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Financial Analysis and Pricing Structure for Off 2 Gran Grans - Research Paper Example

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The paper "Financial Analysis and Pricing Structure for Off 2 Gran Grans" analyzes the financial and pricing structure for Off 2 Gran Grans, a company that offers services to elderly people. It significantly emphasizes using corporate social responsibility as a positioning and competitive tool…
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Financial Analysis and Pricing Structure for Off 2 Gran Grans
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Financial Analysis and Pricing Structure The understanding of financial status and pricing of an organizationis important in the overall implementation of a strategy that will work better for the specific organization. Start up businesses as well as established ones are able to leverage on the different opportunities because of their ability to have proper analysis of their financial and pricing status. This paper presents the financial and pricing structure for Off 2 Gran Grans, a company that offers services to the elderly people. Off 2 Gran Grans is a service organization with a significant emphasis on using corporate social responsibility as a positioning and competitive tool. The target market for the company is the senior citizen aged 60 to 100, with a secondary market consisting of immobilized shut-ins of varying age categories to assist in revenue production. Off 2 Gran Grans provides assistance services, such as house cleaning and errand running for medications and groceries, with a supplementary service for visitation, consisting of gate keeping services and interpersonal relationship development. Being alone is rather frightening to most senior citizens supporting psychologists stating that warm interpersonal relationships are the most fundamental of human needs (Brammertz and Akkizidis 9). Off 2 Gran Grans will provide psychological adjustment for its target consumers and also fill a tangible need that require fulfilling due to limited mobility, lack of access to transportation, and lack of family and social support. Financial Analysis for Off 2 Gran Grans In the financial analysis of the products and services that Off 2 Gran Grans, the business will need to re-evaluate the number of customers that are likely going to require its services and determine the revenue that it expects from the services it will offer to the customers (Brammertz and Akkizidis 9). The number of customers will be like the probable sales unit that the business is expecting to make in a certain period. Since this is a start up business, the business may consider using statistics from other related business that are already established in the business. Still using data from other related business, Off 2 Gran Grans must be able to inform the market size with a view to determine the market share that it is likely going to have. The business will also need to estimate the expected return on investment before venturing into business. This will aid the decision on how much to invest in the business and even estimate the time that the business is going to require in order o break even. The financial analysis for the above company is going to encompass three main areas, that is, the net present value, the sensitivity analysis, and the break-even analysis (Lee, Lee and Lee 25). This is important in leveraging the company in a business that has negative reviews from customers. However, this will enable the business to identify where its competitors have been failing and correct it before setting out to provide the services to the people. Break-even analysis The understanding of the break-even in a business is important because it helps in fixing the financial status of any business. As a service provider, Off 2 Gran Grans will need to have a a competitive price for its services and products to the elderly people that will be identifiable with the customers. The business will have to take a number of initiatives that are geared towards ensuring that fixed expenses like rent, electricity and others are kept to the minimum with a view of cutting down on the operation costs (Shim and Siegel 32). In determining the breakeven point, Off 2 Gran Grans will require to have 200 customers who will be charged $100 per month as upkeep costs. Since the organization’s initial investments is between $58,000 and $95,000, the company therefore should expect to break even in five years’ time. However, with investment in advertisement each year, this period may be reduced to 3 years. Sensitivity analysis All figures given for Off 2 Gran Grans are projections and therefore there is need to put this factor into consideration. The precision of the projections will be improved with adjustments and changes in the way the organization handles its activities. However, it is evident that the projected figures are all subject to the unanticipated circumstances in the business. The sensitivity analysis for the company is as follows Case Scenario Costs Benefits First year Realistic estimates-$150000 $150000 $150000 Cost+20% Noteworthy costs overruns Realistic estimates+20% $150000 Benefit-20% Overestimated benefits Reduction in severance $150000-20% reorganization Off 2 Gran Grans changes its model without severance Reduction in severance $150000 Delayed implementation of projects Half year delay in implementation of all projects $150000 $150000 Net value analysis The following are the anticipated net value that Off 2 Gran Grans in the first financial year The net present value for the organization is as follows The net present value for the organization is as follows Asset purchases- $ 5000 Asset-linked expenses- $2000 Contribution margin-$15000 Depreciation effect-$10000 Expense reductions-$6000 Tax credits-$8000 Taxes-$4000 Working capital changes-$40000 Off 2 Gran Grans has services that are geared towards meeting the needs of the elderly people. The financial status of the organization provides it with challenges of meeting the organization’s obligations of providing the best services in the industry. This is done by comparing the services and products that other related organizations are offering to their clients. Already the organization has embarked on the marketing process that aims at bringing awareness of its services to the target clients. The organization will therefore require having a strong financial base in order to utilize several tools including advertisement and other media in bringing its services to the client. Ultimately, this calls for a careful strategic planning to ensure that the marketing program does not surpass the budget or organization’s financial base. The percentage of the amount allocated for marketing of its services should therefore be in line with the expected returns that the organization anticipates. Pricing Structure for Off 2 Gran Grans Finding a good pricing for an organization’s services and products is not an easy task. Poor pricing can be detrimental to an organization even if the products and services offered are excellent in the market. However, with understanding of few things surrounding the business, a pricing structure can be arrived at, which then can give a competitive edge to the business (Smith 9). For a service provider like Gran Grans, a good pricing structure is vital in ensuring that the services provided are affordable to the elderly people. The organization’s pricing structure is formulated around competitiveness and affordability. Majorly, Gran Grans pricing structure is based on the services that the organization provides to its clients. The pricing structure for Gran Grans has allowed the organization to operate profitably by ensuring that the clients are able to meet the costs of the service and products provided by the organization (Smith 15). At the same time, the organization is able to continue with its activities and operations using the revenues that it collects from the clients. The pricing strategy for the organization is reasonable because it has enabled the organization be continuously competitive as well as provide quality and sustainable services to the elderly people who are housed at the organization’s premises. Off 2 Gran Grans has a pricing structure that is based on the exisiting competition in the market. The company has a pricing that is slightly below the market price and this has kept clients coming from far away to have the services of the organization. Most of the elderly people who come to this organization get to know the prices at the organization through word of mouth from their friends and family members. In addition, Off 2 Gran Grans utilizes the local resources including the local authorities and other financial advisors to be able to determine and set the prices of its services. This is important more so in situations where there is need to receive tax reliefs from the authorities since the services that are found at the organization are specifically aimed at making the life of elderly people more comfortable Communication is an important ingredient in setting price for a service or a product. Off 2 Gran Grans has a well-established communication channel that allows people to give feedback concerning the services that they received from the organization. This is important especially in finding out how the customers feel about the organization and the quality of the services that the organization provides (Smith, 23). This can also be an opportunity for the organization to know whether the clients are happy with the prices or not that the organization charges for its services. Customer feedback can be effected through surveys and other media that will help to collect information from the clients. In addition, Off 2 Gran Grans engages in the routinely evaluation of the market to determine the existing demand for their services. An increase in demand has always indicated that the organization could comfortably charge a higher price for the services that it offers and still be able to retain clients and even attract more (Alexander, 21). The organization’s pricing model is based on the market research that helps in identifying the needs of the clients and therefore formulates a pricing strategy that satisfies the needs of the clients while at the same time ensuring that the organization is able to meet its cost obligations. Conclusion From the analysis above, Off 2 Gran Grans is well placed to compete with other organizations that are offering similar services. However, considerations should be placed on the strengths that the organization has to ensure that the estimated time for breakeven does not fall beyond the estimates. Delays in meeting critical datelines will increase the estimated costs and therefore the organization must pay attention to the allocated time. Works cited Alexander, Carol. Market Risk Analysis, Pricing, Hedging and Trading Financial Instruments. Hoboken: John Wiley & Sons, 2008 Brammertz, Willi & Ioannis Akkizidis. Unified Financial Analysis: The Missing Links of Finance. Hoboken:John Wiley & Sons, 2011 Lee, Alice, John Lee & Cheng F. Lee. Financial Analysis, Planning & Forecasting: Theory and Application. New York: World Scientific, 2009 Shim, Jae K. & Joel G. Siegel. Handbook of Financial Analysis, Forecasting, and Modeling. New York: CCH, 2007 Smith, Tim. Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures. Connecticut: Cengage Learning, 2011 Read More
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