McAntonys Automotive Repair Business Strategies - Example

BUSINESS PLAN STUDENTS NAME: INSTITUTION: INSTRUCTORS NAME: DATE: Executive Summary It is important to prepare a business plan before starting up any kind of a business. The case study below is an insight of a business plan for automotive repair that will aim meeting the demand for vehicle repairs and services. The plan consists of business idea, market feasibility, technical feasibility, financial feasibility and human resource feasibility. Understanding all these aspects will be useful in preparation of a business plan. Table of Contents Executive Summary 2 Introduction 4 Business Idea 4 Market Feasibility 5 Market Size 5 Growth Rate 5 Market Capacity 5 External Factors Analysis 5 Technical Feasibility 6 Options for Sale and Distribution 6 Resources Required for Development 6 Laws and Regulations Relating to the Business 7 Moral and Ethical Issues 7 Technological Changes 7 Financial Feasibility 8 Projected Revenues 8 Projected Profit and Loss 9 Projected Cash Flow 9 Financial Risks 10 Sources of Financing 11 Financial Indicators of Attractive Business Venture 11 Human Resource Feasibility 11 Business Growth Strategy 12 Conclusion 13 References 13 Introduction According to Mutel, 2010, a Business plan is a tool used by entrepreneurs as a guide on how to take up the business idea and implement so as to start a business. Before commencing any business, it is important to prepare a business plan. This will guide the owner of the business by providing a step by step guide on how to undertake all the business activities. It starts with the identification of a business idea through feasibility study whereby one will be able to identify a gap in the market.successful entrepreneur’s advocate for the use of business plan before starting up a business. It helps entrepreneurs to trace every step during the implementation process. Perhaps an insight of a business plan will help in understanding the various aspects that make up the plan. Business Idea In this case, we are going to prepare a business plan for automotive repair business. This is an idea that came about as a result of an existing gap in the market. The idea is about supplying automotive repair in town. This is because there are many customers who get stranded while looking for repair shops. Also, the existing repair supplies are not reliant in terms of availing all categories if automotive repairs (Sahlman, 2008). The main products of automotive repair will be mechanical and body repairs of vehicles, towing and storage of vehicles, selling used cars, valeting and washing vehicles. The repair shop will be located in suburbs in Minnesota under the name McAntony’s automotive repair. This idea was a result of identification of an existing gap that needed to be filled. Many people in this area own cars abut they spend a lot of money buying spare parts from different locations because there is a shortage of supply for them. Some import spare parts because they cannot find them. Therefore the automotive repair is established to serve vehicle owners by supplying them with repairs and meeting the high demand for imported spares. Our products will be imported from Japan since it is a renowned motor vehicle manufacture country and therefore most of the spare parts are available at cheap prices (Tracy, 2015) Market Feasibility Market Size According to market feasibility that was conducted, the business idea is essential for the people of Minnesota. This is because there are few automotive repair shops around the region and hence there is demand for more repair shops. People in this area own vehicles and the experience shortage of supply and hence there is a reliable market for the business idea. Growth Rate Following the history of growth rate of repair shops, it is evident that it has been very slow since there has been a shortage of supply. Also the fact that the place is populated by high income earning people indicates that there will be high demand for vehicles and spare parts as well. Market Capacity The market is not at full capacity because many car owners prefer ordering spares from other regions since the existing shops cannot meet the high demand. Customers are getting their products either by importing them or by traveling to other places to obtain them. They also get the car washing services at the nearby car wash that does not deal with the repair. There are customers who will be able to purchase from the repair retail in the sense that there is high demand for motor vehicles and hence there will be demand for repairs and other motor vehicle services as well. Since the business will be able to deliver most of products and services, customers will, therefore, be attracted (Kourdi, 2009). External Factors Analysis Analyzing the external factors that comprise the existence of business, the government is one of the factors to be considered before starting up a business. In this case, the government allows for entrepreneurs to start a business that will benefit the society and will create employment. The fact that the business is legal is an added advantage which will allow peaceful co-existence between the government and business. Industry dynamics also dictates the nature of business in the sense that there should be demand for the product, factors such as competition form part of industry dynamics whereby price is a major factor in market entry. Technical Feasibility Technical feasibility comprises aspect that deals with how the business will be able to thrive in the industry. Let’s look at the option for developing technology whereby the business intends to use technology in its operations so as to advance technologically and to also serve a wide area as a result of using the internet to reach customers. The business will design its own method of technology development; this will be achieved through the use of the internet to carry out marketing and service delivery as well. Product and service delivery will be under acquisition of license that will enable the business to run. This option is appropriate since the business will be a joint venture between Japan suppliers and McAntony’s automotive repair. Options for Sale and Distribution The business is a retail which implies that it will meet the demand trough selling and distribute repairs and spares parts to its customers in Minnesota region. The choice of sale and distribution depends on demand and also coverage. In the house is an appropriate choice because the business intends to supply all categories of repairs and therefore clients and customers will get access by either visiting the shop or by ordering for them through online and delivery will be made. Since the business will rely on suppliers from Japan, it is, therefore, a joint venture and this is another sales and distribution option. Resources Required for Development The business is projected to develop and experience growth as a result of existing market; therefore resources for development are required to compel implementation of the business plan. Skills are important resource and the business is going to hire skilled expertise who are experienced in handling motor vehicle spares, these are mechanical engineers.raw materials will be available, in this case, repairs, car washing machines, and computers. The suppliers will be from Japan Automotive suppliers since it is a joint venture and hence the business will receive supplies from them. Laws and Regulations Relating to the Business In every business, there is laws and regulation that govern the operation of legal businesses. Industry standards and regulations stipulate the manner in which businesses should be conducted (Katz et al 2009). Therefore the business meets these standards and regulations, for example importing of repair parts from Japan suppliers. This has been done through following the right procedures, also personal certifications impact on laws and regulations relating to business such that the ownership of the business should be able to meet all the requirements such as citizenship, qualifications, the criminal record of employees and the owner and also the sources of capital. Environmental analysis is another aspect that impacts on laws and regulations relating to business. The fact that the business deals with automotive repairs and spares, it is obvious that during repair, exhaust fumes will be emitted from the motor vehicle engines, therefore the business is located in a place that will be less harmful to the environment in terms of fumes emission. Moral and Ethical Issues The research conducted revealed that people of Minnesota are morally upright and they possess few refinements of polite society. Therefore the business is expected to serve the needs of these people in exchange for peaceful business activity that relies on honesty and timely delivery of service. Technological Changes Technology has impacted the way in which business are conducted, commerce is embracing technological advancement such that every business activity is inclined towards the realization of the importance of using technology. Automotive repair business will rely on technology in the sense that most of our customers will be served through online to minimize costs of advertising and travel. This will as well attract more customers and the possibility of wide coverage will be enhanced (Abrams, 2003). Financial Feasibility Projected Revenues Projected revenues indicate the level in which the business will be able to make profits. When a business is at its break-even, it is said to have reached a point where revenue exceeds the cost of production such that what the business gets exceeds the expenditure (Berger and Udell, 1998). The table below shows the projected break-even point of the business. The projected amount of money to be used in this plan is $ 170,000, therefore the business has a projected on profits to be made at $ 60,000 after deducting the operating expenses. From the market price, the selling price per unit of spare parts is $ 100; this is the moderate price in the market. When it comes to financial dynamics and opportunities, the business will be able to take over opportunities as a result of expanding its business by using the profits made. Costs structure is indicated in the tables below whereby the business intends to ensure the provision of best products and services to fill the market gap. Break-even analysis Monthly revenue Break-even $ 17,581 Average percent variable cost $ 67% Estimated monthly fixed cost $ 5,838 Projected Profit and Loss Profit and loss are used to determine the financial flow of the business such that there will be an indication of expenditure and earnings from the expenditure. Projected profit and loss Year 1 ($) Year 2($) Year 3 ($) Projected sales 300,456 470,850 590.678 Direct sales 240,150 300.455 400,800 Other costs of sales 0 0 0 Totals sales 235,180 300,567 400.500 Gross margin 120,860 150,930 204,190 Gross margin 31.20% 32.46% 32.64% Expenses Payroll 25,000 36,680 66,000 Marketing/promotion 1,700 2,300 3,030 Depreciation 4,000 4,000 4,000 Vehicle expenses 1,600 1,700 2,000 Credit card 3,400 4,000 5,500 Office supplies 500 600 800 security 300 300 300 Telephone 2,000 3,000 4,000 Accounting costs 1,500 1,500 1,500 Rent 19,000 19,000 19,000 Utilities 2,200 2.200 2,200 Insurance 800 800 800 Payroll taxes 0 0 0 other 0 0 0 Total operating expenses 62,000 75,400 109,130 Projected Cash Flow The table below shows projected cash flow for the business, this indicates the manner in which finances are utilized for the purpose of making a profit for the business. In this case, the business intends to use all the resources available for the progress of business. All the investments are indicated in the table below whereby it shows the flow of all resources. Cash flow statement Year 1 ($) Year 2($) Year 3($) Cash received 0 0 0 Cash from operations 0 0 0 Cash sales 300,456 470,850 590,678 Total cash from operations 300,456 470,850 590,678 Total cash received 300,456 470,850 590,678 Financial Risks Zimmerer et al 2005, asserts that there are risks associated with finances in every business, automotive repair has set up its financial plan and has ensured that there will be minimal risks. One of the feared risks is that of loss, this is because the business has allocated most of the capital in ensuring that there is enough supply of stock. Since it is not predicted on whether the first phase of the business will experience a break-even, the business has set aside enough resources that will minimize risks associated with loss. The risk associated with liquidity is critical especially for a new business; this is where the business run short of operating cash, at this point there will be a risk of closing down the business or borrowing loans. The business has set aside cash that will be used when there is fear of liquidity risk. The risk associated with society has been researched and it is concluded that Minnesota is a very secure place to conduct a business as long as it is a legal business. Societal risk comes about aspects such as crimes and when the business is not allowed due to religious barriers. However, an automotive spare is a business that will be beneficial to the society. Rates of interest may result to risk as a result of high-interest rates, the fact that the business is a joint partnership with Japan suppliers, interest rates may affect the rate at which these spare parts are supplied. When this occurs, there will be an increase in prices of products and services which is a risk to a new business. Sources of Financing The Automotive repair business is a joint partnership and therefore the source of capital is from the two partners. This, therefore, means that capital will be contributed equally by both. Other equipment to be used are contributed by McAntony since the business will be under his name. Financial Indicators of Attractive Business Venture From the profit and loss account, it is clear that the business is attractive by the show of increase in numbers for the nest three years. The projections are done basing on the market research and the demand in the area. The gross margin is seen to increase yearly from 31.20% in the first year to 32.64% in the third year. This is a positive progress that indicates the business is growing.net profit margin is also experiencing a gradual increase yearly. Human Resource Feasibility The business deals with automotive repairs and vehicle services such as car washing and towing. These are activities that rely on expertise from mechanical experts. The shop will hire a manager who will be in charge of overall activities that will take place in the retail shop. Technical experts and marketing experts will also be required to accomplish various activities allocated to them. Since the business will rely on a supply of these repairs from Japan, the manager should have experience in all the processes required before importing products from another country. Also, the mechanical experts should have experience in fixing and handling different types of motor vehicles since it is important for the purpose of efficient service delivery. The business is a joint venture between Japan automotive repair and Mc Antony Automotive repair. Japan suppliers all the repairs and McAntony is responsible for selling these spares and repairs to customers and also fixing them. Technological expert is required for accomplishment of this business. Manpower requirement will be in line with the type of business and the products and services to be provided. Automotive repair requires professional in mechanics an information technology and also marketing expert. The mechanic is responsible for diagnosing the motor vehicle and determining the types of repair to be placed; in this case, he is required to have knowledge on all types of vehicles and their spare parts. Information technology expert will be responsible for setting up an electronic-commerce platform where customers are able to view the various spare parts available in the shop and hence place and order. The marketing expert is expected to ensure that the new business is advertised and that the new products and services are made known to potential customers. He will be responsible for conducting market research and using the four marketing mix to attract and retain more customers (Nonaka, 2008). All these employees will be obtained through recruitment and selection process. Compensation will be based on designation and also the expertise. They will be motivated through training and provisions of a well working environment. They will need training regularly so as to keep up to date with current changes in technology. Business Growth Strategy Every business should undergo the stages of growth; it depends on how the business is managed. According to Automotive repair, it is expected to experience the growth stages with each step being a stepping stone to attaining the next stage. The growth strategy is inclined towards achieving a competitive advantage and therefore it is expected that the growth will be gradual since there are potential customers and there is high demand for spares and repairs in Minnesota. In a bid to ensure customer retention, the quality of products and services should also experience progressive growth such that there should be the development of new services and products that will add quality to the existing. This will maintain the quality of products and services and also retain and attract more customers. Growth result to changes in any business, it is expected that as growth accelerates, there should be changes that will enable organization structures to adapt to growth. For example use of technology is subject to change and therefore the business is expected to keep up to date with these changes to avoid risks associated with failure to adapt to changes. Conclusion A business plan is an important tool that will help in achieving goals of a company. From above business plan, it is expected that McAntony Automotive will be able to experience growth that will bring forth more profits. Conducting a market research is important before establishing a business of any kind. In this case, the business idea was a result of market research. Therefore the business will be able to supply all the repairs and spare parts of all types of vehicles and hence it will establish its image and hence growth. References Abrams, R. M. 2003. The successful business plan: Secrets & strategies. Palto Alto, CA: Planning Shop. Ang, J.S., 1991. Small business uniqueness and the theory of financial management. The Journal of Entrepreneurial Finance, 1(1), p.1. Berger, A.N. and Udell, G.F., 1998. The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle. Journal of banking & finance, 22(6), pp.613-673. Katz, J.A. and Green, R.P., 2009. Entrepreneurial small business (Vol. 200). McGraw-Hill/Irwin. Kourdi, J. 2009. Business strategy: A guide to taking your business forward. London, Eng.: Economist in association with Profile Books Mutel, D. 2010. Business plan. Orchamps: Atelier Didier Mutel. Nonaka, I., 2008. The knowledge-creating company. Harvard Business Review Press. Sahlman, W.A., 2008. How to write a great business plan. Harvard Business Press. Tracy, B. 2015. Business strategy. New York: AMACOM. Zimmerer, T., Scarborough, N.M. and Wilson, D., 2005. Essentials of entrepreneurship and small business management. Pearson/Prentice Hall. Appendix A Start-up Expenditures and Expenses Worksheet Item Total Cost Cash Required Land $ 20,000 Capital Equipment $ 10,650 Computer 5 at $200 each Beginning Inventory $ 40,000 Start up Supplies $ 1,050 Licenses and Permits $ 400 Leasehold Improvements $ 550 Utility hookups& Installation $ 600 Advertising (Preopening) $ 1,550 Insurance $ 10,660 Other $ 4000 Total Estimated One-Time Cash Requirements $ 90,550 Start-up Operating Expenses Estimate No. of Months Total Cash Item Monthly Expense X Before Break even = Required Owners Salary $ 2000 Employee’s salary, wages, benefits $ 24,000 Rent $ 19,200 Promotion expenses $ 2,000 Supplies and postage $ 20,000 Vehicle Expenses $ 4,500 Telephone $840 Travel $ 250 Interest 15% Maintenance $2,500 Other _$ 4,000 Total Cash Required to Cover Operating Expenses $ 76,000 Plus: Total One-Time Cash Requirements (Previous Table) 160,550 Add 10% Safety Factor$1000 Total Cash Required for Start-up $ 170,000 Read More