Loan Proposal and Small Business Environment of BizCafe - Assignment Example

?Running head: Business: BizCafe Business Case 3&4 Insert Insert Insert 11th.Aug. BizCafe Business Case 3 Task 1: The choice of the organic coffee was appropriate for my business, as most customers prefer organic coffee because it is natural and it does not have chemical additives. Due to the emergence of many health issues, people are concerned about what they consume, therefore, my choice on organic coffee has contributed to demand of coffee at the cafe. The demand for coffee was high and little waste occurred; nevertheless, the organic coffee is only a dollar high compared to regular coffee, hence beneficial to the business as returns were made. However, we did not choose a logo for the business, but the cups and coffee were purchased in bulk. As a result, the business was able to reduce on costs. The aim of this business is to attain a competitive advantage, and in order to increase on productivity it needs additional cash. As a result of this decision, a loan is required in order to boost the business, and the creation of a loan proposal is necessary. The above decisions made for the cafe did not meet our expectations even though they were fruitful. Loan Proposal Never Enough Cafe is a small business that was recently started with an aim of profit making. Its mission statement includes “to ensure that our customer’s professional and courteous service, by selling remarkable coffee at fair prices and maintaining a clean and comfortable space for our customers and staff…..” The main objective of the business is to attract customer by offering the best services, with an aim of increasing revenues. The Never Enough Cafe seeks to expand in the future; however, for now, we have less than 10 employees, two managers and 4 servers. Most of our staff includes university students. However, due to the high demand of customers, the cafe seeks to employ more staff. Nevertheless, this factor is challenged by the incapability of the business to pay more employees, as it is in its growing stages. The cafe operate six days in a week from 9am to 9pm and closes on Sundays. The cafe offers three different sizes of coffee at different prices that range from $2 to $7; the business has adopted certain strategies like product differentiation, in which it concentrates on different sizes of coffee, as opposed to several other cafes that focus on one-cup size of coffee. This cafe specializes in only coffee beverage, but the coffee comes in different types; cappuccino, black coffee, white coffee and coffee latte. The cafe uses the 4-cup automatic espresso, with an aim of serving more customers at ones, hence avoiding long queues and inconveniences to customers. The loan we are seeking aims at profitability in the sense that we will be in a position to market ourselves, by creating a company logo, advertising on radio, and labeling our cups with the company names. In addition, we require an insurance cover for the business, which we do not have at the moment. Due to the favorable location on Main Street, the cafe targets a variety of customers, for instant, the university students, employees, university staff, and downtown clientele. Our main aim is to satisfy the needs of our customers fast and effectively. Therefore, the required amount expected for the loan is $25,000, which will assist in the above strategies. BizCafe #4 Fiscal evaluation According to Pride, Hughes & Kapoor (2011, p.518), the financial health of a business is very important as it involve the computation of financial ratios. Such information is found in the balance sheets and income statements. Return on sales indicates whether a firm is transforming sales into profits. In addition, a low return on sales may be increased if expenses are reduced or sales are increased, however, in some cases, both strategies may be used. The ‘Never Enough Cafe’ has experienced a number of challenges financially since it started. The management decided to purchase expensive furniture and espresso coffee machine, with an aim of increasing on sales, which is evident. Nevertheless, the large amount of cash used contributed to high expenses of $10,000, in which the business has to rely on the business returns to operate at a profit. In addition, the hiring of an extra manager for the weekend means an added expense to the business; nevertheless, it is profitable for the business to open on weekends. The cafe’s employees have to be paid handsomely to avoid quitting; this may cost the business. Purchasing of the 4-cup espresso machine is an action that has contributed effectively to fast serving of customers; therefore, customers are storming in the cafe, as they are guaranteed fast and effective services. With such an espresso machine, only few servers are needed, therefore reducing extra expenses of hiring more staff. According to Hitt, Ireland, & Hokisson (2009, p.117), product differentiation strategy ensures that a business provides unique services or products as compared to its competitors, thus attracting more customers. Our cafe has adopted this strategy by ensuring that it offers a unique service, which involves serving of coffee in different sizes of cups, thus catering for all levels of customers according to their affordability. This strategy has attracted many customers who feel that their needs are catered for. Nevertheless, purchasing of organic coffee as opposed to normal coffee has also contributed to additional expenses for the business; the management may have to reconsider this strategy in the future, especially if the organic coffee prices continue to rise. Small Business Environment Prior to surveillance on the local labor report, the minimum wage rate for servers is $7.25 while for managers it stands at $600. However, the turnover rate is close to 16%. The cafe management has therefore decided to increase the server’s wages $8.80 to $9.00 after receiving complaint that they are overworked. In addition, the management has seen the need to add two extra servers to assist with the workload. The managers also seem stressed out; therefore, the need for an increase in their wages was necessary from $600 to $670. According to Lathan (2009 p78), motivating employees result to higher performance, which leads to increased productivity. Management should therefore be keen to address the needs of employees, which may include job security and fair wages that will enable an employee, cater for the basic needs like food, rent, and security. Comparative Analysis The customer survey rates our cafe at 40% in customer satisfaction, whereas the industry average stands at 55%. This is a wake up call for our business, as it is important for the cafe to at least attain over 50% in customer satisfaction. As reviewed earlier on, our managers were stressed out while the servers were overworked; therefore, measures were taken on these two problems; which included addition of an extra manager for the weekends and hiring of two extra servers. With these measures in place, we hope to increase on the cafe’s effectiveness, due to the presence of motivated employees, who in return will increase on their performance, resulting to increase in productivity. The local labor reports indicate the average turnover rate is at 16%, even when the manager’s average salary is at $600 per week, as that of server’s stands at $7.25 per week. With the increase in our employee’s wages, we aim at attaining a competitive advantage over our competitors; therefore, we have paid our employees above average so that they are not easily poached by our rival competitors. In terms of marketing, our cafe will enhance on advertising, as it only advertises in the newspapers. There is need to expand on advertising in radio and via the internet in order to create general awareness. Creating a logo on the coffee cups is also another method of advertising our business, especially when customers order take-away; meaning, others will easily recognize the business via the logo and address on the cups. There is need to increase the prices of the big cup coffee as the medium and small cups coffees remain constant. This move is aimed at increasing returns due to the high quality of coffee we are providing. Indeed, organic coffee is very expensive as compared to the non-organic coffee. The management will also ensure that the servers work on a shift basis to avoid biasness. Nevertheless, the management may consider changing the opening hours for our cafe, from previously 9am to an hour earlier (8am). This move is aimed at making more sales within an hour difference, by targeting customers who report to work earlier than others do. The university students will also benefit from our early opening hours, especially during examination period, whereby, they have to get up early to study and need a cup of coffee to keep them warm and alert. In order to attain a competitive advantage, it is important for any business to be different from its competitors. With the above strategies, the management hopes to sustain its market share via increasing on its profits while maintaining its customers, as it attracts more customers. References Hitt, M. Hoskisson, R. and Ireland, R. (2009). Strategic management: competitiveness and globalization: concepts & cases, Edition 8. OH: Cengage Learning Publisher. Retrieved from http://books.google.co.uk/books?id=ul5FsIlWa3EC&pg=PA117&dq=cost+leadership+and+differentiation&hl=en&ei=QsQ7TsHODcvC8QO-1OQ-&sa=X&oi=book_result&ct=result&resnum=4&ved=0CD0Q6AEwAw#v=onepage&q=cost%20leadership%20and%20differentiation&f=false. Latham, G. (2009). Becoming the evidence-based manager: making the science of management work for you. NY: Nicholas Brealey Publishing. Retrieved from http://books.google.co.uk/books?id=uRwOb_pz2AAC&pg=PA78&dq=motivational+tools+for+employees&hl=en&ei=PNFETrqBJ4mY8QOIhY3IBg&sa=X&oi=book_result&ct=result&resnum=1&ved=0CEEQ6AEwAA#v=onepage&q=motivational%20tools%20for%20employees&f=true. Pride, W. Hughes, R. Kapoor, J. (2011). Business. Edition11. OH: Cengage Learning Publisher. Retrieved from http://books.google.co.uk/books?id=h96lvYoQJtMC&pg=PA516&dq=financial+health+of+a+business&hl=en&ei=ZblETrSqC4WV8QPi8aCuBg&sa=X&oi=book_result&ct=result&resnum=2&ved=0CDwQ6AEwAQ#v=onepage&q=financial%20health%20of%20a%20business&f=true. Read More