Healthy Potion Business - Term Paper Example

Student’s Name Name of the Institution Introduction: Healthy potion is a consumable item that has the capability of restoring quite a number of health issues within a span of seconds. Although it proves to be effective immediately after being consumed, its effectiveness reduces as the consumer progresses in their duties. It was a result of this awakening challenge that I decided to venture into healthy potion business, that is, supply of healthy potion together with other food supplements such as eggs and meat. I got to understand that healthy potion when taken together with other food supplements, it effectiveness tend to increase abundantly. After successfully training regarding administration of healthy potions, and decided to source for food supplements that would enhance the effectiveness of these potions, based on my analysis I discovered that healthy potions when consumed with protein especially white meat, its healing efficiency tend to increase. Upon my establishment of this new venture, the demand from my customers grew so fast, in a span of four months; I decided to put up another structure just a few kilometers away to administer the same services. By then, my staff had grown to twelve employees working full time. However, there are some seasons where the business would go down as a result of shortage in supply of the food supplements from the farmers. Based on the fact that I had opted for poultry meat to be the ideal food to be taken with the healthy potion, I was facing a little bit of a challenge to manage this situation. As report by Pawlikowski (2003), the farmers had complained of an outbreak which basically only invaded poultry. It was some sort of viral infection known as Marek’s disease which was so dangerous and really affected the rearing of chicken. The virus was easily transmitted from bird to bird since it would survive in the environment where an infected bird was for a very long time. According to veterinary officers, the virus is believed to infect chicks and only show signs at a later stage. This is due to the fact that the disease invades the white blood cells hence eventually resulting to fully fledged cancer in bird. Following this development, my entire healthy potion business was adversely affected prompting me to think of diversifying by business. One of the aspects I considered viable to pursue in addition to my healthy potion business was to source for other alternative food supplement that would be preferred in place of poultry meat. After a wide consultation, I had to settle on fresh fish since fish just like poultry are very rich nutrients since they are both white meat and source of protein. Although, the business had picked perfectly, based on my proposal I had to source for at least $200,000 as a startup capital to enable roll out the a supportive business. The amount was slightly high and thus prompted me to re-strategize on how to concentrate on my healthy potion business with the little supply of chicken from farmers so as to raise enough funds to enable me source for suppliers of fish since it was the best alternative food supplement to be consumed with health potions. Therefore, I had to seek advice from professional on how to manage this situation having noticed that with no adequate supply from poultry farmers, my business will be rendered useless. Strategic Analysis: This involves developing a mechanism for my business through re-evaluating it and the entire environment where I operate from. It will entail liaising with relevant bodies to come up with favorable solutions for the same. As a sole proprietor, I have to come up with a clear strategic planning process that will enable me restore back my healthy potion business to the position it was before (Nielsen 2010). As I had indicated earlier prior to starting this business, my desire was to create an enterprise that would fulfill my customers’ needs of having a caring healthy lifestyle. To achieve this, I have to evaluate changes in my business environment through SWOT Analysis (Mo’ness 2008). This basically entails identifying the following aspects:- S-Strengths W-Weaknesses O-Opportunities T-Threats SWOT Analysis:- Strengths Having undergone some training in food science and healthy living practices, I thought it wise to use this knowledge to make a difference in the society. I decided to invest my savings in healthy potion business so as to administer appropriate health care practices Weaknesses Although I had known that desire for healthy lifestyle especially with regard to eating habits was on the rise, I had not identified a specific market. I was of the opinion to just establish the business first then look for market later which at some point cost me dearly (Mo’ness 2008). I had overstocked health potion prior to having a clear estimate of the market demand. Opportunities I noticed the fact that there were a number of people consume the health potion but they end up not getting the satisfaction they had anticipated to get. The health experts such as nutritionists preferred their patients to consume healthy potions with some food supplements such as white meat instead of red meat due to nutritional content in it (Mann, M., et al 2004). Threats There were a number of health institutions who were advising people on the best healthy practices to observe rather than consumption of less effective items such as healthy potions. The threat of poultry diseases such as the Marek’s disease was becoming too much for farmers to handle thus the probability of the alternative venture being pursued was high. Therefore, in the event that farmers decide to try their hand in fish farming, therefore my supply of food supplements will suffer a big blow (Pawlikowski 2003). Strategy for the new business: After evaluating probable changes in my business environment, I need to outline strategizes to curb these situation. The fish being a source of protein and white meat just like chicken, the appropriate way to approach this challenge is to get engrossed in matters to do with fish supply business so that in the event that the farmers prove to have a change of mind regarding poultry farming, I will definitely welcome the idea and start administering the healthy potion with fish as an alternative source of protein As I had reported earlier, this new venture will require approximately $200,000 and therefore since my current business seems not be able to generate the estimated amount, I have decided to outline a plan to generate this money. Basically the alternatives I have at my disposal is either to borrow funds from a financial institutions, that is, debt financing or selling off ownership right of one of my healthy potion business outlets so as to realize the $200,000 for the new business project, this is known as equity financing. However, in another alternative could be to borrow part of the money and sell of part of my ownership rights so as to realize the whole amount of $200,000. As result I have to outline the benefits and challenges associated with the debt and equity financing mechanisms, therefore get to know the best alternative to pursue in raising the $200,000 capital. Evaluation of Debt and Equity Financing: Debt Financing:- According to Heron (2004), Debt Financing involves acquisition of funds from an external source with the intention of repaying back the money plus an agreed amount of interest on top. Most entrepreneurs prefer this type of financing to boost up their business. The various external sources that can lend money include banks, micro-finance institutions, and private corporations or even close relatives Advantages of Debt Financing Upon completion of financing my loan, I will maintain 100% ownership of business and therefore will be able to run it whichever way I would consider appropriate (Heron 2004). The lender will be only entitled to the principal amount plus the interest charged therein, and will have no claim on the future profits that I will realize in business. In most cases, the interest payments are considered as part of business expenses and thus can be deducted from income tax returns thus lowering the total cost of the loan to the borrowing party (Heron 2004). Since in most cases the interest rate charged against loan borrowed is fixed, the principal amount and the interest obligations can be calculated in advance and strategic plan on how to repay them outline. Disadvantages of Debt Financing In the event of defaulting in financing the loan, the defaulter may be listed by the credit rating bureau and this may affect one’s ability to borrow from any other body in future. When the business fails to start up as anticipated, the borrower will still be obligated to finance the loan and in situations where the borrower is rendered bankrupt, the lender will have a first priority to claim on the borrower’s assets before the other stakeholders (Heron 2004). The borrower is often required to pledge his/her assets to the lender as collateral, upon default the lender may sell off the assets to recover its loan. This may be quite a challenge for the new entrepreneurs who do not have any asset at their disposal to offer as collateral. Since interest rates tend to be fixed, high interest rates during low business seasons may increase the risk of the borrower going insolvent. Equity Financing:- This is where a borrower gets money from a third party in exchange for the lender having a share of ownership in the business. As stated by Datta (2005), this type of financing is mostly common with large organizations whereby shares such as common stock or preferred stock or even summation of the two are sold off to a third party. Advantages of Equity Financing Equity financing does not have to be paid back. In addition the challenges such as losses will be co-shared between the new business partner, that is, the borrower and the lender. Therefore, upon realization of profit, the proceeds can still be ploughed back into the business (Datta 2005), Since the lenders become part of the business ownership, they tend to bring in helpful skills, growth ideas, experience in management and favorable opportunities to be explored. They also tend to contribute in decision making process of the business. Disadvantages of Debt Financing Depending on the lender that a borrower surrenders the ownership right to, the business owner may probably lose a significant amount of power to make his/her own decisions. In the event that the business starts up perfectly, the business owner will have to share part of the earnings with lender. After a given period of time, the borrower will realize that the profits paid to the other investor shall have exceeded the amount he could have paid had he/she taken up a loan from a third party (Datta 2005), The borrower will have to re-evaluate his/her management schedule so as to ensure the investor is updated on regular basis with regard to status of the business. There tend to be a number of rules and regulations to be complied with while raising funds through equity financing. Fund Raising Plan: After a careful analysis of the two scenarios as outlined above, I would prefer to raise the $200,000 for business through debt financing. I will borrow from a bank since upon completion of the loan, I will retain the ownership rights of my business BIBLIOGRAPHY Blom-Zandstra, Margaretha, and Herman Van Keulen. "Innovative concepts towards sustainability in organic horticulture: testing a participatory technology design." International Journal of Agricultural Sustainability 6.3 (2008): 195-207. Datta, Sudip, Mai Iskandar‐Datta, and Kartik Raman. "Executive Compensation Structure and Corporate Equity Financing Decisions*." The Journal of Business78.5 (2005): 1859-1890. Heron, Randall A., and Erik Lie. "A Comparison of the Motivations for and the Information Content of Different Types of Equity Offerings*." The Journal of Business 77.3 (2004): 605-632. Mann, M., et al. "Moving toward consistent analysis in the HFC&IT Program: H2A." Hydrogen Program Review (2004). Mo’ness, M. Alshishtawy. "Developing a strategic plan for medical specialties in Oman." Oman medical journal 23.1 (2008): 10. Nielsen, Torben D., et al. "Business, market and intellectual property analysis of polymer solar cells." Solar Energy Materials and Solar Cells 94.10 (2010): 1553-1571. Pawlikowski, Marek, and Gabriela Melen-Mucha. "Perspectives of new potential therapeutic applications of somatostatin analogs." Neuroendocrinology Letters 24.1/2 (2003): 21-27. Read More