Feasibility Analysis for Boost - Case Study Example

Executive Summary The paper which provides the feasibility analysis for Boost which is looking to work on a franchise model in Australia has been discussed. The market feasibility analysis shows that the market is growing at a rate of 7.8%. The demand for health drink is constantly rising as people of all age are looking to consume it so that they remain fit. Boost has an opportunity to cater different markets as the demand for product is rising and being able to reach to the final consumer will ensure that the chances of business achieving its results increased. The technical feasibility shows that the business will look at using technology to grow their business. Technology will be used to deliver goods to customer at far off places and even to manage stock and place order. The financial feasibility analysis shows that the business would become profitable in the second year and over a period of time the asset base on the business would grow. The human resource feasibility analysis shows that the business will look at hiring the required employees so that proper service standards can be achieved. The business looks at having employees from different arena to work together so that the business can achieved effectiveness. The overall analysis shows that Boost can go ahead with the business of working out in the franchise model as the business will be able to ensure sound return on the investment made. It will ensure that the overall returns are good and the people carrying out the business will get sufficient return on the investment made. Table of Contents Introduction 3 About the Business 3 Market Feasibility 4 Technical Feasibility 5 Financial Feasibility 6 Human Resource Feasibility 11 Conclusion 12 References 14 Appendix 15 Introduction The report presents a detailed business plan for Boost which is an energy drink specifically for children. The report has been divided into different areas where in the beginning it provides an overview of the business, the feasibility analysis is carried out through technical, market, human resource and financial aspect. This will help the readers to understand whether the venture will be a profitable one or not. It will also guide the users in formulating different strategies through which opportunities for the future can be identified and mechanism which will help to strengthen the working style can be analyzed. About the business Boost is an organization which is already in existence and provides healthy energy drink specifically for children. The business venture which is being considered is a franchise model of business for Australia. Boost will look at identifying a distributor in Australia and entrust him with the responsibility of carrying out business in the entire area. The prime focus for the business would be towards ensuring proper distribution and ensuring that the goods are supplied even to the far off places. The distributor or franchise will be provided a percentage on the amount on goods sold. The franchise will have to procure the goods from the company and based on the different needs of customers the goods have to be supplied. The prime focus is thereby on service i.e. rendering proper service to customers and ensuring timely delivery of goods. In addition to it the business will have to bear the different cost associated with the business but over a period of time will be able to achieve break even which would thereby help to ensure that the business achieves efficiency. The key performance parameter for the business is service as proper service will help to increase sale and provide an opportunity through which business will be able to ensure better returns on investment. Market Feasibility The health drink market is highly competitive as different players look to provide similar products so the focus is towards proper service where the products need to be distributed to wide areas so that it reaches every nook and corner. The overall health drink market in Australia is expected to increase at a rate of 7.8% (Alan, Sakhi, Arabella, Elizabeth & Karen, 2009). The segment of people who consume health drink is increasing at a rapid pace as preference of people towards healthy products is increasing rapidly. Along with children Boost can look to attract people who are conscious about their health. This type of people includes sports men, business class and others who are more conscious towards being healthy. The number of people in this segment will grow by about 12% which provides an opportunity to tap a new market and act as a niche player. Boost through it can look at a bigger market which would provide an opportunity to even add new products so that people can be attracted towards the product (Fletcher and Crawford, 2011). Being innovative and looking to improve the product line with different variants will increase the opportunities. Along with it proper distribution and reaching to even wide off areas will provide an opportunity to ensure that the needs and demand of different type of people are met. Along with it, the population of children in growing at a rate of 7% which provides an opportunity to attract them towards the drink. Since, Boost primarily focuses towards attracting children towards their health drink so it is the main unique selling point which the business focuses. This is an area which Boost has been working on so it will help them to find a big market where goods need to be supplied to them (Coughlan, Stern & Adl Ansary, 2006). This will provide another option which Boost can focus on as it will give them an opportunity to cater to a large audience. The overall market is thereby competitive but still provides an opportunity to capture a large chunk of the people. The overall market is expected to grow at a rate of 8% which would provide an opportunity to capture a big market. Increasing the product line and ensuring better distribution to different parts of the country will provide an opportunity through which good returns can be expected (Miles, Gilmore, Harrigan, Lewis and Sethna, 2015). Thus, the market has a huge potential and if Boost is able to devise correct strategies and develop a proper mechanism to attract customers will provide a big market. The market shows that the idea which Boost is carrying out is feasible and if they look at appropriate strategies than they can strengthen their presence in the market. Technical Feasibility Boost which is looking towards developing the franchise model has to stress upon the need to use technology to the maximum possible extent. Technology has to be used to ensure that the goods reaches customer at the right time. Since, the focus is towards selling products to the end customers so the integration of technology has to be such that the customers are satisfied with it (Dreezens, Martijn, Tenbu¨lt Kok & Vries, 2005). In addition to it technology has to be used to gather customer feedback and areas which the business needs to improve. The use of just in time technology will be beneficial for the model as it will ensure that the goods are replenished as and when they reach below the standard level. The mechanism would help to improve the depth and penetration as it would provide a good idea regarding the area which Boost needs to focus on. In addition to it the use of technology will be seen in the manner inventories are managed. Use of RFID technology will help to keep track of goods and would provide an opportunity where corrective pricing mechanism will be ensured. Boost through the use of technology will also be able to ensure that customers directly place order through the website which will be supplied by the franchise owner. Apart from it tracing of goods dispatched to customer, goods dispatched from the manufacturer to the authorized agent and other similar process will be well taken care off (Denis, 2004). Technology usage will thereby become a very important part of the Boost activity as it would help to develop the required plans through which business improvements will be made. Technology is something which Boost is already using to create awareness about the products. The organization uses mass scale advertising, social media advertising and other forms of technology so that more and more people become aware about their offerings. This has helped them to improve their brand name and will go a long way in determining the manner in which business continues its operations (Chew, Cheng & Petrovic-Lazarevic, 2006). The focus for Boost thereby has to be on technology as they have been using it on a continuous basis. Using it appropriately and in the correct direction will help to bring about the changes in the manner the organization works (Phillip & Gary. 2001). This will also play a role in bringing change in which the different functions are carried out and would help to transform the overall working style. Financial Feasibility The franchise will have to make arrangements for the required finance so that the business can be carried out smoothly. The franchise during the initial course of the business will have to provide $130000 which will be provided as $30,000 as personal finance and another $100,000 as borrowed funds. Based on the need of the franchise alterations can be made but to ensure smooth functioning it is imperative that a proper mix of borrowed and personal funds is ensured. Having proper financial management techniques will ensure that the business doesn’t gets in a financial trap which will help the franchise to ensure proper returns on the investment made. The franchise model of business over a period of time will be able to achieve break even which would thereby help to earn profits. It is important that the franchise understand the manner in which break even will be achieved and works in that direction so that all the operating expenses associated with Boost is covered. The breakeven analysis for the franchise is as Break Even Analysis Monthly Units Break-Even 14,028 Monthly break even revenue $146,453 Assumption: Average Per Unit Revenue $10.44 Average Per Unit Variable Cost $8.34 Estimated Monthly Fixed Cost $29,459 The above breakeven analysis has been developed keeping in mind different factors and making certain assumptions about external factors. To achieve breakeven Boost needs to achieve a breakeven sale of 14,028 units. The total revenue which the business will earn is $146,453 which will help the business to meet its expenses. Selling a minimum of 14,028 units will help to cover all the cost and the business will then have to focus towards profits. Based on the breakeven analysis and the expected demand and supply the franchise model for Boost will be able to earn the following profits in a span of 3 years. The calculations have been made based on certain assumptions which have been kept fixed Profit & Loss Statement Year 1 Year 2 Year 3 Sales 367560 565000 730000 Cost of Sales 51592 79250 102250 Gross Margin 315969 485750 627750 Gross Margin % 85.96 85.97 85.99 Expenses Payroll 282000 357000 410000 Sales & Marketing Expenses 27000 35830 72122 Depreciation 1000 1050 1103 Utilities 1200 1260 1323 Payroll Taxes 42300 53550 61500 Total Operating Expenses 353500 448690 546047 Profit before Interest & taxes (37532) 37060 81703 Interest Expense 10000 9500 8250 Taxes 0 6890 18363 Net Profit (47532) 20670 55090 It shows that the franchise model of business for Boost would become profitable from second year as the business will be able to improve its returns immensely. In a similar manner the balance sheet for the franchise model will look as Balance Sheet Year 1 Year 2 Year 3 Current Assets Cash 50763 67405 116574 Other current assets 50000 50000 50000 Total current assets 100763 117405 166574 Long term assets Accumulated depreciation 1000 2050 3153 Total Long term assets (1000) (2050) (3153) Total assets 99763 115355 163422 Liabilities & Capital Accounts Payable 10294 15217 23194 Total current assets 10294 15217 23194 Long term liabilities 100000 90000 75000 Paid in capital 40000 40000 40000 Retained Earnings (3000) (50532) (29862) Earnings (47532) 20670 55090 Total Capital (10532) 10139 65228 Total liabilities and capital 99763 115355 163422 Net Worth 10532 10139 65228 The balance sheet shows that the asset base for the owner will improve year after year and as the business will grow. The figures should further improve if the business is able to garner good demand from the different segment as identified. The cash flow statement which highlights the receipts and payments for the business would thereby look as Cash Flow Statement Year 1 Year 2 Year 3 Cash from operations Cash Sales 367560 565000 730000 Total cash received from operations 367560 565000 730000 Expenditure Cash Spending 8979 13273 20231 Payment to account payable 395818 525084 645600 Total operational expenses 404797 538357 665831 Long term liabilities repayment - 10000 15000 Subtotal cash spent 404797 548357 680831 Net Cash Flow (37237) 16643 49169 Cash balance 50763 67405 116574 The cash flow analysis shows that the business will be able to generate adequate liquidity to meet its expenses. It will ensure that the business doesn’t fall in a financial trap and will be able to carry out its operations in a smooth manner. The overall financial feasibility shows an opportunity for Boost to work in the franchise model where they will look to provide goods to final customers. The business will be able to achieve breakeven quickly and will be placed to bring about the changes in the financial condition over a period of three years. The business would provide positive returns from second year and the overall asset base of the business would continue to grow. The above predictions have been made keeping in mind the pessimist view and if the situation unfolds in a better way than the business would become more profitable in the future (Osterwalder, & Pigneur, 2012). The analysis thereby substantiates that it is an opportunity which Boost can look forward at as it will help the overall business to grow. Human Resource Feasibility The focus of the business is to ensure proper distribution through the franchise model which thereby stresses the need and importance of proper service. This would require focusing on the service aspect and having appropriate workforce capable of delivering the required goods on time. To manage the business effectively participation from different workforce will be required. The business will have a host of different people like manager, accountant, delivery man, store keeper, sales team and similar other people which will help to carry out the different business process effectively. In the first year Boost through the franchise model will have 8 employees which will be further increased to 10 in the second year and 12 in the third year. The growth in the employees is based on the growth which the business will be able to achieve. In case more people is required for standard service delivery then more people will be hired as it will help to ensure proper service standards (Czinkota & Ronkainen, I 2004). People with different experience and the revenues which will be paid to them will be as Personnel Need Year 1 Year 2 Year 3 Manager 60000 65000 70000 Accountant 42000 45000 50000 Sales Team 54000 60000 65000 Store Keeper 30000 35000 40000 Delivery team 72000 100000 130000 Other 24000 52000 55000 Total People 8 10 12 Total Compensation 282000 357000 410000 The compensation which has been identified as shown above has been based on the prevailing rates in the market. This will help to ensure that no issues with regard to compensation arise and all people are properly compensated. In addition to it if training is required then the business will make the necessary arrangement to provide the required training (Doole and Lowe, 2001). This will enable the business to carry out the different roles and ensure that the business becomes successful. Conclusion The paper which provides the feasibility analysis for Boost which is looking to work on a franchise model in Australia has been discussed. The market feasibility analysis shows that the market is growing at a rate of 7.8%. The demand for health drink is constantly rising as people of all age are looking to consume it so that they remain fit. Boost has an opportunity to cater different markets as the demand for product is rising and being able to reach to the final consumer will ensure that the chances of business achieving its results increased. The technical feasibility shows that the business will look at using technology to grow their business. Technology will be used to deliver goods to customer at far off places and even to manage stock and place order. The financial feasibility analysis shows that the business would become profitable in the second year and over a period of time the asset base on the business would grow. The human resource feasibility analysis shows that the business will look at hiring the required employees so that proper service standards can be achieved. The business looks at having employees from different arena to work together so that the business can achieved effectiveness. The overall analysis shows that Boost can go ahead with the business of working out in the franchise model as the business will be able to ensure sound return on the investment made. It will ensure that the overall returns are good and the people carrying out the business will get sufficient return on the investment made. References Alan, D., Sakhi, K., Arabella, H., Elizabeth, A., Karen, L., 2009. Nutritional quality of organic foods: a systematic review. The American Journal of Clinical Nutrition, 24 (5), pp. 187-194 Czinkota, M.R. & Ronkainen, I. A. 2004. International Marketing, 7th edn. South-WesternPublishing:Australia. Chew, M.M.M., Cheng, J.S.L. & S. Petrovic-Lazarevic, 2006. Managers’ Role in Implementing Organizational Change, Journal of Global Business and Technology, Vol. 2, No. 1 Coughlan, A., Stern, W. & Adl Ansary, E. 2006. Marketing Channels, 7e, ISBN 9780131913462 ISBN 10:0131913468 , Pearson Education Doole, I., and Lowe, R. 2001. International Marketing Strategy. 3rd Edition, Bedford Row, London, Thomson Dreezens, E., Martijn, C., Tenbu¨lt P., Kok, G. & Vries, N. 2005. Food and values: an examination of values underlying attitudes toward genetically modified and organically grown food products. Appetite 44: 115–122 Denis, D.J., 2004. Entrepreneurial finance: an overview of the issues and evidence. Journal of Corporate Finance, 10(2), 301-326. Fletcher, R. and Crawford, H. 2011, International Marketing: An Asia-Pacific Perspective,PearsonAustralia. Phillip, K. & Gary. A. 2001. Principles of Marketing, 9th ed. Upper Saddle River, NJ: Prentice Hall Miles, M., Gilmore, A., Harrigan, P., Lewis, G. and Sethna, Z., 2015. Exploring entrepreneurial marketing. Journal of Strategic Marketing, 23(2), pp.94-111. Osterwalder, A. Pigneur, Y. 2012. Business Model Generation Int. J. Entrepreneurial Venturing, 4 (1) Appendix Start Up Start Up Expenses Legal 1000 Stationery 1000 Other 1000 Total Start expenses 3000 Start up assets Beginning cash balance 88000 Other assets 50000 Total assets 13800 Total requirement 141000 Funding Investment Owner 40000 Current Liabilities Accounts payable 1000 Current Liabilities 1000 Long term liabilities 100000 Total liabilities 101000 Loss at start up (3000) Total Capital 37000 Total Capital & Liabilities 138000 Read More