The Analysis of the Investment Stratagies of Multi-Cuisine Restaurant - Coursework Example

Investment Proposal Report Table of Contents Task Executive Summary 3 Task 2: Sources of Finance 4 Task 3: Return on Investment (ROI) 6 Task4: Explain the Likelihood of the Venture’s Success 7 Task 5: Financial Documentation 10 Forecasted Cash Budget 11 Forecasted Profit and Loss Statement 12 Forecasted Balance Sheets of the Business for the Three Years of Operations 13 References 14 Task 1: Executive Summary It is quite evident that commencing any particular business requires the adoption of various strategic decisions. Various steps need to be effectively planned and executed in order to establish any particular business. Contextually, this particular report will emphasize providing a comprehensive proposal with regard to one of the imperative domains of any business i.e. investment for a particular business idea. The vision of this particular business is to perform in alliance with the rules applicable by the regulatory bodies and ensure maximum number of loyal customers in the UK and other parts of the world to ascertain maximum sustainability for the business in the long run. Contextually, the mission of this particular business will be to operate with the deliverance of high quality products and services to the customers so that it can ensure maximum productivity that further shall ascertain the growth of the business. The business will also take into consideration the interests of the stakeholders while framing its strategies. The business idea, which will be focused in this context, will be multi-cuisine restaurant. A multi-cuisine restaurant is a particular sort of restaurant, which uses cooking methods of different nations of the world. This kind of restaurants often serves customers with diverse sorts of foods that have resemblance of any specific nation or region. However, establishing such business requires a considerable amount of investments. This particular business will require funds for various purposes including equipment and vehicles, marketing, land purchase, purchase of machinery, setting up of infrastructure and startup capital among others. These aspects are mandatorily required to set up multi-cuisine restaurant in any part of the UK. Hence, the need for investors is quite apparent in this particular business. It is known that investors are the people who invest their money in any business and earn profit for the same in return. For this particular business, funds will mainly be acquired from sources preferably the financial institutions of the UK. Funds will be acquired from these institutions against the payment of interest at a particular rate. It can be affirmed that acquiring funds is not only the sole step in setting up investment plans for the business rather financial planning is also considered to be important. Observably, financial planning is a set of financial goals and objectives of any business on which the profitability or the stability of the entire business is dependent. Contextually, in relation to this particular business, effective financial planning linked with eradication of debt, proper use of financial resources, reducing unnecessary expenses along with long-term and short-term debt will be duly considered in order to ensure financial stability of the business. Task 2: Sources of Finance Funds are among the most important needs to initiate any particular business. Contextually, this particular business of initiating a multi-cuisine restaurant in the UK will also require a considerable amount of money. For this purpose, certain potential sources of funds will need to be taken into concern as an important step for setting up the intended business successfully. It will be vital to mention in this regard that for the first year, the invested amount for the business will be around £294,520. This amount is deemed to be appropriate for a medium sized business like that of initiating a medium sized restaurant in the UK. This amount will comprise both the capital of the entrepreneur as well as the loan taken from financial institutions of the UK against an assumed interest rate of 10% approximately. This invested amount for the 1st year of commencing the operations of the business will be utilized in purchasing raw materials, machineries and making food purchases for the smooth daily functioning of the restaurant, paying remuneration for the employees, marketing of the business and buying machinery and equipments among others. Hence, this can be justified as a standard amount to initiate the business in the initial phases. However, in the later years of operations to be conducted by the restaurant, the invested amount is expected to increase owing to the expected expansion of the size of operations of the business. The amount that is invested in the initial phases of the business will be mainly acquired from two sources, which has been planned to include personal capital of the entrepreneur and loan taken from financial institutions of the UK. Since the estimated startup cost of the business, as per the cash budget is quite high, taking loan from the bank has become quite crucial apart from investing through personal capital. However, it will be vital to mention that acquiring loan from these institutions involve several negatives, which the business will certainly need to confront with. In this regard, one of the major problems usually depicted is the complex process of acquiring bank loans in the UK. It will be worth mentioning that banks only pay to the business having the potential to repay back the loan amount within the stipulated period of time. The business is thus likely to face stern challenges while convincing the financial institutions in this regard. Again, a considerable amount of interest has to be repaid to the financial institutions against the loan taken, which further causes a direct impact on the overall profitability of the business. However, the other side of the coin depicts that choosing financial institutions as a potential source of funds has certain benefits as well. The repayment of loan to the financial institutions is made on a periodic basis, which limits the negative effects on the overall financial stability of the business. Furthermore, acquiring loans from banks also accompanies with certain tax benefits. Observably, the interest paid against bank loans in the UK is directly deductible from payable taxes, which directly benefits the business (Jain and Khanna, 2010). Hence, this source of fund can be considered best suited for the overall business. It is worth mentioning in this context that many other potential sources of funds for the restaurant business were not taken into consideration owing to certain concern regarding their effectiveness in the proposed business idea. Among the potential sources ‘Local and state economic development organizations’ of the UK and funds from relatives and friends of the entrepreneur were available for this particular business idea. However, though the local and state economic development organizations’ of the UK could avail the loan at quite a low interest rate in comparison to the financial institutions, they are quite tough to be acquired, taking considerable time in most of the cases. This aspect would surely cause delay in the initiation of the business. Funds acquired from friends and relatives of the entrepreneur can also be considered as potential and advantageous sources for this particular business. However, their lies a fact that this source does not operate in a systematic manner and consequently, the loan amount might need to be paid back at any point of time when they need the same raising an uncertainty to the financial stance of the business (Rao, 2010). Hence, this potential source of funding was also eliminated for the proposed business idea of initiating a multi-cuisine restaurant in the UK. Task 3: Return on Investment (ROI) Conceptually explaining, Return on Investments (ROI) can be regarded as among the approaches of calculating the efficiency of the investment made when commencing the business operations or a particular field of operations in pursuit to attain a determined objective. It acts as a performance indicator that depicts the performance of any business in front of the investors, which further attempts to influence their investment behavior towards the business in the future context (Phillips & Phillips, 2008). In this regard, calculating ROI for the multi-cuisine restaurant business is also quite crucial considering the fact that it will certainly depict the probably for positive return from the business for the investors (the entrepreneur as well as the banks). The ROI for the business is provided hereunder. As apparent, the ROI for the first year of initiating the business will be around 1.13% for the investors. This figure can be considered as quite appreciative for any business in the first year of its operations. This value depicts that there is a 1.13% probability of gaining positive returns from this particular business operations. This aspect is also deemed to be quite appreciative for an investment plan because the chances or the probability of getting positive return from the business is quite high. Task4: Explain the Likelihood of the Venture’s Success It is evident that profit making or continuous maximization to organizational competitiveness is one of the primary objectives for of the proposed business to sustain in the intensely challenging business environment. The proposed business will be initiated with the intention to attain maximum success in its operations with due significance to ensuring sustainability and long run profitability through effective planning, strategic execution in an objective-oriented manner as well as balancing various forms of business activities when delivering quality services and products for the business. Therefore, financial planning is deemed to be quite important for the overall success of this particular business idea. Accordingly, it must be noted that the impact of financial decisions and planning is significant to guarantee the financial stability of the business. Likewise, in the proposed business, financial planning will be crucial towards managing the income, expenditure and operating cash flow of the business. Like in any other business, finance will be the backbone of this particular business idea. Proper financial planning in this particular business will ensure management of its incomes, expenses and resource allocation more efficiently, which will further ensure that budgeting and other financial statements of the business is prepared in the most suitable way through ascertaining maximum accuracy in the same. Furthermore, managing the income efficiently will ensure efficient payment of the taxes, which is again important in order to ensure adequate savings and a benefit indeed. Financial planning is also crucial to track the expenditure pattern of the business. This aspect will allow the business to implement measures to control expenditures, further assuring improving cash flow (Armond & Durband, n.d.; PPPB, n.d.). Financial planning in this particular business is also important in ascertaining a ‘long-term capital base’, which is possible from a substantial increase in the generated cash flow. It will be worth mentioning in the context that with a wide capital base, the business can attract a larger number of investors in the future context. All these aspects associated with financial planning will ultimately enhance the probability of success for this particular venture of initiating a multi-cuisine restaurant in the UK. Generally, investing in business involves certain risks caused due to market fluctuations, competitions and changes of interest and exchange rates, which influences the operations of the business. Market fluctuations resemble the change in demand of the market and change in economic conditions that unfavorably affect business. Correspondingly, intense competition in the restaurant industry of the UK may also increases risks for the proposed business. While focus on obtaining the required amount of funds from two sources, viz. personal secured sources of finance and financial loans at defined interest rate will ensure minimization of the likely financial risks, an objective-oriented and customer-centric strategic management style will ensure growth in customers demand. Thus, both the short-term goals of the business to gain profit through a firm foothold in the market and its long-term intension to preserve sustainability can be sufficed. Pricing strategies is also another aspect that is important to be emphasized while establishing any new business. It will not be ambiguous to state that the price of products or services is often seen as strong determinants to attract new customers in any market. Contextually, this particular business plan will follow a penetrating pricing strategy. In this sort of strategy, price of products and services are usually set quite low to attract the customers in the initial operations of the business. This will allow the business to enhance its customer base in a short span of time, further gaining an advantage over the operating competitors within the industry. However, in the later stages, the prices will be increased depending on the customer demand and their satisfaction level. The multi-cuisine restaurant will further initiate the business with a low pricing strategy along with delivering quality services to attract maximum number of customers in order to preserve their long-term loyalty towards the business. Attaining an impressive reputation through initial operations, the business will intend to capitalize on the same in the later stages of its life cycle. The business will also ensure effective budgeting to ascertain maximum success for the venture. Budgeting in this particular business is important to assure proper allocation as well as utilization of the resources. It will also be important to note that budgeting, in this particular restaurant business, will also help in monitoring along with controlling its operations in an efficient manner. Besides, an effective budgeting will also enable the entrepreneur to ascertain the various aspects that augments the expenditure of the business operations and consequently, brings measures to deal with the same. These practices are expected to ensure financial stability for the overall business. Task 5: Financial Documentation In any form of business, irrespective of the industries they are operating, financial activities remain among the prime operational activities. Financial activities, as depicted in the previous sections of the paper, include aspects such as financial planning, which is again a prime determinant that affects other aspects of the finance management domain of a business. Additionally, preparing financial statements are also among the important concerns of financial activities. These statements present the current financial position of the business for the investors and other stakeholders. Contextually, the forecasted financial statements for this particular business of initiating a multi-cuisine restaurant business are provided hereunder. Forecasted Cash Budget Forecasted Profit and Loss Statement Forecasted Balance Sheets of the Business for the Three Years of Operations References Armond, D. R. D. & Durband, D., No Date. Financial Planner Behavior Impact on Success in Financial Planning. Journal of Behavioral Studies in Business, pp. 1-13. Jain, T.R. & Khanna, O. P., 2010. Business Economics. FK Publications. PPPB, No Date. The Importance of Financial Planning. Home. [Online] Available at: http://www.pppnetwork.com/?view=The_Importance_Of_Financial_Planning&mid=1563&mid=1563 [Accessed February 06, 2014]. Phillips, P. P. & Phillips, J. J., 2008. ROI Fundamentals: Why and When to Measure Return on Investment. John Wiley & Sons. Rao, D., 2010. The 12 Best Sources of Financing. Forbes. [Online] Available at: http://www.forbes.com/2010/07/06/best-funding-sources-for-small-business-entrepreneurs-finance-dileep-rao.html [Accessed February 06, 2014]. Read More