PROPOSED BUSINESS VENTURE
Purpose

The Company, Spirit Sportswear and Marketing, has been formed for the purposeof marketing a school sportswear fund raising program to elementary and secondaryschools. During the 1992-93 school year, North Bay Sportswear initiated alimited schoolwear program for North Bay Area counties. The success of theprogram has provided a new and potentially lucrative outlet for North BaySportswear's products and services. Implementing the program on a nation-widebasis will require intensive planning, regional hiring of employees,communication networking, and sufficient capital to put the system in place.Thus, the formation of a company devoted solely to the marketing of theschoolwear program is seen as the most effective and efficient method ofpromotion and capitalization. Spirit Sportswear and Marketing currently hasa joint development agreement with North Bay Sportswear for the exclusiveproduction of all schoolwear products.

INDUSTRY BACKGROUND
Current Status

The imprinted sportswear market is an international multi-billion dollarindustry. Its primary market segments include local businesses, ad specialties,premium incentives, licensed pre-prints, and original pre-prints. Localbusinesses are the primary market for the majority of screen printers, duein part to the ease in which this market can be entered and to its relativelylow start-up costs. However, the licensed and original pre-print marketstend to be the most lucrative. Overall, the market for imprinted sportswearhas remained strong even during the past recession. The consumer shift towardslower priced garments such as sportswear may be a contributing factor inthe industry's current position.

The schoolwear segment of the imprinted sportswear market is a well definedand easily located population. An estimated 50 million students are enrolledin 108,000 U.S. public and private elementary and secondary schools. Theirpredisposition toward showing school pride and spirit through the wearingof sportswear imprinted with their school logo is exceptional. Based on asurvey of 307 schools covering 5 North Bay Area counties, 97% of the schoolspurchased some type of imprinted schoolwear. These factors indicate theschoolwear market is a large and readily accessible outlet for imprintedsportswear.

Role of Proposed Business

The role of Spirit Sportswear is to market a School Sportswear fundraisingprogram throughout the U.S. The company will handle all aspects of promotionincluding advertising, telemarketing, preparation and distribution of marketingmaterials, sales staff organization, database management, and networking.In addition to its marketing responsibilities, the company will be responsiblefor the expansion and refinement of the existing schoolwear program, theexploration of new markets, and the development of new products for thosemarkets.

MANAGEMENT
Owners

The legal structure of the proposed company has not been finalized. It isexpected to be either a general or limited partnership, and is dependenton discussions with potential investors. The principal owner will be PaulB. Newman. His 16 years of experience in the Imprinted Sportswear businessinclude outside sales, graphic design, screen making, print production, DataBase Program & Design. Mr. Newman is responsible for developing theschoolwear program. His analysis of the potential profitability of a nation-wideprogram, and realization that funding for this type of program is beyondthe resources of North Bay Sportswear, are the primary factors which ledto the formation of Spirit Sportswear.

Mr. Newman will assume the position of President and General Manager of SpiritSportswear & Marketing Co. His responsibilities will include settingcompany goals and policies, short and long term operational planning, systemsautomation, and the hiring of key personnel.

Key Employees

As with all new businesses, Spirit Schoolwear must avoid costly mistakesand maximize employee productivity to grow and prosper. To this end, thehiring of a knowledgeable project coordinator is of paramount importanceto the success of the program. Once the program is ready for nation-widemarketing, the company will begin an exhaustive search for an experiencedmarketing professional to coordinate employee activities, manage salesoperations, and assist in all phases of the program.

PERSONNEL

Required Employees

The company will require telemarketing, office, and sales personnel.Telemarketers will be used to identify the contact person for each school,follow-up on brochure mailings, enter and update information into the salesdatabase, and set and organize sales appointments. Office personnel willbe responsible for copying marketing materials, preparing sales packets formailing, updating customer records in the data base, processing sales andpurchase orders, light bookkeeping, and customer service. Outside sales personnelwill be hired to contact and meet with school officials, make salespresentations, take design and order information, maintain customer contactduring production, and make follow-up contact at periodic intervals. Becauseit is anticipated that hiring new employees will be a continuing occurrence,the company is developing an Employee Database which will organize, sort,and profile all applicants for future needs.

Salaries and Wages

Salaries and wages outlined in this section are estimates based on fullcapitalization and implementation of the program on a nation-wide basis andare subject to revisions. As President and General Manager, Mr. Newman willreceive a base salary plus a percentage of the net profits agreed upon bythe ownership. Base salary for the Project Coordinator will be $27,000 plusbonuses. The office manager will receive $18,000 to $23,000 depending onexperience. Telemarketing wages will start at $7.50/hr plus incentives andbonuses. Starting wages for office personnel will be $6.50 to $7.50/hr.Salespersons will be paid commissions based on gross sales at a rate of 12%for first orders if the salesperson books the appointment, 10% for firstorders if the company books the appointment, and 8% for reorders. Other salesincentives will include bonuses based on sales volume and monthly salariesfor top producers.

Personnel Policies

Mr. Newman will be responsible for developing a complete job descriptionfor each employee position prior to the hiring process. He will also createa monitoring system to track employee productivity. Personnel policies atSpirit Sportswear will attempt to create a pleasant and stress-free environmentfor employees. Dress for office and telemarketing personnel will be casualand for the most part accommodating to employee tastes and desires. The officeswill be smoke-free, with smoking privileges limited to outside areas.

BUSINESS OPERATIONS

Facilities & Equipment

Facilities for Spirit Schoolwear will be located in offices adjoining NorthBay Sportswear's existing 6,000 sq. ft. facility at 570 B Soscol Ave., Napa,CA. 94559. Rent is currently $.30 per square foot.. Computer equipment necessaryfor the school database network will consist of a file server, a networkmodem, and one computer terminal per telemarketer. The company currentlyhas 3 telemarketing lines and a custom 800 line, and plans to add severalmore lines for telemarketing, 1 for incoming local calls, and 1 custom 800number. Until that time when the company can purchase a full-function copymachine, copying services will be provided by North Bay Sportswear at cost.

PRODUCTS & SERVICES

Products Offered

Products offered in the schoolwear program consist of custom imprinted garmentsand accessories. They include T-shirts, sweatshirts, sweat pants, shorts,sport-shirts, hats, and canvas backpacks, tote bags etc. All items will bescreen printed exclusively by North Bay Sportswear. The program is specificallygeared toward casual attire and does not generally include the sales of teamuniforms or gym clothing. However, the gym wear market is potentially aneven bigger outlet for sales, with an estimated $4.5 million in sales forBay Area high and middle schools alone. Customers wishing to purchase thesetypes of products will be referred to Spirit Sportswear for special pricingconsideration. Once the schoolwear program is established at a school, itis the company's intention to begin active pursuit of the school's gym wearorder.

Production

All items offered by Spirit Sportswear will be produced exclusively by NorthBay Sportswear and guaranteed to be first quality and free from defects.Design and pre-press production of artwork will also be the responsibilityof North Bay Sportswear and will follow the guidelines set forth in the program'sTerms & Conditions (see Program Guide). North Bay Sportswear will requirea significant amount of equipment to meet projected sales levels. North BaySportswear will rely on Spirit Sportswear to secure this equipment and willlease/purchase the equipment from Spirit Sportswear.

Economics of Product Sales

The pricing of all schoolwear products is based on item & productioncosts, number of colors in the print, quantity purchased, and competitorprices. A pricing analysis from Spirit Sportswear's pilot program is presentedbelow. Considering the various problems associated with pilot programs ingeneral, the profit margin (19.0%) was an acceptable return on gross sales.The experiences and sales data gained from the pilot program have been usedto refine and expand operations. The company has since reduced operatingexpenses by about 15% and will continue its efforts in this area.