Business Plan for Co-Working Space - Example

Business Plan for co-working space Name of student Institutional Affiliation Business Plan for co-working space For every business to prosper, its activities must be based on a comprehensive business plan. The business plan of a business is the separation between a success in business strategies and chaos in the business. A business plan avoids randomized activities by proposing an estimated, pre-evaluated list of activities that may be given different priorities within the probably business growth time It also offers the promises of having a success oriented business by evading unwanted occurrences of activities that might shock the business venture (McKeever, 2008). In building a business plan, some of the key areas that determine the validity and comprehensiveness of the plan are the financial analysis, the financial projection and finally the projected development plan of the business. This can be a rather demanding task to undertake as it makes an exhaustive, detailed analysis of the activity or activities of the relevant company. The financials combine a strategic vision of the company alongside the data that will lead the business into achieving its long term financial goals, planning, measuring and improving its operating levels (DeThomas and Derammelaere, 2008). a) Financial Analysis According to Palepuet al. (2004), the main goal of a financial analysis is to assess the performance of a company in the context of its pre-stated goals and strategy. The two principle tools of financial Analysis are ratio analysis and cash flow analysis where ratio analysis involves assessing the relationship of items in the company’s financial prospects while Cash flow analysis allows the enables company liquidity examination and management of the company’s cash operational finances, investment. According to Helfert (2001), financial analysis involves determination and weighing the financial impact of the business decisions made. This means that it not only analyses the present but also the past, current and future financial situation of business. Analysis Our co-working space business will offer our members a collaborative, engaging work environment that will enable them to share resources and ideas within their co-working groups. The business will further provide consulting services to external businesses looking to incorporate fresh ideas to their branding initiatives, marketing direction and workflow management. Additionally to providing co-working space, the business will also provide a selection of interactive, experiential learning classes will touch a myriad of topics such as creative and rational thinking, effective project management, and improve sustainability. Therefore, individuals can develop skills that can enhance their readiness to give their work and play new strength and energy. This business comes when there is dire need for continued innovation among businesses, workmanship and individuals which make us confident there is ample market potential for the success of the business in our selected niches. We already have a working team that is already seeing customer demands after completing leading creativity lessons and workshops in and around the community. Break-even Analysis For the break-even analysis, it will be assumed that per month costs of running business will include rent, payroll, utilities, and an estimation of other running costs are factored in at the beginning of every month operation. The business should get at least 20 constant customers in order to start making any reasonable profits from the capital investment. In spite of the above checkpoints, the overall monthly sales are expected to be higher than the projected break-even point in the graph above. This will give the business a better chance of increasing its profits margins after a few months of operation. Analysis figures Monthly Revenue Break-even $18,000 Assumptions: Average Percent Variable Cost 67% Estimated Monthly Fixed Cost $6,838 b) Financial Projections The co-working business’s operating expenses will revolve around salaries and rent as the two major fixed cost. The other expense such as depreciation is another significant cost but this will however appreciate as the company grows bigger with its asset capital base increasing to higher values. The major way of financing the business growth will be through plugging back the revenue got from giving the services. This will however lead to a slow growth but steady and stiff, making the process reliable and appropriate. It should be known that the business undertook a long term debt in the form of capital investment that must be paid back. Until then, the owners of the business do not intend to make any profits at all. Additionally, all the profits that will remain after the repayment of the debt will be utilized in finance growth especially in the acquisition of additional inventory within the business. Important Assumptions In the financial projection analysis, the business will have the following analysis based on the operations and expected incomes. It is assumed that the business does not engage in credit service deliver. This is because the current financial state of the business cannot allow it to maintain its course with debt balances from customers. The business may also flop if it suffer bad debt. It is also assumed that with the little marketing investment at the beginning, the business will experience an increasing popularity among consumers. With this assumption, there is expected gathering of loyal customers. In terms of financial growth indication, it is assumed that monthly sales are the largest indicator for this business. There are however some seasonal variations with March and September being the highest in gross sales. Even though there is limited access to capital, it is assumed that the availability of financing sufficient to maintain the business’ financial plan as shown in the tables. The numerical assumptions for the first three months are as shown in the table below. Plan Month 1 2 3 Current Interest Rate 11.00% 10.00% 11.00% Long-term Interest Rate 11.00% 10.00% 11.00% Tax Rate 28.00% 28.00% 28.00% Other 0 0 0 Key Financial Indicators The business is expected to grow steadily towards recovery of the initial capital and widening the profit margin. The key indicators in this business plan illustrate increasing sales, control of costs, and increasing profit margins. As stated in the above assumptions, the cash flow per month will indicate whether the business is growing financially or failing to achieve its financial goals. Projected Balance sheet The business will acquire several assets, for which the fixed one will include the building and premises, transport vehicles, electronic equipments, office equipments and other furniture. The financial standing of the business in terms of its asset finance is as shown in the balance sheet below. The owners’ equity, the return on the capital investment is also calculated as shown below. With the succeeding years, the revenues are likely to increases because of the plan to add a part-time employee in the second year and one full time one in the third year. We expect depreciation figured at $29,000 in expensed equipment at a constant rate of 8 years. Pro-forma Balance Sheet ASSETS Current Assets Cash $ 20,000 Accounts receivable $ 15,000 Inventory $150,000 Total Current Assets $ 185,000 Non-Current Assets Building and Equipment $ 50,000 Business premises $650,000 Vehicles $70,000 Total Non-Current Assets $770,000 TOTAL ASSETS $955,000 Current Liabilities Accounts payable $25,000 Bank overdraft $10,000 Credit card debt $5,000 Tax liability $ 30,000 Total Current Liabilities $70,000 Non-Current Liabilities Long term business loan 1 $450,000 Long term business loan 2 $50,000 Total Non-Current Liabilities $500,000 TOTAL LIABILITIES $ 570,000 NET ASSETS $ 385,000 OWNERS EQUITY $ 385,000 Cash Flow Statement Following is a cash flow statement prepared using indirect method: Co-Working Business. Cash Flow Statement For the Year Ended Dec 31, 2010 Cash Flows from Operating Activities: Operating Income (EBIT) $489,000 Depreciation Expense 112,400 Loss on Sale of Equipment 7,300 Provision of Training Services −51,000 Increase in Accounts Receivable −84,664 Decrease in Prepaid Expenses 8,000 Decrease in Accounts Payable −97,370 Decrease in Accrued Expenses −113,860 Net Cash Flow from Operating Activities $269,806   Cash Flows from Investing Activities: Sale of Equipment $99,000 Provision of Training Services 237,000 Purchase of Equipment −100,000 Net Cash Flow from Investing Activities 136,000   Cash Flows from Financing Activities: Payment of Dividends −$90,000 Payment of Bond Payable −200,000 Net Cash Flow from Financing Activities −290,000 Net Change in Cash $115,806 Beginning Cash Balance 319,730 Sending Cash Balance $435,536 Development Plans a) Recruitment. The company will start with an initial trainer staff of 20, and other 10 non-training in the training departments. Recruitment will be done once in every six months to bring in new ideas onto the business. The areas that will be available for recruitment will include: Training Department Marketing and Promotion Events management and organization Technology Roadmap The business intends to incorporate information technology fully in the service delivery process by the introduction of automated collaboration software and communication equipments that allow for such collaboration as in through video conferencing. The machines will significantly reduce the physical requirement of the instructors and increase learning reliability. The business will also automate its documentation system including the administration documentation, workers management and product data storage. He business will build a network infrastructure to enhance information sharing and communication. Advertisement Channels The business will undertake advertisements in the following channels: Radio Advertising Television Advertising. Internet advertising and marketing. Email marketing. Newspaper advertising Each of the channels will have their own evaluators and reports that explain their suitability and reliability. Channels that are deemed unreliable or that do not contribute to proportional increase in sales will be abandoned. Expected challenges and risks This is the first business of this kind in our niche market and engagement in it is a great deal of risk. The success will depend on its customer satisfaction and population capacity among other inherent factors IP, Patents, Copyrights, Brands The business will patent all the unique office design and advertisement methods used in its service delivery network and learning process and copyright any material produced within the jurisdiction of the business. This will instill property right and place the business at a better place in the legal platform and enhance its relation with other businesses. References McKeever, M. (2007), “How to write a Business Plan” Ninth Edition, Consolidated Printers, Inc., The USA, 2007; DeThomas, A. and Derammelaere, S. (2008), “Writing a Convincing Business Plan” Third Edition, Barron’s Educational Series press, The USA, 2008; Palepu, K. G., Healy, P.M, Bernard, V. L. (2004),“Business Analysis & Valuation: Using Financial Statements” Third Edition, Mason, Ohio, 2004; Helfert, E. A. (2001), “Financial Analysis Tools and Techniques: a Guide for Managers”, the USA, 2001; Read More