Small Business and Franchise Management - Essay Example

Small Business and Franchise Management Executive Summary Terry Tobiko’s Daycare Center is a startup child care and support business that will be located at the heart of Grogan Hill. The day care center will serve children between the ages of 2 to 4 years. The business will be under the management of Terry Tobiko, who will also be in charge of the center’s daily operations. The main objective of the business is to be an excellent center where need swill be met and exceeded. Its mission is to provide the best child care and support services. The kind of services offered at the center will make it look like a home away from home. Children will be well cared for and they will be given a chance to learn everything a child needs to learn. In line with global trends in the industry, Terry Tobiko’s Daycare center will use internet resources to market itself to its prospective customers in and around Grogan Hill. There are many young parents in Grogan Hill who need daycare services for their children since most of them have daytime careers. The absence of enough of similar centers means that the market is flooding with opportunities. The center will also be advertised through brochures, newsletters and the local newspaper. Financing will be done through equity and debt financing. Part 1 Business Concept Terry Tobiko’s Daycare Center is a start up child care and support business that will be located at the heart of Grogan Hill. The center’s services will be tailored to fit the needs of children between ages 2 to 4. The childcare and support services will be offered from 6 in the morning to 6 in the evening. Some of the activities that the children will be exposed to include: socializing, arts and crafts, exercises and group activities as well as general classroom learning. The service that will be on offer at Terry Tobiko’s Daycare center will be priced depending on the capability of Grogan Hill parents to pay. We will offer a low teacher to pupil ratio to ensure that the needs of each and every child are well taken care of. The children care center will be located in an easily accessible location, inside premises that will offer a comfortable learning and developing environment for the children. This Local based enterprise will be under the management of Terry Tobiko, who will also be in charge of the center’s daily operations. Objectives The objectives for the first twenty four months will include: Creating an excellent day care center which will meet and exceed the expectations of customers The use of Terry’s Toddler daycare services by 20-25 different families in the first five months To increase the number of customer by at least 10 percent every six months To develop a simple, sustainable and profitable business Mission Statement The mission of Terry Tobiko’s Daycare Center is to provide excellent child care and support services. The aim of our existence will be to bring in and maintain customers in our business by providing the best child care services available in and around Grogan Hill. Services Terry Tobiko’s Daycare Center will offer quality child care for all toddlers aged between 2 and four years old. Each of the children will enjoy close attention from the caretakers. The center will be home away from home as the environment has been designed to fit the home atmosphere. The caretakers are also well trained in child care and they will be the best virtual parents the children will ever know. The center will not simply be a baby sitting facility, but a place where the child will be able to learn and develop new skills while reinforcing that he or she will already have learnt (Brightwell, 2006). Industry Trends Globalization, Effects of Internet on Business Globalization is the world that defines the way in which business has concurred physical boundaries in order to reach people from every corner of the world. It is through globalization that business owners are able to sell their products to customers that would have never reached before. One of the most visible agents of globalization is the internet. People have turned to online means of marketing their products as an easier option of reaching the worldwide market. The day care industry has not been left behind in this internet phenomenon (Martinson, 2003). Many players in this fast growing sector are increasingly involved in advertising their services online. Some of the marketing information of day care centers fund in their websites includes their location, pricing and the unique services that they have on offer (Brightwell, 2006). Terry Tobiko’s Daycare Center plans to utilize this online opportunity to help market its services to residents of Grogan Hill. Many people who live in this area use the internet to carry some of their daily activities. Therefore, they are likely to come upon the center’s website when they are looking for other things around Grogan Hill. Using online marketing will be a good marketing strategy for Terry Tobiko’s Daycare Center since it is not only cheap, it will enable the business to sell its services to as many people as possible (Martinson, 2003). Marketing Plan Market Description Grogan Hill does not have enough child day care centers to cater for all the children in the area. Most of the people who have young children are also professionals and they have to attend to their work every day of the week. The absence of many establishments that offer quality day care services means that there is potential for business growth in the area. Target Market Evaluation The specific target market for Terry Tobiko’s Daycare Center has been identified as those parents who live within and in the outskirts of Grogan Hill. A recent survey shows that many young parents nowadays have day jobs which require them to be in their places of work most of the days of the week. In fact most of them work from 8 in the morning to around 5 in the evening Monday to Friday. This means that most of them do not have enough time to take care of their children at home. Some of them have resulted to hiring nannies, which is quite an expensive choice for most people of Grogan Hill. The same survey showed that 94% of young parents would prefer to take their children to day care centers which were near their homes (Martinson, 2003). Terry Tobiko’s Daycare Center will target those double income families who want their children to have the best quality care from an all rounded daycare center. General Market Trends In many places today where young parents need to work on a daily basis, many people have opted to enroll their children in day care centers where they receive the necessary child care services that they need (Brightwell, 2006). Although there are some people who prefer to get nannies for their children, the tradition is slowly dying and being replaced by day care centers. The fact that the modern world is increasingly becoming a global village means that more jobs opportunities are coming up than ever before. People are engaging in more than one job making it difficult to handle home chores such as baby sitting, with such services opening up professional opportunities for daycare centers to tap from this market. In advanced baby daycare centers, lactating mothers can visit their children and breastfeed them on certain times of the day as children also partake in early learning. Offering the baby sitting services and educational elements in the service opens up the industry to a fully fledged social, economic and educational service industry. When expatriates move to settle in an overseas job location, it is becoming more important in the global setting that baby daycare centers assimilate the newcomers into the new environment. This implies that the market is a huge business opportunity in the future where globalization makes the world a tiny global village despite its diversity in culture and other social elements. Terry Tobiko Daycare Center sets the pace for this imminent global market. Marketing Strategy Advertisements will be one of the key marketing strategies that Terry Tobiko’s Daycare center will use to get people to know about its services. The advertisements will run in the local community newsletter and daily newspaper. The aim of the advertisements is to raise awareness of the new day care and the kind of services that are on offer to customers (Pinson and Jinnett, 2006). There will also be a number of door-to-door distribution of informative brochures which will have details on services and costs. Terry Tobiko’s Daycare Center will also hold a grand opening ceremony where customers will have an exclusive chance to see the kind of child care services that their children will enjoy. A clearly visible information ad will be placed in the yellow pages of the local directory so that interested customers can contact the center without any problems (Martinson, 2003). Part 2 Financial Plan In order to generate an appropriate financial plan for the Terry Tobiko Daycare Center, a consideration of the most important investment expenses will be made alongside the available revenue sources. Since budgeting will come in handy in the preparatory phase of the business, it will be important that these two elements of budgeting are considered right from the beginning. On one hand, the expenses may be too much if the necessary attention is paid, such that they exceed the revenue available. In such an instance, financing the deficit will be contemplated in order to cover the loose ends before the commencement. In a different approach, such deliberations will be important in case the revenues available for business are not all factored in the business thereby limiting operations which will translate in ignorantly foregoing revenue earning opportunities. Factoring emergency reserves and expanding the business to manageable levels will only be possible if the Terry Tobiko Daycare Center performs an informed financial planning procedure. The projected expenses will be the first stage in the deliberation in order to enable counterchecking against the available sources of revenue. The total expenses expected for this business for the first year are $244,000 with an allowable expense range of about $5,000. Below is a breakdown of the expenses: Utilities $10,000 Equipment $2,500 Payroll $105,000 Insurance $4,000 Uniforms $400 Banking charges $2,000 Legal fees $3,500 Building Taxes $2,000 Miscellaneous fees $1,500 Travel $3,500 Lease (quarterly) $100,000 Advertising $4,000 Maintenance $2,600 Miscellanies $3,000 Registration, $1,200 Since this is the initial operation projection, the management will factor in some element of an allowance or reserve fund to cater for any unforeseen expenses. From the projected financial statement, it will be possible for the management to factor in the reserve fund as well as define the ploughed back element of the revenues for expansionary approach. Expenses at the initial stage will be anticipated to rise during the actual operation for cautionary cushion which will be factored in the expenses emergency reserve. All elements of expenses will be factored in depending on their future implications n the operations. By classifying the expenses as fixed and current expenses, it will enable the management at Terry Tobiko Daycare Center to arrange for their coverage in advance. Concerning the revenues, the available funds from different sources as well as those discussed in the financing options will be placed on the table for deliberations. Terry Tobiko Daycare Center will target a long term solution to revenue sources as and when needed for use in the operations. By planning for the capital expenditure against the capital available, it will be found out that the money funds will not always be sufficient. The need for the investment to create an emergency reserve fund makes the need for extra sources of funding to be sought if it is likely to increase financial requirements. Budgeting requirements will force Terry Tobiko Daycare Center to seek the highlighted options for extra funding. The biggest source of initial capital will be from personal savings flanked by other sources such as donations. Unused assets disposals as well as equity investment earnings as discussed in financing section below, will be factored in the financial period. Projected Financial Statement Terry Tobiko’s Day Care Projected Financial Statement for the Period Ending 31st Dec 20XX Income $ $ Revenues 235,000 Cost of Revenues (28,000) Gross Profit (Loss) 207,000 Other Income Gain on sale of Assets 32, 000 Interest gained 4,000 Donations 1,000 Grants 45,000 Refunds 2,000 84,000 Total Revenues 291,000 Expenses Utilities 10,000 Equipment 2,500 Payroll 105,000 Insurance 4,000 Uniforms 400 Banking charges 2,000 Legal fees 3,500 Building Taxes 2,000 Miscellaneous fees 1,500 Travel 3,500 Lease (Quarterly) 100,000 Advertising 4,000 Maintenance 2,600 Miscellanies 3,000 (244,000) Other Expenses Registration (1,200) Total Expenses (245,200) Net Profit 45,800 Financing Options Terry Tobiko’s Daycare center is a new business therefore it will need a sizable amount of money as start up capital. There are two financing options that the business can take: equity financing and/or debt financing. Equity Financing involves raising capital for business by selling preferred or common stock to investors (Green, 2003). This is to say that the business owners have to trade a certain percentage of their business in exchange for a specified amount of money. The advantage of equity financing is that one dos not have to take on additional debts. In case the business fails, one does not have to refund the financers. A disadvantage of equity financing is that ownership and control of the business will have to be shared among the investors (Pinson and Jinnett, 2006). Debt financing on the other hand involves borrowing money which has to be repaid with interest. One advantage of debt financing is that it lets the owner of the business have total control over it. The owner also enjoys all his profits and the loan is tax deductible. The main disadvantage of debt financing is having the burden of loan repayment (Green, 2003). Terry Tobiko’s will use both modes of business financing. For equity financing, the main source of money will be friends and family. The owners will also use their own personal savings to finance the business. The business owners have already contacted some family members and trusted friends who are willing to invest in the business. The local bank is also willing to lend a medium loan to the business, the loan has a low interest rate and is payable within five years. With these two sources of financing, Terry Tobiko’s Daycare Center will be off to a great start. Investment Portfolio To ensure that the Terry Tobiko Daycare Center is sustainable in the long term, a diversified investment portfolio will be designed. Diversification of investment portfolio will facilitate the business sustainability plan through spreading of risks, while tapping up a high revenue generating opportunities for the business. As observed from the revenues section on the projected financial statement, interest earned will be incorporated into the revenue earners for the business in the first financial period. To expand on this section, revenue earning opportunities will be factored in the coming financial periods, to facilitate viability and sustainability of the business in a diversification perspective. In the investment portfolio, Terry Tobiko Daycare Center will begin by apportioning a fraction of the net profit for the initial financial period into the stock market. Other financial periods will also be factored in for a different investment such as poultry farming, dairy farming and vegetable farming for internal consumption as well as for commercial purposes. By engaging revenues earned into investments, the business will not only target extra earnings but will also attract tax refunds for allowable investments such as agriculture and asset purchases (Blankson, 2004). Summary Terry Tobiko’s Daycare Center is a new child care and support business that will carry out its operations in Grogan Hill. The services that will be on offer will be designed to fit the needs of children between ages 2 to 4. Terry Tobiko will be the overall manager of the business whose objectives include: the creation of an excellent day care center, the use of Terry’s Toddler daycare services by 20-25 different families in the first 5 months and to develop a simple, sustainable and profitable business. These objectives are in line with the business’s mission which is to provide the best child care and support services. The business will make use of online marketing strategy since it is cheap and it will conveniently reach many of the prospective customers who reside in Grogan Hill and its environs. There are many people in this area who are in need of day care services for their children since most of them have day jobs, hence do not have enough time to take care of their children during the day. The lack of enough day care centers in Grogan Hill means that this kind of business has the potential to thrive. The total expenses forecasted for the first year are $139,000. Terry Tobiko’s Daycare Center will be financed through equity financing and debt financing. Family and friends will chip in and add onto what the owners have and a medium loan from the local bank will be more than enough to kick start to business. References Blankson, S. (2004) Tax avoidance: a practical guide for UK residents. London, UK: Lulu Press Incorporated Brightwell, A. (2006). The Daycare Manual: How to Set Up a Licensed Center. Bloomington, IN: Authorhouse. Green, C.H. (2003). Financing the Small Business. Avon, MA: Adams Media. Martinson, C. (2003). Planning, Promoting and Managing Your Childcare Business. Victoria: Trafford Publishing. Pinson, L. and Jinnett, J. (2006). Steps to Small Business Start-Up. London: Kaplan Read More