Marten Arts Gallery Case

Financial Assessment
What is Marten Arts Gallery?
Established in 1988 to complement owner's interest in art

Family-run business by Dennis Pal and Judy Stephenson

Fine art and fine craft retailer

Serves visitors and residents of Bayfield, ON and surrounding area

Goods sold in the physical store in Bayfield, ON

Liabilities exceed assets

Negative net income ($4,639)

Operating expenses have lowered by 17.7% since 2006

Weak quick ratio of 0.07:1

Weak current ratio of 0.9:1

Mission
Deliver the residents of Bayfield and the surrounding area fine art from local and
international artists.

Marten Arts Gallery

Nathan Harte Martha Woodruff
Status Quo
Sell the business
Internet Sales
Wind Down Business
Projected increase in sales to 2007 level at $362,059
Reduce operating costs from 2008 by 25%

Inventory control reduces COGS by 2%

Provided net income for the year of $44,487

Gain a salary of $40,000 annually

Pay $17,350 in expenses

Rent out the gallery space for $2,000 - $2,500

Inventory would be hard to sell off or find a place to store

Invest $15,000 to upgrade and change POS

Generate $60,000 in sales

2.5% service fee on all transactions

$1,000 each month on maintenance expenses

$20,000 for an additional employee to monitor the system

Net loss of ($16,614)

Based on NPV:

$177,623 at 8% over five years

Projected income pending implementation of the status quo option

Expansion to Stratford
Summary
Art Expos
Projected net income positive

New sales of $400,000 in the first year of operations

Overall expenses to open are $238,050

Feasibility of securing a loan small due to their weak financial position

Annual Toronto Art Expo

 $17,000 one-time fixed expense

 One weekend
 Must sell 7 pieces at an average price of $6,000 to break even

Annual Affordable Art Fair

 $21,000 one-time fixed expense

 Three days
 Must sell 14 pieces at an average price of $3,500 to break even

Internet option is a good idea

 Forward thinking - future of the business

 Generates a net loss

Expansion

 Generates a positive net income

 Feasibility of loan is low

Sell

Wind Down

 asdf

Conclusions
Marten Arts Gallery should:

Work on the status quo to obtain a manageable operating expense

Attend the Annual Toronto Art Expo

Marten art Gallery Case Solution
Introduction
Simply put, Marten Art Gallery is a fine art and craft retailer that was established in 1988,it is a
Canadian based family owned business by Judy Stephenson and Dennis Pal. Its delivers the
residents of Bay field and the surrounding area fine art from international and local artists. The
products are sold in the physical store in Bay field. The gallery is a rare find in Ontario, it has
excellent quality fine and art craft. Furthermore, it is recognized by Days out Ontario for the best
retail art gallery with the best variety offering a broad spectrum of the paintings of different styles,
mediums and prices rarely found in one gallery.
The issue
In the fine art gallery, the significant variation and changes, the economy and the increased
competition in the market have affected the ability of the Martin Art Gallery to get profits and operate.
Regardless of the strong reputation of the company in market, the clientele buying behavior is
changing. The owner of the company had to take a closer look over the alternatives ranging from the
adding another shop to sell the company. The responsive marketing strategy of competitor has
created some urgency for Marten Arts Gallery to revise its options.
Objectives
Corporate
It is to notify that the financial performance and stability of the company has impaired by the recent
changes in the recent changes in fine art industry and economy. The owner of the company has
concerted its persistent efforts to regain the profitability in first half of year 2009, due to which he had
to determine the feasibility of the options. Also, the company has aimed to return to the previous
profitability level even in unfavorable and adverse economic times. The mission is to deliver the
exceptional quality products by international and local artists to the Bay field residents, surrounding
community and art lovers.
Personal
Marten Art Gallery had to make sound decision relative to the family artistic interest. Furthermore,
the company has integrates the photography interest into the service.
Internal Analysis
S-W-O-T
SWOT is helpful tool that is used to comprehend the weaknesses and strengths and distinguish both
opportunities and threats the company confronts. Not only this, the company would be able to get a
comprehensive knowledge into potential and discriminating issues affecting accomplishments of
business goals.
Strengths & Options
The company has strong market presence and enough expertise and knowledge as to how to
smoothly run the business operations. The company is popular in Bay field area and located in the
most famous tourist hub that draw the population from Canada and United States. The owner is
dedicated and motivated in bringing the desirable profit margins with the unique set of skills to
effectively manage the different business aspects. The operating expenses have successfully
reduced by Pal by achieving 25% reduction in business operation cost.
Weaknesses & Threats
The sales and profits have reduced, the income statement shows that the high interest expenses
affecting the profit line of the company. Also, the liquidity position of the company shows that the
company is over leveraged with the significant long term and short term loans, this in turn affect the
ability of the company to obtain the additional debt financing to implement growth plans and support
long term investment in future to pursue its efforts to promote the gallery.
There is a risk indicator to suggest the possible bankruptcy and potential non-payment of interest.
Though there exists some collateral to possible secure further financing in truth the biggest asset is
Pal. This would not be a desirable state for lenders.  This would also impact his ability to sell the
gallery.
External Analysis
PEST Analysis
This framework is used for the strategic planning and to understand the long term and short term
external influences on the operations of business. The profound understanding of the external
environment would help the company in minimizing the threats and maximizing the opportunities.
Political factors
The appreciation of the US dollar against Canadian dollar, the Canadian products’ cost has
significantly increased for the customers in America.  This in turn has impacted a number of tourist
who travel from the United States, and with the increased restrictions on travelling as a result of
Western Hemisphere Travel Initiative (WHTI) has daunted tourists from traveling United States and
Canada.  According to new regulations set in 2009, the company is required to obtain a trucking
permit to deliver art to its customers in US.
Economic factors
The bottom line of the company has adversely affected by the economic recession. Though, the art
and craft market is mature, the overall industry has dramatically influenced by the economic
recession. The company location is in the small town that is famous amongst tourists. Adding new
art stores in area would create the art culture hub which would attract more avid art lovers to the
town.
Social factors
It is to notify that the 20% clientele of company are art followers, who likely contribute up to 80% of
the total revenue. Rest of the customers are tourists that have the potential to become followers. It is
important for the company to focuses on increasing its reach and exposure through various social
media channels. Pal should focus increasing the customer services and delivering brand loyalty by
investing in training session provided to staff. He should create a brand loyalty program, email
subscriptions (to drive traffic to his website), to inform new followers of events, featured artists, etc. 
A strong relationship with artists is key to company’s Repu-brand, and will aid in distinguishing
company from other galleries. Thus it would be wise to invest in a robust e-commerce setup in order
to achieve the corporate goals.
Technology factors
E-commerce has revolutionized the way companies do the business.  It has reduced the
dependency on local demographic and has created an opportunity for company to expand its
clientele nationally and internationally, thereby increasing its targeted segment in a cost effective
manner. The company’s website is impressive as compared to industry standards; however, the e-
commerce component is needed to stay relevant in the market.
Competitive Analysis
Notably, there are three art galleries in the market that is engaged in catering different segments of
market and they have contemplated to strengthen the arts sector in same area and still there is a
moderate competition due to which the MAG’s financial performance is not obstructed by the
competition’ intensity……………