Starting a New Business for Snacks - Term Paper Example

? Business Plan Contents Business Plan Contents 2 Executive Summary 4 Introduction 4 of business idea 5 Business Idea 5 Mission 5 Objectives 5 Legal Structure 6 Marketing 6 Target Customers 6 Competitor Analysis 12 Competitive Business Strategy Based on Marketing Mix 12 Resources 12 Management Team and Employees 12 Premises / Location 13 Equipment 13 Finance 14 Financial Assumptions 14 Sales Forecast 15 Capital Expenditure 16 Capital Investment Analysis 16 Financial Projection (Income Statement, Balance Sheet & Cash Flow) 18 19 Conclusion 20 Reference 21 Appendix 22 Questionnaire 22 Executive Summary The main idea of the paper is to set up a business for snacks made of corn, boiled potatoes, sauces and other spices in the Edinburgh area of Scotland. On the basis of such the paper aims to conduct a survey of the legal, business, consumer and marketing paradigms of the snack company based in Edinburgh. A range of secondary and primary survey based on questionnaires would be conducted to retrieve effective inferences based on which financial and sales forecasting would be conducted for a period of five years. Finally the paper would conclude summarising the essential points derived from the analysis through which it would be suggested whether ‘CoRn Me’ would be successful in its snack trade in Edinburgh. Introduction ‘CoRn Me’ is a new company that is conceptualised to focus on selling of snacks made of corn, boiled and steamed potatoes that would be served hot to the people with using sauce and spice toppings. The target market for the products chosen is Edinburgh city based in Scotland. An effective survey based on secondary and primary research tools would be conducted to understand the nature of consumer feedback pertaining to the region. Secondary research would be sought from the internet while questionnaire based surveys would be done for primary research. Further effective forecasting of sales and financial figures would be conducted for a period of five years based on the resource potential and information obtained from surveys to understand whether the business of ‘CoRn Me’ would be successful in the region. Description of business idea Business Idea The main idea of the business is to sell healthy and fresh snacks made of corn that would be served to the customers with sauce spread over. The snacks would be prepared based on corn, other fries and boiled potatoes and would be available in two different sizes of containers, large and small. The containers of different sizes would be priced accordingly and would contain the name and logo of the company embossed on such. Herein the logo of ‘CoRn Me’ would be created with the letter ‘R’ upside down in order to attract the attention of the consumers. The business idea of selling the corn snacks would be enhanced based on partnership ventures. Stores for the same are taken to be built in George Square based in Edinburgh. Mission The mission of ‘CoRn Me’ as a Street Trade business dealing in the production of snacks would be to provide to the consumers based in Edinburgh a healthy and fast option for a snack diet. Such enhancement of relationships with the consumers is held to build a strong brand name and goodwill of the company in the Edinburgh area. Objectives The key objective of the business is to provide a low cost option to the consumers desiring to avail good quality snacks at affordable rates. Moreover ‘CoRn Me’ also stress on the enhancement of positive relationship with the consumers through quick and effective deliveries and through rendering effective after sales services. The snacks company targets in selling of around 250 cups of snacks on an average basis. Legal Structure The company would tend to operate based on a new partnership agreement known as the partnership for limited liability that tends to define the liability or responsibility of the different partners in the trade. This sets to assign limited liability to the new members to the trade and also helps in defining the functions of each of the different members. This process helps in enhancing the effectiveness of the different functional sets to help in the proper functioning of the long term business endeavour (Weygandt, Kimmel and Kieso, 2010; Grossman and Livingstone, 2009). In addition to the above the business is required to gain an insurance number in regards to the selling of food and snack items to the consumer profile based in Edinburgh, Scotland. Further the business is also required to abide by several environmental and food and hygiene standards in the process of delivering snack to the consumers. Heating and labelling standards must be strictly followed in consonance to the Food and Standards Authority of Scotland (Food Standards Agency, 2006; Food Standards Agency, 2007). Marketing Target Customers Description of the target consumer base: Geographic: The consumers of the corn snacks and other snack products produced by the company pertain to Edinburgh, a city based in Scotland famous for its blend of a variety of attractions ranging from shopping quarters to places of historic interests and availability of restaurants and a number of cafes (Visit Scotland, n.d.). Demographic: In regards to demographic profiles the population of Edinburgh can be divided into mainly four groups depending on their income and age trends. The first group comprising 12 percent of the population contains of people in their 30s that tend to the affluent urbanites. They tend to spend lavishly on the purchases. Again the second group featuring individuals belonging to the age group of 25 to 29 years comprises 17 percent of the population and contains of young professionals aiming to lead a prosperous and wealthy lifestyle. However a significant group of consumers belong to the third group. This group consists of around 49 percent of the population and consists of teenagers mainly falling in the low to middle level income groups. However these people are large group of socialites. Finally the fourth group consists of around 22 percent consumers ranging from 20 to 30 years who prefer to reside out of the city in rented houses but tend to spend increasingly on lavish purchases (Leith Docks Development, 2007, p.11). For understanding the Psychographic and Behavioural pattern of the consumers tending to visit the ‘CoRn Me’ snack outlets a primary survey was conducted through the use of questionnaires. The sample size for the primary survey would consist of 200 respondents belonging to the age group of 20 to 40 years would be selected from the campus of Edinburgh University and from amongst visitors to the Meadows Garden based in Central Park of Edinburgh such that each would be subjected to a level of seven close ended questions. Responses to such would be rated on a multi-scalar or dichotomous technique (Rich, 2005, p.208). A.1. Responses received from the interviews conducted on the 200 respondents reflect that around 55 percent of the people render high priority to the quality and freshness involved in regards to choosing the outlets for consumption of snacks. Again around 35 percent of the respondents also render priority to the quality and freshness paradigm of the snack products. Thus where a meagre 2.5 to 5 percent of the people show no interest in regards to quality and freshness it reflects a consumer attitude in gaining quality and fresh products. A.2. Herein, it is observed that around 65 percent of the total 200 resposndents reflect an interest in gaining snacks within a span of 2 minutes. 25 percent of the resposndents desire the time required for presentation of snacks not to exceed 2 minutes. Thus this reflects an increasing desire of the people to avail the snacks and food stuffs on time. A.3. The target market of Edinburgh city based in Scotland consists of both elite and middle level consumers. Hence where 35 percent of the people desire to avail premium level products 40 percent of the people are found to go for snack products that are low priced and hence affordable. Again the resposndents also consistsing of popualtion based in Universities reflect that around 25 percent of the people desire discounted products. A.4. Response received in regards to this question reflect that around 72.5 percent of the respondents gain an interest in availing offers while only 27.5 percent of the people are found to reflect no interest as to offers available. This reflects that a major number of respondents interviewed consist of medium level consumers or students pertaining to universities. A.5. Responses received reflect that around 55 percent of the people interviewed state an increased interest in receiving effective after sales services. 25 percent of the people reflect a medium interest in gaining effective after sales services while only 10 and 5 percent of the people reflect an indifferent or low interest as to such. Thus ‘CoRn Me’ is required to render effective customer care in order to retain potential consumers. A.6. ‘CoRn Me’ in order to gain the best benefit from the consumers of the Edinburgh region are required to set up a large number of corners in the city for around 80 percent of the people demand high access to the corners where around 17.5 percent of the people reflect a moderate interest in largely availing snacks. A.7. Another behavioral or psychographic response received from the consumer’s end reflect that around 87.5 percent of the respondents would like to avail samples and leaflets. Thus the same can be taken by ‘CoRn Me’ as an effective strategy for enhancement of relationships. Competitor Analysis The competitor analysis for the ‘CoRn Me’ snacks bar would be done based on the region where the company tends to open up its store for conducting the business. It is found that the company tends to open up the store in the vicinity of the Edinburgh University. The company herein faces the competition from organised players like Sainsbury, Peter Yards and Starbuck whose stores can be located at around 1 kilometre from the University. Indirect players consist of a small booth that focuses on serving coffee frosted food to the people. Competitive Business Strategy Based on Marketing Mix ‘CoRn Me’ would proceed on a competitive business strategy that can be outlined as follows. The products produced by the company would contain organic flavour in regards to the incorporation of corn and again the freshness of the quality of the products would be sustained to help the people gain the same pattern of flavour for a long period. Snack products would be affordably priced and rendered to the customers on time within 2 minutes. Price discounts would be offered to the students. An effective survey would be conducted to understand the changes in tastes and preferences and thereby in taking proper care to address the same. Booths would be placed near the University and Central Park to help in getting more number of consumers. Promotion of ‘CoRn Me’ would be carried through the printing of leaflets containing description of products and also in rendering free samples to the customers to entice their interest. Resources Management Team and Employees ‘CoRn Me’ is a snacks booth. So, it is a small food business. Limited Liability Partnership is the suitable choice in starting up this business. Because this almost similar like the partnership business but in this system of start up, one partner will be active and there will be limited responsibilities for the other members in the partnership. So, the active member will be designated as entrepreneur and one manager and one assistant manager are needed to this type of snacks bar. Apart from these employees in the management level, the company needs others employees in the operational level. One cashier is needed for billing. Two cooks are needed for producing snacks and one cleaner is needed. Premises / Location “CoRn Me” will open near the University of Edinburgh. The location is quarter mile next to the university. This location will be suitable to start this snacks booth business because the area is surrounded by the University of Edinburgh. There are near about 28,000 students currently studying in this university and this is a good potential customer base this business has. Apart from this, Meadows garden is located in this area and it is one of the crowded central parks of Edinburgh. “CoRn Me” will be established in this location targeting the student of the university and the visitors of the central park. Equipment “CoRn Me” represents a snacks bar or snacks booth. Customer will come here for refreshment and for having their Tiffin. This snacks booth will be opened targeting mainly the students of the nearby university. So they might come here for lunch break and in the evening for with friends. So, along with the food the shop needs to offer some level of entertainment to the students, families and children. So, a large sitting arrangement and few video game vending machines will be needed. This video game facility is the USP of the service of this business. Apart from the quality and the variety of the product “CoRn Me” will be offering, the entertainment facility of the shop will be the USP of this business which might attract substantial no of customers to this shop. Finance Financial Assumptions Following are the assumptions in financial forecasts: i. The assumed inflation rate is 3.38%. ii. Registration fees including food licence and national insurance number is ?250. iii. The tax rate is ?22,250 plus 39% of the income above ?100,000. iv. The average cost per serving is ?4 whereas the price charged is ?20. v. Average customer per day is taken as 200 in the first year, 250 in 2nd and 3rd year, and 300 in 4th and 5th year. vi. The variable costs are assumed at 70% of the total sales where the maintenance expenses are assumed to be 12% of sales, credit card company payments 2.5%, advertising expenses 12%, and rent 7%, average meal costs (snacks and cold drinks) 25%, utilities 2.5% and other miscellaneous expenses 9% of the total annual sales. vii. The depreciation method for all the fixed assets is assumed to be straight-line with zero salvage and average life is 3-7 years. viii. The initial security deposit for leased restaurant is first 2 months’ rent. ix. There are total 7 employees excluding the entrepreneur- 1 manager, 1 assistant manager, 1 cleaner, 2 cook, 1 helper, and 1 cashier. x. Trade credit from food suppliers is for 30 days and inventory is 10% of next month’s sales. xi. The EMI on the bank loan is ?863 @ 3.5%. xii. Working capital will be funded by own capital. xiii. Restaurant timings are 9 am to 9 pm and all the seven days a week. xiv. There will be significant capital expenditure in 4th year and 5th year of operations. Sales Forecast The sales forecast is determined by assuming the average customers per day in a snacks booth located in such crowded area. The average expenditure on food by a student of the University of Edinburgh and the visitors of Meadows garden is ?20. The location of this snacks bar is a crowded place due to the students and the visitors of the university and the park respectively. So, “CoRnMe” might be able to achieve the average number of customers per day as 200 due to its location’s advantage. The sales forecasts are provided in Figure 1. Figure 1: Sales Forecasts for CoRn Me Capital Expenditure The initial capital investment is ?141500 which includes initial purchase of some fixed assets and other variable cost. These are registration fees, chimney, costs of renovation, ovens, commercial refrigerator, dessert bar, cash register, laptop, video gaming machines, lunchroom equipments, cutlery, furniture, food handling equipments, cooking utensils and initial security deposit for the shop. Each of these cost are shown in Figure 2. Figure 2: Capital Expenditure Budget of CoRn Me Capital Investment Analysis The initial capital outlay is the sum of total capital expenditure and working capital expenditure. The investment analysis consists of projection of each year’s cash flow of next five years. Net Present Value has been calculated by considering after-tax cash flows. Each year’s cash flow has been discounted at the assumed inflation rate of 3.38%. After the projection of investment analysis it has been summarised that net present value of this business is positive. Figure 3: Net Present Value Calculation The internal rate of return is too high at 67%. The profitability index is the ratio of present value of inflow to the present value of inflow. It is 4.6. According to the calculation of payback period this business might achieve its break even in the second year of its business if all the assumption matches the actual financial numbers. Figure 4: Rate of Return Figure 5: Payback Period Financial Projection (Income Statement, Balance Sheet & Cash Flow) Income Statement: The five year forecasted income statement determines that “CoRn Me” might be generating net profit from the first of its business. Cost of sales contributes a major proportion of the total sales. Figure 6: Five-year forecasted Statement of Income Balance Sheet: The five years forecasted balance shows the net assets and the net liabilities of this business which are expected from this business over the first five years of its business operation. A percentage of profit of each year is invested as capital investment every year. Figure 7: Five Year Forecasted Balance Sheet Cash Flow Statement: The cash flow statement comprises the cash flows from operating, investing and financing activities. The operating cash flows are from the operations of the business which are positive for all the five years. The investing activities are the capital investments made by the entrepreneur in the five years. Some of the investments made are reflected in the pro forma balance sheet under investments and rest is reflected under PPE in Assets. The financing activities show the borrowing and repayments. The loan of amount ?141,500 is reflected under this section and its subsequent payments too in the form of EMI. Figure 8: Five-year forecasted Cash Flow Statement Financial Budget: The business’ initial funds requirement is mainly for the purpose of working capital and capital expenditure. Own funds have been decided to be used for the purpose of working capital requirement. For the capital expenditure needs a loan from bank for duration of 10 years has been availed to meet the requirements. The funds are likely to be utilized in purchasing the equipments for the snacks bar. From the forecasted sales and financial statements the business CoRn Me is likely to be a good success. Conclusion The city of Edinburgh contains of both middle level and high income level based consumers that reflect an increasing desire for consumption of snack products. Thus ‘CoRn Me’ focusing on the production of corn snacks and other snack items made of boiled potatoes would gain a success in gaining the views of the consumers. Moreover the company tends to render the snack products at affordable rates and through effective promotion and public relations based on rendering free samples. This fact along with proper after sales services would help the company in gaining large number of consumers both students and middle level people in the Edinburgh region. Reference Food Standards Agency, 2007. Edinburgh food hygiene inspection results at a glance [Online]. Available at: < http://www.food.gov.uk/scotland/aboutus_scotland/pressreleases/2007/aug/edinburghfhi> [Accessed 18 April, 2012]. Food Stndards Agency, 2006. Starting Up [Pdf]. Available at: [Accessed 18 April, 2012]. Grossman, T., and Livingstone, J., 2009. The Portable MBA in Finance and Accounting. John Wiley and Sons. Leith Docks Development, 2007. Edinburgh Retail Review & Assessment [Pdf]. Available at: [Accessed 18 April, 2012]. Rich, J., 2005. The Push Guide to Which University, 2006. Nelson Thornes. Visit Scotland, No date. About Edinburgh [Online]. Available at: [Accessed 18 April, 2012]. Weygandt, J., Kimmel, P., and Kieso, D., 2010. Accounting Principles. John Wiley and Sons. Appendix Questionnaire Q.1 What priority do you render to the quality and freshness of the snacks offered to you by the snack bars spread around the city? A.1 (a) High (b) Medium (c) Indifferent (d) Low (e) Not bothered Q.2 How much time do you want the snack products to be served to you? A.2 (a) Less than 2 minutes (b) 2 minutes (b) More than 2 minutes Q.3 What kind of pricing standards do you like the snacks to be based on? A.3 (a) Premium Pricing (b) Low pricing (c) Discounted pricing Q.4 Would you like to go for offers in regards to the snacks delivered? A.4 (a) Yes (b) No Q.5 How much priority do you render on the customer servicing initiatives in regards to the snack products delivered? A.5 (a) High (b) Medium (c) Indifferent (d) Low (e) Not bothered Q.6 In what frequency would you like the snack products to be accessible to meet your needs? A.6 (a) Highly accessible (b) Moderately accessible (c) Sporadic Q.7 Do you want to avail free samples and leaflets of the snacks before deciding to buy? A.7 (a) Yes (b) No Manager’s CV Bob Richards D.O.B. - 02.06.1986 Education: 2008 BA (Hons) Advertising, Communication and PR – University of Napier 2007 Regional winner of DCF competition 2005 - 2007 BTS Communication Enterprise – ESARC School, France 2004 - 2005 DEUG Foreign Languages - University of Aix en Provence, France 2002 - 2003 Baccalaureat Social and Economic issues option English – High School Emile Zola Aix en Provence, France 2000 Brevet - College Arc de Meyran, France Additional skills: I am fluent in both French and English and speak Spanish at GCSE level Word, Excel, Power Point, Photoshop Experience: 2008 La P’tite Folie – Edinburgh Waiter Gusto Restaurant – Edinburgh Bartender 2005 - 2007 Le Passage - Aix en Provence, France Waiter, Bartender Events Organising Antidote production – Communication Assistant 2005 Le Plit - Aix en Provence, France Public, Relations 2004 Bastide du cours - Aix en Provence, France, Waiter 2003 Le Mistral - Aix en Provence, France, Waiter Interests: Music: House, electro, rap, rock. Books: Science fiction, Comics. Sports: Gym, football, volley-ball Manager’s personal SWOT analysis Strengths Experienced and having skills of food service Good communication skills Able to understand customer future requirements Weakness No entrepreneur knowledge Weak at financials Lack of patience Opportunity Experience of crowd management Possibility of future self employment by this type of business Threat Very small business Lack of job security Read More