BUSI 1301 Spring 2013 Business Plan Assignment Stash Your Stuff Storage Warehouse

You have a very unique opportunity to purchase a storage warehouse. Ima Hoarder is an aunt of one of your classmates is getting up in years, and has owned Stash Your Junk Warehouse for quite a few years. It is not a really big facility, so it does not require a full time attendant. In fact, Ms. Hoarder has always managed the facility in just afternoons and some week end work. This could be the perfect part time business for you while you continue taking courses at COM..if you can turn a profit worth your effort.

The facility consists of the following units: 20 large units that rent for $60 per month 10 medium units that rent for $40 per month 20 small units that rent for $20 per month Ima only accepts cash or check for the rental payments. She does have to work a little harder at the first of every month to make sure she collects all the rents. There may be some way to streamline this process, but Ima hasnt given this any thought. You have a friend, Bruce Glover, who owns storage warehouses. You might be able to call or email him to get a hint on how to streamline this process. He can be reached at bglover@com.edu or at 409-933-8552. Stash Your Stuff is located on a fairly busy street in Texas City, and there are two brand new apartments close by with another scheduled for construction within six months. The currents rental rates have not been increased in eighteen months, and a quick check of other rental rates suggest that some form of slight rate increase might be justified, but then again, raising rates could increase vacancy. The facility has a lighted sign on the front of the building that gives the business name and its website. Ms. Hoarder is a lifelong learner, and has taken classes at COM to help her maintain her website.

Ms. Hoarder has invested her money wisely, and now that she is getting a little older, she would like to slow down just a little. She has grand children in Austin, and would really like to spend more time with them and her daughter there. So far, Ima hasnt spoken to anyone about selling Stash Your Junk, but you know that if she were to call a realtor, her asking price would increase dramatically. In an initial conversation with her, you feel that you could possibly purchase the property now for $62,500. If someone else talks to her and she feels she has two interested parties, the price would likely go up to around $94,000. If she were to talk to a realtor, then very likely she would list the property for around

$125,000. Needless to say, speed is of the essence if you are to get a good deal on this business. You talked to your banker who quoted you 6 % interest on a 10 year loan with 20% down payment. The monthly payments would be as follows: $50,000 (80% of $62,500) for 10 years would be a monthly payment (principle and interest) of $568 $75,000 (80% of $94,000) for 10 years would be a monthly payment (principle and interest) of $852 $100,000 (80% of $125,000) would be a monthly payment (principle and interest) of $1135 You have enough cash in savings to make any of these down payments. You have also done your research to find out the following: Normal vacancy rates run about 10% of maximum possible monthly rental income. You should assume that your vacancy rates would approximate this norm. Maintenance of the facility typically runs about 5% of maximum possible monthly rental income and you should be able to expect this to hold true for you. Ima uses a local handy man for maintenance, and her maintenance expenses still fall within the 5% range. Taxes and insurance run about $400 per month Advertising including maintenance of the website typically runs about $150 per month. Ima really hasnt done much advertising.

Your assignment is this:

1. (25 Points) a. 15 Points: Create a spreadsheet that shows the three possible purchase prices of the property, with monthly profit/loss calculations for each purchase price. Create this in a columnar type form or in an Excel spreadsheet where I can clearly see your work. Extend your monthly profit/loss to give an annual amount. This must fit on one sheet of paper. Note that I will print your submission before I grade it, so be sure to go through page set up in Excel so the final product is confined to one sheet only. b. 5 points: Determine if the business would be a worthwhile purchase at each of the three purchase prices. Also, be sure to consider your time and desire/lack thereof to own a business. c. 5 Points: Would you be taking advantage of Ima to purchase the property/business at the lowest price? 2. (25 points) a. 13 Points: Describe how you would run the business (would you handle it yourself or would you hire a part time person). If you would hire a part time person, factor in those costs. b. 12 points: Can you think of anything you could do to lessen the work load, especially rent collection, of the business? 3. (20 Points) Identify any potential growth opportunities for this business. Do not consider adding additional storage units at this time since you do not have enough information to work through this scenario. 4. (30 Points) Based only on the lowest purchase price, and assuming you spent none of your profits: a. 10 Points: What would be your financial position from this business venture immediately after you paid off your note to the bank in ten years? b. 10 Points: How much cash did you have to come up with to earn that money? c. 10 Points: What if anything else did you have to contribute to earn that money?