be profitable. You
should also strive to push volumes up, in order to increase your revenue and profits. Below are
some of the products that we will offer;

Cosmetics

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Products in this category comprises of cosmetics products used for beautifying the body. They
include; body lotions, hair cream, powder, make-up kits. These products are on high demand
because everyone needs to look good and neat at all times.

Organic Food

Products in this category consist of fresh fruits and raw vegetables. Organic food should be well
preserved to maintain its freshness.

Toys

Most times kids go for shopping with their parents. So a section of different toys should be on
display in a Supermarket.

Drinks

Products in this category include various assorted drinks, both locally made and imported. They
include; wines, fruit juice, soft drinks.

Hair Products

Products in this category include every item needed to keep the hair neat, such as; hair
extensions, hair cream, hair relaxing creams.

Kitchen Wares

These consists of various utensils which are used in the kitchen such as plates, cutleries, kitchen
pots and pans, stoves, gas burners, dish washers.

Canned Foods

These include products that are packaged in tin containers; such as tomatoes paste, sardines,
canned sauce and many other canned products.

Dairy and Poultry Products

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These are produced from farm animals and birds. They include milk, different types of meats,
eggs, and cheese.

Clothes

Products in this category include clothing materials worn on the body. They include; shirts,
suits, jackets, sweaters, skirts, pull-over, underwear, and many more.

Footwear

These include items worn on the feet such as male and female shoes; loafers, boots, sandals and
slippers.

Packaged Products

These comprises of packaged goods. They include, bread, assorted biscuits, rice, mealie-meal,
macaroni, flour etc.

Toiletries

Products in this category include; soaps, toilet rolls, face towels, hand napkins, and shampoos.

Household Products

Products in this category consists of items used in the home, such as flower vases, shoe bags, and
many others.

Seasonal Products

These include products which are sold periodically. For instance, during the Christmas season,
Christmas trees will be sold in major supermarkets.

Food Stuffs

Dry foods stuffs such as rice, beans and tin tomatoes.

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Pet Supplies

These are products used in taking care of pets. They include pet food and liquid soaps for bathing
them.

Over the Counter Medications

We will carry a range of over-the-counter medications that include aspirin, cough medicine, lip
balm, sinus medication and throat lozenges.

Sweets and Snacks

We will devote an entire section of the store to a range of candy products, both in single servings
and bulk, chips, chocolates, dried meat snacks, chewing gum, canned puddings and sweet cakes.
You will also find a variety of nuts as well.

Prepared foods

We will also offer prepared sandwiches, bakery products and cooked meals designed to appeal to
customers who visit the store hungry.

Additional Items

Tobacco products, batteries, foam coolers, plastic gas cans, flashlights, candles, windshield
cleaners and cleaning fluid, transmission fluid and motor oil are some of the additional items that
may be found in a supermarket because they are products consumers may need in an emergency
or impulsively purchase because they happen to be in the store.

Ownership
You must choose a legal structure for your supermarket business, and there are 3 options you
might consider. The structure you choose will depend on the size of your business, along with
your personal circumstances and how much you want to grow the business. Keep in mind that if
you need to, you can change your business structure later on if you find that a new structure will
meet your needs better.

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Sole Trader

You can operate your business as a Sole Trader. A sole trader is a person trading on their own.
The sole trader controls, manages and owns the business, is personally entitled to all profits and
is personally liable for all business taxes and debts. As a sole trader you can usually begin the
supermarket business without following many formal or legal processes to establish it, but you
will have to obtain a shop licence. You will employ other people to help run the supermarket
business.

The advantages of operating your supermarket business as a sole trader are that it is a simple set
up and operation, you retain complete control of your assets and business decisions, there are
fewer reporting requirements, and any losses incurred by your business activities, may be offset
against other income earned (such as your investment income or wages). It is also relatively easy
to change your legal structure if the business grows, or if you wish to wind things up. The
disadvantages are unlimited liability which means all your personal assets are at risk if things go
wrong, and it is also harder to raise the start-up capital when you are alone.

Partnerships

In a partnership, two or more people run a business together. Each partner shares responsibility
for running the business, shares any profit or loss equally, unless the partnership agreement states
otherwise, and is liable for any debt within the partnership. A partnership is relatively
inexpensive to set up and operate. It is wise to establish your partnership with a formal written
partnership agreement.

The advantage of a partnership is that it is easier to raise the start-up capital, as all the partners
will contribute towards the start-up capital. If 2 or more of the partners are actively involved in
the business, there will be an advantage of skills diversification, whereby one might have
experience in the supermarket business, and the other experience with accounting issues etc. The
combined skills, experience and knowledge can provide better products and service in the
supermarket business. You can also consider a partnership if you are based outside Zambia, and
you find someone in Zambia who will run the business on your behalf. A partnership is also
simple and inexpensive to set up, there are minimal reporting requirements, and you can share
management/staffing responsibilities.

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The disadvantages of a partnership include potential for disputes over profit sharing,
administrative control and business direction. Another disadvantage is joint and several liabilities
of partners, which means that each partner is fully responsible for debts and liabilities incurred
by other partners – with or without their knowledge. Changes of ownership can be difficult and
generally require an old partnership to be dissolved before a new one is established. 

Company

A company exists as a formal and legal entity in its own right. It is separate from its
shareholder(s) or owner(s). It’s responsible in its own right for everything it does and its finances
are separate to your personal finances. Any profit it makes is owned by the company, after it
pays Corporation Tax. The company can then share its profits. It will have to be registered at the
Registrar of Companies. A company is a complex business structure, with higher set-up costs
and administrative costs because of additional reporting requirements.

The advantages of registering your business as a company include limited liability to the owners
of the business, ability to raise significant amount of capital, and it is also easy to sell and pass
own ownership. A company will require you to open bank account, and as registered company
you will then have access to loans and credit facilities for your business. Operating as a company
increases trading confidence and credibility. Customers and suppliers will feel more confident
and comfortable doing business with you. A company will also be able to qualify to apply for
any formal tenders in the market.

The disadvantages include significant set-up costs and maintenance costs, limited or no control
of company affairs, complex reporting requirements and company can't distribute losses to share.

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Company Structure

Manager

Finance Operations Marketing


Departmen Departmen Departmen
t t t
The required staff will depend on the scale of the business. The organizational objectives of your
supermarket help determine the business's overall structure. For example, an overarching
objective of turning a profit may lead you to create a smaller organizational structure with you as
the sole manager and decision-maker. Alternatively, an organizational objective designed to
sustain growth could give rise to partially autonomous departments reporting to you as the
company's director and owner. Setting clear objectives early in your company's life allows you to
implement your organizational structure quickly.

Manager

The Manager is responsible for leading the development and execution of the Company’s long-
term strategy with a view to creating shareholder value. The Manager’s leadership role also
entails being ultimately responsible for all day-to-day management decisions and for
implementing the Company’s long and short-term plan. The Manager is responsible for making
major corporate decisions, managing the overall operations and resources of a company. For a
small company this is usually the owner of the company.

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Finance Department

The finance department will be responsible for all the day to day transactional accounting for the
business. This will include the tracking of all transactions and the management of any
government reporting. In very small owner-managed supermarket business this role is often
filled by the owner or a family member with accounting experience. An outside accounting firm
is usually used for annual financial statements and returns. The finance department is also
responsible for management of the organization’s cash flow, payroll administration and ensuring
there are enough funds available to meet the day to day payments. The department include till
operators or cashiers who are responsible for receipting and receiving payments on behalf of the
organisation.

Operations Department

The operations department is responsible for handling the operations of the company. It includes
the operations manager, buyers, stock controllers, cleaners etc. It is also the one which is
responsible for the welfare of workers, addressing the issues which workers have and hiring new
employees. This department is responsible for promoting the highest standards of business ethos
within the administrative function of the supermarket. Some of the roles of the department are
explained below;

Buyers, Receiving assistants and Stock Controllers

 Performs any combination of following tasks to compile records concerned with


ordering, receiving, storing, issuing, and shipping materials, supplies, and equipment:
Compiles data from sources, such as contracts, purchase orders, invoices, requisitions,
and accounting reports and writes, types, or enters information into computer to maintain
inventory, purchasing, shipping, or other records.

 Keeps back order file in established sequence and releases back orders for issue or
shipment as stock becomes available.

 Compiles stock control records and information, such as consumption rate,


characteristics of items in storage, and current market conditions, to determine stock
supply and need for replenishment.

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 Prepares requisitions, orders, or other documents for purchasing or requisitioning new or
additional stock items.

 Compares nomenclature, stock numbers, authorized substitutes, and other listed


information with catalogs, manuals, parts lists, and similar references to verify accuracy
of requisitions and shipping orders.

 Reviews files to determine unused items and recommends disposal of excess stock.

Shop Assistants/ Cleaners  

 Conducting in store promotion


 Notifying customers of sales and special offers
 Stocking shelves
 Responsible for cleaning the supermarket facility at all times
 Ensure that toiletries and supplies don’t run out of stock
 Cleans both the interior and exterior of the supermarket facility
 Handle any other duty as assigned by the supermarket manager

Administrative and HR function

 Maintain office supplies by checking stocks and by placing new orders.


 Ensure operation of equipment by completing preventive maintenance requirements;
 Defines job positions and manages interview processes.
 Carries out staff induction for new team members
 Responsible for training, evaluation and assessment of employees
 Manages logistics and supply chain software, Web servers, e-commerce software and
POS (point of sale) systems
 Manage the organization’s CCTV
 Ensures that all contacts with clients (e-mail, SMS or phone) provides the client with a
personalized customer service experience of the highest level

Marketing department

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Responsibilities of the department personnel include;

 Manage external research and coordinate all the internal sources of information to retain
the organizations’ best customers and attract new ones
 Models demographic information and analyse the volumes of transactional data generated
by customer purchases
 Identify, prioritize, and reach out to new partners, and business opportunities
 Identifies development opportunities
 Develop, execute and evaluate new plans for expanding and increasing sales
 Document all customer contact and information
 Help increase sales and growth for the company
 Through interaction with customers on the phone, uses every opportunity to build client’s
interest in the company’s products and services
 Consistently stays abreast of any new information on the organizations’ products,
promotional campaigns etc, to ensure accurate and helpful information is supplied to
customers when they make enquiries

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Operational Requirements

Premises

We will need a shop for our business. This is where we will be operating from. The business will
be located in Lusaka. We will be renting one shop with back offices which will act as the
warehouse and offices of the management. The premises will also have parking space for our
customers.

Furniture

The furniture that we need for our supermarket include;

Shelves

Shelves are used to display goods for sale. We will use shelves that creates a storefront that is
appealing to consumers. In order to keep the supermarket shelves organised and the maximum
amount of money spent at the tills, the shelves are strategically arranged to entice shoppers to
spend more money. Related products will be displayed near each other on the shelves for
example basic goods such as sugar, salt, cooking oil are usually found on one shelf.

Trolleys

The trolleys feature a robust design, making them suitable for everyday heavy-duty use by
shoppers in our supermarket. Trolleys are used by customers for transporting goods throughout
the store and car parks. The shopping trolleys will be equipped with a plastic baby seat, bumpers
and handle as well as four swivel castors.

Baskets

These are used by customers to carry light weight goods throughout the store. We will need
baskets to make it easier for customers to shop, affording them the best shopping experience.

Office desks and chairs

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We will buy chairs and desks for use by our employees.

Refrigerators

We will need three refrigerators in our supermarket. One will be for beverages, the other for
perishable products such as meat, chicken and milk and milk related products, and the other for
vegetables and fruits.

Truck

We are going to purchase a 1.5 tonne truck which we are going to use to transport products for
small supplies. For large orders we will be hiring large trucks

POS System and Computers

POS system is a computerized network operated by a main computer and linked to several
checkout terminals. It let you track usage, monitor changes in unit dollar costs, calculate when
you need to reorder, and analyze inventory levels on an item-by-item basis. You can even control
inventory right at the cash register with point-of-sale (POS) software systems. POS software
records each sale when it happens, so your inventory records are always up-to-date. Better still,
you get much more information about the sale than you could gather with a manual system. By
running reports based on this information, you can make better decisions about ordering and
merchandising.

POS systems help you gain better control of your business through their reporting features. You
can slice and dice sales data in a variety of ways to determine what products are selling best at
what time, and to figure out everything from the optimal ways to arrange shelves and displays to
what promotions are working best and when to change seasonal promotions.

Reporting capabilities available in POS programs include sales, costs, and profits by individual
inventory items, by salesperson, or by category for the day, month and year to date. Special
reports can include sales for each hour of the day for any time period. You can also create
multiple formats for invoices, accounting statements and price tags. Additional reports include
day-end cash reconciliation work sheets and inventory management. Examine a variety of POS
packages to see which comes closest to meeting your needs.
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With a POS system:

 You can analyze sales data, figure out how well all the items on your shelves sell, and
adjust purchasing levels accordingly.
 You can maintain a sales history to help adjust your buying decisions for seasonal
purchasing trends.
 You can improve pricing accuracy by integrating bar-code scanners and credit card
authorization ability with the POS system.

There are plenty of popular POS software systems that enable you to use add-on devices at your
checkout stations, including electronic cash drawers, bar-code scanners, credit card readers, and
receipt or invoice printers. POS packages frequently come with integrated accounting modules,
including general ledger, accounts receivable, accounts payable, purchasing, and inventory
control systems. In essence, a POS system is an all-in-one way to keep track of your business's
cash flow.

Features to consider in a POS system include the following:

 Ease of use. Look for software with a user-friendly graphical interface.


 Entry of sales information. Most systems allow you to enter inventory codes either
manually or automatically via a bar-code scanner. Once the inventory code is entered, the
systems call up the standard or sales price, compute the price at multiple quantities and
provide a running total. Many systems make it easy to enter sales manually when needed
by letting you search for inventory codes based on a partial merchandise number,
description, manufacturing code or vendor.
 Pricing. POS systems generally offer a variety of ways to keep track of pricing, including
add-on amounts, percentage of cost, margin percentage and custom formulas. For
example, if you provide volume discounts, you can set up multiple prices for each item.
 Updating product information. Once a sale is entered, these systems automatically
update inventory and accounts receivable records.
 Sales tracking options. Different businesses get paid in different ways. For example,
repair or service shops often keep invoices open until the work is completed, so they need

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a system that allows them to put sales on hold. If you sell expensive goods and allow
installment purchases, you might appreciate a loan calculator that tabulates monthly
payments. And if you offer rent-to-own items, you'll want a system that can handle
rentals as well as sales.
 Security. In retail, it's important to keep tight control over cash receipts to prevent theft.
Most of these systems provide audit trails so you can trace any problems.

Each retail business has its own special requirements and needs. Customer tracking, loyalty, size
of order, upselling, mobile transactions, data analysis, gift transactions, inventory control and
more should be considered when choosing the best POS software for your business. Be sure to
prepare a spreadsheet of your needs for an effective selection of retail POS software. Options
may include POS cloud software, in-store mobile POS devices, omni-channel retail sales, mobile
POS printing and a variety of mobile payment options.  

Government Regulations
You are required by law to have a licence for your supermarket business. You obtain the licence
from the city council offices in your area. Below are the steps and fees of obtaining the license

ZRA Registration
Income Tax

 All clients, including individuals, companies, partnerships and cooperatives who want to
venture into any business venture are required to register with ZRA and comply with all
obligations as stipulated in the legislation.

 Once you have a bank account, you can then approach ZRA for registration. You will be
required to complete registration forms depending on the nature of your business
operations. Once registered, you will be issued with a TPIN (TAX PAYER’S PIN) which
acts as the business’ identification number and is used for all transactions with ZRA,
including remittances of tax.

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 After commencing operations, you are required to keep records of all your business
operations and pay VAT on the stipulated dates

 Some businesses, operators are required to pay Presumptive Taxes and this includes
operators of omnibuses, taxi-cabs, driving schools, goods vehicles, hairdressing salons,
informal traders, operators of restaurants or bottle stores, small scale miners,  cottage
industry operators, operators of commercial waterborne vessels used for the carriage of
passengers for profit and fishing rigs.

PAYE

 Every business person who becomes an employer is required to apply to the


Commissioner General for registration within 14 days of becoming an employer.

 The employer will be given the relevant tax deduction tables and informed of his/her
obligations as an employer.
Some of the obligations include:

 Calculation and deduction of PAYE in accordance with the tax deduction tables

 Remittance of PAYE to ZRA within 10 days after the end of the month during which the
amount was withheld. Please note that with effect from 1st September 2010, the
remittance of PAYE was moved from within 10 days after the end of the month during
which the amount was withheld.

 Keeping accounting records for a period of at least six (6) years.

 Submission of the ITF 16 return which contains details on annual earnings, deductions,
credits and PAYE for each employee within 30 days after the end of the year.

 You will note that failure to withhold any amounts which you are required to withhold
renders you liable to the amounts due as well as penalties and interest. Observing these
basic requirements will assist you in running your business professionally and helps
avoid the anxiety and stress associated with noncompliance and having to pay arrears,
interest, fines and penalties.
 

Customs and Excise

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 In the event that you intend to import goods, you are still required to have registered with
ZRA so that you have the TPIN number that will identify you as an importer. You will
need a clearing agent approved and registered with ZRA to handle your importations or
you may register with ZRA to do your own clearances.

 For exports, you will also need an agent to handle the exports or register on your own
with ZRA. 

 You are required to keep reasonable and proper records and books of accounts for all
transactions and maintain records of all the bills of entry, bills of lading, rail notes,
invoices and all other documents required to be accounted for in terms of the Customs
and Excise Act.

Value Added Tax (VAT)

 Any person who carries on trade in taxable supplies must apply to register for VAT

 Completing and submitting VAT returns even if you do not owe ZRA. ZRA will advise
you of the frequency of submitting the returns though most clients submit returns either
monthly or after every two months.

 Advising ZRA of any change in business details, including address, addition of/or change
of partner, cessation of trade, etc.

 Allowing ZRA officials to enter your business premises and examine goods and all
business records.

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Operating Strategy

Source of Products

Most of our products are going to be bought from local suppliers in Zambia, mainly from
Lusaka. We will try to source the products from their direct manufacturers. However, for
products, which are not manufactured in Zambia, we will get them from wholesalers. As our
business grow we may import some products on our own from abroad .

Transportation of Products

We are going to purchase a 1.5 tonne truck which we are going to use to transport products for
supplies.

Pricing of Products

We are going to aim for an average of 30% mark up for our products. This implies that if we buy
stock worth $10 000, we should be able to get revenue of $13 000 from that stock. This margin
will allow our business to be profitable, and it’s realistic given the current trends in the
supermarket industry in Zambia. However, the margin is just the average, meaning that some
products will have a higher margin than 30% while other products will have lower margins than
30%. In pricing our products, we would also check what our competitors are charging, as we
would not want to be regarded as an expensive supermarket shop.

Inventory Control

We will use a software, with combined Point of Sale (POS) system, accounting and inventory
control feature. This will enable us to manage our inventory well, know when to place orders,
carry out our audits easier, and compile our financial accounts easily.

We will have a stock taking exercise done after every two weeks – this will help us understand
which products are “moving” fast off the shelves and which ones need immediate restocking.

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Stock taking can also help us control possible theft by our employees; which has often been
cited as one of the biggest challenges in running a hardware shop.

Hours of Operation

We will be open every day, Monday to Sunday, from 8AM to 7PM. This arrangement is very
convenient to the customers as some of them may not find time to do shopping during the
weekdays, however they can shop during the weekends. These opening hours are the norm with
Zambia grocery shops.

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Tips for running a supermarket business

Steps to take in order to set up your business

Below are the steps which you need to take in order to set up your business

Step 1: You need to have a business plan for your business.

Step 2: If you have chosen a company as the legal structure of your business, then you have to
register the company with the Registrar of Companies in Zambia (PACRA). There are many
consultancy companies which offer those services. The prices for company registration are from
$25-$500 depending with the consultancy company.

Step 3: You have to secure the premises where you are going to operate from. This will involve
negotiating the rentals, signing the lease agreements. You will also have to find the people who
will work for you. You have to buy the equipment you will need for your business e.g.
refrigerators.

Step 4: You will then have to seek the shop license from the city council of where you intend to
operate from. Go to the city council in your area, e.g. if you are in Lusaka you go to Civic Centre
where the City of Lusaka offices are located.

Step 5: After securing the shop license, you can then start operating.

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A supermarket is one of the most familiar business which is not hard to start but the most
demanding part is running it successfully. Every business has its challenges and can be tackled if
you have the right tips. The following are a few tips which can help you run a supermarket
successfully in Zambia:

Pricing strategy

Most of the customers in the retail industry of Zambia are price sensitive as they are many
players in the industry offering the same products .Therefore, you need to choose the most
strategic and innovative pricing strategy such as psychological pricing strategies, so as to attract
more customers in order to survive the stiff competition. Below is an explanation of the different
pricing strategies that you can use for your supermarket business.

High-low pricing

Products offered by the business are regularly priced higher than competitors, but through
promotions, advertisements, and or coupons, lower prices are offered on key items. The lower
promotional prices are designed to bring customers to the store where the customer is offered the
promotional product as well as the regular higher priced products.

Keystone pricing

A retail pricing strategy where retail price is set at double the wholesale price. For example, if a
cost of a product for a retailer is $100, then the sale price would be $200. In a competitive
industry, it is often not recommended to use Keystone Pricing as a pricing strategy due to its
relatively high profit margin and the fact that other variables need to be taken into account.

Loss leader

A loss leader or leader is a product sold at a low price (i.e. at cost or below cost) to stimulate
other profitable sales. This would help the companies to expand its market share as a whole. Loss
leader strategy is commonly used by retailers in order to lead the customers into buying products

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with higher marked-up prices to produce an increase in profits rather than purchasing the leader
product which is sold at a lower cost. When a "featured brand" is priced to be sold at a lower
cost, retailers tend not to sell large quantities of the loss leader products and also they tend to
purchase less quantities from the supplier as well to prevent loss for the firm. Supermarkets
usually apply the strategy of loss leader.

Odd pricing

In this type of pricing, the seller tends to fix a price whose last digits are just below a round
number (also called just-below pricing). This is done so as to give the buyers/consumers no gap
for bargaining as the prices seem to be less and yet in an actual sense are too high, and takes
advantage of human psychology. A good example of this can be noticed in most supermarkets
where instead of pricing at $10, it would be written as $9.99

Penetration pricing

Penetration pricing includes setting the price low with the goals of attracting customers and
gaining market share. The price will be raised later once this market share is gained.

A firm that uses a penetration pricing strategy prices a product or a service at a smaller amount
than its usual, long range market price in order to increase more rapid market recognition or to
increase their existing market share. This strategy can sometimes discourage new competitors
from entering a market position if they incorrectly observe the penetration price as a long range
price.

Penetration pricing strategy is usually used by firms or businesses who are just entering the
market. In marketing it is a theoretical method that is used to lower the prices of the goods and
services causing high demand for them in the future. This strategy of penetration pricing is vital
and highly recommended to be applied over multiple situations that the firm may face. Such as,
when the production rate of the firm is lower when compared to other firms in the market and
also sometimes when firms face hardship into releasing their product in the market due to
extremely large rate of competition. In these situations it is appropriate for a firm to use the
penetration strategy to gain consumer attention

Price discrimination

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Price discrimination is the practice of setting a different price for the same product in different
segments to the market. For example, this can be for different classes, such as ages, or for
different opening times.

Price discrimination may improve consumer surplus. When a firm price discriminates, it will sell
up to the point where marginal cost meets the demand curve. There are 3 conditions needed for a
business to undertake price discrimination, these include:

1. Accurately segment the market


2. Prevent resale
3. Have market power

Psychological pricing

Pricing designed to have a positive psychological impact. For example, selling a product at $3.95
or $3.99, rather than $4.00. There are certain price points where people are willing to buy a
product. If the price of a product is $100 and the company prices it at $99, then it is called
psychological pricing. In most consumer's minds, $99 is psychologically 'less' than $100. A
minor distinction in pricing can make a big difference in sales. The company that succeeds in
finding psychological price points can improve sales and maximize revenue.

Advertising and marketing

Learn how to make your business look more attractive and inviting. Find a proper way of
marketing your business so it stands out and advertise in such a way that your business lures
more clients.

Customer service

Customers must always be given a memorable special treatment so that they will return back
next time. Always make your customers feel welcome and treat them as kings paying attention to
their needs and problems that they face. Employees should be taught how to handle customers as
they are the bedrock of the business.

Cleanliness

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A clean environment improves your employees’ mood and helps them concentrate better at
work. Customers will also feel fresh to step into the supermarket and feel hygienic to buy your
products. It's important that you create a clean, welcoming environment so that customers keep
coming back. Assign someone to carefully manage produce and remove any bad produce
immediately.

Choose the right staff

An excellent staff is key to running a successful supermarket business. You must find smart and
friendly people who will go above and beyond for customers. Consider uniforms so that
customers can easily identify employees.

Be a Part of Your Community

Connect with your community. Sponsor clubs and events. Make the first move by putting out
bins and placing a few items of your own in them. Work with local non-profit organisations to
donate products that you might throw out, but that are still good. Listen to what your community
wants. The most successful supermarkets respond to what their communities need.

Increasing Customer Traffic

Customer traffic is important whether the customers visiting your shop are buying or not. The
best way to achieve high customer traffic levels is to locate your store in high-traffic areas. This
may include business districts or areas close to residential or apartment buildings. Customer
traffic can also be enhanced by providing plenty of parking space and easy access to and from
major roads. Owners can also increase customer traffic by providing proper lighting and security
for those who shop at night. For example, a small supermarket may hire a security guard at night
to patrol the parking lot.

Building Customer Loyalty

Loyal customers are those who regularly buy from your shop. One way to build a repeat
customer base is through loyalty programs. Loyalty programs are designed to reward customers
according to their purchase volumes. These rewards can include coupons on popular items or

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even free products. We are committed to understand and meet the needs of our customers, while
maintaining a customer-focused culture, to deliver a high level of customer satisfaction.

Improving Department Ratings

Customers expect high-quality and exceptional service when shopping for groceries. They expect
the quality and service to be the same whether they are shopping for dairy products or produce.
Grocers can hire marketing research agencies to conduct phone surveys among customers, for
example. Each department may be rated on quality, service, cleanliness and other key factors.
Customers should be encouraged to make comments on their ratings. That way management can
study the survey results and make the necessary changes to upgrade certain departments.

Be Respectful

Your competition is just like you. They worked hard to get where they are, and they fight every
day to keep their business open. They deserve respect as an equal counterpart to your business.
You don’t want to go around bashing them especially in front of customers. Keeping customers
focused on your services makes a stronger impression than focusing on the negative points of
others.

Assess Your Competition

Get to know your competition, but don’t obsess over them. What do they do differently than
you? What are their strengths and weaknesses? Online reviews will be your best resource for
this. Any weakness will be an opportunity for your business to capitalize on. You will also want
to revert to tip number one when it comes to capitalising on a weakness.

Watch Your Pricing

When many businesses feel a huge threat from a competitor they like to look at their pricing. Can
I win over more customers by offering cheaper supermarket services than my competition? The
answer is yes for the short term and no for the long term. The lower price will initially attract
more customers, but most small businesses like supermarket companies don’t charge enough to

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keep their long-term operations afloat. What eventually happens is your supermarket services
start to go downhill, and your customer retention starts to fall.

Understand Your Own Threats

There is not a supermarket business out there that doesn’t have a weakness. Gathering feedback
from your clients is a great way of understanding where your business might need some
improvements. You should make both anonymous and client identifiable surveys so you can
gather both biased and unbiased feedback. The important thing is to not take your client’s
feedback too personally. You may think your supermarket business rocks based on the variety of
entrees you offer. However, with guest feedback you may find out that most of these entrees
taste very poorly. At that point, it might be a good thing for your business to focus on the entrees
that you excel at.

Manage your inventory

Inventory is the main aspect of your business, therefore it needs to be organized, optimised and
kept under control. Keep an account of what is coming in the inventory and what is leaving. Use
software to organize the information and identify trends so you always have what you need in
stock. Below are detailed tips of how to control and manage your inventory.

Inventory Control and Management Tips

Inventory management is the management of inventory and stock. As an element of supply chain
management, inventory management includes aspects such as controlling and overseeing
ordering inventory, storage of inventory, and controlling the amount of product for sale. Simply
put, inventory management is all about having the right inventory at the right quantity, in the
right place, at the right time, and at the right cost.

Every business that sells products must keep close track of its inventory. Even if 1,000 people
are clamouring for your products, it will not matter if you are sold out and waiting the next
shipment of your supply. The basics of inventory control are simple. You need enough on hand

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to satisfy your sales, and not much more than that. You also need to track your inventory closely
enough to know the difference.

1. Begin your inventory system by counting how much of your stock and ancillary supplies
you have on hand.
2. Review your sales records to determine a reasonable expectation of future sales.
Determine which products are the best sellers.
3. Analyse your inventory counts to ensure that you can service the sales you can expect.
4. Track your sales so you know how your inventory is dwindling, and when you need to
resupply. The simplest way to do this is at the point of sale, by using your registers to
track what is being sold. At the end of each sales day, the registers will be able to tell you
exactly how many items were sold. This is far easier--and cheaper in terms of labour--
than manually redoing a count regularly.
5. Place your orders so your resupply arrives before you run out. These orders must take
into account the turnaround time of your suppliers. Making purchases too early depletes
your cash on hand, and ties it up in inventory value, which does not become liquid until
you have made another sale. Your bottom line will be healthier if your excess inventory
is just enough to handle sales fluctuations, but no larger than that.
6. You should balance the need not to overstock, thus being illiquid, and avoiding high
transport costs associated with ordering items frequently

Finding the Right Inventory Availability Balance

You will have limited resources at your disposal, so you will need to keep inventory to optimum
levels in order to remain profitable. The unit cost of some products is high, and oversupply can
have a serious impact on the bottom line. Conversely, having real-time access and insights into
your product availability is critical to meet volatile customer demand, and having safety nets in
place (such as automated safety stock, also called buffer stock) can offset the risk of running out
of inventory.

Keep Product Availability High for High Demand Products

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You need to react quickly to changes in the market in order to satisfy customer demand. This
means that you must keep adequate stocking levels to fill orders, as back orders and delays can
lead to lost sales opportunities and harm the reputation of the business.

Ideally, you should have a stock taking exercise done after every two weeks – this will help you
understand which products are “moving” fast off the shelves and which ones need immediate
restocking.

Stock taking can also help you control possible theft by your employees; which has often been
cited as one of the biggest challenges in running a supermarket.

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Marketing Strategies
We realize that the success of our company will have to be achieved by doing more than serving
quality products and providing pleasant service. We will utilize a marketing plan to build
customer traffic. We will continually strive to win more customers by being proactive rather than
reactive in our marketing efforts and stay current with popular industry trends. Our marketing
strategy is based upon the marketing mix, which are the 4 p’s of marketing, which are product
(service), price, promotion and place (distribution).

Product/Service

Our supermarket offers a wide variety of products. We will provide the best service to our
customers; we listen to their needs and offer solutions to their problems. We are focused on
providing the best service with the highest level of satisfaction for the customers. We will do
anything to fulfil the customers’ expectations and needs; with a variety of offers to choose from
we are sure that our clients will be happy to visit us.

Our supermarket will be a self-service shop offering a wide variety of products. Customers will
be pleasantly surprised at how attentive our supermarket is in regards to their needs. The
business operates on the assumption that it will do whatever is reasonably necessary to keep the
customer happy.  This reflects the notion that if the customer is kept happy; long-term profits are
ensured.

Price

Our supermarket items are moderately priced. While we are not striving to be the lowest priced
supermarket around, we are aiming to be the value leader. The quality of our commodities will
match the prices we charge. Business owners or management in the supermarket industry can
draw on many price strategies to maximize profits.

Promotion

Our supermarket business will use various ways of promoting our company so as to gain more
customers and increase general awareness for our company and the products we offer.

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Word of Mouth

We believe that the best form of advertising is still "word-of-mouth." By providing an


entertaining environment, with unbeatable quality at an affordable price in a clean and friendly
environment, we will be the talk of the town. Therefore, the execution of our concept is the most
critical element of our plan.

Community Involvement

Our supermarket team will also be active in the local community and we plan to take an active
role by participating, sponsoring, and donating to local churches, sports clubs or teams in the
market area. We know being part of our community is a big responsibility. We respect all
individuals regardless of age, race, gender or religious beliefs. We will give back to the
community for our success belongs to them.

Fliers

We will use colorful, informative fliers to increase awareness of our business in Lusaka. These
fliers will be distributed to random people in the CBD, especially close to where we are located.
We hope to get potential customers from the distribution of fliers.

Newspapers

We will place adverts in the Sunday mail so that more people can be aware of our supermarket
business. Placing our advert in the Sunday mail will ensure that our advert will be read the whole
week as it is a weekly newspaper. It will also ensure that we reach all the age groups as it is a
family newspaper. It also has a wide coverage in Zambia and it is read by many people.

Public Transport Advertising

We will advertise our supermarket business on commuter minibuses which commute from
Lusaka CBD to different locations in Lusaka. This will make more people aware of our
supermarket.

Internet Marketing

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Our company will have a dedicated website. It will be the virtual business card and portfolio for
the company, simple, contemporary and well designed. The site will offer products,
prices, reviews and happenings at our company. We will also have active social media accounts
on Facebook, Twitter and LinkedIn. The internet is a very powerful marketing tool. We will also
advertise our products on many Zambia advertisement websites. An increasing number of
Zambians are using the internet every day. These internet marketing strategies will make more
people aware of our services and products.

Major billboard/ Signage

We will put up a large billboard to attract customers to our business. An extra vivid and
attractive signage on the business premises will also be put up to attract customers. 

Other Strategies

Ongoing operational excellence

Our company will continually focus on improving the customer experience, the quality and skills
of its workforce, and the speed of service. Improving these areas drives up revenue, reduces costs
and enhances profitability.

Customer Database

We will have a customer database which we will continually update. We will also offer a weekly
or monthly drawing for our customers to win our company’s T-shirts.

Seasonal Campaigns

Supermarket owners might be under the impression that seasonal campaigns can only happen
during Christmas Holidays. Well – you no longer have to wait in-between seasons for Christmas
to come around for your supermarket to cash in. Creating marketing campaigns around Easter,
Valentine’s Day, Mother’s and Father’s Day can help you to earn year-round, with much smaller
interims between seasonal days.

Advertise Multi-Use Products

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Often supermarkets will make the majority of their revenue from existing customers, who
already know the quality of the shop and the brands they offer. Because of this, the majority of
new sales and increase in sales will come from convincing existing customers to spend more –
rather than attracting new customers. If you advertise a product as having more than one
purpose, you will give people an extra incentive to buy.

Sales Strategy
We will hire experts who have a good understanding of the supermarket and grocery industry to
help us develop marketing strategies that will help us achieve our business goal of gaining a
significant market share. To stay in business, we must make sure our sales value is greater than
the cost of goods sold and the operating costs. Our strategy is simple; we intend to succeed by
giving our customers a combination of a wide range of goods in an appealing environment, with
excellent customer service, whether on their first visit or their hundredth.

Our marketing strategies are designed to get critics and initial customers into our doors. Our
sales strategies must take the next step and encourage customers to become repeat customers,
and to tell all their friends and acquaintances about the great experiences they just had at our
supermarket.

Our company sales strategy requires consistently high quality products, wide range of goods,
superior service, speed, and atmosphere. We can accomplish this by:

 Hiring employees who genuinely enjoy their jobs and appreciate our company unique
offerings

 Continually assessing the quality of all aspects mentioned above, and immediately
addressing any problems

 Interacting with our customers personally, so they know that their feedback goes directly
to the owners.

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Market Analysis
Demand
The demand of supermarket services in Zambia is very high. The MMD government in 2008
stabilized the economy, and the disposable income increased. The increased urbanization is
leading to increased demand in the supermarket sector. More people are flocking to urban areas
from rural areas, and pushing the demand of supermarket services upwards. Flexibility in
payment options has also increased the demand of supermarket services as some of the players
do not accept other payment methods such as mobile money whilst others charge different rates
depending on the mode of payment.

Due to the high competition in the sector, supermarket are now offering various promotions,
variety of goods, and other marketing techniques, as a way to lure customers, and as a result the
demand for supermarket services in increasing.

Market segmentation
Fast and furious

These consumers want to complete their shopping as quickly as possible. They are habitual
buyers and are loyal to the supermarket and brands, due to their need to make their supermarket
experience highly time-efficient. They tend to be busy people (perhaps with family or career –
making them mostly in the 30-50 years age range). This segment wants to find items quickly and
be able to get in and out of the supermarket as fast as possible. Therefore, their prime need is for
convenience.

Budget conscious

Budget conscious consumers are limited to a fixed budget for their shopping purchases. And, as
a result, tend to seek out lower priced goods or discounted items. They tend to be somewhat
loyal to lower-priced brands, which often happen to be private label brands. However, they are
happy to switch for discounted brands (to take advantage of sales promotions).They are more
likely to be low-income families and retirees. This market segment is highly price-sensitive and
they seek out retailers who are discounters and that adopt an everyday low pricing (EDLP)

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structure. They are less likely to frequent grocery stores and value savings over time. They tend
to be significant users of coupons and loyalty programs.

A day out

These consumers enjoy shopping and are happy to spend large amounts of their time browsing
and looking through stores. In particular, they enjoy bargains and finding new and unusual
merchandise. They vary by demographic profile, but are generally more likely to be female and
often will shop in social groups. This group of consumers like stores that are interesting in their
layout and design. They also desire refreshment facilities (such as cafes) as they spend long
periods shopping.

Variety seekers

This market segment consist of innovators and early adopters. This segment likes to switch
around and often try new things. In a supermarket setting, they like new tastes and flavors of
foods. They are quite responsive to in-store demonstrations (free samples). Typically, these
consumers are younger (under 50 years) and usually of a higher social class. Variety seeker, as
their segment profile nickname suggests, like supermarkets with a broad range of products to
choose from. They also enjoy new products and offerings.

Gourmet focus

This target market are seekers of higher quality products (and foods in supermarkets) and are
willing to pay a premium price. They tend to equate “value” with higher quality and some of
these consumers derive social status from their purchasing behavior. Typically, these consumers
are middle to upper social class, underpinned by higher levels of both education and employment
status. This potential target market segment has a preference for higher status brands. However,
in the food product category, these brands are probably not mainstream and may be considered
niche brands. They also enjoy variety of products and will often experiment with purchases.

Smart shoppers

These consumers take pride in their ability to shop. They see themselves as being quite effective
in determining value and “spotting a bargain”. They are not the same as the budget-conscious

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market segment above, as they do not always look for the cheapest product. Instead they are
looking for the best value product offer. This may be a major brand on discount, or a two-for-one
offer, or a larger packaging size, and so on. This market segment like to generate self-esteem
from their shopping success of obtaining bargaining. As a result, they dislike consistent product
and pricing offers. Instead, these consumers need a variety of sales promotions and price
differences between stores. This allows them to seek out the best offers in the marketplace.

Competition and Buying Patterns

Customers consider a lot of factors when choosing supermarket services. The high income
earners are naturally attracted to high supermarket services like Pick n Pay, Game stores, which
corresponds to their class while medium to low income earners are attracted to low end
supermarkets like Choppies, wholesalers, and also tuck shops. Customers, especially the low and
medium income earners are price sensitive thus, they will consider the prices offered by the
supermarkets. Location is another important factor. Customers tend to buy from supermarkets
whose location is convenient to them.

Supermarkets with good customer care are preferred by customers than those with bad customer
care. Once a company has bad customer care, it will lose customers. Quality of products is also
another important factor. High quality and less expensive commodities are preferred by
customers. Customers also want healthy food thus they consider the hygiene of the supermarket
and cleanliness of workers.

Customers also prefer to buy from supermarkets where there are promotions and special offers.
A little competition is healthy, but don’t let it cost you your business.

Our competitive advantage


If you are starting your own supermarket, you inevitably have to compete with large national and
regional chains. Your store doesn't have the same buying power with suppliers as the large retail
outlets, but that doesn't mean you can't successfully compete on other factors. Establishing a
loyal client base means your store doesn't have to compete on price. Offer products not easily
found in chain stores like Shoprite, Pick and Pay and Choppies and of course, provide superior
customer service.

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You can consider importing inventory from neighbouring countries such as Tanzania, Botswana,
Namibia etc. Suppliers in these countries offer a wide range of goods. Staff members should be
knowledgeable about the types of products you are offering, where the products are located in
the store and the ingredients in products made on premises if there are any. Special orders should
be accommodated with minimal or no additional charges. We will ensure that we have a wide
range of products from different manufacturers available in our store at all times. It will be
difficult for customers to visit our store and not find the product that they are looking for. Our
excellent customer service, culture, online store, various payment options and highly secured
facility will serve as a competitive advantage for us.

Lastly, our employees will be well taken care of, and their welfare package will be among the
best within our category (start-up supermarkets and grocery stores) in the industry meaning that
they will be more than willing to build the business with us and help deliver our set goals and
achieve all our aims and objectives. We will also provide good working conditions and
commissions to freelance sales agents that we will recruit from time to time.

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Profitability of Supermarket business

The supermarket business is a low profit margin industry, with the average net profit margin for
supermarkets typically ranging from 3 to 10 percent. The average markup for supermarket
products is 15%-40%. The profitability will depend on the products you are selling, your pricing
strategy and the volumes. It is of great importance to consider the profit margins of your
products, as this is a business and it has to be profitable. You should also strive to push volumes
up, in order to increase your revenue and profits. By pushing volumes, you will be able to get
enough revenue to cover your fixed costs which include salaries and rentals. It’s of great
importance to have many customers in this business.

Supermarkets and grocery stores generally have low profit margins but high asset turnover. The
bulk of their assets exist as inventory. Because supermarkets typically lease their buildings, their
fixed assets consist of shelving, lighting, refrigerators and other fixtures required to preserve the
perishables. Supermarkets require a large, varied inventory to satisfy customers and their
demands. In addition, some of the inventory is perishable, meaning that, if it does not sell within
a specific time frame, the store must discard the inventory.

In addition to customer sales, high turnover can result from spoilage, theft and accidents. For
example, if a customer knocks over a can of tomato sauce and the can bursts open, most stores
do not charge the customer. Turnover due to customer demand drives revenue; turnover due to
theft and spoilage drives expenses. Tracking software can also reduce theft as can the installation
of cameras and a video monitoring system

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Industry Analysis

Players in the Industry

In Zambia, the supermarket industry is largely concentrated by big retail outlets namely Shoprite
Zambia, Pick n Pay supermarkets and Choppies supermarkets. Revenue of these big operators
has been increasing signalling massive opportunities for new entrants to tap in the lower end of
the market not catered for by these big supermarkets. One of the major challenge in this industry
is the proliferation of unlicensed informal vendors who operate in front of supermarkets.

The low margins on many supermarkets items has meant that retail players are hard pressed to
generate a high volume of sales to make sufficient profits. As such local supermarkets are
increasingly employing their private label products to compete with more expensive branded
products or imported commodities. Such a strategy has allowed supermarkets to expand their
networks with more stores openings in different locations across the country to match
consumers’ needs and expectations.

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SWOT Analysis

The following SWOT analysis captures the key strengths and weaknesses within the company,
and describes the opportunities and threats faced by our company.

Strengths

 The owner has supermarket industry experience, he already has established a customer
market and approved vendors
 Our location is visible, highly accessible and has a lot of parking space
 By hand selecting our employees we will strive to offer unsurpassed service when
compared to our larger competitors
 Superior customer service
 Friendly and helpful Staff
 Affordable prices and good quality of products offered
 Monthly coupon and special plans to attract customers
 New promotional deals which connects with the consumers

Weaknesses

 Difficulty in recruiting and retaining quality employees


 Existence of competitors who purchase goods at lower prices from manufacturers and
producers because of their buying power
 Limited capital which affects our ability to expand our operations
 Lack of reputation in comparison to our competitors
 Product mix and shelving is relatively lesser than bigger brands
 Low geographic reach of the brand compared to other players
 Higher costs of operation and increasing inventory management costs
 Low flexibility in pricing

Opportunities

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 Economic growth, which lead to higher disposable incomes and greater demand for
groceries
 Availability of new locations where the business can open more outlets
 Market potential in online retail shopping
 Tie-ups with international players to boost business
 Reaching out to newer customers through advertising and also new locations

Threats

 Government mandates (supermarket operation, food safety, health, sanitation, safety, fire
at the local level)
 Rising operating costs
 Consumers that believe that meals at home are healthier than those prepared in
supermarkets
 Instability in the Zambian economy
 Competition for premises with other stores such as hardware, clothing boutiques etc
 Economic downturn, high rate of inflation
 Weak economy affects the sales tremendously
 Intense competition from the existing competitors

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PEST Analysis
We understand that our supermarket business is affected by Political, Economic, Social and
Technological factors. Below we look at how some of those external factors may affect our
supermarket business.

Political factors

The government may impose a new tax or duty due to which entire revenue generating structures
of the organization might change. Political factors include tax policies, fiscal policy, trade tariffs
etc. that a government may levy and it may affect the business environment to a greater extent.
The tax policies of the Government of Zambia will affect the operations of our supermarket
business. If the government of Zambia increases the taxes for supermarket companies, it will
affect the profitability of our business. Trade restrictions and tariffs will also affect our business,
some products are from outside Zambia. Political instability like wars, protests will affect our
business and that of our clients, and we may end up failing to conduct business due to such
instability. Changes in employment laws, environmental regulations, safety regulations
especially those targeted to the retail sector will affect the operations of our business. We expect
political stability to continue in Zambia, and we do not expect any significant changes in the tax
policies of the government of Zambia.

Economic factors

Inflation crisis in Zambia which is currently in Zambia will likely continue for the coming years.
This has caused high interest rates. The high interest rates affect the cost of capital, the rate of
interest being directly proportionate to the cost of capital. Rate of inflation determines the rate of
remuneration for employees and directly affects the prices of our services. Again, the proportion
between the inflation rate and wages/prices is indirect. Economic trends act as an indicator of the
sustainability and profitability of our business in Zambia and will help us determine the right
marketing strategy. These factors point to economic growth of our Zambian economy, which
will mean more business for the industry as the economy becomes more active and more people
get higher disposable income.

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Social factors

Due to a variety of social changes, trends indicate that customers in Zambia have moved towards
bulk shopping and one-stop shopping. Therefore, supermarkets have increased the number of
non-food items offered for sale. The type of goods and services demanded by consumers is
mostly influenced by their beliefs and attitudes which, in turn, are influenced by social
conditioning. Because customers are becoming more aware of health issues, their approach
towards food is changing constantly. Most supermarkets in Zambia are adapting to these changes
by accommodating the demand for organic products. Higher population growth has also led to
higher demand for our products

Technological factors

A good technical infrastructure would lead to better production, procurement and distribution
logistics, resulting in reduced wastage and lower costs. The advancements in technology have
brought various new opportunities for supermarket. Two of the most distinct ones include,
firstly, the development and introduction of online shopping. Secondly, self-service checkout
points have provided convenience and ease for customers, which in turn have reduced labour
costs.

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Financial Statements
Start-up Costs

Item Value
Fixed Assets Purchase
Shop Furniture $1,500.00
Refrigerators $1,500.00
Truck $8,000.00
POS System And Computers $2,000.00
Total Fixed Assets $13,000.00

Working Capital
Stock $10,000.00
Utility bills $200.00
Rentals $1,500.00
Licences $800.00
Fuel $200.00
Marketing And Advertising $250.00
Insurance $2,000.00
Other Costs $300.00
Total Working Capital $15,250.00

Total Startup Costs $28,250.00

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Funding Required

Total Startup Capital $28,250.00


Owner Contribution $12,250.00
Loan Required $16,000.00

The table above shows that the total capital required to do this project is $28,250.00. The owners
of the business will contribute $12,250 of their own funds into the business. We thus require a
loan of $16,000.

Loan Repayment
Loan sought $16,000.00
Repayment term (Months) 36
Interest Rate per annum 15%
Monthly Repayment $554.65

The table above shows that we will be making a monthly repayment of $554.65 for 3 years to
repay the loan.

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Pro Forma Income Statement

Year 1 Year 2 Year 3

Revenue $360,000.00 $432,000.00 $518,400.00


Cost of goods sold $276,923.08 $332,307.69 $398,769.23
Gross Profit $83,076.92 $99,692.31 $119,630.77
Operating Expenses
Salaries $22,800.00 $26,400.00 $31,800.00
Rentals $18,000.00 $18,000.00 $18,000.00
Licenses $800.00 $800.00 $800.00
Fuel $2,400.00 $2,400.00 $2,400.00
Advertising and $3,000.00 $3,000.00 $3,000.00
Marketing
Insurance $2,000.00 $2,000.00 $2,000.00
Utility Bills $2,400.00 $2,400.00 $2,400.00
Other Costs $3,600.00 $3,600.00 $3,600.00
Depreciation $2,600.00 $2,600.00 $2,600.00
Interest Paid $2,094.88 $1,361.70 $510.66
Total Operating Expenses $59,694.88 $62,561.70 $67,110.66
Net Profit Before Tax $23,382.05 $37,130.61 $52,520.11
Tax (25%) $5,845.51 $9,282.65 $13,130.03
Net Profit After Tax $17,536.53 $27,847.96 $39,390.09

Assumptions

Initial Stock Value $10,000.00


Expected Average Monthly $30,000.00
Revenue
Average Markup 30%
Annual Revenue Growth 20%

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Employees (Year 1)
Position Number of Monthly Total Salary
Employees Salary
Cashier/Till operator 2 $300.00 $600.00
Shop Assistants 2 $150.00 $300.00
Logistics & Stock Controller 1 $300.00 $300.00
Security Guard 1 $200.00 $200.00
Manager/Accountant 1 $500.00 $500.00
Total Monthly Salaries $1,900.00
Annual Salary $22,800.00

Employees (Year 2)
Position Number of Monthly Total Salary
Employees Salary
Cashier/Till Operator 3 $300.00 $900.00
Shop Assistants 2 $150.00 $300.00
Logistics & Stock Controller 1 $300.00 $300.00
Security Guard 1 $200.00 $200.00
Manager/Accountant 1 $500.00 $500.00
Total Monthly Salaries $2,200.00
Annual Salary $26,400.00

Employees (Year 3)
Position Number of Monthly Total Salary
Employees Salary
Cashier/Till Controller 4 $300.00 $1,200.00
Shop Assistants 3 $150.00 $450.00
Logistics & Stock Controller 1 $300.00 $300.00
Security Guard 1 $200.00 $200.00
Manager/Accountant 1 $500.00 $500.00
Total Monthly Salaries $2,650.00
Annual Salary $31,800.00

Operating expenses Per month Per Year


Rentals $1,500 $18,000.00
Licenses   $800.00
Fuel $200 $2,400.00
Marketing And Advertising $250 $3,000.00
Insurance   $2,000.00

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Utility Bills $200 $2,400.00
Other Costs $300 $3,600.00

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Monthly Cash Flow
Year 1
Month Month Month
  Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 10 11 12 TOTAL
                           
CASH INFLOWS  
Equity Capital
Injection 12,250 - - - - - - - - - - - 12,250

Loan Capital 16,000 - - - - - - - - - - - 16,000

Sales 24,000 25,200 26,400 27,600 28,800 30,000 33,000 33,000 33,000 33,000 33,000 33,000 360,000

  -

Total Receipts 52,250 25,200 26,400 27,600 28,800 30,000 33,000 33,000 33,000 33,000 33,000 33,000 388,250
                           
CASH OUTFLOWS  

Stock 18,462 19,385 20,308 21,231 22,154 23,077 25,385 25,385 25,385 25,385 25,385 25,385 276,923

Salaries 1,900 1,900 1,900 1,900 1,900 1,900 1,900 1,900 1,900 1,900 1,900 1,900 22,800

Rentals 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000

Licenses 800 - - - - - - - - - - - 800

Fuel 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Marketing And
Advertising 250 250 250 250 250 250 250 250 250 250 250 250 3,000

Insurance 2,000 - - - - - - - - - - - 2,000

Utility Bills 200 200 200 200 200 200 200 200 200 200 200 200 2,400

Other Costs 300 300 300 300 300 300 300 300 300 300 300 300 3,600

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Loan Repayment 555 555 555 555 555 555 555 555 555 555 555 555 6,656

Shop Furniture 1,500 - - - - - - - - - - - 1,500

Refrigerators 1,500 - - - - - - - - - - - 1,500

Truck 8,000 - - - - - - - - - - - 8,000


POS System And
Computers 2,000 - - - - - - - - - - - 2,000

Tax QPD Payments - - 585 - - 1,461 - - 1,754 - - 2,046 5,846

  -

Total Payments 39,166 24,289 25,797 26,135 27,058 29,443 30,289 30,289 32,043 30,289 30,289 32,335 357,424

SURPLUS / (DEFICIT) 13,084 911 603 1,465 1,742 557 2,711 2,711 957 2,711 2,711 665 30,826
OPENING BANK
BALANCE 13,084 13,995 14,598 16,062 17,804 18,361 21,072 23,782 24,739 27,450 30,161  

CLOSING BALANCE 13,084 13,995 14,598 16,062 17,804 18,361 21,072 23,782 24,739 27,450 30,161 30,826 30,826

Year 2
Month Month Month Month Month Month Month Month Month Month Month Month
  13 14 15 16 17 18 19 20 21 22 23 24 TOTAL
                           
CASH INFLOWS  

Sales 36,000 36,000 36,000 36,000 36,000 36,000 36,000 36,000 36,000 36,000 36,000 36,000 432,000

  -

Total Receipts 36,000 36,000 36,000 36,000 36,000 36,000 36,000 36,000 36,000 36,000 36,000 36,000 432,000
                           
CASH OUTFLOWS  
Stock

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27,692 27,692 27,692 27,692 27,692 27,692 27,692 27,692 27,692 27,692 27,692 27,692 332,308

Salaries 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 26,400

Rentals 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000

Licenses 800 - - - - - - - - - - - 800

Fuel 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Marketing And
Advertising 250 250 250 250 250 250 250 250 250 250 250 250 3,000

Insurance 2,000 - - - - - - - - - - - 2,000

Utility Bills 200 200 200 200 200 200 200 200 200 200 200 200 2,400

Other Costs 300 300 300 300 300 300 300 300 300 300 300 300 3,600

Loan Repayment 555 555 555 555 555 555 555 555 555 555 555 555 6,656

Tax QPD Payments - - 928 - - 2,321 - - 2,785 - - 3,249 9,283

  -

Total Payments 35,697 32,897 33,825 32,897 32,897 35,218 32,897 32,897 35,682 32,897 32,897 36,146 406,846

SURPLUS / (DEFICIT) 303 3,103 2,175 3,103 3,103 782 3,103 3,103 318 3,103 3,103 (146) 25,154
OPENING BANK
BALANCE 30,826 31,129 34,232 36,407 39,510 42,613 43,395 46,498 49,601 49,919 53,022 56,125  

CLOSING BALANCE 31,129 34,232 36,407 39,510 42,613 43,395 46,498 49,601 49,919 53,022 56,125 55,980 55,980

Year 3
Month Month Month Month Month Month Month Month Month Month Month Month
  25 26 27 28 29 30 31 32 33 34 35 36 TOTAL
                           
CASH INFLOWS  
Sales

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43,200 43,200 43,200 43,200 43,200 43,200 43,200 43,200 43,200 43,200 43,200 43,200 518,400

  -

Total Receipts 43,200 43,200 43,200 43,200 43,200 43,200 43,200 43,200 43,200 43,200 43,200 43,200 518,400
                           
CASH OUTFLOWS  

Stock 33,231 33,231 33,231 33,231 33,231 33,231 33,231 33,231 33,231 33,231 33,231 33,231 398,769

Salaries 2,650 2,650 2,650 2,650 2,650 2,650 2,650 2,650 2,650 2,650 2,650 2,650 31,800

Rentals 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000

Licenses 800 - - - - - - - - - - - 800

Fuel 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Marketing And
Advertising 250 250 250 250 250 250 250 250 250 250 250 250 3,000

Insurance 2,000 - - - - - - - - - - - 2,000

Utility Bills 200 200 200 200 200 200 200 200 200 200 200 200 2,400

Other Costs 300 300 300 300 300 300 300 300 300 300 300 300 3,600

Loan Repayment 555 555 555 555 555 555 555 555 555 555 555 555 6,656

Tax QPD Payments - - 1,313 - - 3,283 - - 3,939 - - 4,596 13,130

  -

Total Payments 41,685 38,885 40,198 38,885 38,885 42,168 38,885 38,885 42,824 38,885 38,885 43,481 482,555

SURPLUS / (DEFICIT) 1,515 4,315 3,002 4,315 4,315 1,032 4,315 4,315 376 4,315 4,315 (281) 35,845
OPENING BANK
BALANCE 55,980 57,494 61,809 64,810 69,125 73,440 74,472 78,786 83,101 83,476 87,791 92,106  

CLOSING BALANCE 57,494 61,809 64,810 69,125 73,440 74,472 78,786 83,101 83,476 87,791 92,106 91,825 91,825

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Pro Forma Annual Cash Flow
Year 1 Year 2 Year 3
Opening Balance $0.00 $30,825.67 $55,979.58

Cash Sales $360,000.00 $432,000.00 $518,400.00


Subtotal Cash from $360,000.00 $432,000.00 $518,400.00
Operations

Additional Cash
Received
Equity Capital $12,250.00 $0.00 $0.00
Loan Capital $16,000.00 $0.00 $0.00
Subtotal Cash Received $28,250.00 $0.00 $0.00

Cash Expenditures
Cost of goods $276,923.08 $332,307.69 $398,769.23
Operating Expenses $55,000.00 $58,600.00 $64,000.00
Subtotal Spent on $331,923.08 $390,907.69 $462,769.23
Operations

Additional Cash Spent


Taxes $5,845.51 $9,282.65 $13,130.03
Loan Repayment $6,655.74 $6,655.74 $6,655.74
Purchase of Fixed Assets $13,000.00 $0.00 $0.00
Subtotal Additional $25,501.25 $15,938.40 $19,785.77
Cash Spent

Net Cash Flow $30,825.67 $25,153.91 $35,845.00


Cash Balance $30,825.67 $55,979.58 $91,824.58

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Pro Forma Balance Sheet

Year 1 Year 2 Year 3


Long Term Assets
Fixed Assets $13,000.00 $13,000.00 $13,000.00
Accumulated Depreciation $2,600.00 $5,200.00 $7,800.00
Total Long Term Assets $10,400.00 $7,800.00 $5,200.00
Current Assets
Cash $30,825.67 $55,979.58 $91,824.58
Other Current Assets $0.00 $0.00 $0.00
Total Current Assets $30,825.67 $55,979.58 $91,824.58
TOTAL ASSETS $41,225.67 $63,779.58 $97,024.58

EQUITY AND
LIABILITIES
Equity
Shareholders Equity $29,786.53 $57,634.49 $97,024.58
Total Equity $29,786.53 $57,634.49 $97,024.58
Liabilities
Loan Outstanding $11,439.13 $6,145.09 $0.00
Other Liabilities $0.00 $0.00 $0.00
Total Liabilities $11,439.13 $6,145.09 $0.00
TOTAL EQUITY AND $41,225.67 $63,779.58 $97,024.58
LIABILITIES

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Breakeven Analysis

Break-even Analysis Value


Mark Up 30%
Fixed Costs/year $59,694.88
Break-even point/year $258,677.80
Break-even point/month $21,556.48

The break even analysis shows the value of goods we should sell for our revenue to cover all our
costs. Thus in order to break even, we should have a monthly revenue of at least $21,556.48.

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Risk analysis

New or more inflexible Zambian government regulations could adversely affect our
business.

New laws or regulations that impose additional regulatory requirements on us could increase our
cost of doing business or restrict our actions, causing our results of operations to be adversely
affected.

Intense forces beyond our control

Theft is a common risk that unites all retailers, but supermarkets can have a harder time dealing
with theft due to the nature of their products and business. Unlike retailers that sell electronics or
other expensive goods, retail grocers don’t usually have high-tech security systems. This makes
theft more likely and easy to conceal. Additionally, many supermarkets are embracing self-
checkout technologies to help customers save time. Unfortunately, the convenience of self-
checkout may also result in more instances of theft. We will make sure that our store is equipped
with security cameras and performs regular inventory counts. We will also have a security guard
by the door to check all goods that have been purchased by the customers.

Contaminated products

We will make sure that our business is protected in the event that one of the products we sell
ends up making one of our customers sick. Goods that need to be regularly checked are
perishable goods such as cooked food, vegetables, fruits and other pre-packed products. You
should make sure any customers who purchased it know they can return the item for a refund.

Slip and fall incidents affect most businesses

We will often stress the importance of having a good risk management program to help avoid
these types of incidents. Like any other supermarket business, we are already at risk due to wet
and icy surfaces both inside and outside the premises that arise as a result of the weather. But
these risks are even more present in grocery retail locations due to the nature of the business.
Produce falling on the ground and customers accidentally dropping or spilling products can also

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create hazards for other shoppers. Beyond that, the best response is to be proactive about
keeping your supermarket safe from hazards. Having a spot check at regular intervals is always
recommended. Also having a security guard who is able to witness and make records if an
incident does occur, can help.

Decline in economic growth

Retailers are often sensitive to economic conditions because they sell items typically purchased
with disposable income. When economic conditions decline and consumers have less spending
power, retail businesses often experience hardship. Opening a retail store carries the risk of poor
timing.

Severe Competition from big box stores.

Unfortunately, there is no insurance that protects you from a big box retailer opening up a store
down the street from you. Regardless of the type of store you run, you're competing with major
retailers. To protect your business, you should remember to stay adaptable.

Escalating Labour cost

Controlling operational costs is certainly one of the biggest challenges that any retailer faces.
Since supermarkets typically run on extremely low profit margins, the need for a lean and
efficient operation is critical. Labour costs are the single greatest controllable expense. Some
supermarket managers have a tendency to cut labour during tough times. If labour cost reduction
is not managed properly, customer service and store conditions may suffer. This, of course,
results in lost customers and sales. Retailers that do not properly budget for necessary training
programs will most likely see both increased employee turnover, which becomes very costly
over time, as well as reduced customer service, due to a lack of training. Controlling operational
costs is certainly one of the biggest challenges that any supermarket owner faces.

Lack of access to accurate, timely financial information

Running a supermarket can be challenging with a constant need to access more relevant financial
and operational information about the business. With increased competition from superstores, the

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grocery operators are required to provision for high-level strategic analysis of the sales and
margins by store department. This requires access to not only experienced accountants but also
best-in-breed technology including business intelligence and analytics. Most of the small
business owners have access to neither the resources nor the technology to address these
concerns.

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Potential Sources of Finance
Equity Financing
Equity financing means exchanging a portion of the ownership of the business for a financial
investment in the business. The ownership stake resulting from an equity investment allows the
investor to share in the company’s profits. Equity involves a permanent investment in a company
and is not repaid by the company at a later date.

Personal Savings
Not everybody has savings but if you do, they are a good place to start. If you don’t have savings
yet, now is a good time to start. Your timeline for starting your business may be six months to a
year anyway, so if you start putting money away now, you’ll have at least a starting point from
which to raise more cash. Starting a business is about sacrifice and so you should cut down your
lifestyle as far as possible and save the cash, you’ll be glad you did.

Come up with a savings plan, save a certain percentage e.g. 20% of your salary/income towards
start-up capital for your business. Open a savings account with a reputable bank. Be disciplined.
Cut your expenses. Yes, with proper planning you can do it. Yes, it will take time, but it’s worth
it. A year from now you will wish you had started today.

Friends and Relatives


Founders of a start-up business may look to private financing sources such as parents or friends.
It may be in the form of equity financing in which the friend or relative receives an ownership
interest in the business. However, these investments should be made with the same formality that
would be used with outside investors.

Venture Capital
Venture capital refers to financing that comes from companies or individuals in the business of
investing in young, privately held businesses. They provide capital to young businesses in
exchange for an ownership share of the business. Venture capital firms usually don’t want to
participate in the initial financing of a business unless the company has management with a
proven track record. Generally, they prefer to invest in companies that have received significant

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equity investments from the founders and are already profitable. In Zambia, we have few if any
venture capital firms.

Angel Investors
Angel investors are individuals and businesses that are interested in helping small businesses
survive and grow. So their objective may be more than just focusing on economic returns.
Although angel investors often have somewhat of a mission focus, they are still interested in
profitability and security for their investment. So they may still make many of the same demands
as a venture capitalist. Angel investors may be interested in the economic development of a
specific geographic area in which they are located. Angel investors may focus on earlier stage
financing and smaller financing amounts than venture capitalists. Angel investors are hard to
come by in Zambia. To get one, you need strong networking at many business functions where
you can try to befriend the wealthy.

Debt Financing
Debt financing involves borrowing funds from creditors with the stipulation of repaying the
borrowed funds plus interest at a specified future time. For the creditors (those lending the funds
to the business), the reward for providing the debt financing is the interest on the amount lent to
the borrower.

Debt financing may be secured or unsecured. Secured debt has collateral (a valuable asset which
the lender can attach to satisfy the loan in case of default by the borrower). Conversely,
unsecured debt does not have collateral and places the lender in a less secure position relative to
repayment in case of default.

Debt financing (loans) may be short term or long term in their repayment schedules. Generally,
short-term debt is used to finance current activities such as operations while long-term debt is
used to finance assets such as buildings and equipment.

Friends and Relatives


There are a number of pitfalls associated with borrowing from friends and family; on the positive
side, such borrowing arrangements can often be made on more attractive terms than might
otherwise be available from a more formal source of funding. For example, it may be possible to
borrow either without any form of security against the loan and it may also be possible to borrow

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at either a lower rate of interest, or even interest free. Repayments may also be possible over an
extended period of time and a detailed business plan may not be necessary.

It is best to keep any arrangement formal, however, and to give your benefactor as much
financial information as possible upfront. You will be responsible for their money and as such it
is in everyone’s interest to manage your money effectively.

Banks and Other Commercial Lenders


Banks and other commercial lenders are popular sources of business financing. Most lenders
require a solid business plan, positive track record, and plenty of collateral. These are usually
hard to come by for a start- up business. Once the business is underway and profit and loss
statements, cash flow budgets, and net worth statements are provided, the company may be able
to borrow additional funds. It is usually easier to get loans from local owned banks like
ZANACO, NATSAVE AND AB BANK. You will have to take a personal loan, as they rarely
fund start-ups. We do not advise borrowing money from micro-financial institutions to start a
business. Their interest rates are too high and unsustainable.

Tips for Applying for a Loan


1. Look objectively at the future of your business. What do you need funding for? Do you need
short-term or long-term funding? How are you going to generate the money needed to repay the
loan?

2. Be confident when you seek a loan. You are selling a business proposition and the lender
should make a profit from lending you the money. You have to convince the lender that they are
not taking a huge risk. Have plans ready to show how you would cope if a risk arises.

3. Approach your bank to see if they would be prepared to consider lending you money against
the securities you can offer. You will need to prepare a proper application, including a business
plan.

4. Get together the following information for your application:

 How much money do you need?

 What type of loan do you want?

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 When will you need the money?

 What will you use the money for?

 How will you repay the loan? Have copies of any contracts that you have negotiated.
Detail your projected income and ALL of your costs.

 How long do you want the period of the loan to be?

 What security can you offer in return for the loan? You might need to get independent
and realistic valuations of the assets offered.

 Personal information should include your age, education, experience and personal worth,
together with a statement of your personal financial needs. Consider what funds you will
need to cover your living costs while you are setting up your business.

 Information about your business should be included in your business plan. Include a short
history of your business, your plans for the future, current and past years’ accounts if it is
an existing business, and a cash flow projection for both existing and new business
ventures.

 Also include information about funds that you already have and amounts owing to you.
List your assets and liabilities, bank balances and other deposits or investments.

 What is your previous borrowing history? What other commitments do you already have?
List any loans, hire purchase and leasing agreements.

5. Present the information in a bound document if you can – ideally make three copies: two for
the bank and one for your files. Include copies of all relevant documents and contracts. If your
accountant prepares the documents for you, make sure that you get an explanation of everything
that is included so that you can answer any questions put to you by the bank.

Be absolutely honest with your claims. Do not exaggerate your earnings; do not downplay your
expenses or conceal your shortcomings. You must get your loan solely on the basis of merit
because your venture is viable. Above all, do not delude yourself by being overly optimistic.

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Top reasons why supermarkets fail in Zambia

Location

A bad location is one of the biggest reasons why a supermarket business fails. Poor visibility, no
parking space, no foot traffic is a combination to disaster.

Bad Customer Service & Low quality products

Customer service, along with good quality products, is integral to staying open. Therefore, don’t
shy away from getting customer feedback, whether in the form of comment cards or suggestion
box. It is said for every customer complaint you get, three more are left unsaid. If your customers
can rely on good quality products and outstanding service, it is certainly a reason to return to
your business. The competition is too strong to retain them. Make sure that the quality of
products and customer service in your supermarket is at high level and more importantly keep it
constant. You need to have scheduled supermarket operation to keep everything under control.

Not Watching Your Cash Flow

Cash is king. It is vital that supermarkets (well, any business for that matter); keep a close eye on
their cash flow. Make sure you have enough cash to cover big expenses like orders and payroll,
every week, along with all the other bills that come with a supermarket. If your bank account
starts running into the red, it is time to look for ways to save money at your supermarket.

In today's business environment, the grocery owners need to effectively manage the cash flows
to improve their store's profitability. Effective monitoring & tracking business cash flows helps
the operators to expand capacity, increase inventory, extend their product lines and penetrate
new markets.

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Low start-up capital

It’s important that you have enough money to keep your business alive until you begin making
profit. The company that runs out of working capital before it can start running at optimal
performance and making profit is doomed to fail. When this happens, it is rarely possible to find
a way out of financial problems and to pay expenses.

You should have enough cash in reserve to make sure that you have enough capital for all the
uncertainties that you are going to face in the initial period of operation. This is very important
because in the first year you cannot accurately predict the course of your financial operations.

Lack of Inventory and Staff Control

Profitability analysis and inventory control is an important task of every manager or owner of a
supermarket business, which must be carried out regularly in order to prevent theft and reduce
unnecessary costs. Your employees maybe stealing from you. The supermarket manager must
understand the inventory inside and out. In addition to knowing what the product is, the manager
also has to know how often it ships from the producer, how big the packages are, the most cost-
effective quantity to order, etc. Above all, the manager must know at all times exactly what is on
hand, where it is located, and when it will be replenished.

Improper Planning

Lack of proper planning is another common reason companies fail and go out of business. All
too often, entrepreneurs focused on achieving their dream of financial independence fail to take
the painstaking but necessary step of creating a strategic business plan that factors in components
such as workforce needs, analysis of competitors, sales and expense forecasts and marketing
budgets.

Poor Management and Leadership

Effective management and leadership skills are essential to business building success, and a lack
of either can lead to confusion and conflict within the ranks, poor morale and reduced
productivity. You hire someone who you think will be a great general manager, since they have

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experience and excellent references. Then a few months down the road not only don’t they
manage the supermarket, they alienate staff, drink away the profits and/or steal money. Hiring a
manager is fine, in some cases it is a necessity, but don’t ever trust anyone completely with your
money or your business reputation. Remember that no one is going to care about your business
the way you do.

Underestimating the Competition

Another reason why supermarkets go out of business is underestimating the competition. Even if
you have a sound business model, plenty of funds to operate and the necessary management
skills to be successful, you still face one daunting challenge: the competition. There is no success
without good promotion. People have to be aware of your supermarket business. You have to
push volumes up in order to be successful. To increase your chance of success, conduct a
competition analysis as part of your overall market analysis. Assess your competitor’s strengths
and weaknesses and implement strategies to improve your competitive advantage. With the
emergence of the small grocery store chains, it is becoming more difficult for new supermarkets
to establish and survive in competitive environment. With low labour costs, material costs, and
low currency values, these emerging grocery stores can easily undercut established
supermarkets.

Higher productivity requirements and fewer resources

Supermarkets are always looking for ways to squeeze extra expenses out of every part of the
profit and loss. One of the places they squeeze is in logistics and Inventory. Retail soft wares
helps and hurts this aspect of the business. It helps by finding those extra expenses, but hurts by
making it appear as if there are more and more places to squeeze. They need to focus of the
profit loss ratio of the expenses they are making and what are the benefits they are achieving
from that investment. Cost benefit ratio is very much important while choosing a process and
software for your business.

Customer demand

Most supermarket managers prefer to manage products for customers according to their needs
and expectations. It is the responsibility of the manager to understand what the customer expects

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and to deliver the results they require. Otherwise, the manager can expect to lose business
quickly as customers are quick to switch to other stores.

Low Profit Margins

Supermarkets operate with extremely low margins and rely on improving sales volume to
generate profits. Profit margins can be razor-thin: in some cases, a grocery store's net profit is
less than a penny per dollar of retail sales. Moreover, competition limits a company's ability to
raise prices. As a result, supermarkets struggle to survive due to a combination of intense price
competition and low margins in the grocery retailing industry and are looking for the cost-
effective ways to improve their business profitability.

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