Car Care : My Car Care Buddy - Business Plan Example

 Financial Plan My Car Care Buddy Introduction An Overview The most crucial part for just about any business plan is the Financial Plan. Normally the financial plan of any company appears at the bottom of the Business Plan. The main objectives of any business plan will be: 1. Better Comprehension of the Business. 2. Carefully examining the pros and cons of a business. 3. Engender revenues by any means of funds generation. (Public issue, Private Placement, Bank Loans, etc.) Even though the financial plan is at the bottom of your business plan, it will enable the reader to determine the viability of your business plan. The Financial plan will always embrace the three crucial statements: the cash flow statement, income statement, sales forecasting, BEP (Break Even Point), and sources of finance. With the help of the following statements we will clearly and proficiently be capable of determining the practicability of our business plan. Car Care Business Plan Realizing various cons of maintaining a car, we have decided to create a firm “My car care buddy”, the prime strategy for our car care business plan that will help it gain an edge over our competitors will be to provide conveyance facilities for our expected clients, that is, instead of driving to the car wash, the customer can now get his car cleaned with the help of just 1 phone call. Realizing that the equipment is getting shorter and shorter (in terms of size and matter), we know that all the equipments for a car cleansing and checking job can now be fitted in a mere van. This also means that now our predicted customer will not have to waste valuable time (waiting in a queue) or money (spend on transportation). This will not only enable the client to save time and money, it will be a great way to maintain the car. Yes… Our services include not only the cleansing of car from the outside as well as inside, but we will also avail extra services such as keeping a check on water levels, engine oil and tyre pressures. Why the car care business? Looking at the present conditions of Cyprian Economy, where the number of vehicles are constantly increasing at a steady rate, the idea of maintenance of a car was originated and thus we reached to the conclusion that the door – step car wash service will be optimum realizing the low availability of time in case of professionals and executives. Besides the number of cars in Cyprus has increased from 270,000 to 345,000 (Public Works dept. of official statistics, found at : http://www.mcw.gov.cy/mcw/PWD/PWD.nsf/All/1099BBC9002543B4C225713B00147808?Opendocument) A person doesn’t want to waste time waiting in a queue at a petrol pump for his car wash, and that’s where we come in with our mobile car wash, equipped with our state of art high tech equipment; we are confident that we will be able to cover a decent share in the turnover of the industry. Although the still car washers are much more faster and easier to use but they are also ten times more costly then the mobile car wash equipments, which is cheaper because it requires more labor and uses less technology, not only that but mobile car wash equipment is also environment friendly as it uses less water and less harmful cleansing agents. Costing of the Project Determining the costing of a business project is the toughest task, it’s because of the fact that the costing of any project could easily be dogged incorrect once you start doing the business. If the estimated cost of the project comes out to be higher than the practical cost, the situation is quite controllable. But if under any circumstances the estimated cost of the project is lower than the actual price, it gets extremely hard to overcome the situation with a viable solution because of the fact that the estimated costing helps us determine the market price of the product. Secondly, it is very tough to find reliable sources from where we could arrange the Dealer price of the product and not the retail price. Therefore, we have conducted a survey including 2 prominent businessmen as participants to calculate the actual cost of our products and services. Cost of Raw Materials / Equipments Primarily, we have to keep our service plan in mind, which is ‘door – to – door’ car wash services, since we will provide car was services at the client’s own convenience at his own home / office, we will have to keep in mind that we do not require bulky or heavy car wash equipments such as the ones at a petrol pump or car care centers; rather we would require equipments that could easily fit into our employee’s van so that it’s easy to carry. Thus we have come to the conclusion that we will be using the traditional car wash techniques which include more labor than technology and bulky machines. The next step will be to evaluate the categories of various costs, such as initial costs, fixed costs and variable costs. Startup Expenses / Initial Costs Our startup costs will include the cost for purchasing of equipments and raw materials, as well as paying for lease for land / office, and van / truck. Since the customer won’t come to our office to get his car cleaned, we would not require a big space but the space should be sufficient enough to have comfortable sitting arrangements for all our employees and must include a godown to store equipments and raw materials. Initially to keep our budget under control we have decided to rent an office space. We have also made a list of equipments to be purchased; this will also be included in our initial costs. Particulars Cost Per Unit (Approx.) Units Total Cost Deposit for Office Space £ 3,000 1 £ 3,000 Mobile Car Wash Equipment £ 11,500 3 £ 34,500 Spray Gun and other equipments Included in Mobile Car - - Chemicals (raw materials) £ 1000 (Accumulated figure including shampoos, shiners, coatings, etc.) - £ 1,000 TOTAL £ 38,500 Table Initial.1 Operating Costs Fixed Costs (Monthly) (Estimated) Particulars Cost Rent for office £ 750 Salaries (3 cleaners, 1 secretary, and self) £ 9,000 Firm registration and legal expenses £ 250 TOTAL £ 10,000 Table Fixed.1 Variable Costs (Monthly) (Estimated) Particulars Cost Conveyance £ 1,500 / month Overheads £ 200 / month Re-purchase of cleansing chemicals £ 300 / month TOTAL £ 2,000 Table Variable.1 Total Cost (Fixed Cost + Variable Cost) (Start up Cost Not Included) Fixed Cost + Variable Cost £ 10,000 + £ 2,000 = £ 12,000 / month As you must have noticed that we are spending too much on labor, well… that’s because of the fact that the labor is our main resource in this project. Since we won’t be using heavy duty machinery, we will be required to have a good staff that can handle all the cleansing operations. Expected Sales Considering a labor force of 3 people equipped with 3 trucks appointed to wash a car, the optimum capacity of the enterprise would be 10 washes per person that would lead to 30 washes per day. So 30 x 30 = 900 washes per month or 10,800 washes per annum. We may easily find 900 customers per month considering the fact (based on Primary Research: Survey) that a built - in car care center in a petrol pump gets about 43 customers per day. Thus initially we will be expecting a low client base, and since we are starting this enterprise with low cost techniques based on more manual labor than machine work, the BEP would be balanced in a very short notice of time. Margin and Profit Expectation Based on the above we may easily calculate the margins for our business. The costing per wash would total: £ 12,000 / 900 = £ 13.33 per wash (approx.) These will be the rates of our car wash facilities considering the fact the each employee finishes cleaning 10 cars per day and works 7 days per week. Based on the primary research, a complete car wash with triple foam coating, waxing, drying, etc. is charged about £ 12, but since we are providing door delivery services and our client base is supposed t be high – end executives we could charge a little over that, thus we have decided to include the following price quotation: Wash, Triple Foam Wax, Undercarriage Cleaning and Dry + Extra and unique facilities such as better polishing with high-end material, scratches removal, interior cleaning, water levels checks, engine oil check and tyre pressures check: £ 22 (Retail price) Later on we will launch bulk schemes such as discounts on quarterly payments, etc. so that we may get an edge over our competitors. Break Even Point Based on the above calculations we have estimated the profit per wash which comes out to be $ 8 (practically it is 8.7, but since we are expecting some unforeseen overheads we have rounded it off to $8, actually its $ 22 - $ 13.3 = $ 8.7) In an average of 2 petrol pumps, 43 customers come to get their car cleaned every day. And therefore we have considered that working at full capacity we might be able to entertain 30 customers per day. We will use the simplest formula to calculate the BEP which is BEP = Fixed Cost / (Unit Price – Variable Cost per unit) Therefore, BEP = 10,000 / (22 – 2.22) BEP = 505.5611 That is, we will need to sell at least 506 units, or in our case 505 washes to be at a no profit no loss situation. The Income Statement Profit & Loss Account For Year 2008 - 09 Particulars Amt Final Amt Revenues: Gross Profit £ 237,600 Expenditure: Rent for office £ 9,000 Salaries £ 108,000 Legal expenses £ 3,000 Conveyance £ 18,000 Overheads £ 2,400 Cleansing Chemicals £ 3,600 TOTAL EXPENDITURE £ 144,000 NET PROFIT £ 93,600 Sources of Finance Many sources of finance are available in this epoch of computers and finance, now even billions of dollars can be easily arranged for any project (Parks, S. 2004, Pg. 143). The various sources of finance are: 1. Large Scale finance: a. Equity capital generated via public issue. b. Preference Shares (used for small scale finance also). c. Debentures. d. Foreign investment. e. Loans from Commercial banks. f. Loans from Financial Corporations. 2. Medium / Small Scale Finance: a. Loans from Private medium level financers. b. Loans from Banks. c. Institutional Loans. d. Preference Shares. e. Asset Securitization. f. Venture Capital. Since we do not require bulky finance (only £ 38,500) we will opt for medium scale finance options and the best option here is Loans from commercial banks, where we would also give our business assets (the 3 trucks) as security. Cash Flow Statement Cash flow via the Direct Method Cash flows from business activities Cash received from Clients £ 230,500 Cash paid for salaries (£ 108,000) Cash paid to suppliers (£ 6,000) Cash paid for rent (£ 9,000) Interest Paid (assuming @ 10 % of loan amt. 40,000) (£ 4,000) Taxes (assuming @ 15 % of turnover) (£ 35,640) Cash generated from other operations, fines, etc. £ 7,100 Cash spent for conveyance and maintenance (£ 18,000) Net cash flows from operating (£ 10,900) Risk Analysis Risk analysis of our business will be a little different than other businesses. Like for example, a flood will be great for our business, as the cars of clients will be so dirty that they can’t “take” their cars to a car wash, so they will “have” to avail our services. Although a major risk factor is that our prices are very high, but we can not face that as our costing as well as fixed costs are high. That is the reason why we are providing extra and unique facilities such as better polishing with high-end material, scratches removal, interior cleaning, water levels checks, engine oil check and tyre pressures check, etc. other than the normal cleaning, waxing and drying. References Public Works dept. of official statistics, found at : http://www.mcw.gov.cy/mcw/PWD/PWD.nsf/All/1099BBC9002543B4C225713B00147808?Opendocument Parks, S. 2004 “Start Your Business - Week By Week: How to Plan and Launch your successful business" Pg. 143 Bibliography Burke,R. 2006 "Entrepreneurs Toolkit" - Gazelle Books/Burke Publishing. Burke,R 2006 "Small Business Entrepreneur" Gazelle Books/Burke Publishing. Parks, S. 2004 “Start Your Business - Week By Week: How to Plan and Launch your successful business" Pg. 143 Sue Birley, Daniel F. Muzyka 1997 Financial Times "Mastering Enterprise" - Financial Times Pitman Publishing. Colin Barrow, Paul Barrow & Robert Brown,2005-5th Edition, The Sunday Times "The Business Plan Workbook". Jim Green, 2000-3rd Edition, "Starting Your Own Business - How to plan, build and manage a succesful enterprise" Read More