The for ConnAmin Enterprise - Business Plan Example

BUSINESS PLAN OF CONNAMIN ENTERPRISE Student’s Name Course Instructor Date BUSINESS PLAN OF CONNAMIN ENTERPRISE This business plan has been prepared in a very precise manner in order to be understood by non-professionals in the field of accountancy. Since this is a new business, most of the figures used in this report are estimates and approximations. Most of the details have been acquired from entities of the same nature like ConnAmin. Data belonging to cafes around the place of business for ConnAmin have also been used. The main focus in this report has been designing an approach to new business that will guide Amin and Connie in their business. Assumptions have been made in the financial and non-financial forecasts. In forecasting financial performance, the issue of inflation has been ignored. At the same time, factors affecting the business after its commencement have been factored in the forecasts. Table of Contents 1 THE BUSINESS 4 1.1 Business Description 4 1.2 Business History 4 1.3 Business Objectives 5 2 .0 MARKETING 5 2.1 Environmental Trends 5 2.1 Products and Services 6 2.3 Customers 7 2.4 Competitors 8 2.5 Marketing Methods 9 2.6 Marketing Controls 10 3 STAFFING 10 3.1 Management 10 3.2 Organizational Structure 11 3.4 Staff Controls 12 4 .0 PURCHASING 13 4.1 Supplies 13 4.2 Purchasing Controls 13 5.0 FINANCIAL 13 5.1 Break-even Analysis 13 5.2 Statement of Taxable Income 15 5.3 Financial Controls 15 6.0 RECOMMENDATIONS 15 References 16 1 THE BUSINESS 1.1 Business Description ConnAmin Enterprise is a medium size business entity that operates a cafe situated along King William Road, Hyde Park. The premise is built on a 50 M2piece of land. ConnAmin is a partnership run by Connie and Amin as the major partners. The business runs for six days a week, from Monday to Saturday. The hours of operation are from 9 a.m. to 8 p.m. The premises have been acquired on a three year non-cancellable lease 1.2 Business History ConnAmin Enterprise is scheduled to begin its operations on 5th of next month. As a business, it will be guided by its mission statement and philosophy. It shall be fully committed to the mission. The proprietors have the skills to drive this business basing on the fact that they have a mass of experience from their previous occupations. Mission Statement: We are committed to offering our customers exceptional services, timely delivery of deliciously prepared fresh, healthy and tasty meals every day. We do everything within our reach to make sure you look healthy to handle every issue in your life. Our Philosophy: We are passionate about offering fresh, healthy, modern, high quality food stuffs at ConnAmin café. We offer unique services that make our customers to keep coming again. Our services and menu is a clear reflection of who we claim to be. 1.3 Business Objectives To be able to break-even at the end of the first year Try to seal the café expenses at not more than 40% of revenue Quick service to our clients at most 25 minutes per client Increase our premise space at the end of the second year Open two more outlets at the end of the second year Increase the number of employees for better service Sales growth rate of 30% pa. Control increase in costs at most 20% 2 .0 MARKETING 2.1 Environmental Trends This being a new business in a quite new environment, there are a number of issues that are of concern to us. There both challenges and opportunities that are likely to face this business. Opportunities: The place where the café is located is densely populated Most of the people are medium and low class who are our main target The facility is also strategic because is located at the junction There shall be easy acquisition of supplies mainly from neighbouring plantations Challenges Stiff competition from existing cafes is anticipated High operation costs for the first three months is a major concern Cultural diversity of our customers Waste disposal is expected to be another major concern From the research carried out, high operation costs during the first quarter are expected to be high. There are other concerns that have also emerged but all these are deemed to be short-term. Things are expected to turn around at the middle of the second quarter. 2.1 Products and Services The café is expected to sale a variety of products. The main products to be sold are meals. These will consist of breakfast, lunch and dinner. Of this, the main meals shall be lunch and dinner. Due to the diversity in culture of customers, we will make sure we offer types of meals that are diverse enough to meet the needs of our customers. We are also prepared to offer snacks and other meals for in between meals. This is to ensure we meet the needs our customers throughout the day. Breakfast: Tea Chocolate toast Cakes Sausage Crumpets Bread Iced Tea Lunch: Chilli Chicken Ham and Cheese Tomato and Pesto Baked Potato Chicken Caesar Salad Vegetable Penne Pasta Fish Pie Steak Sandwich Dinner: Rice Pilaf Sautéed Spinach Grilled/Steamed Vegetables Mushroom Sauté Grilled Asparagus Snacks: Lamb Filed Pizza Tandoori Chicken Pizza Chilli Prawn Pizza Soft Drinks Orange Juice The performance of these meals during the first year shall help us to make necessary adjustments in relation to our menu. Nevertheless, there are meals that we may be forced to introduce in the midst of this financial year if the prospects of such a meal are very high. The same policy applies to those meals proprietors feel is not performing well during the year. 2.3 Customers As earlier on noted, this area is densely populated. The area has many medium size business entities running. Small businesses and a few big companies are also in operation. To add on it, there are also a number of colleges which are established in this region. Both governmental and non-governmental organizations are also situated in this region. People working in all these organizations are my main target customers. Most of them are middle class employees and business owner who form a larger portion of my target customers. The prospects of this café are very promising considering the recent findings concerning region. Research has indicated that populated in this region is expected to grow at a rate of 7.45% annually. At the same time, businesses are currently flourishing in this particular region. The completion of the main highway that connects with King Williams Road on the eastern side is also another major boost. At the same time, the on-going establishment of Miduenah College is also a good venture for this business. There many other prospects that makes this particular choice of business very feasible. 2.4 Competitors This café is not going to operate in a monopoly; it is going to operate in a very competitive market. As a matter of fact, there are already established cafes that are running in the same business environment. Nevertheless, necessary mechanisms have been put in place to ensure this business is competitive enough to cut through this market. Despite the fact that there are many competitors in the region, the main and most established competitors are two: Hindley Café This café is run by Mr & Mrs Hindley. The business is located 200 M from Hyde Park. Their premise is on five-storey building near the Velvet Chemist. The couple have had experience from their 15 years in hotel and tourism industry. They have operated other cafes in other states before including two in Missouri and one in North Carolina. They already have an established chain of customers. Most of their administrative responsibilities are easily undertaken by use of modern technology. They deal with a very wide variety of meals. This includes Chinese and Italian meals. In spite of all these, there are a few areas in the Hindley café that this business can capitalize upon. One is the fact that their meals are very expensive. Their excess pricing policy is not that effective considering the many middle class customers in this region. Another weakness is the fact that their café is on the third floor of the five-storey house. Their customers find it hard to use stairs considering the lift was disabled Delicious Café Another competitor in the region will be the Delicious café. This café has been in operation for the past six years. Their service delivery in the last two years has been termed exceptional. It is located next to the pub near El-Shaddai house. It is approximately 430 metres from ConnAmin café. It also deals in a variety of means from other countries. It is very strategic to tourists coming in from the nearby state. It has other established cafes that are already running. Nevertheless, they are not as lucrative as the mother-café (Delicious). Just like any other business, it has some weaknesses. There were recent family feuds over the café. These wrangles led to disappearance of a substantial amount of money during that period. If these feuds persist, it may only work to the detriment of the business. Besides, the café imports almost all its foodstuffs which translate to high costs. 2.5 Marketing Methods Our marketing approaches have been strategically designed to counter on the weaknesses of our main competitors. They are designed to help this business have a cutting edge in the industry. We are committed to ensuring high levels of hygiene and health standards. Our differentiation policy is guided by the need to provide products that are exceptional. We want to build an image of offering high quality meals to our customers in the region. For us to break through faster, our pricing policy shall be friendly to our customers. We shall be pricing three quarters of our meals at 85% of the normal cost. We are doing this to make sure we attract enough customers during the first quarter of operation. When the business catches up, we shall be reviewing this price slowly so that our customers do not feel the effect of the increase. We look forward to accepting credit cards as from the second quarter of our operation. We have also put in place mechanisms to help as deliver foodstuffs to our customers around. They will be allowed to make orders online and their foodstuff shall be supplied to them. With time, we look forward to put in place promotions in form of discounts to our most loyal customers. This shall be designed according to the needs of our customers. This is focused on widening customer loyalty base. This is expected to work well with our long term goals and aspirations. 2.6 Marketing Controls Marketing control mechanisms shall be in operation on a regular basis. We shall carry out an analysis to assess the effectiveness of our marketing strategies. This shall be through assessing customer satisfaction. This can be achieved through analysing the trend of return customers over a given period like one month. If the percentage of return customers shows a rising trend, then that shows more customers are satisfied. Similarly, there shall be a suggestion box where customers can drop in their comments and complaints. Besides, we shall also have an email where customer issues are channelled to. 3 STAFFING 3.1 Management The management of this business shall be in the hands of Connie Yak and Amin Yak. These are the main proprietors of this business. Amin has prior experience in the management of bars and guest lounges. He has worked as a manager for about three large hotels. Throughout his time in the hotel industry, he has established a reputation of hard work and diligence. His manyyears of experience in the hotel industry will enable him bring a wealth of experience into this business. At the same time, his wife Connie has also worked in the hotel industry for a very long time. She earned a diploma in TAFE Clerical Associate. She has been in the financial sectors in hospitality industry. She has worked exceptionally wherever she has been. She therefore brings into the business a whole range of experience when it comes to management of finances. 3.2 Organizational Structure Manager Administration Manager Finance Sales Persons kitchen staff cleanliness In-door sales out-door sales Duties and Responsibilities a. Manager Administration- (Salary 65000 pa) Oversee daily running of the café Ensure compliance by all staff Handle employee disputes and needs Manage all supplies b. Manager Finance (65000 pa) Handle matters relating to finance Payment of employees Sales forecasts Drafting budgets c. Sales Persons (20000 pa) In charge of sales made Delivery of meals Keep daily sales records d. Kitchen Stuff (15000 pa) Timely preparation of meals Carrying of meals inside the café e. Cleanliness in charge (15000 pa) Maintenance of cleanliness in the entire premise N/B: Salaries are to be increased at a rate half the rate of sales increases annually (15%) 3.3 Advisors The success of this café shall be partly based on the advice of the following professionals: Accountant – Thistle, Kostya & Lotz Attorney – Baker Stephens Bank – Barclays Bank 3.4 Staff Controls The performance evaluation and appraisal shall be conducted by qualified personnel. For the first year, we will use the services of a hired human resource specialist to help the entity to carry out performance evaluation of employees. This will be conducted after every four months. 4 .0 PURCHASING 4.1 Supplies We will be purchasing our required raw food from the neighbouring sales agents. There many outlets that we are considering to rely upon to meet our supplies needs. Preference shall be given to those who have outlets near our café and those with favourable pricing policy. Besides the regular supplies, some other goods shall be acquired from nearby shopping mall. So far, the only supplier we have given a tender is Terry Philips. He will be supplying all the cereals. 4.2 Purchasing Controls There shall be proper purchase documentation Purchase orders shall be drafted by one party and the reception by a different person 5.0 FINANCIAL 5.1 Break-even Analysis Break-even point is a situation where a business has made sales just enough to fully cover the expenses. It is a point where the firm is neither making loss nor profit. BEP =  Estimation of Fixed Costs Fixtures & Fittings = 20000 Floor Coverings = 9500 Furniture =40000 Business Equipment = 35000 Lease Rentals = 64800 pa Employee Salaries = 165000 pa N/B: The prices have been selected based on prevailing market prices N/B: In calculating marginal contribution, average price of meals has been used. Similarly, average variable cost has also been used. Marginal Contribution: Average Sales per meal – Average Cost per meal $13.5 – $ 6.0 = $7.5 Total Fixed Costs = $ 334,300 BEP =  44533.33 units BEP in Sales = 44533.33 x 13.5 601199.96 Note 1: Since the target was to attain BEP at the end of first year, then we will use the BEP sales as the sales value for the first year. Note 2: since the target was to maintain costs at not more than 40% of revenue, we will take the value of revenue to be 40% of sales. 5.2 Statement of Taxable Income Since the income of Amin and Connie is solely from the café, their taxable income shall be the share of profits they receive from the business. The allowable expenses shall be subtracted from the amount of profits due to them. The necessary tax rate shall be applied to get income tax. 5.3 Financial Controls The necessary checks and balances shall be put in place to monitor the utilization of resources of the business. The financial statements of the business shall be subjected to annual audit to ensure transparency. Where necessary, there will be rotation of duties especially sales people in order to make sure no frauds are concealed for long. Later on, we will adopt accounting and other software to help fully track the operations of the entire business. Use of accounting computer software will reduce some of the malpractices that are likely to arise. 6.0 RECOMMENDATIONS There is a lot of potential in the business. The financial indicators show that the business can do well if properly managed. Since the business is managed by a couple, caution should be taken so as not to allow family disagreements to affect the business. This calls for professionalism in the management of this business. The business should also pay attention to the likelihood of other competitors emerging in the future. The business should competitively establish itself in preparedness of other potential competitors. References Carl, W, Reeve, J.M & Duchac, J 2011, Accounting, South-western college pub, Mason, p.35-71. Fridson, M & Alvarez, F 2002, Financial Statement Analysis: A Practitioner’s Guide, 3rd Ed, Wiley, New York, p.46-93. Pinson, L & Jinnett, J 1999, Anatomy of a Business Plan: A Step-By-Step Guide to Starting Smart, Building the Business, and Securing Your Company’s Future, Dearborn Trade Pub, New York, p.114-165. Terry, L 2012, Management in 10 words, Random House Business, London, p.27-41. Read More