"Feasibility study of starting a new business".

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Ryan Packer                                                                                           Business Studies

 “Feasibility study of starting a new business”

Introduction

This investigation will carry out a study to see if it would be feasible to open a new nightclub, ‘Sinners’ in Maidenhead town centre.  Maidenhead is a small town in the southeast of England, located in the county Berkshire.  The nearest major city is London, which is located twenty-five miles east of the town.  

The reason I have chose to investigate this type of business venture is because I take an interest in this type of business as I would like to look into it in the future, and also feel Maidenhead possesses the qualities, and provides a great opportunity to start up a business of this nature and for it to be successful.  

To find out whether this business venture would be feasible, a feasibility study needs to be carried out covering all aspects relating to starting up a new business. Several tools will have to implemented to do so.

There are two main types of tools that will be used; these include research tools and analysis tools.  Firstly the primary research will include interviews and questionnaires, and from this the information needed such as demand levels and financial information will be analysed to help with the final decision of the study.   For secondary research company account will be used, along with books, maps, and Internet sites.  All these sources will allow me to find out about the local area of Maidenhead such as demographic information and statistics.  All this research will aid me in being able to make my location decision.  

There are several analytical tools that will be implemented, and these will be marketing tools such as PEST analysis and SWOT analysis, financial tools such as cash flow forecast and break-even analysis.  Then the final part of the report will be the analysis and conclusion, to actually see if it is viable to open a nightclub as a business venture in Maidenhead.

Secondary Research Objectives and methodology

Objective 1

The first is to decide where in Maidenhead Sinners is going to be located.  Research on the infrastructure and rent values in maidenhead needs to be carried out so information can be gained on some of my start up costs.  Locations of direct competition (other nightclubs), and indirect competitors (public houses/bars), which are located in the area will be researched, so the best possible location can be chosen in Maidenhead for Sinners.

Method

To find out information on land values in and around Maidenhead I will visit the local town hall and pick up some local information booklets.  To find out about the local infrastructure and competitors of Maidenhead, I will use the local Windsor and Maidenhead borough website. By carrying out a SWOT and maybe a possible PEST analysis, I can decide on the best location for my nightclub.

Objective 2

To find out the number of economically active 20-39 year olds in Maidenhead and the borough and to find out if the disposable incomes of this age group are high enough for me to stay in business.  This will allow me to discover whether there are the sufficient number of people in this age group to target, and will interlink with my primary research to show whether there is sufficient demand for the nightclub that is being proposed.

Method:

The information can be achieved from the local borough through the  website.  There is a section that focuses on the local demographics of the area including population, house prices, socio economic factors, type of employment, car ownership and incomes per household.  

Objective 3

To find out all health and safety requirements about running a nightclub.  These include how many people per square feet can be in the building.

Method:

I will use the Internet to find this information, if not I will have to use primary research and ask an owner of a nightclub the rules and regulations.  

Objective 4:

To find out how many staff will be required on a Friday and Saturday night, and the costs for employing them in terms of wages and training.

Method:

I will look on the borough website at local wage rates and compare this with costs of living in Maidenhead and decide on a suitable wage rate for employees.

Objective 5

To discover the fixed and variable costs of running the nightclub. This will deal with rent, equipment, staffing, supplies, registration and marketing.  

Method:

I will use the Internet to find out information on prices.  Local borough and property websites will be used to find out rent and business rates, and specific bars and clubs websites will be used to find out information on equipment, supplies and training courses.

Primary Research Objectives and methodology

Objective 1:

To discover the likely demand for a new nightclub in Maidenhead.  This includes whether people would welcome a new nightclub and how often they would visit it.  From this information it can be decided what opening times will be and when to open the club.

Method

After researching various methods of research and considering the time limitation in which it must be brought together, I have decided that a questionnaire is to be conducted in Maidenhead using a stratified quota sample of 30 males and 30 females within the specific age group of 20-39.  I have decided to use this type of sample because I am targeting a market around what I have stated, because that age group tend to be the most popular customers of public houses and nightclubs.  There is no point carrying out a random sample when not all ages are associated with nightclubs.  Concentrating on the rough age group will give me a much better idea on the demand for my new business.  See appendix 1.6 for the sample questionnaire.

 Objective 2:

To discover the tastes of consumers in terms of music and beverages, so the needs of customers can be met as this nightclub follows a more market led approach.

Method:

Same method as objective 1.

Objective 3:

To find out how many staff will be required on a Friday and Saturday night, and the costs for employing them in terms of wages and training.

Objective 4:

To discover the fixed and variable costs of running the nightclub. This will deal with equipment, supplies and rates.

Method:

Devise a questionnaire for Smokey Joes (competitor of proposed nightclub), and find out how much their costs amount to.

Research results and analysis

After conducting secondary research of looking on the Maidenhead and Windsor Borough website looking at the social demographics for Maidenhead the following information was found:

Population, Incomes and possible demand.

The graph on the previous page shows that the age profile 25- 64 is the most prominent in Maidenhead and the borough with 56 per cent of the total population being within this age group. Although only 20-39 year olds are being targeted, it is evident that via a simple calculation that 28 per cent of the population fall into this age group.  By referring to the table “Population Census 2001 Maidenhead and the borough” appendix 1.0 it is evident that out of 133,606 people 37,113 are in the age segment I would be targeting most, and it is not to say the nightclub will not attract person’s older than 39 and so it is felt that there are enough people to target for the new nightclub.

From the two tables appendix 1.1 and 1.2 “Housing Tenure and Car Ownership”

 it is evident that of the borough’s total households, 82 per cent have access to a car compared to 66 per cent in Great Britain as a whole.  Also 74 per cent of the borough’s households are owner occupied, compared to only 66 per cent in Great Britain as a whole.  This means that people in Maidenhead are very wealthy because 82 per cent car ownership is far higher than the national average.  This suggests that people in Maidenhead have high disposable incomes, and so proving Maidenhead is a very good area to highly focus advertising upon.

By referring to table appendix 1.3 and graphs 1.1 and 1.2, it is evident that more people own houses in Maidenhead than the national average, as it is 74 per cent against the Great Britain average of 66 per cent.  Table 1.3 shows that in Maidenhead house prices are far higher than the national average, as detached houses are almost £250,000 more expensive in Maidenhead.  This itself shows that people who live in Maidenhead must have exceptionally high incomes because 74 per cent of them actually own their houses even though the house prices are much higher than the national average.  The fact that 28 per cent of the total population fall into the 20-39 age segment means that about one in every three owner occupied there is someone between the age of 20-39, which is extremely high and shows that their income must be high.

In the business world the highest paid jobs in most cases are usually professional or managerial jobs. By referring to appendix table 1.4 it is evident that in the borough that 10.9 per cent of households work in professional roles.  Compare this to the Great Britain average of 6.8 per cent, and then look at the borough’s staggering 44.4 per cent percentage for managerial/technical jobs, and compare that to the Great Britain average of 31.1 per cent, it is evident that Maidenhead and Windsor house people with very high incomes.  If there people did not have the high incomes then they would not be able to afford to live in the borough because of the extremely high house prices.

From analysing all of the tables it is clearly evident that people in Maidenhead do have the sufficient income’s for the business to survive, because Maidenhead is such an expensive area to live in the UK, and if people can afford to live here with such high house prices compared to the rest of the UK then their incomes must be high.

However there are some issues that need to be considered before a decision can be made just from local residents incomes.  Who is to say that everyone who owns a house or a car in Maidenhead wants to go to a nightclub at the weekend?  People may have different leisure desires and prefer to indulge in alternative leisure activities such as the cinema, bowling, eating out or even sport.  This issue of demand, and who would want to use the nightclub is a very significant factor.  The following Primary Research results provide an insight into the desires and wants of the people of Maidenhead.

Based on the “consumer questionnaire ” (see appendix 1.6), the following results were found.

Question 1).

For this question people were asked which bars/nightclubs they drink in most often.  More than one option could be chosen.

From the 12 options possible the results show that the most popular bars that people drink in are firstly Heroes with 17 per cent, Bar 38 with 14 per cent, Whetherspoons with 13 per cent, The Bear with 12 per cent and The Toad with 11 per cent. These are the most popular bars according to the questionnaire results.  The location of Sinners needs to be considered based on this information, as it needs to be as near to as many “feeder” bars as possible to capitalise on custom. There is also only a percentage of 1 for the number of people who did not drink in any of the bars, and so can be assumed there is an extremely large market of people who visit bars in Maidenhead.

Question 2)

This question asked the days on which people go out drinking most often.  More than one option could be chosen.

The results show that Friday with 33 per cent and Saturday with 26 per cent are by far the most popular days when people visit the bars in Maidenhead.  15 per cent of people asked said they visit on a Wednesday and 9 per cent on a Thursday, but Monday, Tuesdays and Sundays are un-popular, as only a total of 17 per cent of people in total said they visit on the three days. This would mean that it would be in the nightclubs best interests to definitely open on Friday’s and Saturday’s, and possibly on Wednesday’s.  These are the days when there will be most custom because less people work on Saturday and Sunday day’s meaning they will not have to worry about getting up in the morning for work.  There is no point the nightclub being open on weeknights such as Monday’s because there will not be the demand due to people having to get up for work the next morning.

Question 3).

This question asked whether people would welcome another nightclub in Maidenhead?

Join now!

The results show that 62 per cent of people would welcome a new nightclub to the Maidenhead compared to 38 per cent who would not. The fact that there are more people who are for the proposal than against is very positive, especially the high number of 62 per cent.  This in turn means that in the age group of 21-39 there are a large number of people who would use the facility rather than people would not.

Question 4).

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