The market is expected to grow by 3% a year and we believe that there will be continuing demand for our service.
Competitor analysis
There are many other coffee shops offering similar service. Therefore, our business will offer more than that. We will serve the finest Italian coffee and fresh cakes made from unique traditional polish recipes. We will also offer a free WI – FI connection, so customer can browse internet, check their email or just communicate with friends on Facebook.
SWOT Analysis
Strengths
- Excellent premises
- WI-FI connection
- Lower prices
Weakness
- Limited financial resources
- High running costs
Opportunities
- The trends towards eating out will continue
- Premises allow for future expansion
Treats
- Competitors are in better financial state and already established
- Changes in EU legislation and laws may bring burden on the business
Marketing objectives
Our objectives are to:
- Establish reputation for excellence
- Achieve a turnover of £16.000 in the first months by serving 30 customers per day
Marketing tactics
We will achieve our objectives through the following mix:
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Product – we will serve delicious cakes from traditional polish recipes, made by the best bakers. We will concentrate on quality rather than volume in order to secure the market
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Price – our prices will be very competitive comparing with other coffee shops,
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Promotion – our promotion will be concentrated towards portraying an image of quality. The business name and logo have been carefully selected. We have produced leaflets and posters which will be distributed throughout Luton. The business name and contact details have been entered in Local Directory and a website is under development.
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Place – we are based in town centre with free parking area, so our place will be accessible to customers who drive and for those who walk.
Operational plan
A unit is one customer served
Production cost and materials: £0.50 per unit
Labour: £0.70 per unit
Production schedule
Quality assurance
Our products will be inspected carefully before serving to customers. Cakes will be nicely packed in appropriate boxes. Since our aim is to establish a reputation for quality we will put every effort to achieve it.
Physical resources
Capital expenditure:
The following assets will be purchased at start:
Premises:
The premises rented have appropriate space and facilities for the business.
Materials, stock:
Materials will be purchased from local suppliers who provide same day delivery.
Financial resources:
22.500 of start up capital will be raised as shown in the introductory section. The owner hopes to arrange credit terms with the supplier, although this may not be possible in the early stage of the business.
Overhead costs:
Estimated for the first six months are:
Human resources:
Mrs. K will concentrate on marketing, management and finance of the business. Miss B will be involved in sales and customer service. The owner will take drawings of £650 a month. Fresh cakes will be made and delivered by Hanna`s Bakery.
Legal plan:
The premises are already designed for commercial use and comply with health and safety regulations. The premises will not cause any disruption to neighbouring properties and there is space for loading and parking.
Employment law are applicable as there will be one person employed by the business, however employment contract will be prepared according to statutory requirements.
Initially the business will not register for VAT as annual turnover will be below Chancellor`s most recent threshold.
A financial transaction will be recorded by Mrs. K on a computerised system. An accountant will be engaged each year to draw up the business final accounts for the Department of Revenue & Customs.
The licence to operate a cafe is required and has been issued by local authority.
After balancing the cost of insurance premiums against the expected risks, cover has been arranged for: premises, contents, breakages, product liability, public liability and personal accident.
Source of information:
In drawing up this business plan the following sources of information have been invaluable:
- Business Link in Luton
- Ramsey Consultants, Luton
- Austins LLP Solicitors
Financial plan
Sales Budget:
Please see marketing plan for details.
Production Budget:
Please see operational plan for details. Payments will be in the month shown.
Cash Flow forecast for 6 months
Profit and Loss account for period ending 30 Jun 2010
Break - even point
Fixed cost
Break – even point =
Sales per unit – variable cost per unit
Fixed cost = £5760
Sales per unit = £3.50
Variable cost per unit = £1.20
Contribution = 2.30
5760 5760
Break – even point = = = 2504
3.50 – 1.20 2.30
Break – even point = 2504 units
Break – even table
Break – even chart
Evaluation and contingencies
Marketing
The sales are estimated based on customer`s interest. Our marketing research shows that a number of customers are interested in our service.
Operations
The production budget shows that the business can provide the service to customers demand. Should there be further demand the business will have the capacity to serve more customers.
Finance
The cash flow forecast shows that the business will have negative bank balance in the first month. This happens because of start up cost incurring in January. The sales are not sufficient to cover all the costs. The business may have problems paying to suppliers and wages. But from February onwards the business is able to sell enough to cover all costs incurred. Additional funding of £250 will be needed in the initial stage and the business hopes to obtain an overdraft from the bank.
Profitability
The business will break – even at 2504 units ( customers) and generate a net profit of £4843 for the 6 month period. This will enable the owner to take drawings and plough back to for future growth. Assuming the overdraft is forthcoming the business plan is viable. The owner is prepared to operate with minimal drawings during the first year.
Monitoring and review
The financial forecast will be monitored on monthly basis
Contingencies
The owner feels that there is a little risk in this business proposal; the sales forecast is based upon business orders and there will be no unmanageable debt.
The plan is to grow business gradually.
Nevertheless the following contingency plans are in place:
- In event of cash shortages the business the owner is prepared to forego drawings during the first 6 months
- Any cash surplus will be invested by the business
- In case of increase in cost of materials the business will change to cheaper suppliers
- The business will arrange suitable insurance, and to avoid high upfront cost the premium will be spread into monthly instalments
- Increase in demand – the business is prepared for growing demand. In case in significant increase in demand the business will expand further
- The business will arrange one month credit terms with the suppliers to improve cash flow