Looking for a maternity clothing business plan? You're in the right place.
A maternity shop sells to a customer for about nine months, then loses her. How much stock does that kind of customer need on the shelves? What brings her back after the birth? How long before the store earns a profit, and what happens if a spring comes in 20% short? Each has a believable answer, and seeing one makes your own easier to write.
This article takes a maternity boutique in Memphis, Tennessee, from executive summary through SWOT to the full five-year financials, so you can watch stock, lease and payroll interact before drafting your own.
What you'll get from it:
- The executive summary: see how a shop, its stock and a $225,000 raise fit on one page, so the ask is easy to find
- The customer section: learn how to write about a buyer who stays for months and not years, and what the shop sells her next
- The SWOT analysis: find out how to name a small brand and a single lease candidly
- The opening-stock budget: see what slice of the raise becomes inventory, and how big the reserve behind it should be
- The rental line: learn how a small gown collection earns a higher margin than the racks beside it
- The five-year statements: trace how rent, pay and stock turns move profit, cash and the balance sheet
- The weak-sales case: see the owner's response when a spring comes in 20% short, step by step
Planning a maternity, baby or children's clothing shop? Borrow what fits. The shop here is fictional, so adjust every figure to your own market.
In this plan
Looking for a maternity clothing business plan template? The Toolkit builds yours with your own numbers.
Executive Summary
Malone's Maternity is a maternity, nursing and baby boutique that opens on January 1, 2027 in a 1,650-square-foot unit in an East Memphis shopping center. It sells maternity apparel, fitted nursing and postpartum wear, baby clothing and shower gifts, and rents occasion gowns for photo shoots and baby showers. Sandy Malone owns 80% of the store. A family investor owns the other 20%.
The store needs $225,000: $60,000 of Sandy's savings, $50,000 from the investor and a $115,000 bank term loan. Of that, $64,000 buys opening stock, $59,000 pays for the build-out, fixtures, rental gowns and point of sale, $70,000 stays in the bank as a reserve and the other $32,000 pays for legal work, licenses, deposits, rent before opening, staff training and the launch.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $454,200 | $561,247 | $647,086 |
| Net income after start-up costs | ($55,263) | $1,211 | $22,814 |
| Closing cash | $43,973 | $45,696 | $60,355 |
Year 1 loses money: three people work the floor and rent runs all twelve months, yet the first customers are still finding the shop. EBITDA turns positive in March and stays positive through December. Year 2 just clears zero, and Years 3 to 5 earn between $17,426 and $29,737.
If sales run 20% under plan, the owner delays one hire, drops another, trims hours, pay and marketing and pays no distributions. Year-end cash then stays positive in every year, never below $12,966, and the store reaches a small profit in Year 3.
The store's pitch is a fitting service. A trained fitter sizes nursing bras and postpartum wear in a private room, and a second appointment after the birth brings the customer back.
The Store and Its Founder
Legal name: Malone's Maternity, LLC, a Tennessee limited liability company. Owners: Sandy Malone, 80%; a family investor, 20%. Premises: 1,650 square feet in an inline unit off Poplar Avenue in East Memphis. Opening: January 1, 2027, in time for the spring selling season. Stage: lease in draft; first three vendor accounts opened.
Why the store exists
The store exists to dress a changing body from the first trimester to the months after birth, with a fitter on hand. Sandy spent eight years in retail, five of them buying for the children's and maternity floor of a regional store. Customers told her the same thing every month: the nursing bra bought online in the eighth month did not fit in the tenth.
Targets for the first two years
- Revenue of $561,247 in Year 2, with the store at break-even after tax.
- Stock turning 2.6 times on year-end inventory, up from 2.3 in Year 1.
- A weekend and evening associate on the floor from March 2028.
- Bank loan interest paid on schedule, with principal repayments starting in July 2028.
What the shop sells
| Product line | Basis of sales | Share of Year 1 sales |
|---|---|---|
| Maternity apparel | About 2,500 sales at an average of $98 | 54% |
| Nursing and postpartum wear | About 1,350 sales at $64, bras fitted in store | 19% |
| Baby clothing and shower gifts | About 1,600 sales at $48 | 17% |
| Online and ship-to-home orders | About 300 orders at $74, mostly from fitted customers | 4.9% |
| Occasion and photo-shoot gown rental | About 280 rentals at $85 from 24 gowns | 5.2% |
Rules the store runs under
The store registers with the Tennessee Department of Revenue to collect sales tax, and the model taxes the store as a corporation. The state rate is 7%, per the department's sales and use tax page, and local rates add to it, so the store confirms the combined rate for its address. Baby clothing is subject to federal children's product safety rules, and the store buys only from vendors that can supply the required paperwork; the store confirms current requirements with the Consumer Product Safety Commission before it buys a new brand. It carries workers' compensation for every employee and checks with the state whether the law requires it at the store's size.
The Memphis Maternity Market
The store's market is expectant and new parents in East Memphis, Germantown, Collierville and Midtown, plus the friends and relatives who buy gifts for them. The plan sizes the store from its own volumes: about 1,900 customers in Year 1, of whom roughly 950 are expectant customers buying about four times each. By Year 3 maternity and nursing sales of $458,309 need about 1,230 expectant customers at roughly $370 each.
A short selling window
A maternity customer wears each piece for a few months, so she buys less per visit than a regular clothing shopper and stock ages quickly. The plan holds a 2.5% markdown charge on sales for this reason. A common rule of thumb for apparel retailers is a gross margin near half of sales, though this is not a sourced benchmark. The store's blended 52.5% sits a little above it because nursing wear is fitted and gown rental carries little cost per rental. Take away markdowns, returns, shrinkage and card fees and about 46.4 cents of every sales dollar is left. Occupancy costs 7.3% of Year 1 revenue and 5.4% by Year 3, while sales per square foot climb from $275 to $392.
Pay in the trade
Retail salespersons earned a median of $17.03 an hour in May 2025 per the Bureau of Labor Statistics, which expects employment in the group to be flat through 2035. The lead fitter's pay is within a few percent of that.
Other places a mother might shop
| Option | Range | Pull for the customer | Where Malone's Maternity differs |
|---|---|---|---|
| Department-store maternity sections | A few racks inside a larger store | One trip, familiar names | Full range by trimester and a private fitting room |
| National maternity chains | Wide range, regular sales | Price and selection | Nursing-bra fitting and a small rental collection |
| Online maternity retailers | Very wide range delivered | Choice and price | Try-on, same-day exchange, fit advice |
| Consignment and resale shops | Used maternity wear at low prices | Price | New stock with consistent sizes |
| General women's boutiques | Stretch styles and a few maternity pieces | Existing loyalty | Specialist depth and baby gifts |
Each row describes a type of seller. The plan names no competitors.
SWOT
| Strengths | Weaknesses |
|---|---|
| A founder with five years of buying for a maternity floor | A single lease tied to a single local economy |
| A fitting service that online sellers cannot copy | A customer who stays only months |
| A rental line with a margin above the racks | Stock is the largest asset and goes out of season |
| Opportunities | Threats |
|---|---|
| Referrals from midwives, doulas and childbirth classes | Online sellers and chains discounting |
| Shower gifts, which bring in buyers who are not expecting | Falling local births or a weak spring |
| Repeat purchase from nursing wear after the birth | Vendor price rises that cannot be passed on |
Who Walks In
The store serves three kinds of customer, and each buys differently.
The expectant customer is the core, at about 950 in Year 1. She arrives in her second trimester, often after a colleague or her midwife mentions the store, and buys across three or four visits: work tops and jeans first, a dress for a shower or photo shoot, then nursing wear in the last weeks. She spends roughly $350 on apparel and nursing wear in the year and is the customer the fitting service is built for.
The gift buyer is a friend, grandparent or colleague, about 700 in Year 1. She wants a ready-wrapped present within a budget of about $48, which is why baby clothing and gift sets are priced at that point and wrapped without charge.
The gown renter, about 250 in Year 1, books a photo shoot or a shower. She rents for $85, returns the gown within three days and often buys a nursing top or a baby item on the same visit.
Each customer is counted once, under the role in which she first buys.
Fitting, Pricing and the Sale
Appointments are walk-in or booked online. A fitter measures, explains what changes through the pregnancy, and pulls pieces that work in more than one trimester. Nursing bras are fitted late in pregnancy, and the fitter books a second fitting after the birth because size changes again.
Prices follow the brand's suggested retail price and the store competes on fit and service, not on discounts. Baby shower gifts are wrapped at the counter, and a registry card lets family members buy from the store's gift range. Missing sizes are special-ordered with a deposit and arrive within the week.
Every customer is invited to a mailing list at checkout. Messages go out by trimester, with a nudge to book the post-birth fitting and a thank-you after each rental.
Reaching Expectant Families
The Year 1 marketing budget is $32,000, of which $12,000 launches the shop and $20,000 keeps it running. It equals 7.0% of Year 1 revenue and falls to 3.2% by Year 3. Over about 1,900 customers it comes to about $17 each.
| Channel | Year 1 spend | Role and expected customers |
|---|---|---|
| Website and photography (launch) | $5,000 | Site with stock by size, fitting bookings and product photos |
| Opening event (launch) | $3,000 | A launch afternoon with a fitting demonstration; about 200 customers |
| Midwife, doula and OB office outreach (launch) | $4,000 | Samples, referral cards and a lending closet; about 250 customers |
| Local search and Google reviews | $5,000 | Searches such as "maternity clothes Memphis"; about 350 customers |
| Paid social | $6,500 | Short videos of fittings and arrivals; about 330 customers |
| Childbirth-class and provider partnerships | $3,500 | Class visits and referral cards; about 300 customers |
| Baby expos and community events | $2,500 | A booth at local baby fairs; about 180 customers |
| Email and text | $1,500 | Trimester and post-birth reminders; about 120 customers |
| Shower registry program | $1,000 | Registry cards and gift guides; about 100 customers |
The remaining 70 of the 1,900 customers are walk-ins drawn by the storefront. Spend per customer is about $17, and Year 1 revenue per customer is about $239.
Behind the Fitting Room Door
The unit
1,650 square feet in an East Memphis shopping center, at about $20 a square foot all in ($33,000 in Year 1), under a five-year lease that Sandy guarantees personally. The selling floor takes about 1,150 square feet, with two private fitting rooms, a nursing nook and a gown rack. The rest holds the stockroom, steaming and a small office.
Buying and stock
The store buys in four windows around market weeks: spring maternity in the fall, summer and nursing wear in winter, holiday gifts in summer and fall basics in spring. Year-end stock is planned at $94,214 in Year 1 and $107,045 in Year 3, and stock turns rise from 2.3 to 2.9 once sales outgrow the opening buy. Sizes are counted weekly. A line that has not sold in five months is marked down, in step with a turn rate of just over two.
Gown rental
Twenty-four gowns in sizes small through 3X are rented for three days at $85. Each is cleaned after every rental at $14, and the plan sets aside money each year to replace those worn out. Year 1 rentals average about twelve per gown, rising to 17.5 in Year 3.
Systems and licenses
A point-of-sale system that tracks stock by size and trimester, an appointment tool, a text and email platform and bookkeeping software, together $4,800 in Year 1. Bookkeeping hours and an outside accountant come out of the $10,000 professional-fees budget. The store holds a city and county business license, a sign permit and a Tennessee sales tax registration, and pays $5,000 in Year 1 for liability, contents and lost-income cover, with a separate policy on Sandy.
Who does the work
Three people open the store: Sandy, a full-time lead fitting specialist and a part-time associate. A weekend and evening associate joins in month 15 and a third part-time associate in month 34. Hires follow sales; the weak-sales case later shows which are delayed or dropped.
Sandy Malone and the Team
Sandy has eight years in retail, five as the buyer for a regional store's children's and maternity floor, where she managed a team of six. She completed a nursing-bra fitting program run by a bra manufacturer and holds a business degree. Her $60,000 is eleven years of savings.
The lead fitting specialist is hired for training in measurements and sensitivity to what pregnancy and early parenting involve, and covers the floor for short absences.
Sandy has bought for a chain but has never carried a lease, a loan and the cash risk herself, and has not run payroll as an owner. An outside accountant reviews the cash forecast monthly in Year 1, a part-time bookkeeper keeps the books, and a retired children's retailer reviews the buying plan each quarter, unpaid.
Sandy holds 80% of Malone's Maternity, LLC and guarantees the bank loan personally. The family investor holds 20% and stays out of daily running. The bank wants quarterly accounts and a monthly stock report.
Financial Plan: Stock, Fitting Rooms and the Lease
The section opens with the $225,000 the store raises and where it goes. After that come the store figures behind the forecast, sales by product line, payroll, profit and loss, cash, the balance sheet and a weak-sales case. Year 1 is month by month and the later years are annual.
Opening stock, build-out and who pays for it
| Use of funds | Amount |
|---|---|
| Opening stock: maternity tops, dresses, bottoms and workwear | $38,000 |
| Opening stock: nursing and postpartum wear, belly bands, hosiery | $14,000 |
| Opening stock: baby clothing and shower gifts | $12,000 |
| Build-out (about $17 a square foot): flooring, lighting, fitting suites, nursing nook | $28,000 |
| Fixtures, mannequins, racks and baby displays | $14,000 |
| Rental gown collection (24 gowns) and garment steamer | $9,000 |
| Point of sale, tag printer, cameras, signage | $8,000 |
| City and county business license, sign permit | $1,500 |
| Legal: LLC, lease review, vendor terms | $3,500 |
| Pre-opening rent and staff training | $9,000 |
| Launch: website, photography, opening event, doula and OB office outreach | $12,000 |
| Lease security deposit and utility deposits | $6,000 |
| Reserve for the slow first winter and the spring stock build | $70,000 |
| Total uses | $225,000 |
| Source of funds | Amount |
|---|---|
| Sandy Malone's savings | $60,000 |
| Family investor (20% stake) | $50,000 |
| Bank term loan | $115,000 |
| Total sources | $225,000 |
Sandy Malone puts in $60,000 of savings. A family investor adds $50,000 for a 20% stake, and a bank lends $115,000 over seven years at 9.5%, interest-only for the first eighteen months. The rate is a planning figure and the loan carries Sandy's personal guarantee. Equity is 49% of the total. Opening stock takes $64,000, or 28% of the money raised. The $70,000 reserve covers the thin winter, the spring stock buy that precedes the first strong months, and a gap between when vendors are paid and when the sales arrive.
Store figures behind the forecast
- Maternity apparel is the anchor line: 2,500 sales in Year 1, each averaging $98, which is $245,000 and about eight sales on each of 305 trading days. A sale is usually one or two pieces. Sales reach 3,200 in Year 3 (10.5 a day) and 3,450 in Year 5. Every line's prices go up 3% annually after Year 1.
- Nursing and postpartum wear is 1,350 sales at $64 ($86,400): fitted nursing bras and tanks, belly bands, recovery wear and hosiery. Baby clothing and shower gifts are 1,600 sales at $48 ($76,800), and 14% of that line falls in December. Online and ship-to-home orders are 300 at $74 ($22,200), taken through the store's booking website for customers who have been fitted in person. Gown rental is 280 rentals at $85 ($23,800) from 24 gowns, about twelve rentals per gown in Year 1 and 17.5 in Year 3.
- Gross margin is 52.5% in every year. Cost of goods is 48% of sales for maternity apparel, 46% for nursing wear, 53% for baby and gifts, 50% for online orders and 28% for gown rental, which covers wear and lost items. Below gross profit the model charges markdowns, returns and exchanges at 2.5% of sales, shrinkage at 0.9% and card fees at 2.7%, so each sales dollar yields about 46.4 cents ahead of payroll and occupancy. One point of gross margin is worth $4,542 in Year 1 and $6,471 in Year 3, and the plan's Year 2 profit would not survive a loss of one point.
- Inventory is carried at cost. Opening stock is $64,000, and each year's purchases add stock equal to 14% of that year's cost of goods sold, taking it to $94,214 at the end of Year 1 and $107,045 at the end of Year 3. Vendors allow 30 days once an account has a payment history; the first orders are paid up front from the opening stock budget, and the rest of the year's reorders ride on terms, which leaves $17,738 owed at the end of Year 1. Receivables run to two days of sales, made up of special-order deposits and rental balances, since the register takes payment at the counter.
- The store takes a 1,650-square-foot inline unit in an East Memphis shopping center at about $20 a square foot a year all in, which is $33,000 and 7.3% of Year 1 revenue (5.4% in Year 3). The rent is a planning figure and could be higher in a strong center; each extra dollar per square foot costs $1,650 a year. The build-out costs about $17 a square foot and is paid by the store, and $6,000 goes on lease and utility deposits. Utilities are $6,000. Insurance costs $5,000 and includes liability, contents, lost income if the shop closes, and a policy on Sandy's life and ability to work.
- On-costs of 27% sit on top of full-time wages (15% for part-time staff) for payroll taxes, health cover and workers' compensation. A full-time schedule makes the lead fitting specialist's $35,000 about $16.83 an hour; the Bureau of Labor Statistics put the May 2025 median for retail salespersons at $17.03, and the part-time associates are paid near $16 to $17. Sandy takes $40,000, which is less than she earned as an employee. The personnel table lists starting wages, and a 3% annual raise is booked on its own line from Year 2. The $10,000 professional-fees line pays for bookkeeping hours, a monthly cash review by the accountant in Year 1 and the tax filings.
- The store serves about 1,900 distinct customers in Year 1: roughly 950 expectant customers who each visit about four times, plus gift buyers, gown renters and online buyers. Year 1 marketing totals $32,000: $12,000 for the launch, funded from the raise, and $20,000 to run the shop. That is about $17 per customer and 7.0% of revenue, and it falls to 3.2% of revenue in Year 3 once the launch spend is behind the store.
- The model taxes the store as a corporation (the LLC elects corporate treatment), at the federal rate of 21% plus Tennessee's 6.5% excise tax on net earnings. Losses carry forward, but the $32,000 of start-up costs is left out of the carryforward, which makes the tax lines conservative: $269 in Year 3, $6,166 in Year 4 and $10,522 in Year 5. Tennessee also levies a franchise tax of 0.25% of net worth with a $100 minimum; it is small here and not modeled separately. The state sales tax rate is 7% and local rates add to it. Sales tax is collected, passed on and left out of revenue, and the store's accountant confirms every rate before filing.
- Owner distributions of $8,000 in Year 4 and $15,000 in Year 5 come out only of cash left after loan payments, and the loan runs its full term.
Sales by product line
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Maternity apparel | $245,000 | $292,726 | $332,698 | $358,742 | $380,535 |
| Nursing and postpartum wear | $86,400 | $108,768 | $125,611 | $136,372 | $144,065 |
| Baby clothing and shower gifts | $76,800 | $93,936 | $106,939 | $115,392 | $122,095 |
| Online and ship-to-home orders | $22,200 | $34,299 | $43,964 | $50,134 | $55,803 |
| Occasion and photo-shoot gown rental | $23,800 | $31,518 | $37,874 | $41,797 | $44,964 |
| Total revenue | $454,200 | $561,247 | $647,086 | $702,437 | $747,462 |
| Growth on prior year | – | 24% | 15% | 9% | 6% |
Maternity apparel is 54% of Year 1 revenue and 51% of Year 3. Nursing and postpartum wear, 19% of Year 1, brings customers back after the birth, when a maternity-only customer usually stops buying. Online orders grow from 4.9% to 6.8% of revenue because they come from customers who were fitted in store. Gown rental is 5.2% of Year 1 revenue, earns the highest margin and reaches $37,874 in Year 3.
Year 1, month by month
| Month | Maternity apparel | Nursing and postpartum wear | Baby clothing and shower gifts | Online and ship-to-home orders | Occasion and photo-shoot gown rental | Total revenue | EBITDA |
|---|---|---|---|---|---|---|---|
| Jan 2027 | $9,702 | $3,392 | $2,160 | $888 | $510 | $16,652 | ($11,137) |
| Feb 2027 | $14,210 | $4,096 | $3,072 | $1,036 | $935 | $23,349 | ($7,622) |
| Mar 2027 | $23,324 | $6,208 | $5,472 | $1,554 | $2,125 | $38,683 | $426 |
| Apr 2027 | $24,794 | $6,592 | $6,528 | $1,702 | $2,975 | $42,591 | $2,477 |
| May 2027 | $25,088 | $7,424 | $7,680 | $1,850 | $3,570 | $45,612 | $4,062 |
| Jun 2027 | $21,756 | $8,000 | $7,056 | $1,924 | $2,975 | $41,711 | $2,015 |
| Jul 2027 | $19,796 | $8,320 | $5,664 | $1,850 | $2,295 | $37,925 | $28 |
| Aug 2027 | $21,560 | $8,448 | $5,808 | $1,924 | $1,785 | $39,525 | $868 |
| Sep 2027 | $24,990 | $8,704 | $6,432 | $2,072 | $2,380 | $44,578 | $3,520 |
| Oct 2027 | $23,618 | $8,704 | $6,816 | $2,220 | $2,125 | $43,483 | $2,945 |
| Nov 2027 | $19,502 | $8,256 | $9,408 | $2,442 | $1,360 | $40,968 | $1,625 |
| Dec 2027 | $16,660 | $8,256 | $10,704 | $2,738 | $765 | $39,123 | $657 |
Revenue opens at $16,652 in January and reaches its first high of $45,612 in May, when spring-summer maternity wear and shower gifts overlap. It eases to $37,925 in July, lifts again to $44,578 in September and closes December at $39,123, when baby gifts supply $10,704 of it. EBITDA is negative in January ($11,137) and February ($7,622) and positive from March to December, though July ($28) and December ($657) are close to zero. The engine's monthly view does not time stock payments, so the spring buy could take cash below the year-end figure of $43,973; the reserve is sized for that, and the store would also talk to the bank about a seasonal credit line before it opens.
Staffing by year
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Owner, buyer and store manager | $40,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Lead fitting specialist | $35,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Fitting-room associate (22 hours a week) | $19,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Weekend and evening associate (17 hours a week) | $15,000 | Month 15 | – | 0.5 | 0.5 | 0.5 | 0.5 |
| Floor and rental associate (24 hours a week) | $20,000 | Month 34 | – | – | 0.5 | 0.5 | 0.5 |
| Total payroll incl. on-costs | $117,100 | $131,475 | $140,100 | $157,350 | $157,350 |
Sandy, a full-time lead fitting specialist and one part-time associate open the store. A weekend and evening associate joins in month 15, when rentals and weekend fittings need a second pair of hands, and a third part-time associate joins in month 34, once sales per day pass ten. Part-time roles are shown at annual-equivalent pay. Sandy's $40,000 is already in the costs, so the profit lines are what remains after she is paid.
Earnings by year
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $454,200 | $561,247 | $647,086 | $702,437 | $747,462 |
| Cost of goods sold (merchandise at cost, gown wear) | ($215,812) | ($266,675) | ($307,461) | ($333,761) | ($355,155) |
| Gross profit | $238,388 | $294,572 | $339,625 | $368,676 | $392,307 |
| Payroll incl. on-costs | ($117,100) | ($131,475) | ($140,100) | ($157,350) | ($157,350) |
| Rent | ($33,000) | ($34,000) | ($35,000) | ($36,000) | ($37,100) |
| Utilities | ($6,000) | ($6,200) | ($6,400) | ($6,600) | ($6,800) |
| Marketing | ($20,000) | ($20,500) | ($21,000) | ($21,600) | ($22,200) |
| Insurance | ($5,000) | ($5,300) | ($5,600) | ($5,900) | ($6,200) |
| Professional fees | ($10,000) | ($10,300) | ($10,600) | ($10,900) | ($11,300) |
| Software subscriptions | ($4,800) | ($5,200) | ($5,500) | ($5,800) | ($6,000) |
| Card processing fees (2.7% of sales) | ($12,263) | ($15,154) | ($17,471) | ($18,966) | ($20,181) |
| Markdowns, returns and exchanges beyond planned margin (2.5% of sales) | ($11,355) | ($14,031) | ($16,177) | ($17,561) | ($18,687) |
| Shrinkage and damage (0.9% of sales) | ($4,088) | ($5,051) | ($5,824) | ($6,322) | ($6,727) |
| Gown cleaning and repair ($14 a rental) | ($3,920) | ($5,191) | ($6,238) | ($6,884) | ($7,406) |
| Bags, tissue, gift wrap and store supplies | ($3,600) | ($4,100) | ($4,500) | ($4,800) | ($5,000) |
| Repairs, alarm monitoring and cleaning | ($3,000) | ($3,200) | ($3,400) | ($3,600) | ($3,800) |
| Market-week buying trips | ($3,500) | ($3,800) | ($4,100) | ($4,300) | ($4,500) |
| Licenses, permits and state filings | ($900) | ($950) | ($1,000) | ($1,050) | ($1,100) |
| Fixture refresh and gown replacement | $0 | ($2,000) | ($3,500) | ($6,000) | ($3,000) |
| Annual pay raises (3% a year) | $0 | ($3,944) | ($8,532) | ($14,591) | ($19,749) |
| EBITDA | ($138) | $24,176 | $44,683 | $40,452 | $55,207 |
| Depreciation | ($12,200) | ($12,200) | ($12,200) | ($9,200) | ($9,200) |
| Interest | ($10,925) | ($10,765) | ($9,400) | ($7,660) | ($5,748) |
| Income tax | $0 | $0 | ($269) | ($6,166) | ($10,522) |
| Net income before start-up costs | ($23,263) | $1,211 | $22,814 | $17,426 | $29,737 |
| One-time opening costs charged in Year 1 (legal, licenses, deposits, rent before opening, training, launch) | ($32,000) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($55,263) | $1,211 | $22,814 | $17,426 | $29,737 |
Year 1 posts EBITDA of about zero (a loss of $138), loses $23,263 after depreciation and interest, and loses $55,263 once $32,000 of start-up costs is charged. Year 2 is the first profitable year, at $1,211, which is close to zero. Net income is $22,814 in Year 3, $17,426 in Year 4 and $29,737 in Year 5. Year 4 dips because the third part-time associate works a full year, the pay-raise line reaches $14,591, the fixture refresh rises to $6,000 and tax of $6,166 begins. EBITDA margin is 6.9% in Year 3, a modest return that leaves little room for a bad buy. Payroll with pay raises is 26% of revenue in Year 1 and 23% in Year 3.
Where the cash goes
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($122,027) | $9,884 | $32,185 | $24,802 | $37,454 |
| Build-out, fixtures and rental gowns | ($59,000) | $0 | $0 | $0 | $0 |
| Funding received | $225,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | ($8,160) | ($17,526) | ($19,266) | ($21,178) |
| Owner distributions | $0 | $0 | $0 | ($8,000) | ($15,000) |
| Net change in cash | $43,973 | $1,724 | $14,659 | ($2,463) | $1,276 |
| Closing cash | $43,973 | $45,696 | $60,355 | $57,892 | $59,168 |
Cash from operations is negative $122,027 in Year 1, mostly the $94,214 of stock on the shelves less $17,738 owed to vendors, plus the loss and the start-up costs. Closing cash is $43,973 at the end of Year 1 and $45,696 in Year 2, after the first $8,160 of loan principal. It is $60,355 in Year 3 and stays near $58,000 to $59,000 in Years 4 and 5, when distributions begin. The loan falls from $115,000 to $48,870 by the end of Year 5.
Balance sheet, stock included
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $43,973 | $45,696 | $60,355 | $57,892 | $59,168 |
| Accounts receivable | $2,489 | $3,075 | $3,546 | $3,849 | $4,096 |
| Inventory at cost | $94,214 | $101,335 | $107,045 | $110,727 | $113,722 |
| Build-out, fixtures and rental gowns (net) | $46,800 | $34,600 | $22,400 | $13,200 | $4,000 |
| Total assets | $187,475 | $184,706 | $193,346 | $185,667 | $180,985 |
| Owed to vendors | $17,738 | $21,919 | $25,271 | $27,432 | $29,191 |
| Bank term loan | $115,000 | $106,840 | $89,313 | $70,048 | $48,870 |
| Paid-in capital | $110,000 | $110,000 | $110,000 | $110,000 | $110,000 |
| Retained earnings | ($55,263) | ($54,052) | ($31,238) | ($21,813) | ($7,075) |
| Total liabilities and equity | $187,475 | $184,706 | $193,346 | $185,667 | $180,985 |
Stock turns and the break-even point
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -0.0% | 4.3% | 6.9% | 5.8% | 7.4% |
| Net margin (before start-up costs) | -5.1% | 0.2% | 3.5% | 2.5% | 4.0% |
| Payroll incl. pay raises as share of revenue | 26% | 24% | 23% | 24% | 24% |
| Revenue per full-time equivalent at year end | $181,680 | $187,082 | $184,882 | $200,696 | $213,561 |
| Average monthly revenue | $37,850 | $46,771 | $53,924 | $58,536 | $62,289 |
| Monthly revenue needed to cover operating costs | $37,872 | $42,932 | $46,829 | $52,114 | $53,523 |
| Debt service cover (EBITDA / interest + principal) | -0.0x | 1.3x | 1.7x | 1.5x | 2.1x |
Year 1 averages $37,850 of revenue a month against $37,872 required to pay operating costs, which leaves the store within $22 a month of covering its running costs and has nothing left for depreciation, interest and start-up costs. Year 2 averages $46,771 against $42,932, and Year 3 $53,924 against $46,829. Turns (cost of goods sold divided by year-end stock) are 2.3 in Year 1, 2.9 in Year 3 and 3.1 in Year 5. Each dollar of stock returns gross profit of 2.5 in Year 1 and 3.2 in Year 3. Per square foot of the 1,650, sales come to $275, $392 and $453 in Years 1, 3 and 5. Debt service cover is below zero in Year 1 while the loan is interest-only, then 1.3x in Year 2, 1.7x in Year 3 and 2.1x in Year 5. The Year 2 figure is the one a lender would question first.
If sales run a fifth short
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $363,360 | $448,998 | $517,669 | $561,950 | $597,970 |
| Net income before start-up costs | ($40,391) | ($13,147) | $2,646 | $5,293 | $10,840 |
| Net income after start-up costs | ($72,391) | ($13,147) | $2,646 | $5,293 | $10,840 |
| Closing cash | $29,838 | $17,908 | $12,966 | $6,734 | $4,410 |
Here every revenue line falls 20% in every year, and the owner responds in these ways: the weekend associate starts six months later (month 21), the third part-time associate is never hired, part-time hours fall by 20%, the lead fitting specialist's hours fall by 10% and Sandy takes a 20% pay cut, no fixtures are refreshed, the marketing line is trimmed by a fifth, professional fees and supplies fall, card fees and shrinkage track sales, and owners draw nothing. Markdowns are held at base-case dollars, because slow stock is what gets marked down. With those steps year-end cash stays above $4,410, the low comes in Year 3, and the store reaches a profit of $2,646 in Year 3 after losses of $72,391 in Year 1 and $13,147 in Year 2, then earns $20,373 in Year 4 and $31,279 in Year 5. Equity ends Year 1 at $37,609, a thin cushion that the store would take to the bank before any covenant date. Only Year 1 is modeled by month, so a seasonal low in later years could sit below the year-end figure, and the seasonal credit line would be drawn then.
Sources
- Tennessee Department of Revenue, Sales and use tax: the general state rate is 7%; local rates vary by county and city and are not given on the page.
- Tennessee Department of Revenue, Franchise and excise tax: the franchise tax rests on net worth and the minimum franchise tax is $100. The department's due-dates and tax-rates page lists the franchise tax at 0.25% of Tennessee net worth and the excise tax at 6.5% of taxable income.
- U.S. Bureau of Labor Statistics, Occupational Outlook Handbook, retail sales workers: $17.03 an hour was the May 2025 median for retail salespersons; the projection for 2025 to 2035 is zero change in employment.
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