Samkent Bar and Nightclub Marketing and Financial Analysis - Example

SAMKENT BAR AND NIGHTCLUB BUSINESS PLAN Name Course Instructor’s name Institution Date Table of Contents EXECUTIVE SUMMARY 3 1.0 INTRODUCTION 4 2.0 MARKET FEASIBILITY 4 2.0.1 Market size 4 2.0.2 Growth rate 4 2.0.3 Target market 5 2.0.4 External factors to bear 6 2.0.5 Barriers to entry 6 6 3.0 TECHNICAL FEASIBILITY 6 3.0.1Technology development options 6 3.0.2 Product and service provision options 7 3.0.3 Sales and distribution options 7 3.0.4 Development resources 8 3.0.5 Laws and regulation relating to the business 8 3.0.6 Technological changes affecting the business 9 3.0.7 Emerging technological changes that may affect the business 9 4.0 FINANCIAL FEASIBILITY 9 4.0.1 Financial Dynamics 10 4.0.2 Investments 10 4.0.3 Source of finance 11 5.0 HUMAN RESOURCE FEASIBILITY 11 5.0.1 Technical and management experience 11 5.0.2 Ownership 12 5.0.3 Ownership structure 12 5.0.4Manpower requirements 13 5.0.5Growth strategy 14 References 15 APPENDICES 17 Appendix 1: Start-up Expenditures and Expenses Worksheet 17 Appendix 2: Sales forecast 19 Appendix 3: Projected income statement 19 Appendix 4: Projected balance sheet 20 Appendix 5: Projected financial ratios 20 SAMKENT BAR AND NIGHTCLUB’S BUSINESS PLAN EXECUTIVE SUMMARY A business plan is an essential attribute for the success of any enterprise in the market. The bar and nightclub business is estimated to make up more than 12% of the businesses in Melbourne. This is attributed to the metropolitan combination of this city, it offers great potential to start-ups, more so the significantly growing population in Bundoora, Melbourne. The growth rate of the bar and nightclub industry is estimated to stand at 5% currently. In this case, there is still potential for further growth with upcoming businesses such as Samkent Bar and Nightclub and many more that are venturing into the Melbourne market on a weekly or daily basis. Thus, Samkent Bar and Nightclub has the opportunity to penetrate this industry and expand exponentially. However, its success will rely on many attributes and technology will be at the central of its operations, thus adoption of the most recent technologies will help Samkent bar and nightclub run its business at optimal level without any hitches or losses.it will also have to adopt a solid growth strategy to help it in its overall growth and expansion. On the other hand, for Samkent Bar and Nightclub business to succeed in this industry, it will have to abide by the industry’s rule, regulation and standards as stipulated by the Australian government, alcohol licensing board and the Melbourne city’s regulations. On the other hand, the workforce essential if Samkent has to succeed in this industry, thus incorporating a competent workforce to run its operation will be Samkent’s top most agenda once it starts its operations. Also, the business venture requires capital to run its operations and thus Sam’s global investment group will invest 7% of their revenues on this venture to ensure continuity and sustainability. 1.0 INTRODUCTION The bar and nightclub industry is one of the fast growing industries in Bundoora, Melbourne this has been attributed to the increasing population of foreigners. Thus, global institutions like universities and organizations have drawn people from all walks of life Melbourne; this has led to a significant change in the Australian culture and a boom in business. Moreover, the bar and nightclub industry development and current trends have also been significant contributors to the growth of this industry. The bar and nightclub industry in Australia is ranked as one of the industries under the entertainment categories that has the highest recorded annual revenues in the past three years (Wilkinson, 2014 p.4). The significance of this industry is also attributed to the current perception where drinking and clubbing is now seen as a leisure activity among the youths. In this case, the number of people in Australia visiting the bars and night club has been significantly high. With most international students residing in Bundoora, Melbourne Samkent bar and nightclub is likely to grow exponentially in terms of size and profits 2.0 MARKET FEASIBILITY 2.0.1 Market size The market size of the bar and nightclub business in Melbourne is estimated to be 12% of the entire entertainment industry in Australia. This market size is pinpointed to be one of the rapidly increasing industry sectors with Australia’s entertainment industry (Krrmer et al., n.d. pp.113-114). 2.0.2 Growth rate The growth rate of the bar and nightclub industry in Melbourne, Australia is estimated to hit a 43% in the next five decades (Wilkinson, 2014 p.3). However this growth rate is attributed to the current societal perceptions in Bundoora and Melbourne in geneeral where clubbing and visiting bars for drinks is increasingly becoming a significant leisure activity. On the other hand the bar and nightclub industry in Bundoora, Melbourne is not yet at full capacity but with this growing perception and a number of soccer fans who visit bars and nightclub to watch their favourite matches the industry may be fully grown in the years to come. In this case, a venture like Samkent Bar and Nightclub has a chance to succeed more so in Bundoora, Melbourne due to the students’ niche that has not been fully utilized. Currently, Bundoora RSL Bowling Club, Bar Eight, and Eagle bar are dominating the bar and night club industry in Bundoora, Melbourne (Tutenges et al., 2013 pp.4896-4906). 2.0.3 Target market Bundoora, Melbourne is an area famous for the significant number of foreigners residing there especially the Asian students. Therefore, these Asian students will form a significant part of Samkent Bar and Nightclub target market. Moreover, it is estimated that the most visitors of the existing bars and nightclubs are claimed to be these students of Asian descent. Thus, parties are a common activity in Bundoora, Melbourne due to availability of bars and night clubs that readily offer services at reasonable prices (IBISWorld, 2016). With restrictions on holding parties on school premises without approval, Samkent bar and night club will seek to attract student with offers and discounts. Similarly, Samkent bar and nightclub will target the working class as they form the larger share of revenue contributors for businesses all over Australia. This target market is ideal having that most working class individuals visit bars and nightclubs after a long day at work, having that they consider this as a most convenient way to pass time and relax with their friends and colleagues (Tsang, Lee and Chan, 2011 p.332). 2.0.4 External factors to bear The external factor that Samkent Bar and Nightclub will bear is the harsh government regulations more so on the operating hours. Consequently, the business will bear with the stiff rules and regulation put in place by the government for the bar and nightclub businesses. The other external factor that on industry dynamics. In this case, the business will be forced to be flexible enough to change with the current changing issue in the industry and business as a whole in order to remain relevant in the industry (Skinner, Moss and Parfitt, 2007 pp.114-124). 2.0.5 Barriers to entry One significant barrier to entry that poses a challenge to Samkent Bar and Nightclub, in this case, is the rules and regulation for business under this industry, this is likely to prove challenging on the smooth operation of the business for instance dealing with cases of age manipulation to gain entry as well as gun shootings in most nightclubs. Money is central to any business’ operations however the overhead costs are likely to jeopardize the smooth start of Samkent’s (Reingle et al., 2009 pp.629-638). In this case, the labour cost and that of beverages and meals may prove to be too high for the business to meet. Therefore Samkent Bar and Nightclub will need to overcome these barriers in order to succeed in this industry. 3.0 TECHNICAL FEASIBILITY 3.0.1Technology development options Technology is essential for businesses nowadays that intend to boost its development and growth. Technology development, in this case, will offer Samkent Bar and Nightclub options that will ensure smooth and successful operations. Technology development, in this case, ensures that Samkent Bar and Nightclub is able to manage its properties, staffs and customers effectively, In this case, Samkent Bar and Nightclub can adopt technologies like metal detectors to scan for guns at the entrance (Pettigrew, 2006 pp.157-169). Samkent Bar and Nightclub will also take up a technological system known as Ipourit. This technology enables customers to pour drinks by themselves use controlled taps, valves and meters located at the management workstation. Samkent Bar and Nightclub may subcontract for the services pertaining to this application due to the advanced technological skills and knowledge required to fully adopt, maintain and run it (Moss, Parfitt and Skinner, 2009 pp.61-79). 3.0.2 Product and service provision options In the early stages of this venture, Samkent Bar and Nightclub will go with the option of a joint venture for the production and distribution team. This will ensure that the business benefits from the availability of professional services in a short period. In this case, the business will also save time that would have been spent in recruiting an in-house production and distribution team. Thus, Samkent Bar and Nightclub will seek these services from a reputable nightclub professionals outsourcing company to help run some of its divisions, this will enable Samkent Bar and Nightclub to ensure that it maintains high standards in regards to the quality of services offered in the new venture (Lloyd-Tait, 2016 p.1). 3.0.3 Sales and distribution options For smooth kick-off Samkent will outsource for the sales and distribution representatives from a reputable company that has some experience in this sector. This option appears to be the best one especially in regards to time saving and the business picking up from the onset. The in-house sales and distribution team option would not be quite viable having that this would require time in order for this team to adjust and pick up. The joint venture option would also consume a significant amount of time as the team would need to align itself with the needs of the industry and the other team from the joint venture group. This, therefore, leaves the outsourcing option as the only remaining best viable option that Samkent Bar and Nightclub can take up (Livingston, 2013 p.41). 3.0.4 Development resources Samkent Bar and Nightclub requires a specific resource pool for it to succeed in this venture and these resources include; suppliers, skills, facilities and equipment’s and components. These are essential facilities for any business venture especially one in the Bar and night club industry. Some of the skill required by Samkent Bar and Nightclub to operate includes; professional mixology skills and professional waiters and waitresses who are experienced and knowledgeable in good customer relation (Krrmer et al., n.d. p. 114). On the equipment resources, Samkent Bar and Nightclub also requires equipment such as furniture, refrigerators, entrainment equipment’s and bar counters which are essential in the layout and presentation of the bar and nightclub(Lloyd-Tait, 2016 p.2). For the suppliers, Samkent Bar and Nightclub will require liquor beverage, meals ingredients and soft drink suppliers and also the entertainment components suppliers which are essential in the bar and nightclub business. 3.0.5 Laws and regulation relating to the business Businesses have rules and regulations which ensure that their operations meet the required standards before they can be allowed to operate or carry out their businesses. Therefore in this industry Samkent Bar and Nightclub will abide by the stipulated rules and regulations. The licensing board, in this case, it tasked with ensuring that the health and hygiene standards in the bars and nightclubs are observed (Kalkhoran et al., 2016 pp.222-229). Samkent Bar and Nightclub also seeks to abide by the protection of minors law which states that any bar or nightclub operating in Australia is not supposed to sell alcohol to minors. Additionally, this law also stipulates that minors should not visit bars and night clubs even in the company of adults. 3.0.6 Technological changes affecting the business In regards to this research, there is no specific moral or ethical issue that I am uncomfortable with. 3.0.7 Emerging technological changes that may affect the business One emerging technological change which poses a negative effect to businesses is the increasing relevance of social media and blogs. Here an individual can write a review of a particular bar and nightclub then a significant number of people will get to see it. This ia a challenge likely to hinder Samkent if a customer gives a negative review on a blog or social media platform. For instance, there have been reported cases where anonymous individuals post negative reviews of a particular bar or night club due to the resentment they have towards them (Fallin et al., 2014 pp.e148-e153). The bar and nightclub, in this case, could be badly tainted to the extent that its reputation is affected leading to customers opting not to be visiting this particular bar and nightclub or being associated with it. 4.0 FINANCIAL FEASIBILITY The projected revenue for Samkent Bar and Nightclub from the sale of its services and bear products is estimated to be AUD 600,000 in the first year. The sales volume for an average cost of a drink sold in this bar and nightclub will be AUD 25; thus, it is estimated that a total of 113,000 drinks will be sold in a month that would make it 3,800 units of drinks daily sale volume. 4.0.1 Financial Dynamics The cost structure per unit of a bear and services offered in Samkent Bar and Nightclub is estimated to be AUD 25 therefore for every drink sold in this bar and nightclub there will be a profit of AUD 10. On the other hand, the variable cost of the goods sold and the controllable cost is estimated to be AUD 5 per unit of bear sold in the bar and nightclub and AUD 3 as entry fee. The gross margin per unit minus is therefore projected to be AUD 4; making the fixed costs per unit equal to be AUD 12. On the other hand, the net margin per unit is projected to be AUD 5. This is concrete evidence that Samkent Bar and Nightclub will breakeven and operate at optimal levels. 4.0.2 Investments On the required investment required to run Samkent Bar and Nightclub is estimated that the one-time assets and start-up expenses will be AUD 780,000 in the first year and AUD 1,000,000 in the second year. On the other and the expenses to be injected in research and development will be AUD 60,000 while the expenses for the legal and experts being estimated to be AUD 28,000. In this case, the operating expenses of Samkent Bar and Nightclub prior to its break-even point AUD 321,000. These figures ensure that Samkent Bar and Nightclub is able to gain profits within its first years of operation. The breakeven point within the first two years of this business is estimated to be at AUD783, 000 and AUD 2, 783, 200, On the other hand the expected return on investment within the first two years when the business is operational is expected to be 56.86 and 69.78% respectively while return on investment is estimated to be 75.32% and 79.47% respectively. Samkent Bar and Nightclub sales focus will evidently be guided by the information retrieved from the Bundoora, Melbourne market ad depicted assumption from this market forecast. Samkent Bar and Nightclub Payback time is estimated to be a one year period regarding the financial risk there is evidence of some great promises of this risk in a grace period of between one to three years hence, a solid affirmation of the projected sales. 4.0.3 Source of finance The significant source of finance for Samkent Bar and Nightclub will be the Sam’s global investment group and their joint venture partners at a ratio of 60:40. Since Samkent Bar and Nightclub is a joint venture business, all the owners will be required to make their capital contributions depending on the number of shares of the business that they own (Executive Style, 2016 p.3). The business will try to minimize its borrowing since it another risk that it rather avoids however in its early stages it will borrow AUD 756,000, from its parent company Sam’s global investment group to cover some of its operational costs. 5.0 HUMAN RESOURCE FEASIBILITY 5.0.1 Technical and management experience Technical and management experience will be essential in the running of Samkent Bar and Nightclub. Some of the technical and management experiences required by Samkent Bar and Nightclub include; team working abilities, good work ethics, good and eloquent communication abilities and able to work independently and under pressure, also honesty and good customer service will be central to Samkent’s operations, (Baiman, Bar-Yosef and Sarath, n.d.). 5.0.2 Ownership Samkent Bar and Nightclub will be owned by Sam’s global investment group and PEDET Management Company. This is global group of entrepreneurs operating in 36 countries. Being a group of successful entrepreneurs their chairman will be at the center of Samkent’s bar and nightclub’s board overseeing the overall operations. In this joint venture, the entrepreneurs are tasked with the generation of the funds whereas the managers are tasked with putting these funds into viable and profitable use in this business venture. On the other hand, the group will be tasked with looking for growth opportunities more so in the countries that Sam’s global investment group operates in. 5.0.3 Ownership structure The ownership structure of Samkent Bar and Nightclub business venture entails individuals who have come together from different professionals and careers entailing hotel managers, nightlife entertainment entrepreneurs and all rounded entrepreneurs. These members forming this particular joint venture are categorized based on the number of shares that one holds (Kalkhoran et al., 2016 p.223). On the other hand, the hierarchies will be constituted according to contributions made and Sam’s global investment group will take the lions share. 5.0.4Manpower requirements The manpower that Samkent Bar and Nightclub requires is three bartenders, five waiters and five waitresses an event manager, sales manager and an hotelier. The hotelier, in this case, ensures that the beverage and meals offered in this bar and nightclub is in line with the stipulated law and standards. The event manager, on the other hand, will be in charge of overlooking the entire bar and nightclubs operations while also noting areas that need improvement. The sales manager is in charge of the marketing and public relations The business will outsource for a hiring team which will carry out the interviews, vetting and hiring processes for Samkent Bar and Nightclub. In this case, the business will choose the outsourced hiring team that is experienced in hiring in the bar and nightclub industry. This will ensure that the business venture saves time and is also guaranteed talented, experienced and well capable workforce (Livingston, 2013 p. 113). The business will adopt specific compensation strategies in line with its compensation policy. In this case, the business will pay a specific amount of money for first time employees for a period of six months where a performance review will be carried out with the prospect of a salary increment be discussed with the stakeholders. In this case, Samkent Bar and Nightclub workforce management strategy will be based on performance review which will be carried out after every six months. The motivation, in this case, will entail job promotion and rewards (Pettigrew, 2006 p. 163). Samkent Bar and Nightclub employees will also be frequently taken through training which will entail updating them with a current trend in the bar and nightclub industry. For instance the waiters and waitress will be informed on the importance of etiquette service provision and good customer relation (Reingle et al., 2009 pp.629-638). 5.0.5Growth strategy The growth strategy of Samkent Bar and Nightclub will be solely based on improving customer’s loyalty, therefore, increasing its market margin. On the other hand, the business growth strategy will also entail expansion of the business to countries that Sam’s global investment group operates in. For its growth strategy, Samkent Bar and Nightclub will host events where it will invite celebrities to come and grace these events this will, therefore, draw more customers more so those who are fans of the bar and nightclubs as well as the entertainer’s fans (Tutenges et al., 2013 p.4900). In line with the business growth, it will also introduce loyalty cards where the returning customers to Samkent Bar and Nightclub will be offered free drinks. This will enable Samkent maintain its image in Bundoora and Melbourne as well through popularity and brand awareness. Quality in Samkent Bar and Nightclub will be maintained through employing experts with skills and who are also highly knowledgeable in all areas. The growth of the business will also call for change in the organization performance where more managers and workforce employees will be involved. This growth will enable the employees to advance their skills in order to meet the level of the business in line with its advancement. References Baiman, S., Bar-Yosef, S. and Sarath, B. (n.d.). Bilateral Incentive Problems and the Financing of Start-Ups. SSRN Electronic Journal. Executive Style, (2016). So you want to open your own bar. [online] Executive Style. Available at: http://www.executivestyle.com.au/so-you-want-to-open-your-own-bar-2ufhv [Accessed 13 Oct. 2016]. Fallin, A., Neilands, T., Jordan, J. and Ling, P. (2014). Secondhand Smoke Exposure Among Young Adult Sexual Minority Bar and Nightclub Patrons. American Journal of Public Health, 104(2), pp.e148-e153. IBISWORLD, (2016). Pubs, Bars and Nightclubs in Australia Market Research | IBISWorld. [online] Ibisworld.com.au. Available at: http://www.ibisworld.com.au/industry/default.aspx?indid=448 [Accessed 13 Oct. 2016]. Kalkhoran, S., Lisha, N., Neilands, T., Jordan, J. and Ling, P. (2016). Evaluation of Bar and Nightclub Intervention to Decrease Young Adult Smoking in New Mexico. Journal of Adolescent Health, 59(2), pp.222-229. Krrmer, F., Schmidt, K., Spann, M. and Stich, L. (n.d.). Delegating Pricing Power to Customers: Pay What You Want or Name Your Own Price?. SSRN Electronic Journal. Livingston, M. (2013). To reduce alcohol-related harm we need to look beyond pubs and nightclubs. Drug and Alcohol Review, 32(2), pp.113-114. Lloyd-Tait, E. (2016). How to open a small bar. [online] Time Out Sydney. Available at: https://www.timeout.com/sydney/bars/how-to-open-a-small-bar [Accessed 13 Oct. 2016]. Moss, G., Parfitt, S. and Skinner, H. (2009). Men and women: Do they value the same things in mainstream nightclubs and bars?. Tourism and Hospitality Research, 9(1), pp.61-79. Pettigrew, S. (2006). Symbolic double‐coding: the case of Australian pubs. Qualitative Market Research: An International Journal, 9(2), pp.157-169. Reingle, J., Thombs, D., Weiler, R., Dodd, V., O'Mara, R. and Pokorny, S. (2009). An Exploratory Study of Bar and Nightclub Expectancies. Journal of American College Health, 57(6), pp.629-638. Skinner, H., Moss, G. and Parfitt, S. (2007). Nightclubs and bars: what do customers really want?. International Journal of Contemporary Hospitality Management, 17(2), pp.114-124. Tsang, N., Lee, L. and Chan, P. (2011). Staff Perceptions of Jaycustomers in Hong Kong Bars and Nightclubs. Journal of China Tourism Research, 7(3), pp.326-342. Tutenges, S., Bøgkjær, T., Witte, M. and Hesse, M. (2013). Drunken Environments: A Survey of Bartenders Working in Pubs, Bars and Nightclubs. International Journal of Environmental Research and Public Health, 10(10), pp.4896-4906. Wilkinson, C. (2014). How to start a bar. [online] The Sydney Morning Herald. Available at: http://www.smh.com.au/small-business/ask-our-experts/how-to-start-a-bar-20140630-3b4wv.html [Accessed 13 Oct. 2016]. APPENDICES Appendix 1: Start-up Expenditures and Expenses Worksheet Item Total Cost Cash Required Land AUD 22,000 Capital Equipment AUD 26,100 Beginning Inventory AUD 8,000 Start-up Supplies AUD 12,000 Licenses and Permits AUD 6,000 Advertising (Preopening) AUD 500 Insurance AUD 3,000 Other AUD 1,000 Total Estimated One-Time Cash Requirements AUD78, 600 Start-up Operating Expenses Estimate No. of Months Total Cash Item Monthly Expense X Before Break even = Required Owners Salary AUD 27,000 Employee’s salary, wages, benefits AUD 1,700,200 Rent AUD 57,000 Promotion expenses AUD 16,800 Supplies and postage AUD 3,458 Vehicle Expenses AUD 4,000 Telephone AUD 1,500 Travel/Transport AUD 97,800 Interest AUD 650 Maintenance/Repairs AUD 12, 500 Other AUD 10,000 Total Cash Required to Cover Operating Expenses AUD 1,903,908 Plus: Total One-Time Cash Requirements (Table below) AUD 36,500 Add 10% Safety Factor AUD 14,300.18 Total Cash Required for Start-up AUD 1,954,708.18 Appendix 2: Sales forecast Appendix 3: Projected income statement Appendix 4: Projected balance sheet Appendix 5: Projected financial ratios Ratio type Working formula Year 1 Gross profit Sales-direct total cost (AUD) 1,652,820 Gross profit margin Gross profit x 100 Sales 1,652,820x 100 1261000 1854810 x 100 1871000 2367110 x 100 2382500 96.4% Return on equity Net profit after tax x 100 Owners equity 668 x 100 1500,000 495 258 x 100 1500,000 799464 x 100 1,500,000 0.04% Return on investment Net profit after tax interest 668 + 35500 495 258 + 37500 799464 + 70200 36168 Contribution margin Sales – total variable cost 1261000- 30630 1871000- 36910 2382500- 34990 1230370 Contribution margin percentage Contribution margin x 100% Sales 1230370 x 100 1261000 1834090 x 100 1871000 22347510 x 1000 2382500 97.6% Fixed total assets 1,115,400 Read More