Business as a form of premeditation and the expectations - Essay Example

Going through the state of a business is one of the contemporary and most recognized ways through which modern day business people recognize the strengths and weaknesses of a certain business. The business under review in this case is a small business, a wine shop. It is important to go through the general situation that the business thrives in an effort to understand the best way to manage it. The paper will discuss the various ideas for the business as a form of premeditation and the expectations. As stated, the size of the business is generally small and deals with sale of wines. The large part of the business can be sighted after the first entrance to the shop as it does not have multiple doors except one leading to the storage room. There are racks present in the premises where the wines are stored until customers come to purchase it. The business is in an open place and thus there is sufficient lighting. Moreover, there are also bulbs in the premises since the sale of wine goes on to the night. There are two assistants who assist in the ordering and the arrangement of material in the premises. In addition, there is a telephone for the customers who might want to book a certain brand of wine. The business in question is rather thriving in an environment that has a lot of active customers. This is got from the manner in which it has managed to have a steady flow of sales per unit. This one of the aspects that keeps a business alive and conformation with the environment generally comes in as another positive chip. The breakeven point is recognized as the point in business where the revenue that the company makes is equivalent to the amount of expenses it incurs. In the stated business, the breakeven point is high. This is from the fact that the company had to sell whole 71000 units in an effort to have the small margin that exists. The margin between the revenue and the expenses is minimal at 30 for every unit and this sets in as a risk for making deficits to the company rather than the large profits that every business speculates. The business itself is in a proper category to buy even more alcohol; however, the amount of money that it makes is not sufficient enough to make a large investment such as the acquiring of another staff member. Having seen the shallow margin that the business makes has implications for the business. These implications come in as both positive and negative regarding the time it takes. If the business has short term goals, the small margins cannot come in handy in their fulfillment. However, in the accomplishment of long term goals for the business, this can work as cumulative amounts of money would get retained in the business after deduction of the general fixed costs that are the rent, staff costs, telephone and others. Going through the profitability of the business is another major aspect to bring in when identifying the actual stature of the business (Barrow, 2011,57) Looking at the sales that the business makes, it is clear to state that the profitability of the business is in line with what a small business of the sort. This is from the fact that a business entity such as the wine shop managing to have 20 Euro profit margins per unit is great. When that amount of money is multiplied with the amount of units sold in a year, the total exceeds initial capital investment by far. Understanding the liquidity of the company is another aspect that a company ought to consider when going about the daily running (Blackwell, 2008, 75). This is from the fact that for a business to keep on running, it is important to ensure that in case of anything the amount of money lost is not much. The business is well set in this from the previous fact stated regarding the amount of money that the business makes in a whole year. The wine industry is one industry that is always up from the fact that it does not have seasons and is not affected by factors such as weather. If the business runs for a couple of years which is a likely possibility, the liquidity of the company is assured in case of anything and the investors alongside everyone else can get the initial money put in. With regard to the efficiency of the company, the fact that there are 2 assistants is a fact that has ensured efficiency within the business. However, it is important to note that it is not entirely important to have that number of assistants given the size of the business and its type. This is from the fact that a large business is usually in need of many employees to assist in the carrying out the numerous activities that the company has. However, in this situation, one staff member is enough to assist while the customers are being served. In the prevailing economic environment there is the ability to accommodate both of the workers, however, if the situation gets to appoint where the breakeven point gets even hire, there will not exist any choice other than letting go of the least effective member. In an effort to ensure that the liquidity, gearing and the profitability remains constant, it is important for the management of the business to ensure that bookkeeping is always done and in a daily basis (Boakes, 2009, 41). This is effective as it ensures that everything in terms of stock and finances are accounted for. The wine shop is small and thus no need of having a complex bookkeeping strategy. This is from the fact that many large companies calculate their finances at the end of the month. Calculating on a daily basis and summing up the amounts is one step that should assist the company in its running. A profit is the actual goal of every business and is defined as the financial advantage that an individual or a business attains after the selling price of a commodity exceeds the one they purchased at (Sloman, 2012, 138). The matching principle is one that necessitates a company to compare the revenues that it has made with the expenses in an effort to get the exact profitability over a certain period. Cash flow is defines as the transfer of finances either to a company or out of it. From this, the amount of profit is calculated by subtracting the contemporary closing cash from the previous sessions closing cash which is taken to the bank from the business. In the business, it is important to recognize that there is the flexibility of getting complements that are responsible for earning the business an even huger amount of profit. One of the complements that the company can incorporate is providing a discount which comes as an additional amount of wine in a sizable box. This would attract even a larger amount of customers as compared to other businesses in the same industry. When calculating this as an economy of scale, it is recognized that the profitability of the business can even get higher from this as a result of more wine getting sold. There is also the substitute for wine which can either be vodka or whisky which regularly go at a cheaper price. This can come in as an advantage for cases when the economy doesn’t support the sale of whisky. Door to door delivery can also come in as a major advantage in this venture. This is from the fact that many businesses in the contemporary world and more specifically in the wine industry have not come up with that idea. In order for a business to thrive, it is important that it goes through the various trends and changes in the contemporary world. It has been a matter of concern that many people nowadays do not like going out but rather like sitting at the comfort of their homes and getting whatever it is that they wish for delivered to them. This case can apply even better for this industry provided that wine is mostly needed at homes for various activities such as small family gatherings, hosting a party or even just as a relaxing agent for a person after getting home from work. Setting up a well structured delivery process with charges included can come in as a major complement for the business. The business can manage to get a very large margin between the money it puts in and the actual amount of money it gets from this idea. Breaking down this to prove it is that there would be the transport charges for delivering the alcohol and also the charges they pay to purchase the wine, which would have remained on the rack in the business premises. This in overall is a complement to both customers and the business. There are many factors that may affect the demand and the supply of the wine in the industry. One of the factors that can affect the demand made by suppliers is a change in the income. The business relies heavily on the salaries of the customers from the fact that the commodity is not a basic necessity but is rather a luxury. A decrease in the amount of money that people make might have them cut down their drinking habits. A factor that may affect the supply of the wine is the market condition. A point may reach that the amount of wine distributed is a lot and this is a factor that may have the customers ask for a decrease in price. This might go on to a point that the suppliers fail to get any benefits. The suppliers may then decide to withhold the supply until a point when the customers require the commodity so much that they would purchase it at any set price. A constriction and extension in the demand is a point where all factors can affect the demand and supply of the commodity except the price because in such a situation, the price does not change. The amount to which the price of a particular market commodity affects the demand and supply curve is the elasticity Cleaver, 2012, 57) Understanding the elasticity of the market is vital to the business from the fact that it is one of the major determiners of the number of customers that purchase the commodity (Begg, 2011, 400). Elasticity matters with regard to the need that these consumers have of the commodity. For a business that majors in the supply of basic needs such as salt, the elasticity of the price both negatively and positively has minimal effect on the consumer behavior seeing as salt is a necessity, however, for the case of wine, this might not always apply. Changes in income within the economy as stated is one of the major factors that affect the amount of commodities that a certain business sells It has come clear as a demonstration that wine is a luxury and thus the importance of having in check the customers that one has. However, a major advantage that the company may have with regard to this is the fact that wine drinkers are well established people and glitches in their income generations do not affect the sale of the wine very much as opposed to Vodka and Whisky sellers. There are very many market imperfections that may come in to affect the wine business. One of this is with regard to religion. Many religions are known to condemn the consumption of any substance that may alter the thinking of a person and thus may have people shunning away from the market. There is also high task rates imposed on wine shops as compared to other similar shops. This is due to the notion that these shops make more money. In addition, the fact that many people claim that children under the legal drinking age consume alcohol because of such shops is a major imperfection in the industry. Having gone through the various thoughts on the business and picturing, calculating and understanding the estimated figures, it is clear to state that the business has very high probability of succeeding. This is from the liquidity and profitability sighted for the business. Having all the market analysis also comes in as a major factor despite the negligible market barriers sighted in the research. References Atrill, P.& McLaney, E. 2010. Accounting and finance for non-specialists 8th Ed. New York: PrenticeHall. The 7th edition is also available as an electronic resource. Barrow, C. 2011. Financial management for the small business 5th Ed. Chicago: Kogan Page. The electronic version is also available. Blackwell, E. 2008 How to prepare a business plan, 5th Ed. 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