Electric Bicycle Manufactures Limited - Perspectives of Development - Example

Business Plan for Electric Bicycle Manufactures Limited Students Name: Institution: Instructors Name: Date: Business Plan for Electric Bicycle Manufactures Limited Before commencing on any business, entrepreneurs prepare a business plan that guides them in accomplishing the main objective of making profits. A business plan helps in giving direction on what the entrepreneur is expected to implement (Mutel, 2010). In this case, we are going to prepare a business plan for a new product in the market. The electric bicycle business will aim at manufacturing and sell electric bicycles to people in the region. The business was developed as an idea that there is a gap in the market whereby the demand for bicycles in increasing and hence the new product will attract more customers. In the business plan below, we shall look at the market analysis and the strategies to venture into the new market. The profit and loss account, the balance sheet, SWOT analysis, Gantt chart and cash flow statement reflect the financial aspect in the business plan. Market Analysis A research was conducted and a gap was identified, this compelled the initiative to manufacture and supply electric bicycles. Our target market is students who enjoy going to school while riding, also the fact that it is summer season, there is high demand for bicycles. Therefore, the business is expected to thrive with the existing gap and market demand. The strategies to ensure that the business thrives involve; Segmentation of the product to fit customer preference Manufacturing bicycles that are fit for physically challenged people Ensuring that the supply of bicycles is constant The prices will be favorable especially for the summer season where the demand is high. The current size of the business has its current turnover of $250,000 since the business is at its starting point; the number of employees is three. The business is expected to grow and hence there is a need to estimate the amount of money allocated to every activity for the purpose of predicting the financial situation of the business in the next two years. Annual Profit and Loss Account profit and loss Year 1 ($) Year 2($) Projected sales 345,000 450,670 Direct sales 250,000 340,500 Other costs of sales 0 0 Totals sales 230,450 306,900 Gross margin 110,340 180,450 Gross margin 30.20% 32.46% Expenses Payroll 20,000 25,550 Marketing/promotion 1,500 2,000 Depreciation 3,000 3,000 Vehicle expenses 1,500 1,700 Credit card 3,500 3,800 Office supplies 400 500 security 500 500 Telephone 1,500 2,000 Accounting costs 2,000 2,000 Rent 20,000 20,000 Utilities 2,000 2,000 Insurance 500 500 Payroll taxes 0 0 other 0 0 Total operating expenses 65,450 70,550 Balance sheet Year 1($) Year 2($) assets Current assets; cash 200,000 250,000 Other current asset 50,000 100,000 Total current assets 250,000 350,000 Long term assets 65,000 85,000 Accumulated depreciation 60,000 129,000 Total long term assets 5000 (-44,000) Total assets 255,000 306,000 Liabilities Current liabilities; accounts payable 14,750 15,450 Current borrowing 0 0 Other current liabilities 0 0 Total current liabilities 14,750 15,450 Long term liabilities 100,000 80,000 Total liabilities 114,750 95,450 Paid in capital 100,000 100,000 Retained earnings (60,000) (54,550) earnings 13,000 20,000 Total capital 53,000 65,450 Total liabilities and capital 167,750 160,900 Net worth 53,000 65,450 Break Even Analysis Break-even analysis for the business is the point at which revenue exceeds the cost of production. In this case, the business should have been able to make its first profit. For the case of Electric bicycle business, the breakeven point should be realized by the sixth month from the inception of the business. The cost analysis below shows the breakeven point of the business in the projected six months. The figures are presented in monthly revenue break even, average percentage variable cost and estimated monthly fixed cost. Break-even analysis Monthly revenue Break-even $ 18,761 Average percent variable cost $ 57% Estimated monthly fixed cost $ 6,569 SWOT Analysis SWOT analysis is important for any business as it highlights on areas that the business needs to focus on in terms of strengths and weaknesses. The SWOT analysis of electric bicycle business is stated for the purpose of making appropriate strategies in making more profits and attaining a competitive advantage. It is important to consider the internal and external factors that could impact on the business. Strengths Weakness Existing market gap on electric bicycles Competition from renown bicycle manufacturers Favorable environment for business High cost of raw materials Unique design of the product High demand for bicycles Skilled employees in manufacturing Effective marketing strategy Opportunities threats Demand for physically challenged designed bicycles Strong relationship between competitors and targeted retailers The season is summer favorable for business Use of internet in marketing Gantt Chart A Gantt chart is a table that indicates the sequence of activities that should be accomplished within a specific time. It is a guide to everyday activity in any business. It is developed by using the strategies and the implementation program. activity Week 1 Week 2 Week3 Week 4 Week 5 Week 6 Week 7 Preparing budget Assembling all the manufacturing materials Reporting of employees and orientation Manufacturing of the bicycles Producing the first batch of bicycles Marketing Supply of bicycles to retail shops Cash Flow Forecast Cash flow forecast determines the amount of money that flows in and out of the business. It is important to prepare a cash flow projection for the bicycle business for the purpose of making an appropriate decision on resource and finance allocation. Year 1 Year 2 Cash received Cash from operations Cash sales 345,000 450,670 Total cash from operations 345,000 450,670 Additional cash received Sales tax, VAT, received 0 0 Current borrowing 0 0 New liabilities 0 0 New long-term liabilities 0 0 Sales of current assets 0 0 Sales from new long-term assets 0 0 New investment received 0 0 Total cash received 345,000 450,670 expenditures Operations expenditure Cash spent 260,800 273,840 Payment of bills 43,607 86,964 Total spending on operations 304,407 360,804 Additional spending on cash Sales, tax, vat paid out 0 0 Repaying current borrowing 0 0 Repayment of liabilities 0 0 Repayment of long-term liabilities 0 10,000 Current assets purchase 0 0 Long term assets purchase 0 10,000 dividends 0 0 Total cash spent 304,407 380,804 Net cash flow 40,593 69,866 Reference Mutel, D. 2010. Business plan. Orchamps: Atelier Didier Mutel. Read More