Analysis of Business Plan for JJB - Assignment Example

Business Plan Review Introduction Jolly’s Java and Bakery (JJB) has planned to commence a business of coffee as well as retail store in the southwestern region of Washington, US. It is planned to be a partnership business between two individual parties, i.e. Mr. Austin Patterson and Mr. David Fields. According to the planning, JJB is intended to be inaugurated as a company with the objective of providing a diverse variety of coffee as well as pastry products. The company will also adopt a competitive pricing strategy in order to compete effectively within its target market. Moreover, with the competitive pricing strategy, the company aims to attract middle as well as higher income group people and tourists from the local market area (Palo Alto Software, 2013). However, similar to any other plan, the business plan of JJB requires the assistance of adequate financial assistance in order to successfully commence its business as per planning. The company has also proposed in this regard that with quality and a variety of coffee as well as pastry products at competitive price, it is likely to be facilitated with the opportunity of performing business operations successfully and profitably. The discussion in this paper will emphasize on the facts that business plans are formulated with the intention of starting up a new venture with the accumulation of the required funds from credible sources. With this concern, the business plan of JJB will be critically analyzed and reasons for the plan to probably fail in accumulating the required funds will also be described in this report. Financial requirements and business plan of JJB Mr. Austin Patterson and Mr. David Fields who are the two partners of JJB possess adequate experiences in the practical field of sales and finance respectively. In the business, these two partners have agreed to provide the funds required for the first month of its operations and startup expenses from their savings. The rest of the funds required for the business operations will be acquired from Small Business Administration (SBA) as a loan on a ten year basis (Palo Alto Software, 2013). Notably, the requirement of the firm to set up as planned is $211,000. As per the plan, JJB intends to adopt a competitive pricing strategy and provide wide range of quality products with the aim of developing a better position in the market segment during its initial period of commencement (Value Based Management, 2013). In the business plan, it has been predicted that market competition and competitors in the market segment of Washington is likely to be mild or moderately competitive, adding better growth prospects for the set up firm, i.e. JJB. Moreover, the demand for coffee retail industry is seemed to be increasing rapidly as well (Kim & Mauborgne, 2009). Furthermore, the forecasted sales figures depict that the company will be successful in performing its business operations in a proficient and effective manner with the collaboration of quality and diver product categories. Furthermore, on successful performance, the company will be able to acquire individual investment amount as well as the loan amount planned to be taken from SBA within a four months period from its operations (Kaplan & Norton, 2008). Reasons for not receiving funds by business plan One of the common hazards witnessed by start-up firms is often termed as the unavailability of the required funds despite of the assistance assured by government and other probable investors. There are various factors which are argued to play a contributory role in obstructing the accumulation of required funds such as misrepresentation of financial data and misconception of market conditions among others. Additionally, the errors which are often accounted in the preparation of the business plans can be identified as lack of rationality in content description, gaps in financial modeling and forecast irrationality among others which further limits the accuracy of the business plan and thus, discourage the investors from offering the required funds to implement the plan (Cayenne Consulting, n.d.). When assessing the business plan of JJB, it can be observed that there are certain mistakes which are quite likely to obstruct it in acquiring the required funds from SBA. The business plan of JJB states that there is mild competition in the market segment which signifies inflation of value. This assertion in the business plan of JJB may be inappropriate as the level of competition may grow due to better quality products from competitors, decreasing switching cost of buyers because of greater availability of substitute products which may further lead to the decrease in the sales as well as profitability of the company. Moreover, new entrants in the market segment of Washington may also intensify the market competition for JJB in the future context. Apart from the above described forecast errors, the business plan also lacks in explicitly affirming the marketing strategies which will be adopted by the company with relation to distribution or promotion of its intended products. Optional measures to counter the future probable risks have also been lacking in the business plan such as market risks, operational risks, technology risks, legal risks and management risks. These risks are required to be scrutinized in an efficient manner with the motive of starting up as well as establishing the business operations successfully and execute the planning efficiently which can be considered as the content mistakes in the business plan of JJB. Hence, the business plan of JJB may fail to acquire the required amount of funds from SBA to commence its business operations proficiently as planned (Cayenne Consulting, n.d.). Additionally, the plan also encompasses certain financial errors which consist of certain assumptions that can further be criticized to be conservative in nature. These conservative assumptions may depict inappropriate financial reporting as well as forecast. Moreover, these conservative assumptions may not be provided with proper support and justification by the potential investors treating the plan as a risky venture. Furthermore, the valuation of income and expenses are based on predictions and in certain instances, over or low valuation of any price may adversely affect the financial performances of the company. Additionally, the financial projections of the company depict that from the initial stage of its commencement it will generate profit and there will be a continuous rise in the profit margin which can be further criticized as somewhat impractical. In the initial commencement stage, the company may not acquire huge profits as the company will require adequate time in creating awareness of quality products among the local people, i.e. the targeted customers. These factors are identified to be the financial projection errors in the business plan of JJB (Cayenne Consulting, n.d.). Hence, it can be ascertained that the predictions of financial projections of JJB are unrealistic in nature may adversely affect the business plan of JJB in acquiring funds. Moreover, the business plan of JJB has not been reviewed by any professionals who are aware of the preferences of consumers as well as the extent of competition in the targeted market segments of Washington (Cayenne Consulting, n.d.). Consequently, these aforementioned factors will obstruct investors such as SBA in providing funds to JJB. Conclusion In its business plan, JJB had proposed to commence the business of providing quality coffee and pastry products in the market segment of Washington. It will be commenced as a partnership business between two individuals who are experienced in sales and finance sectors. The company initiated the plan of setting up the business with a competitive pricing policy in order to perform operations in a competitive manner. Moreover, the company with quality products as well as services aimed to target local people and tourists within the local community of Washington. The company predicted that the market competitions are mild and with the assistance of the aforementioned factors it will perform competitively. However, the business plan of JJB is observed to be inappropriate in certain areas or segments with relation to the prediction of market competition. Moreover, risks analysis has not been conducted in a proper manner which may affect the performance of the company and its fund allocation prospects by a large extent. Furthermore, the conservative assumptions in the financial projections may adversely affect the proposed financial performance of JJB. These are the various factors which can be held accountable for not receiving funds by investors such as SBA to implement the business plan. References Cayenne Consulting. (n.d.). Why business plans don’t get funded. The one stop shop for startup, pp. 1-4. Kaplan, R. S. & Norton, D. P. (2008). Mastering the management system. Harvard business review, pp. 63-77. Kim, W. C. & Mauborgne, R. (2009). How strategy shapes structure. Harvard business review, pp. 73-80. Palo Alto Software. (2013). Bakery business plan. Retrieved from http://www.bplans.com/bakery_business_plan/executive_summary_fc.php#.UUGUetanBsQ Value Based Management. (2013). Creating the perception of a product / brand / company identity. Retrieved from http://www.valuebasedmanagement.net/methods_trout_positioning.html Read More