Looking for a clothing retail business plan? You're in the right place.
A clothing store lives or dies on its inventory. How much does the opening day need? How many times a year must it turn over? When does the store start to earn a profit, and what happens if the season's sales come in short? A blank template won't show what a sensible answer looks like.
In this article we'll walk through a complete sample business plan for a western-wear store in Houston, Texas, section by section, so you can see how the inventory, the lease and the payroll fit together before you write your own. We'll cover the executive summary, the SWOT analysis and, in particular, all of the financials.
Here's what you'll take away:
- The executive summary: see how to put a store, its inventory and its funding on one page, so a lender reads the ask in the first minute
- The SWOT analysis: learn how to name a thin brand and a single location honestly without putting a reader off
- The opening-inventory budget: find out how much of the money raised goes onto shelves, and how to size the cash reserve behind it
- The buying calendar: see how one store plans its stock around a local event that can bring more than a tenth of the year's sales into one month
- The inventory ratios: learn to read inventory turns, gross profit per dollar of inventory and sales per square foot, the numbers a retail lender checks
- The five-year profit, cash flow and balance sheet: understand how rent, pay and inventory decisions show up in the numbers
- The downside case: have an answer ready for "what if sales are 20% short?", along with the steps the owner takes in response
If you're opening a clothing or accessories store, read this before you write your own. The store is fictional, so take what fits your trade and change the rest.
In this plan
Looking for a clothing retail business plan template? The Toolkit builds yours with your own numbers.
Executive Summary
Harbor Western Wear is a western-wear store that opens in a 3,000-square-foot unit in northeast Houston on 1 January 2027. It sells boots, shirts, jeans and outerwear in regular, tall, big and short fits, hats with fitting and shaping, belts and buckles, group outfitting for riding clubs and wedding parties, and alterations. Founder Marcus Delaney owns 80% of the store. Two community investors own the other 20%.
The store needs $388,000: $150,000 of Marcus's savings, $70,000 from the investors and a $168,000 term loan from a community development lender. Of that, $150,000 buys opening inventory, $100,000 pays for the build-out, fixtures and point of sale, $102,700 is held as a cash reserve and the remaining $35,300 covers legal work, licensing, pre-opening rent and training, and the launch campaign.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $687,550 | $921,129 | $1,071,403 |
| Net income after start-up costs | ($77,732) | $33,895 | $44,540 |
| Closing cash | $49,675 | $68,229 | $98,323 |
Year 1 is a loss because the store pays a floor team and a full year of rent while its customer base is still forming. Operating profit is positive in March, when Rodeo Houston runs, and from September to December. Year 2 is the first profitable year, and profit continues in every year after.
The plan tests itself. If sales run 20% under plan and Marcus delays hiring, trims marketing and his own pay, buys less opening inventory and pays no distributions, the store still ends every year with cash in the bank.
The store's pitch is narrow. Most western-wear shelves are stocked for a middle build. Harbor Western Wear stocks deep runs in the sizes that get a single pair or shirt elsewhere, including wide-calf boots, big and tall shirts and short inseams, and fits them in the store.
The Store
Legal name: Harbor Western Wear, LLC, a Texas limited liability company that elects corporate tax treatment. Owners: Marcus Delaney, 80%; two community investors, 20% together. Premises: 3,000 square feet in an inline unit of a northeast Houston shopping center. Opening: 1 January 2027, two months ahead of the Rodeo Houston run (March 2 to 21, 2027). Stage: pre-opening. The lease is in draft and the first boot and hat vendor accounts are open.
Why the store exists
Sell western wear that fits, in sizes most stores stock thinly or not at all, to riders, ranch and farm workers and families in the Houston area. Marcus saw the gap from both sides of the counter: eleven years selling western wear, and years of riding with a Houston trail-ride club whose members told him where they had to drive or order online to get a shirt or a pair of boots that fit.
Where the store should be by 2028
- Revenue of $921,129 in the second year, with a profit after tax.
- Inventory turning 2.2 times on year-end inventory, up from 1.7 in the first year.
- A full-time associate on the floor from October 2028.
- The community lender's loan serviced on schedule, with interest-only payments ending in January 2028.
What the store sells
| Department | How it earns | Year 1 share of revenue |
|---|---|---|
| Western and work boots | About 1,200 pairs at an average of $205 | 36% |
| Shirts, jeans and outerwear in extended fits | About 2,030 sales at $100 | 30% |
| Belts, buckles and accessories | About 1,850 sales at $48 | 13% |
| Hats with fitting and shaping | About 450 sales at $145 | 9% |
| Group and event outfitting | About 50 orders at $1,250 | 9% |
| Alterations and fit service | About 880 jobs at $25 | 3% |
Rules the store runs under
The store collects Texas sales tax at the local combined rate, which is capped at 8.25% (6.25% state plus up to 2% local), and holds a sales and use tax permit before it sells. It stocks no exotic-skin boots in its first two years, to stay clear of the permit questions that come with them; the store would confirm those rules with the relevant agencies before adding any. Texas lets private employers decline workers' compensation, but the store carries it for every employee.
The Houston Western Market
A market with a calendar
Rodeo Houston lists March 2 to 21, 2027 for its next run. The plan expects that for three weeks, many Houston-area residents who rarely wear western clothes will buy boots, hats and jeans to wear to it. That is the plan's own expectation, not a measured figure. It puts 13.5% of Year 1 revenue into March, against 3.4% in January, and builds its buying calendar backward from the show. Attendance and spending figures are not quoted because the show's site did not publish them. The fall boot season and the holidays are the other two peaks.
What the plan's margins look like against the trade
Owners in apparel retail often quote a gross margin near half of sales as the level that covers rent, staff and the markdowns that follow each season; the plan treats that as a rough benchmark and not a sourced figure. Harbor Western Wear's blended gross margin is 49.8%, close to it. After markdowns, shrinkage and card fees, about 42.6 cents of each sales dollar remains. Rent is 9.2% of Year 1 revenue and 6.2% by Year 3, and sales per square foot rise from $229 to $357.
Pay in the trade
The Bureau of Labor Statistics reported a median wage of $17.03 an hour for retail salespersons in May 2025 and projected little employment change for the group from 2025 to 2035. The store's hourly staff sit within a few percent of that median. Marcus and the assistant manager are paid above it.
Who the store competes with
| Alternative | What it offers | Why a customer might choose it | How Harbor Western Wear differs by design |
|---|---|---|---|
| Regional western-wear chains | Wide brand range in many stores | Familiar names and several locations | Deeper runs in tall, big and short fits, and in-store fitting |
| Farm-and-ranch supply stores | Work boots, jeans and tack under one roof | Convenient for a full supply trip | Dress and show boots, hat service and event outfitting |
| Independent saddleries and tack shops | Tack, with some apparel | Long relationships with riders | Apparel and boots as the main business |
| Department and big-box stores | Casual western styles at low prices | Price and convenience | Fit, brand depth and alterations |
| Online sellers | Very wide range, delivered | Choice and price | Try-on, hat shaping and same-day exchanges |
The table describes what each type of seller offers and how the store positions itself, not a ranking. Named competitors are left out because the plan has no sourced facts about them.
SWOT
| Strengths | Weaknesses |
|---|---|
| A founder with eleven years in western retail and a riding club's network | One location, so one lease and one local economy |
| Deep size runs and in-store fitting that online sellers cannot offer | No brand yet; every customer starts from zero |
| A hat-shaping and alterations service that brings customers back | Inventory is the largest asset and sits on the shelf |
| Opportunities | Threats |
|---|---|
| The Rodeo Houston run each March | A weak spring or a wet March |
| Group orders from clubs, teams and wedding parties | Chains discounting against a small store |
| Repeat buyers returning for hats and boots | Rising vendor prices that cannot be passed on |
Who Shops Here
The rider and the working hand
Trail-ride and riding-club members, ranch and farm workers, and rodeo participants. They want boots that last and fit a wide calf, and shirts that fit through the shoulders. They come with a list, buy within one visit and tell their club.
The Rodeo-season buyer
An occasional wearer who comes in February or March, buys a hat, boots and a belt, and may not return until the next show. This buyer is the reason March is the strongest month, and the reason the seasonal associate is hired in January to start on February 1.
The event buyer
A wedding party, a church group, a drill team or a family planning a quinceañera court. One order is worth about $1,250 on average, takes a deposit and brings in a party of several people.
What customers ask of the store
The right size in stock. A fitter who knows boots. A price that matches what the same brand costs elsewhere. A hat shaped in front of them.
How many customers
The plan counts about 3,400 distinct customers in Year 1, each buying 1.9 times across the departments, which is 6,460 sales or 21 a day. Many of those sales share a basket. Customers reach about 4,300 in Year 2 and 4,900 in Year 3, with roughly 45% of each year's customers returning from the year before. Revenue per customer is $202 in Year 1 and $219 in Year 3.
Selling the Fit
From the door to the register
A greeter-fitter asks what the customer will use the item for. Boots are fitted on a measuring device and tried in the right width. A hat is sized and shaped on the spot. Missing sizes are special-ordered, with a deposit, and arrive within the week.
Pricing
Prices match the brand's suggested retail price, and the store competes on size availability and service, not on discounts. A markdown allowance of 3.5% of sales is built in, because some seasonal inventory will be cleared at a loss.
Special orders and groups
A group order is quoted within two working days. Half is paid as a deposit, and the remainder is due when the order is picked up. The plan expects 50 group orders in Year 1 and 82 in Year 3.
Bringing customers back
Customers join a text and email list at the register. The store sends notice of new boot deliveries, a spring hat-cleaning offer and an annual fit check for children's boots.
Getting the Word Out
Spend and what it buys
Year 1 marketing is $45,000: $15,000 of launch spend from start-up capital and $30,000 of running cost. That is 6.5% of Year 1 revenue, and about $13 for each of the 3,400 customers. Running cost alone is 4.4% of Year 1 revenue and 2.9% by Year 3. From Year 2 about 55% of customers are new, so the same budget works out at about $11 per new customer.
| Channel | Year 1 spend | What it is expected to do |
|---|---|---|
| Website and photography (launch) | $6,500 | A store site with sizes in stock and a map, and product photos |
| Opening weekend (launch) | $4,000 | A launch event with a hat-shaping demonstration; about 150 customers |
| Riding-club and trail-ride sponsorships | $12,000 | Sponsored rides and club discounts; about 700 customers |
| Paid social | $9,000 | Photos of arrivals and sizes; about 650 customers |
| Google Business Profile and local search | $5,000 | Searches such as "western wear Houston" and "wide calf boots"; about 600 customers |
| Community events and print | $5,500 | Church and community events and flyers; about 700 customers by referral |
| Email and text | $3,000 | Reminders and offers for existing customers; no new customers counted |
The remaining 600 of the 3,400 customers are Rodeo-season walk-ins drawn by the storefront sign.
Marketing milestones
- January 2027: store open, social and search profiles live.
- March 2027: the Rodeo month, with a seasonal associate and a full inventory position.
- September 2027: the fall boot season, with the first club sponsorship completed.
- December 2027: about 3,400 customers served in the first year.
Running the Floor and the Stock Room
The unit
3,000 square feet in a northeast Houston shopping center, at about $21 a square foot all in ($63,000 in Year 1), on a five-year lease with a five-year option and a personal guarantee. About 2,300 square feet is selling floor, with a boot wall, denim tables, a hat bar and three fitting areas. The rest holds the stockroom and a small alterations corner.
Buying calendar and inventory control
The store buys in three windows. The Rodeo stock for 2027 is part of the opening buy; from 2028 the Rodeo buy is placed in the fall for delivery in January and February. The fall boot buy is placed in the spring, and the holiday accessory buy in the summer. Year-end inventory is planned at $198,364 in Year 1 and $225,366 in Year 3, and turns rise from 1.7 to 2.4 as sales outgrow the opening buy. Size runs are counted each month, and a size that has sold out twice is reordered in depth. Slow lines are marked down after 120 days.
Systems
A point-of-sale system that tracks inventory by size and width, a text and email platform, and bookkeeping software. Software costs $5,400 in Year 1 and $6,900 in Year 5. A part-time bookkeeper and an outside accountant are paid from the $13,000 professional-fees budget.
Who does the work
Four people open the store: Marcus, a full-time boot and hat fitter and two part-time associates. A seasonal associate joins for the Rodeo run and the holidays. A full-time associate joins in month 22 and an assistant manager in month 46. Each hire follows sales, and the downside case shows which are delayed if sales fall short.
Licenses and safeguards
- Certificate of occupancy, a signage permit and any city or county registrations the location requires.
- A Texas sales and use tax permit.
- General liability, contents and business interruption insurance, budgeted at $6,800 in Year 1, plus key-person coverage on Marcus.
- Workers' compensation for every employee.
- Written terms for group orders, with the deposit and pickup date.
Vendors and advisers
Boot, hat and apparel vendors on 30-day terms, a contract seamstress for alterations, a part-time bookkeeper and an accountant. A retired western retailer from Marcus's riding club reviews the buying plan each quarter, unpaid.
The People
Marcus Delaney, founder and head buyer
Marcus has eleven years in western-wear retail. He spent six of them as the manager of a regional chain's Houston-area store, where he bought boots and hats and ran a staff of nine. He has a business degree and a long-standing membership in a Houston trail-ride club. His $150,000 is a decade of savings.
Where the team is thin
Marcus has bought for a chain but never carried the lease, the loan and the cash risk himself. He has not run payroll as an owner. The plan covers this with a part-time bookkeeper, an accountant who checks the cash forecast monthly in Year 1, and a quarterly buying review with the retired retailer.
If Marcus is out
The boot and hat fitter can run the floor for short absences, and the assistant manager covers the floor on buying trips from Year 4. The store carries key-person coverage on Marcus.
Ownership, tax and the lender
Marcus owns 80% of Harbor Western Wear, LLC and gives the lender a personal guarantee. The two investors own 20% together and have no day-to-day role. The LLC elects to be taxed as a corporation, which is why the model charges the 21% federal rate. The loan is secured on inventory and fixtures, and requires quarterly accounts and monthly inventory reports.
Financial Plan: Inventory, Rent and the Rodeo Month
The tables below run in one direction: how the $388,000 is raised and spent, the store figures that drive revenue and cost, then the sales forecast, payroll, profit and loss, cash, balance sheet and a downside case. Year 1 is shown month by month; later years are annual.
Opening inventory, build-out and the community loan
| Use of funds | Amount |
|---|---|
| Opening stock: boots (men, women, children) and work boots | $74,000 |
| Opening stock: shirts, jeans, jackets and outerwear in regular, tall, big and short fits | $50,000 |
| Opening stock: felt and straw hats, belts, buckles and accessories | $26,000 |
| Build-out (about $19 a square foot): flooring, boot wall, lighting, fitting rooms, hat bar | $57,000 |
| Fixtures: boot wall, denim tables, racks, hat steamer and shaping tools, boot stretchers | $30,000 |
| Point of sale, tag printers, security cameras, exterior signage | $13,000 |
| Certificate of occupancy, signage permit, city and county registrations | $1,800 |
| Legal: LLC, lease review, vendor agreements | $4,500 |
| Pre-opening rent and staff training | $14,000 |
| Launch: website, photography, opening weekend, trail-ride sponsorships | $15,000 |
| Cash reserve for the first slow summer and the pre-Rodeo stock build | $102,700 |
| Total uses | $388,000 |
| Source of funds | Amount |
|---|---|
| Marcus Delaney's savings | $150,000 |
| Two community investors (20% stake together) | $70,000 |
| Community lender term loan | $168,000 |
| Total sources | $388,000 |
Marcus Delaney puts in $150,000 of savings. Two community investors add $70,000 together for a 20% stake, and a community development lender provides a $168,000 term loan over seven years at 9.75%, interest-only for the first twelve months. The loan is secured on the inventory and fixtures, which a lender would value well below cost if it ever had to sell them, and it carries Marcus's personal guarantee. The rate is a planning figure, not a quote. Equity is 57% of the total and the loan is 43%. Opening inventory takes $150,000, 39% of the money raised, and the $102,700 reserve carries the store through its first summer and the inventory build before the fall and holiday months.
Floor, inventory and payroll figures
- Boots are the anchor department: 1,200 pairs in Year 1 at an average of $205, which is $246,000 and about four pairs per trading day over 305 days. Pairs reach 1,760 in Year 3 (5.8 a day) and 1,940 in Year 5. Prices run from roughly $100 for children's boots to well over $300 for premium pairs. Prices rise 3% a year from Year 2 in every department.
- Shirts, jeans and outerwear bring in 2,030 sales in Year 1 at an average of $100, which is $203,000. The range is cut in regular, tall, big and short fits, with deep runs in the sizes other stores stock one or two of. Hats add 450 sales at $145 ($65,250), with steaming and shaping included in the price. Belts, buckles and accessories add 1,850 sales at $48 ($88,800), and 31% of that line falls in November and December.
- Group and event outfitting is 50 orders in Year 1 at an average of $1,250, or $62,500: trail-ride clubs, rodeo and drill teams, wedding parties and quinceañera courts. Half is taken as a deposit when the order is placed, which holds under $5,000 of customer money at any time and is not shown as a separate liability. Alterations and fit service are 880 jobs at $25, done by a contract seamstress who keeps 40% of the fee.
- Across the six departments the store makes 6,460 sales in Year 1, about 21 a day. It serves about 3,400 distinct customers, who buy 1.9 times each on average. Year 1 revenue per customer is $202. The plan expects 4,300 customers in Year 2 and 4,900 in Year 3, with roughly 45% of each year's customers returning from the year before.
- Gross margin is 49.8% in every year. By department the cost of goods is 54% for boots, 49% for apparel, 46% for hats, 45% for accessories, 55% for group orders and 40% for alterations. Below gross profit the model charges markdowns and clearance at 3.5% of sales, shrinkage and damage at 1.1% and card fees at 2.6%, which leaves about 42.6 cents of each sales dollar. One point of gross margin is worth $6,876 in Year 1 and $10,714 in Year 3.
- Inventory is carried at cost. Opening inventory is $150,000, and inventory on hand grows by 14% of each year's cost of goods sold, to $198,364 at the end of Year 1 and $225,366 at the end of Year 3. Vendors give 30 days to pay, which leaves $28,394 owed at the end of Year 1. Counter sales are paid on the spot, so receivables are 3 days of sales, almost all of it group-order balances.
- Premises are an inline unit of 3,000 square feet in a northeast Houston shopping center at about $21 a square foot a year, all in, which is $63,000. That rent is a planning figure; asking rents differ by center and by landlord, and the lease is negotiated before the loan closes. The build-out is about $19 a square foot and the fixtures and point of sale bring the total to $100,000, about $33 a square foot, with no landlord allowance. Utilities are $7,800. Insurance of $6,800 covers liability, contents, business interruption and key-person coverage on Marcus.
- Payroll adds 27% to wages for payroll taxes, health coverage and workers' compensation (15% for part-time staff). Texas lets private employers opt out of workers' compensation; the store buys it anyway. The Bureau of Labor Statistics median for retail salespersons was $17.03 an hour in May 2025. The fitter's $36,000 is about $17.31 an hour on a full-time schedule and the full-time associate's $34,000 about $16.35, so both sit within a few percent of it. Marcus and the assistant manager are paid above it. Wages in the personnel table are launch rates, and 3% annual pay raises are charged as a separate line from Year 2.
- Year 1 marketing is $45,000, of which $15,000 is launch spend from the start-up capital and $30,000 is running cost. That is $13 per customer, or 6.5% of revenue. Running cost alone is 4.4% of Year 1 revenue and falls to 2.9% by Year 3 as repeat buying and referrals take over. Professional fees of $13,000 cover a part-time bookkeeper and an accountant who reviews the cash forecast each month in Year 1.
- The LLC elects to be taxed as a corporation because of its outside investors, so the model charges the federal corporate rate of 21%. Texas has no corporate income tax, and its franchise tax on retailers applies only above a revenue threshold that the Comptroller sets at $2,650,000 for the 2026 and 2027 reports. Plan revenue stays below that in every year, and the threshold changes, so the store's accountant confirms it each year. Sales tax is collected at the combined state and local rate (a maximum of 8.25%), passed on to the state and left out of revenue.
- Owner distributions of $10,000 in Year 4 and $20,000 in Year 5 are paid only from cash the model shows the store can spare. The loan stays in place rather than being repaid early, so the cash cushion stays in the store.
Revenue by department
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Western and work boots | $246,000 | $329,394 | $382,773 | $416,657 | $447,615 |
| Shirts, jeans and outerwear in extended fits | $203,000 | $272,950 | $316,148 | $340,931 | $360,163 |
| Hats with fitting and shaping | $65,250 | $89,610 | $104,605 | $114,081 | $122,399 |
| Belts, buckles and accessories | $88,800 | $111,240 | $127,308 | $137,421 | $145,866 |
| Group and event outfitting | $62,500 | $90,125 | $108,742 | $120,200 | $129,434 |
| Alterations and fit service | $22,000 | $27,810 | $31,827 | $34,421 | $36,860 |
| Total revenue | $687,550 | $921,129 | $1,071,403 | $1,163,711 | $1,242,337 |
| Growth on prior year | – | 34% | 16% | 9% | 7% |
Boots and extended-fit apparel are 36% and 30% of Year 1 revenue and hold close to those shares to Year 5. Hats earn a little more per dollar than boots and cost little to hold, so the plan lets them grow faster. Group and event outfitting is the most variable line, because one wedding party or riding club can be worth a week of floor sales. It reaches $108,742 in Year 3.
Month by month, Rodeo included
| Month | Western and work boots | Shirts, jeans and outerwear in extended fits | Hats with fitting and shaping | Belts, buckles and accessories | Group and event outfitting | Alterations and fit service | Total revenue | EBITDA |
|---|---|---|---|---|---|---|---|---|
| Jan 2027 | $9,020 | $7,400 | $1,885 | $2,688 | $1,250 | $825 | $23,068 | ($17,949) |
| Feb 2027 | $13,325 | $11,100 | $3,480 | $4,272 | $2,500 | $1,225 | $35,902 | ($11,563) |
| Mar 2027 | $36,490 | $28,300 | $12,035 | $8,880 | $5,000 | $2,450 | $93,155 | $16,923 |
| Apr 2027 | $17,220 | $14,400 | $3,915 | $5,520 | $5,000 | $1,600 | $47,655 | ($5,715) |
| May 2027 | $16,195 | $13,300 | $3,625 | $5,472 | $6,250 | $1,575 | $46,417 | ($6,331) |
| Jun 2027 | $15,375 | $13,800 | $3,045 | $6,096 | $6,250 | $1,525 | $46,091 | ($6,494) |
| Jul 2027 | $14,965 | $12,400 | $3,190 | $5,424 | $5,000 | $1,475 | $42,454 | ($8,303) |
| Aug 2027 | $21,935 | $17,000 | $4,640 | $6,576 | $3,750 | $1,875 | $55,776 | ($1,675) |
| Sep 2027 | $22,960 | $19,100 | $5,655 | $7,392 | $5,000 | $2,100 | $62,207 | $1,525 |
| Oct 2027 | $24,395 | $20,200 | $6,235 | $8,880 | $7,500 | $2,225 | $69,435 | $5,121 |
| Nov 2027 | $27,060 | $22,400 | $8,410 | $13,776 | $6,250 | $2,475 | $80,371 | $10,562 |
| Dec 2027 | $27,060 | $23,600 | $9,135 | $13,824 | $8,750 | $2,650 | $85,019 | $12,875 |
Revenue opens at $23,068 in January, jumps to $93,155 in March when Rodeo Houston runs (March 2 to 21, 2027), falls back to $42,454 in July, and climbs through the fall to $85,019 in December. March is the strongest month at 13.5% of the year's revenue and November and December together bring 24.1%. EBITDA is positive in March and from September to December, close to zero in August, and negative in the other six months. The lowest month-end cash balance is Sep, at about $45,000. The monthly view does not time inventory purchases, so the real low point just before the Rodeo and holiday buys would be lower; the reserve is sized with that in mind.
Who works the floor
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Owner, head buyer and store manager | $52,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Boot and hat fitter | $36,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Sales associate (part time, about 24 hours a week) | $21,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Weekend associate (part time) | $17,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Rodeo and holiday associate (part time, February to March and November to December) | $21,000 | Month 2 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Full-time sales associate | $34,000 | Month 22 | – | 1 | 1 | 1 | 1 |
| Assistant manager | $41,000 | Month 46 | – | – | – | 1 | 1 |
| Total payroll incl. on-costs | $163,510 | $174,305 | $206,690 | $219,708 | $258,760 |
Marcus, a full-time boot and hat fitter and two part-time associates open the store. A seasonal part-time associate, hired in January, starts in February and works the Rodeo run and then returns every November and December, which makes five people on the floor in those months. A full-time associate joins in month 22, when boots pass five pairs a day, and an assistant manager joins in month 46, so Marcus can spend buying weeks away from the floor. Part-time and seasonal roles are shown at annual-equivalent pay. Marcus's $52,000 is already in the costs, so profit here is what remains after he is paid.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $687,550 | $921,129 | $1,071,403 | $1,163,711 | $1,242,337 |
| Cost of goods sold (merchandise at cost, alterations contractor) | ($345,460) | ($462,822) | ($538,327) | ($584,707) | ($624,213) |
| Gross profit | $342,090 | $458,307 | $533,076 | $579,004 | $618,124 |
| Payroll incl. on-costs | ($163,510) | ($174,305) | ($206,690) | ($219,707) | ($258,760) |
| Rent | ($63,000) | ($64,900) | ($66,800) | ($68,800) | ($70,900) |
| Utilities | ($7,800) | ($8,000) | ($8,300) | ($8,500) | ($8,800) |
| Marketing | ($30,000) | ($30,500) | ($31,000) | ($32,000) | ($33,000) |
| Insurance | ($6,800) | ($7,200) | ($7,600) | ($8,000) | ($8,400) |
| Professional fees | ($13,000) | ($13,500) | ($14,000) | ($14,500) | ($15,000) |
| Software subscriptions | ($5,400) | ($5,900) | ($6,300) | ($6,600) | ($6,900) |
| Card processing fees (2.6% of sales) | ($17,876) | ($23,949) | ($27,856) | ($30,256) | ($32,301) |
| Markdowns and clearance beyond planned margin (3.5% of sales) | ($24,064) | ($32,240) | ($37,499) | ($40,730) | ($43,482) |
| Shrinkage and damage (1.1% of sales) | ($7,563) | ($10,132) | ($11,785) | ($12,801) | ($13,666) |
| Bags, hat boxes, tags and store supplies | ($4,200) | ($4,900) | ($5,400) | ($5,700) | ($5,900) |
| Cleaning, alarm monitoring and repairs | ($4,000) | ($4,200) | ($4,400) | ($4,600) | ($4,800) |
| Buying trips and market-week travel | ($4,500) | ($5,000) | ($5,400) | ($5,700) | ($6,000) |
| Licenses, permits and franchise-tax filing | ($1,400) | ($1,500) | ($1,600) | ($1,700) | ($1,800) |
| Fixture refresh and equipment replacement | $0 | ($2,500) | ($3,500) | ($9,000) | ($4,000) |
| Annual pay raises (3% a year) | $0 | ($5,229) | ($12,587) | ($20,373) | ($32,477) |
| EBITDA | ($11,023) | $64,352 | $82,359 | $90,036 | $71,938 |
| Depreciation | ($15,029) | ($15,029) | ($15,029) | ($15,029) | ($15,029) |
| Interest | ($16,380) | ($15,429) | ($13,219) | ($10,785) | ($8,102) |
| Income tax | $0 | $0 | ($9,571) | ($13,487) | ($10,250) |
| Net income before start-up costs | ($42,432) | $33,895 | $44,540 | $50,736 | $38,558 |
| Start-up costs expensed at opening (legal, licensing, pre-opening rent and training, launch marketing) | ($35,300) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($77,732) | $33,895 | $44,540 | $50,736 | $38,558 |
Year 1 loses $42,432 before start-up costs and $77,732 after them. Year 2 is the first profitable year, at $33,895. Net income is $44,540 in Year 3 and $50,736 in Year 4, then $38,558 in Year 5, when the assistant manager's first full year and $32,477 of accumulated pay raises arrive together. EBITDA margin is 7.0% in Year 2, 7.7% in Years 3 and 4 and 5.8% in Year 5, and net margin before start-up costs never passes 4.4%. That is a thin return, and it leaves little room for a bad buy. Income tax is zero in Year 2 because the Year 1 loss carries forward, and $9,571 in Year 3.
Cash and inventory movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($238,325) | $40,219 | $53,969 | $62,325 | $50,657 |
| Build-out and fixtures | ($100,000) | $0 | $0 | $0 | $0 |
| Funding received | $388,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | ($21,666) | ($23,875) | ($26,310) | ($28,993) |
| Owner distributions | $0 | $0 | $0 | ($10,000) | ($20,000) |
| Net change in cash | $49,675 | $18,553 | $30,094 | $26,015 | $1,664 |
| Closing cash | $49,675 | $68,229 | $98,323 | $124,338 | $126,001 |
Cash from operations is negative $238,325 in Year 1. Most of it is the $198,364 of inventory on the shelves less the $28,394 owed to vendors, plus the operating loss. Closing cash is $49,675 at the end of Year 1 and rises every year to $126,001 in Year 5. The loan falls from $168,000 to $67,157 over the same period, and distributions begin in Year 4.
Balance sheet with inventory
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $49,675 | $68,229 | $98,323 | $124,338 | $126,001 |
| Accounts receivable | $5,651 | $7,571 | $8,806 | $9,565 | $10,211 |
| Inventory at cost | $198,364 | $214,795 | $225,366 | $231,859 | $237,390 |
| Build-out and fixtures (net) | $84,971 | $69,943 | $54,914 | $39,886 | $24,857 |
| Total assets | $338,662 | $360,538 | $387,409 | $405,647 | $398,459 |
| Owed to vendors | $28,394 | $38,040 | $44,246 | $48,058 | $51,305 |
| Community lender loan | $168,000 | $146,334 | $122,459 | $96,150 | $67,157 |
| Paid-in capital | $220,000 | $220,000 | $220,000 | $220,000 | $220,000 |
| Retained earnings | ($77,732) | ($43,837) | $703 | $41,439 | $59,997 |
| Total liabilities and equity | $338,662 | $360,538 | $387,409 | $405,647 | $398,459 |
Turns, margins and break-even
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -1.6% | 7.0% | 7.7% | 7.7% | 5.8% |
| Net margin (before start-up costs) | -6.2% | 3.7% | 4.2% | 4.4% | 3.1% |
| Payroll incl. pay raises as share of revenue | 24% | 19% | 20% | 21% | 23% |
| Revenue per full-time equivalent at year end | $196,443 | $204,695 | $238,090 | $211,584 | $225,879 |
| Average monthly revenue | $57,296 | $76,761 | $89,284 | $96,976 | $103,528 |
| Monthly revenue needed to cover operating costs | $59,142 | $65,983 | $75,490 | $81,896 | $91,479 |
| Debt service cover (EBITDA / interest + principal) | -0.7x | 1.7x | 2.2x | 2.4x | 1.9x |
Year 1 averages $57,296 of revenue a month against $59,142 needed to cover operating costs, so the store ends its first year about $1,850 a month short. Year 2 averages $76,761 against $65,983, and Year 3 $89,284 against $75,490. Inventory turns, measured as cost of goods sold over year-end inventory, are 1.7 in Year 1, 2.4 in Year 3 and 2.6 in Year 5. Gross profit per dollar of inventory is 1.7 in Year 1 and 2.4 in Year 3. Sales per square foot of the 3,000 are $229, $357 and $414 in Years 1, 3 and 5. The ratio is EBITDA-level: Year 2 debt payments of $37,095 (interest plus principal) come out of the $64,352 of EBITDA, which is the 1.7x cover shown. Cover is negative in Year 1 because the loan is interest-only and the store loses money, then 2.2x in Year 3 and 1.9x in Year 5. Payroll with pay raises is 24% of revenue in Year 1, 19% in Year 2 and 20% in Year 3.
A soft year: sales 20% under plan
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $550,040 | $736,903 | $857,122 | $930,969 | $993,870 |
| Net income before start-up costs | ($71,391) | ($520) | $9,069 | $20,543 | ($5,130) |
| Net income after start-up costs | ($106,691) | ($520) | $9,069 | $20,543 | ($5,130) |
| Closing cash | $55,841 | $41,721 | $37,463 | $43,972 | $22,534 |
This case cuts every revenue line by 20% in every year. The response: every hire from month 13 starts six months later (the full-time associate in month 28, the assistant manager in month 52), part-time hours fall by 20%, the opening inventory buy is 20% smaller with the money kept in the reserve, the fixture refresh is skipped, marketing is cut by 20%, Marcus takes a 20% pay cut, card fees, markdowns and shrinkage move with sales, and no distributions are paid. On those terms year-end cash never falls below $22,534, the low comes in Year 5, and the store loses $106,691 in Year 1 after start-up costs and $520 in Year 2, then earns $9,069 in Year 3 and $20,543 in Year 4. Year 5 slips to a loss of $5,130 because the assistant manager starts in month 52 and pay raises have accumulated. Equity ends Year 1 at $113,309. Debt payments start in Year 2 against thin operating profit, so the store would talk to the lender about a longer interest-only period before the first principal payment. The model has no monthly view after Year 1, so the pre-fall low in later years could be lower than the year-end figure.
Sources
- Texas Comptroller of Public Accounts, Franchise tax: retail and wholesale rate of 0.375% and a no-tax-due threshold of $2,650,000 for the 2026 and 2027 report years.
- Texas Comptroller of Public Accounts, Sales and use tax: state rate of 6.25% and a maximum combined state and local rate of 8.25%.
- Texas Department of Insurance, Workers' compensation for employers: private employers may choose whether to carry coverage.
- Bureau of Labor Statistics, Retail sales workers, Occupational Outlook Handbook: median of $17.03 an hour for retail salespersons in May 2025 and projected employment change for 2025 to 2035.
- Houston Livestock Show and Rodeo, rodeohouston.com: the next run is listed as March 2 to 21, 2027. The page did not show attendance figures, so none are quoted.
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