I already know that Saturday will be the busiest day of the week in terms of trading for my sandwich shop. I now need to plan around this for things such as stock deliveries, amount of people working and also have a later closing times than in the middle of the week. I will need a later closing time as I need to maximise sales and by opening longer on a Saturday I can achieve this. I have spotted that there are 30 who either visit Huddersfield town centre daily or 2-3 time per week
Looking at the results from the “does you’re your business/employment buy large orders of sandwiches“ question on the questionnaire I found that 20 people said yes. This is a good amount of people that buy large orders of sandwiches. This means there is a market for large sandwich orders. As large orders is my shops USP then I am pleased with this result as it means there is business out there for me.
I asked potential customers about the price they are willing to pay. My results were as I thought 60%of people I asked were willing to pay between £1-£2. This confirmed what I thought as many of the sandwiches I have bought from sole trading sandwiches are around this price.
I wanted to find out from consumers if they were interested in my sandwich shop. I posed the question “are you interested in buying from snappy sandwiches” on my questionnaire. I was pleased with the results as I only got 3”no” answers. I was pleased that 15 said “yes” and 32 people was “maybe”. This maybe is the main proportion of the results. I expected this as people could not say yes if its not open and they have no idea what snappy sandwiches is like. They need recommendations from other people to try it themselves before they can decide this. The maybe results would be non existent is snappy sandwiches was an open sandwich shop and then I did another questionnaire. People in Huddersfield town centre would know more about the shop then.
I am to open a sandwich shop then I need to know what sandwiches are most popular and least popular. I gave a list of sandwich fillings on my questionnaire and then asked people to tick which sandwiches they like. From these results I drew up a graph with all the results on. I was then able to make comparisons of how popular the sandwiches were. From my results I saw that ham and chicken were the most popular and that corned beef was the least popular. This will be crucial when it comes to deciding what sandwiches I will sell.
My questionnaire asked whether they shopped regularly in Huddersfield or not and 43 told me that they regularly shopped. This was a pleasing result as it shows Huddersfield town centre is very busy and that it’s a thriving town. People must shop in the town centre as it has everything they need.
90/30 rule
This an American technique. This method relies on market research which asks customers about whether or not they would use the business, maybe or not use the business. 90% of those who say they will use the business are assumed to be likely to actually, whilst 30% of the maybe respondents are assumed to be likely to use it. None of the no respondents are expected to use the business and generate sales.
People who said yes to using my business= 15
30% of 15= 4.5 people
4.5 divide by 51*100=8.8%
People who said maybe to using my business.
30% of 32=9.6 people
9.6 divide by 51*100=18.8%
I have identified the cost of sandwiches to be between £1-£2. I have chosen this as most people from the results on the questionnaire chose this to be the price they will be willing to pay.
I anticipate that every customer spends at least £2.50 every time they come to the shop. This will be the purchase of a drink and a sandwich.
I think that on average 80 people per day, will come in and spend this. I have worked out this figure by taking in aspects such as students on way to college/school, workers and also the thought of some large orders of sandwiches at dinner times from large companies in the HD1 area. I think this is a realistic figure as the location is in a busy shopping area and that fact that its quite cheap sandwiches.
80x2.50=200
I also anticipate extra sales by people just buying drinks.
I think this will be around and extra £30 a day at least. Selling both hot and cold drinks should mean that I am not affected by seasonal demand such as warm drinks when it cold. I want to sell both so that people can buy what ever beverage they want. But in the summer I do expect more sales from people buying cold drinks. I have anticipated extra sales in the summer months because I know that more people will buy from the sandwich shop as people spend a lot more when its warm.
200+30=£230 This is the figure that I think on average will be the daily income. I think to calculate a Saturday would be much high than this as it is the busiest trading day of the week and also the fact that snappy sandwiches closes later.
I think there will be well in the excess of 150 spending on average £2.50.
150x2.50=375
I also think there will be other sales and I estimate this to be around £40 on a Saturday.
375+40=£410 for a day trading on a Saturday.
Expected monthly sales
Per week
22 weekdays @£230=£5060
4 Saturdays @£410=£1640
£5060+1640=£6700 estimated sales revenue per month.
I have identified my target audience. As I sell food and beverages I have a wide target market. This is because a lot of people will use the sandwich shop. Everybody eats food and so having my sandwich shop in Huddersfield town centre is ideal because there is a lot of potential customers and the competition is healthy.
My results from the questionnaires have been encouraging. I had some positive feedback. I then used this data and analysed it using the 90/30 rule. This technique allowed me to get a clearer view of the likely numbers of people who are likely and unlikely to use the business. From this I was able to work out expected sales. It gave me an idea of the likely number of people that will use the shop. This was great as I needed to work out sales and then generate sales figures. I got these figures from the Kirklees census data. I was then able to make predictions of sales. These will then be used later in the report for break even and cash flow forecasts. At this stage the report is coming together nicely. Results have been positive and the idea of opening a sandwich shop is looking feasible.
I put together all the graphs from the results of the questionnaires. From these graphs I was able to see how many people were likely and unlikely to use the business. This allowed me to make predictions using the 90/30 rule of how many people are likely to use the business. I was able to identify my consumer target. I worked this out using the minimum and maximum age ranges from my questionnaires. This gave me an idea of the likely age market the sandwich shop will have. As its food and drinks then it has a wide target audience.
I asked a question of how many people shop in Huddersfield and how often they shop in Huddersfield. I was pleased that so many shop on a regular basis in Huddersfield. This shows that many people shop in Huddersfield.
Need to show the census data here.
Tally
Yes 15
No 3
Maybe 32
This is the graph of people that might be interested in buying from snappy sandwiches. From this I am pleased to find out that there is only a small minority that would not be interested. This is less than 10% of the people I asked so I know there is a market for snappy sandwiches. The high proportion of people that “maybe” interested is good as this would give them a reason for trying snappy sandwiches and if they did then like it would give them reasoning for choosing snappy sandwiches again.
Tally
Male 23
Female 27
This is the graph of the proportion of people I interviewed for my questionnaires. From the graph I can tell that more female filled in my questionnaires than males.
From this graph I can then choose which sandwiches are most likely to be most popular. Ham and chicken are the most popular and so I will be definitely using ham and chicken. I can also recognise which sandwich fillings are going to be not so popular and so I can question whether to use them or not.
Tally
Yes 43
No 7
This graph shows me that of the 50 people I asked if they shopped regularly, 43 regularly shop in Huddersfield and so I know that there are plenty of people who shop in Huddersfield. These people will be the target audience.
Tally
Daily 10
2-3 times per week 20
Monthly 20
60% of the people I asked either visit Huddersfield town centre daily or at least 2-3 times per week. This shows me that many people visit the town centre so I need to locate as close to the town centre as possible so that I can reach this target audience.
Tally
Yes 20
No 30
My USP of my shop was to prepare large orders of sandwiches for business’ aswell as providing sandwiches to the public. This response does not put me off this idea as there is still 40% of the people I asked that their business/employment buy large orders of sandwiches. I think I can gain market share of this if I can keep a good lead times of delivering the sandwiches and over the counter sandwiches.
Tally
£0-1 2
£1-2 30
£2+ 18
This shows me that the majority of people are prepared to pay £1+ for a sandwich. The 60% of people opted for between £1-£2 and so I think I will have my sandwiches priced between this. Another 36% were prepared to pay more and so If I opted to produce quality sandwiches cheaper then I think they will use snappy sandwiches not only because there cheaper but also because the sandwiches are still a high quality.
The majority of people are tempted by sales and so I will have promotions such as buy one, get one free etc. To promote snappy sandwiches I will plan several promotions during the opening of the shop.
Conclusions to section 4.1.1
4.1.2 The Competitors
Competition is the act of striving against another force for the purpose of achieving dominance or attaining a reward or goal. I have researched on the internet on yell.com and I researched sandwich shops in the HD1 area. There was 9 results. These were both local and national business’. The national business was Subway who is all over the country.
Competitors can have a number of effects on a business. They can create healthy competition that keeps a business on it toes. They can also drive out businesses and ruin them. This could be where there is a monopoly business that dominates a market and a small business tries to compete against it. An example of a monopoly business is Microsoft. Competitors can be threats and opportunities. Threats meaning then could take over you or force you to lower prices or change your product or service. Opportunities meaning there is possibility of a merge-in or you could take over their business. I think as there are so many small sandwich shops in this HD1 area then it is oligopoly with the occasional national business.
Key competitor’s that I have identified are:
Breaktime sanwich bar, HD1 6BE
The bakehouse. HD1 2BR
Jacks’s café, HD1 5EZ
Stephen’s, HD1 2RT
Subway, HD1 2AN
Jazz Cuisine, HD1 4LE
Party pantry, HD1 5EY
Ma Bakers, HD1 6ER
Chapel hill sandwich box, HD1 3ED
I class these as my key competitors because these are the ones who came up when I searched on yell.com in the HD1 area.
This is a comparative table of the top 4 competitors.
Qualitative interviews.
I had to do a couple of interviews so that I could find out about what people thought about my competitors.
I will have 3 people the same 5 questions but about different sandwich shops. The people will be random and I will only interview them if they have been to the sandwich shop in the last month. I will ask these people in the area near the sandwich shop.
Interview1 Discussing breaktime sandwich bar
Me: Are the sandwiches made from quality ingredients?
Tom: Yes I like the sandwiches. The breads soft and the sandwiches are very nice.
Me: What do you like about breaktime sandwich bar?
Tom:There I a lot of choice. The price is right and I think the staff are friendly.
Me: Is there a lot of choice?
Tom: Lots of choice and there is a special evry week which is something different.
Me: Whats your favourite sandwich?
Tom: Chicken tikka and cheese.
Me: What don’t you like about breaktime?
Tom: Not much(laughs) I go all the time. There could be more shops around Huddersfield.
Interview 2 The bakehouse
Me: Are the sandwiches made from quality ingredients?
Susan: The bread could be softer. It seems a couple of days old. Other than that the bacon, cheese, ham etc is fine. All the sandwiches I have had are very nice and seem fresh enough.
Me: What do you like about the bakehouse?
Susan: The choice there is every sandwich you can think of.
Me: Is there a lot of choice?
Susan: Yes there is a lot of choice. They have smoked salmon which is nice and no other sandwich shops I know of are offering this. It’s the most expensive sandwich but its very nice.
Me: What’s your favourite sandwich?
Susan: Smoked salmon panini.
Me: What don’t you like about bakehouse?
Susan: The bread on the odd occasion seems stale. If they had a better bread supplier then they would be one of the best sandwich shops.
Interview 3 Subway
Me: Are the sandwiches made from quality ingredients?
Kuram: Yes its all fresh and all the sandwiches are prepared daily. The sandwiches are spot on all quality.
Me: What do you like about subway?
Kuram: The sandwiches are prepared in front of you. Its prepared daily and everything is fresh.
Me: Is there a lot of choice?
Kuram: Yes they have sub of the days which is different everyday. This is a change and its kind of a surprise when you go in subway.
Me: What’s your favourite sandwich?
Kuram: Meatball mariana.
Me: What don’t you like about subway?
Kuram: Its quite expensive but its value for money. The portions are big so I suppose it is worth the money.
Conclusions to section 4.1.2
I found out who my competitors were by searching on . I typed in “sandwich shops in HD1”. The sandwich shops that come up in this search I knew were my competitors.
The competitor section of the coursework meant that I needed to identify key competitors who are both local and national business. I identified subway as been a national business where as I also have competitors such as the Bakehouse who are local business’. I created a table to show key competitors. In this table I showed price range of each competitor. I had to ask some people about the other competitors. I did this by standing out side each shop and under taking an interview. This way I was able to see everything about each competitor and see their individual strengths and weaknesses. Strengths of competitors was quality of products, cheap prices. The things people were disappointed in was quality in the food. This was the case at Stephens and The bakehouse sandwich shops. Subway received positive feedback but yet people said it was also the highest prices. This showed that Subway had market power as even though it was the highest price, people still visited there on a regular basis.
4.2 Production and Resource Requirements
4.2.1 Location
I have chosen a location in the centre of Huddersfield as I think this is where the main sandwich shop market in Huddersfield is. I think it will be good to open a sandwich shop there ant that my sandwich shop will be successful.
To find the location that best suits my business I need to have the location that is close to my suppliers and customers. I think that by having a location in Huddersfield town centre then I am in the middle of the sandwich shop market and I am also close to competitors. From this I can learn from them and also the competition will be healthy. I can also gain knowledge from how existing small sandwiches have set up and been successful. I can learn what factors have helped them in been successful.
The main factors that affect a firms choice of location is practability and cost. The business will ask itself if it can afford the rent of the property and also whether it is a safe location that is near to customers. The location needs to be in a place where customer can see it and don’t have to travel far to get to it. Been on the high street is a major advantage as people pass it.
I need a location that will be cheap as I am setting up a small business. I also need the location to be in HD1 as there is a big sandwich shop market here. Cost is a major deciding factor as it will be the first year of the opening of the business. Cash flow will be tight so paying more than £15,000 per year for a property is too much
Location
Factors influencing location.
- Cost of production
- Availability of labour
- Transport implication
- Customer needs
- Government incentives
- Possible profitability from location.
Cost of production will be how much it costs to make a sandwich. I need to take into account the raw materials bread etc the time it takes staff and also the energy it costs to produce sandwiches. This will need to be carefully calculated so that I can work out the contribution per sandwich sold.
The availability of labour will be fairly easy as Huddersfield is a thriving Town and also there are many students who would like a part time job on minimum wage.
Transport implications will be access etc and surrounding transport links. There is bus rail and taxi in Huddersfield and so staff and suppliers can use the main roads to travel to and from the shop.
Customer needs is whether customers need another sandwich shop in Huddersfield. I think that they do as another sandwich shop in Huddersfield will support the local economy and also gives customers more choice. Customers have choice and they can then decide where they want to buy a sandwich.
Government incentives are when money is available for business’ that are setting up. Government help is available to these business’ as the government want to support these as it boosts the economy. Also the money is available for business’ that choose to set up in a run down area or on Brownfield sites.
A new business choosing a location also needs to assess whether the location will be profitable for them. They need to compare possible locations and research the possible profitability of each location and then choose which is right for them.
Qualitative factors influencing location.
Local infrastructure will be the transport systems in place that that allow access to this location. I need good transport links as staff and customers need easy access to the shop. These will be very important when it comes to choosing a location as these are necessary to the long term success of the shop.
Safety and environmental requirements will be in place. This will not affect me that much I just need to meet health and safety laws and have employer/employee rights in a company scheme. Also I need to research about the land in which I choose my location on is available for years to come and that no plans are in place to demolish it.
Room for expansion and growth should be an idea I look into as I want to be able to have this available to me in the future so that if I can expand as the company is doing really well and needs to grow I can do this.
I want a location that is close to customers and in the post code HD1. This is essential as in HD1 there is a lot of competition but also a big sandwich shop market. I want a property that is already equipped with cookers, extractors etc. I also need heating, lighting and electricity to be in full working order.
Comparative grid
I have chosen to use property 2 because of its distinct advantages. These being:
Cheapest.
In ideal location.
In town centre.
In town centre in a distinctive building.
Attractive to the eye.
Very modern.
Office/storage space.
All these advantages have made me choose this location as it is in the perfect area for me to estabilish and set up a sandwich shop. The advantages outweigh the drawbacks. I can cope with a small premises. I think it is just enough space. This is only the main room and there is also office space aswell. The toilets are also a big bonus as these can be used for both staff and customers. The storage space can be used for an office which will have a computer and filing cabinet in.
To decide the location I wanted I created a comparison table with 4 different potential properties. I was on a budget and so I had to look at which property had the benefits that would be most appropriate and be ideal for my business. Size was also an issue I had to look at which property had a lot of space and for as cheap as possible. I knew rent was a fixed cost and had to be paid so I needed a property that had was not a big expenditure each month that would cripple my business. Most business’ fail in the first year due to lack of funds. I need a good location that I can afford and so I made the decision to rent property 2. This was £12,000 per year which I thought was well within my budget. Also it was in the HD1 post code as I wanted and it had some very useful features that may be of a benefit to me. It was in a distinctive building that was eye catching. I thought that as its eye catching then it may bring in more customers as they will want to see what the shop sells/offers. It also has office space that can be used for storage of invoices etc. this was another reason why this was the ideal property for my shop.
I work in a restaurant already and I was given some information on suppliers that were based in Huddersfield. These suppliers were called Howarths food services. I looked through the catalogue and I found that it sold sandwich fillings. Some of these sandwich fillings were what I intended to sell in the shop. This was good as I had found a supplier that was selling the sandwich fillings I needed. I also rang up macro and asked them to send me some food catalogues. They did send me some catalogues and I found that It had some products that I needed. Also I searched on to find food suppliers. I found that 3663 food service was the biggest food distributor in the UK with a turnover of over £1 billion per year. I decided that anything I couldn’t get from Howarths then I would use 3663 to supply my food.
I then had to make a list of all the products I would sell in the shop. I decided to use the most popular sandwich fillings on my questionnaire. I was then happy that the sandwich fillings would sell. This was the safest way to decide which sandwich to sell by using the results from the questionnaires because I had undertaken primary research and the information was direct from potential customers.
4.2.2 Suppliers
Individuals, companies or other organisations which provide goods or services to a recognisable customer or consumer.
I will be selling sandwiches from fish to cheese. I want a whole range of sandwiches so that I have something that everyone will like. I want sandwich fillings, bread, fruit, vegetables, drinks, meat ,tea/coffee, milk and cooking oil. These are all the things I need for my sandwich shop to start up. All these need to be freshly supplied if there is a danger that the food can “go off”.
I need food delivering daily such as bread, milk etc. I need a supplier that can cater this and is always going to be able to meet my demands. As I will have sandwiches from a whole range as I am offering choice to customers, I need a supplier that also offers me choice.
I have identified several suppliers who I think are the best choices for my sandwich shop. I have narrowed these down through their choice and their unbeatable value for money. I have chosen Howarth foodservice LTD, macro and also 3663. I will use both of these food suppliers for my sandwiches. I will compare prices and then decide what I will use from each supplier. I will now give some examples and prices of the food suppliers are offering.
I will choose the stock I will sell by analysing the results from my questionnaire. This will be such as favourite sandwich fillings.
Chicken
Ham
Cheese
Tuna
Tuna mayo
Beef
Bacon
Egg mayonnaise
BLT
Prawn
Prawn mayo.
Here is a list of the sandwich fillings I think will be most popular. This list will be narrowed down as I will analyse this list further.
I also need to sell beverages. I will sell hot and cold drinks.
Tea
Coffee
Hot chocolate
Cans
Bottles of water
Ribena cartons
Sparkling water
Pint of milk
Pint of fresh orange juice
I will also sell salads. These can be made up freshly containing anything the customer wishes.
I will also need bread from suppliers. For this I may need a bakers to supply my sandwich shop.
Bread
Brown bread
Tea cakes
Barms
Rolls
Baguettes.
Conclusion to 4.2
4.3 The Marketing Mix for your business
This is the theory behind all my research and findings. I will evaluate all of my findings and make some conclusions based on the results from questionnaires and primary and secondary research. Looking at my primary and secondary research I have gained some knowledge about what consumers want, what consumers think about my competitors and also what consumers want from a sandwich shop.
From my questionnaires I was able to find out important infor mation about how regular people shop in Huddersfield. I was also able to find out that most people are prepared to pay between £1and£2 for a sandwich. From this I have decided that I will price up my sandwiches to be between £1 and £2. I decided this as it was the most popular price willing to pay from potential customers.
From this I was able to work out spending averages and then I can work out monthly sales revenue.
I have identified competitors and I undertook some qualitative interviews and I asked 3 people the same 5 questions but about 3 different competitors. I was then able to draw up a comparison table where I could analyse all the different competitors and then find the good and bad points about each competitor. I was able to highlight consumers views that critisized the bad points about each supplier. I could take this into account and then I could take these into account and make sure I am not making the same mistake as my competitors.
I have chosen a location that I think is the most appropriate. I have chosen a location in Huddersfield town centre as this will be the best trading area in Huddersfield. The location I have chosen is close to large retail chains such as M&S. I think this will give me an advantage over my competitors because many people will shop in this area and I think I will get business by being in a prime trading area.
I have researched my suppliers and I have chosen macro, Howarths and 3663 food service as my suppliers. I have been researching these for some time. I have managed to gain some leaflets and food order lists from my suppliers. I did this by ringing up the macro in Leeds and asking if they would be able to send me some leaflets that would be relevant to the sandwich shop idea I had. I was pleased that they could help with my coursework. I also work in a pub and their main supplier is 3663 food service. I managed to get an order form with all the contact numbers on. I was also given a howarths food brochure. I chose these suppliers not only because of all the leaflets I have been given form various sources but the fact that all suppliers have different things that I want. I can use each supplier for different things. 3663 will be the main supplier as it will deliver daily as I will need a daily delivery that supplies my sandwich shop with fresh food.
4.4 Resources Needed
4.4.1 Physical resources
After I have found a location in Huddersfield town centre in the middle of the sandwich shop market I the need to think about the physical resources. By this I mean the kitting out of the shop. I need lighting heating and also electricity. I need suppliers for all of these. I think that if I have the same energy supplier then I will be able to save money as I have all my energy from one supply. Also a telephone connection is necessary as customers and other people such as suppliers etc will be ringing the shop. I also need cooking equipment, a microwave, fridge, freezer, utensils, cooker with a hot plate, drinks fridge, pans and plastic tubs. An EPOS system will be required for customers to pay. This will be linked to a computer that has specialist software like those in supermarkets where it records what has been sold and when it has been sold. This will help as stock sheets can be printed off and then the manager can then work out what needs ordering from suppliers. This will save time as the manager does not then need to manually record what needs ordering.
A vehicle is needed for the delivery of large sandwich orders to local business, in and around the Huddersfield town area. Also there will be 2 seats in the sandwich shop for customers to sit whilst waiting for their sandwiches.
The shop will also need refurbishing with new floors and decorating. The shop needs to be clean and tidy and presentable to customers. The shop needs to have a modern feel and have bright colours. I will have business cards made so that I can give them out to customers so they can telephone orders and then sandwiches will be ready for them to collect.
Total for all resources £5409.99
4.4.2 Human resources
The department and support systems responsible for personnel sourcing and hiring, applicant tracking, skills development and tracking, benefits administration and compliance with associated government regulations.
In order for my business to operate I will need staff to run the shop. I need a manager assistant manager and several part time staff that can cover when the shop is operating at full capacity. I also need a cleaner who will clean several time per week just to keep the shop clean.
The manager will be on £14,000 per annum with annual bonuses if the shop does well. They will be responsible for the running of the shop, locking, cashing up and also to keep records of daily takings. Records also need to be taken of invoices from suppliers and all other receipts. They also need to do staff rotas and keep records of these on the computer. They will also make and prepare sandwiches along with the other staff. They neds some basic if nt an NVQ in cooking or basic hygiene qualfications.
14,000/ 12 = £1166.70 per month
Supervisor will be full time on £6.50 per hour working alongside the manager. They will make and prepare sandwiches, check deliveries and cover for the manager in their absence. They will work approx 30 hours per week.
30 x £6.50 = £195
£195 x 4 = £780 per month
Part time staff will make sandwiches and clean the shop after every shift. They will make sure that all ingredients are filled up and in the refrigerator for the next working day. They also have to clearly label food and when it has to be used for. These will be drafted in for busy times such as weekends. I aim to use students as I can pay them minimum wage of £5.35 per hour.
The cleaner will be paid minim wage and I aim to also use students as there are so many in Huddersfield and keep wages as low as possible.
They will work about 20 hours per week.
20 x £5.35 = £100.70
£100.70 x 4 = £402.80 per month
2 part time staff @ £402.80 per month = £805.60
Total wages per month is £1166.70 + £780 + £805.60 = £2752.30
Snappy sandwiches opening times.
Monday 8am-2pm
Tuesday 8am-2pm
Wednesday 8am-2pm
Thursday 8am-3pm
Friday 8am-3pm
Saturday 8am-5pm
Sunday Closed
The above is a cleaning chart that will be filled in when someone has cleaned up. From this I can then tell who is responsible for anything that has not been completed satisfactory. It will keep control of all staff and it is a diary of who has done what.
4.5 Financial resources
Capital Expenditure
Total capital expenditure
£2879.91
I want to explain what the specialist software will do. Here is some information about the software.
- Art-RM is so simple to use that even a novice without any commercial background can operate it. No previous knowledge of computer is needed to use this package. Takes care of all your day to day invoicing,accounting and inventory functions with great ease.
- Automated Entry:
You need not bother about which account has to be debited or credited since the system automatically takes care of :
- Debit & Credit Voucher
- Journal Voucher(VJ)
- TDS Voucher
- Contra Entries & Transfer Voucher
- Sales & Purchase
- Debit Note &Credit Note
Revenue Expenditure
4.5.1 Income and expenditure
Income: money received over period: the amount of money received over a period of time either as payment for work, goods, or services, or as profit on capital.
Expenditure: An amount of money spent.
Profit arises only when income is greater than expenditure. A business needs to make a profit of break even to stay in existence. If a business looses money it will find it hard to stay open. It may have to look at other sources of finance to help it through a quiet time of the year of if it needs to spent money on new assets for the business such as machinery that will hopefully make money for a business. Profit gives a business power as it looks attractive and it could mean that people want to invest in that particular business. Having made a profit it will also mean that the business can expand or can use retained profit to make changes in a business or to help it grow. A business may also use profits to make investments that will hopefully give them a larger return on the original investment. If a business makes a large profit then it sometimes rewards staff and pays out bonuses. This will be an incentive to staff and the business will hope that the business will again make a profit as it has rewarded it staff.
Income
I think there will be well in the excess of 150 spending on average £2.50.
150x2.50=375
I also think there will be other sales and I estimate this to be around £40 on a Saturday.
375+40=£410 for a day trading on a Saturday.
Expected monthly sales
Per week
22 weekdays @£230=£5060
4 Saturdays @£410=£1640
£5060+1640= £6700 estimated sales revenue per month.
I will then take this monthly sales revenue and multiply it by 12 as there are 12 months in a year.
£6700x12= £80400 is the estimated sales per year.
I have reached these figures by estimating an average spend based on what I think customers will spend on average per visit to the shop.
I think on a whole I wont be affected by seasonal changes except that in late January and Mid Febuary I expect sales to decrease slightly as many people will have overspent in the Christmas period and will have to make some cut in their spending. I think the January sales will make up for this as I expect it will be very busy and that it will give me enough revenue to pay for the shop at quieter times. As I sell hot and cold sandwiches as well as hot and cold drinks I don’t think I will be affected by summer and winter. People will buy hot food more I winter I think. I also expect the sales of cold drinks in summer to be much higher than normal. I will make plans for a change in supplies as I start to see changes in the sales of some products.
In the summer months I expect sales to be slightly higher due to more sales of cold drinks. Also I expect higher sales in other areas due to more people shopping. More people shop when the weather is hot because people don’t like to shop when it is cold. I have shown in my sales that I expect 4 summer months to have higher sales than in the rest of the other months.
Expenditure
Expenditure: An amount of money spent. This is the out goings of a business.
4.5.3 Budgets the production budget
Budgets: summary of income and spending: an often itemized estimate of income and spending, for example of a country or company, during a specified period.
It sometimes includes systematic proposals as to how expenses will be met.
Sales budgets
I have worked out my sales budgets by analyzing peoples spend. The sales figures are slightly lower in the January month because people have less money due to the over spend at Christmas. I have anticipated lower sales due to this. I have only estimated at 240 less sales than the rest of the months. This is 60 less sales per week for the January month. In the summer months of June, July, August and October I have increased expected sales due to the hot weather. I expect more sales due to more people buying drinks and the Huddersfield town area been busier. This is due to more people shopping and walking around due to warmer weather. More people will buy drinks as more people buy drinks in the summer months.
I have put average price at £2.50. This is people buying a sandwich and a drink. As I will price sandwiches between £1 and £2 then £2.50 average price is a good prediction.
Production budget
Purchases will be the same in most months except in January where purchases will be lower due to the anticipated lower sales. I will purchase less stock as I have anticipated lower sales. The summer months I will purchase more stock. I have purchased 60 more stock in the 4 summer months that I have outlined in sales budgets. I need to purchase more stock due to the expected higher sales.
I have put my production budget to 0.5 per unit. This is due to me buying in bulk quantities from the cheapest suppliers. This will help me to keep my unit cost low. Using the cheapest suppliers and using economies of scale will help me keep my unit cost low.
4.5.4 Cash Flow Forecast
An estimate of the timing and amount of a company's inflows and outflows of money measured over a specific period of time typically monthly for one to two years then annually for an additional one to three years.
I have £40000 capital to start off with that a family member will put into the business. I will also take out a further £20000 loan and pay this back over 3 years.
As the rent of the property is £12000 per annum then my rent per month I have calculated to be £1000. This is affordable looking at sales figures.
Loan interest is currently at 6.5% variable. This is subject to change depending on interest rates and if the increase. This works out to be £36.11 every month. This figure is 6.5% of the monthly loan repayment. So the £36.11 is the cost I have to pay every month for the cost of borrowing. I have worked out loan repayment to be £20000 divide by 36, the total number of months I am repaying over.
Wages have been worked out by multiplying weekly wages/salary by 4 to get the expenditure for the month. Even when I expect higher sales I don’t think I will need to open extra hours or have more staff working. I just anticipate a busier working day for all employees.
Insurance works out to be £100 per month with Zurich insurance and they have public liability up to £2 million.
Bills I have worked out by searching on the average price a small sandwich shop pays for gas and electricity per month and this is where I got my bills figure from. I used this as I thought it to be a reliable source.
As I want the business to have good cash flow I have too only £1050 drawings out per month.
The cash flow forecast look healthy. The closing balance at the end of December is £44022.48. This is a good sign after the first cash flow forecast. This may change, increasing or decreasing if other costs or unexpected sales occur.
The cash flow forecast will certainly improve in the future. It will look healthier. This will be due to the fact that loans will be paid off in 3 years and also the business will not be paying interest rates. The business currently pays out £591.66 per month repaying the loan and its interest. This is a lot of money that the business could use to make improvements to the business to make it better and more efficient. This extra capital that will become apparent after the loan has been paid back will improve the business.
4.5.5 Projected profit and loss account
Profit and loss: account showing net profit or loss: an account showing income and expenditure over a given period and indicating net profit or loss.
As I have had to buy a lot of new resources I expected profit if any to be reasonably low. The first target was to break even. This has been achieved. A profit of £5679.08 has been achieved. This figure seems low to most business profits. But as most business’ fail in their first year of trading then this is a good start. In the second year of trading I do not expect to pay out so much money on resources so I would predict a higher profit margin. Also once the business has been trading over a year it will gradually gain a reputation if the products are value for money. This could result in more sales for the business. More sales would mean that the profits would increase. A profit is good no matter how big. The business could use part of this retained profit to make improvements to the business which may make the business more efficient also leading to higher profits due to more sales.
Profit I will expect to be higher after 3 years as the business will have paid back its loan. This will mean it does not have regular outgoings. This will make a big impact on the business and it will increase profit margins. Also interest will not have to be paid so that is also one less out going for the business. With the saving of these expenditures it will most certainly improve the profit of the business. It will increase due to less money having to be paid out.
4.5.6 Projected balance sheet
Projected balance sheet: statement of debits and credits: a statement showing the assets and liabilities of a company or institution at a particular time.
Projected balance sheet: statement of debits and credits: a statement showing the assets and liabilities of a company or institution at a particular time.
The fixtures and fittings of the business that are currently in the fixed asstes will depreciate in value. As time goes on these will loose value because of age and use of them. i worked out the depreciation using the straight line method. This is good because it means that i can see how much my fixed assets will be worth in 5 years time.
Net assets is £44192.48 this is a good figure to be shown taking into account have just opened the business. I think to have an amount this high is good for the business and it shows it has alot of assets. This could be used when showing banks forecasts for the business. It could help wih borrowing capital. Having a balance sheet that shows a high amount of assets for the business is good because these assets can be sold if the business needed to fund new projects or pay off debts etc. The closing capital figure of £46292.50 is also a healthy figure. This hows i have this much capital in the business which is good because i have a long term liability, the £20000 loan. having a high closing capital than my liabilities shows that i have enough assets in the bsuiness to cover by debts.
4.5.7 Ratio Analysis
The study of financial condition and performance through ratios derived from items in the financial statements or from other financial or non-financial information.
Liquidity
the acid test
current assets-stock/liabilities
45192.50-170/20000
=2.25:1 this means the business has 2.25 the amount of cash it currently owes. this is very good for the business as it shows it enough assets to cover the money it owes.
Gearing
long term loans/capital employed x 100
20000/44192.50 x 100
= 45.25% as this is quite high it means the business may be exposed to interest rate fluctuations and having to pay back interest.
Profitability
net profit margin= net profit/turnover x 100
5559.08/68600 x 100
= 8.10%
Return on capital employed
profit/capital employed x 100
5559.08/44192.50 x 100
= 12.6% this means that the business uses every £1 to generate 12.6p profit. this figure is quite low but at least the busness is making profit from the money its invested.
4.5.8 Break even forecasts
This is the point of sales where the company sells enough product to cover all of the variable and fixed costs associated with producing a product. The next unit sold will start to generate profit for the company.
This is the point of sales where the company sells enough product to cover all of the variable and fixed costs associated with producing a product. The next unit sold will start to generate profit for the company.
The total fixed costs is £70567.50. This figure is from all the fixed costs that have to paid. This does not include any variable costs. This means i have to sell enough sandwiches and drinks to cover these costs. To find out how many i need to sell to break even i have to divide the total fixed costs by the contribution per unit. I have worked out that my average spend is £2.50. I have worked out that my contribution per unit is .50. to work out my break even point then i take the .50 away from the £2.50. this gives me £2. I then divide my total fixed costs by £2 and this is my break even point. I will now show my break even point.
£70567.50 divide by £2
= 35283.75 units needed to be sold to break even. This is how many £2.50 average spends i need to sell for the sandwich shop to break even.
4.5.9 Sources of finance
The control of money: the business or art of managing the monetary resources of an organization, country, or individual.
I need a high amount of capital to start up my business as I have a lot of new physical resources. I need all new equipment in order to open my business. I need all of these new resources as I need them to make and produce goods to sell.
There are two types of finance, long term and short term finance.
Long term finance is money that is borrowed and is usually paid back in over 12 months time. This will be mortgages and long term loans. Long term finance is paid back over a long time as it usually large amounts of money and business’ borrow this and cannot afford to pay it back straight away and so long term payments are necessary.
Short term finance is borrowing that is normally paid back in a year. This is things such as an overdraft. It is normally when a business needs short term cover. This can be when a business needs a lot of capital for something. This can be things such as when a business orders a large amount of stock as the business is expecting a rise in sales.
I think I could get a large loan to start off with. I think the loan can be paid back in 3 years. A new business such as mine needs a large cash injection and also needs capital in the bank for other expenditures such as wages and stock. I need both of these as it may start off quiet but then pick up and so I still need money in the bank to pay these costs. It will be important that I don’t commit to long term source of finance. I have chosen to rent the location I have chosen so that I am not tying myself to a long term mortgage. Tying myself to a long term finance may damage mean I have too much debt. I intend to have saved enough retained profit over 3 years to be able to pay back the loan. I think that in the first year I will make a profit. I want to retain this profit and pay back some of the loan.
I am thinking about taking out a £20,000 loan that I will repay back over 3 years.
To get this money I will search the internet and arrange to meet bankers to discuss a personal loan. It will be hard to arrange a loan over the internet as I am borrowing money to start up a small business.
I will take out a loan from HSBC. I have found that this is the cheapest loan for me with 6.5% interest rate. I am also pleased that there is a branch in Huddersfield town centre. This would allow me access to them to sort out any problems or queries. I have chosen a short term
I want a £20000 loan and will pay this back over 2 years. The interest rate is 6.5% and this means than interest for the loan is £36.11 each month. This is worked out by the £20000 divided by 36, the number of months I will pay it back over. This works out at, £555.55. so I will pay this back each month as the loan repayment. I also have to pay back the £36.11 loan interest each month.
I have decided to take out a loan so that I have plenty of cash to help the business. Most business’ fail in the first year due to them not having enough capital. I have taken out
Here is a comparison table of different sources of capital
Lender Comparison Table
A family member will put £40000 capital into the business. This capital will help with start up costs and with the capital expenditure. This capital will help the business to have a cash injection at the opening of the sandwich shop.
Conclusion to the finance section
Concluding the finance section I have studied what resources I need. I have taken into account the cooking instruments needed, the utensils, cutlery etc. Capital expenditure was a big task I listed all the assets I needed to buy and why I needed them. I had to think about how I will use these assets and describe their purpose. I also had to think about where I was going to but these from. Internet I have bought some things from and also macro. I looked at some macro catalogues and found some things I would need. This was a good task as I had to think of all the things I needed and then look them up and I enjoyed this task. It was good the way I had to find the assets I needed and then write about them.
Income I have calculated by using the results from the 90/30 rule.
4.6 Ownership
I will be a sole trader. It will be hard for me to get finance but I think if I propose a realistic business plan and a structure of repayments and when I intend to pay the loan back by then I think I will be given a loan. As I am renting a property then I think I will be able to afford all my expenditures and make a profit. As the business is so small I think a sole trader is the best way. Having only a several amount of people working for me then having a sole trader ownership is more suited because I will know all the staff and be able to get on with everyone. Having a PLC or LTD company is not necessary as the business is too small. My business could also have a partnership as an ownership as it could be two owners who both put up the capital to start up the business. Deciding on who had how many shares would depend on how much each partner put in.
I will now show a table analysing partnerships and sole traders.
I will choose to be a sole trading business. This will then give me total control of the business and I have all the profit from the business. I have chosen this type of business ownership because I also have full control and responsibility of the business. This means I am solely responsible for the business and I cannot blame anyone else. This is the most suitable type of business ownership as the business is very small with several employees. Having a sole trader suits this business because also having full control will help the management of the company. If the business was to be a partnership then conflict could arise over decisions. Conflict can affect the business because if a dispute was very bad then this could mean buying out a partner or selling the business. I want to avoid any conflict and so been a sole trader will allow me to be in charge and manage the business in the way I want to. If the business had more than owner conflict and disputes could arise with employees with management techniques of the two different owners. This could result in demotivating staff. I need to think about Maslow’s hierarchy of needs to ensure staff are motivated and are efficient. I have also found out that borrowing capital is hard been a sole trader. I managed to get the £20000 loan with the sole trader type ownership.
4.7 Internal and external factors that affect the business
4.7.1 SWOT
SWOT analysis is a technique used for understanding a business’ strengths and weaknesses, and looking at the opportunities and threats a business faces.
SWOT is such a good technique because it can help business’ identify their opportunities which can make the business better and more efficient. Also identifying weaknesses in the business can eliminate the possibility of threats. I am now going to undertake a SWOT analysis of Snappy sandwiches.
Strengths
The sandwich shop has the advantage of having a USP. This is that it can produce large orders of sandwiches as well as producing sandwiches to the public. The large sandwich orders is an USP as no other sandwich shops in Huddersfield have the ability to produce large orders of sandwiches for business’ in the HD1 area. This gives me an advantage as I could benefit from large sandwich orders which if received on a regular basis could result in higher profit margins for the business.
The sandwich shop will produce large orders of sandwiches for business with the same quality and at the same speed as if one person was buying a sandwich. All the business’ have to do is telephone or fax the sandwich shop with the order and it will be ready for collection.
The sandwich shop will try buy in bulk to get discount and make resources cheaper. I have several suppliers and so I can switch between them when products become cheaper amongst them. Having several suppliers gives me the ability to do this which also gives me an advantage as it means I have options as to who I but my supplies from.
People will also see cheap quality sandwiches as a strength. People want value for money and that is what Snappy Sandwiches will offer. People will appreciate this and I think it will gain me regular custom. Having choice is also a strength as people want to try different things and so changing sandwich fillings will give people choice
Weaknesses
I could improve sales. Sales prediction are low but this is only a prediction it could rise or fall. I could improve the choice of sandwiches. I will try rotate the sandwich fillings. By having “specials” weekly would keep people interested in the sandwich shop.
Things I need to avoid are conflict with other sandwich shops. I need the business to have a good reputation as been friendly. I also need to avoid having bad cash flow so keeping the accounts is crucial to the survival of the business. I always need to make sure suppliers are paid so that I maintain a good relationship with suppliers.
Borrowing capital is a weakness of the business as it’s a sole trader owned business and is a limited company borrowing money will be hard. This is a weakness and if I had a bad month and I needed to get an overdraft or short term loan the bank are sometimes less reluctant to lend out money.
As I’m a small sandwich shop then his is seen as a weakness because competitors such as subway have the advantage of been nationally known through television and radio advertising. Potential customers may think my shop does not offer much choice so may decide not to use my business. This may be damaging for snappy sandwiches as I could loose out on sales as I’m a small business. People may opt to use larger competitors.
Opportunities
As I am such a small business there is plenty of room for expansion. This could be moving to larger premises. This would depend when a suitable property was to become available for rent. It would also need to be close to the current location. It needs to e close otherwise I could lose regular customers and the reputation the shop has built up. Also I could expand by renting another property where I think a sandwich shop will be successful. This would allow me to have more than one profit centre. This is a good opportunity as it would increase my market share.
A possible merge with another local sandwich shop is a possibility. This would be going into a partnership and part owning several sandwich shops. This would also give snappy sandwiches more market share. It would also allow snappy sandwiches to improve as input from another partner may benefit the business.
As more and more people each day want to eat healthy then I have the opportunity to sell healthy products. This would allow me to create another USP of selling healthy products. I could specialise in healthy sandwiches. If I was to specialise in healthy low fat foods and the government introduced new policies supporting this I may be legible to grants or awards.
Another opportunity would be recognition in quality. I have the possibility to be awarded awards for quality. This gives snappy sandwiches something to aim for. It would be a good award to achieve and would give the shop a good reputation.
Threats
The biggest challenge is to survive the first year. I want to break even and to pay off one third of the loan. I have taken out the loan to make sure there is enough cash flow. I want enough capital to make sure that the business has enough to overcome any obstacles. Another threat is competitors and what they aim to do. They are threats as there actions may directly affect me. Competitors that expand or produce something different may be a threat. This could have an impact on my sales as if competitors reduce prices this could mean that I have to reduce my prices to keep my customers. This will affect my profit margins and my break even point. My profit margins will decrease and my break even point will increase as I have to sell more to break even.
Another threat might be that I may need to change products or services. This may be due to changes in the market or government recommendations. Health and safety inspection is also a threat. The shop has to be clean all the time and be a safe working environment for employees to work in.
The loan is at a variable rate. I have borrowed over 3 years. The interest on the loan may increase. This is a threat as the repayments could become too much and become too much to pay back. The repayments may become too expensive and I may need to sell more products to help cover the extra cost of the interest. This is a major threat as the interest is just affordable. If the loan interest does become too expensive I could view the possibility of a further year in which the loan has to be paid back. This would cost a lot more in interest but yet I would be financially stable. It would also mean less expenditure each month and so it would meant more capital stays in the business.
4.7.2 PEST
PEST
Pest analysis is where an organisation considers its environment before beginning the marketing process. The environmental analysis should help with all aspects of business planning. This is made up of 3 different stages.
Internal environment e.g. the wages and finance in the business.
The micro environment e.g. suppliers and competitors of the business
The macro environment e.g. political and legal factors
I will now undertake a PEST analysis for snappy sandwiches.
Political factors
This has a huge impact on the regulation of the business. It also affects spending power of consumers and other surrounding business’.
The political environment at the moment is stable. I have researched the internet to look for any changes in health and safety or basic hygiene standards that will directly impact my business.
As a business who intends to make a profit then I will be taxed by the government. I hope to be allowed to pay a lesser tax for the first trading year to help the business survive. This will help the business to retain some capital to help prolong the future of the sandwich shop.
The level of inflation employment per capita is very high in the UK. This is due to interest rates also been high and on the increase.
The long term prospects is that the GDP in the UK is currently growing. This means people are starting to earn more each year on a national average. This means that people will have more money to spend. This could result in more sales for the sandwich shop. More sales for the sandwich shop means higher profit margins and it also means break even happens sooner. The sooner the break even point then the quicker the business makes a profit.
Sociocultural factors
There is no dominant religion in Huddersfield especially not in the HD1 area. It is more of a mixed area where there are people from many different religions. Religion links to my sales because I could think about selling halal meat for Muslims. This in effect may increase my sales as I am providing halal meat that all religions can eat. I would also have to find a new supplier that sells halal meat. A new suppler could be more expensive than the current supplier. If halal products are more expensive then the sandwich shop will have to sell more to cover the cost of the halal products. On the other hand the costs will be easily recovered if the halal meat encourages more sales. The matter of using halal meat would have to be researched. Using questionnaires would help me determine in the future if using halal products would be beneficial for the business.
People do not have much leisure time. This means more people eat on “the go”. this is snacking in between daily routines. This will help my business because more people buy food than those who make sandwiches. This shows I am entering a good market with lots of consumers. Also as many people do not make their own sandwiches they buy whilst at work or out of the house. People would rather buy a sandwich than to make a sandwich the night before work. This general prediction is good for my business as it shows that many people buy sandwiches. If I was to produce health fast food then I could make a lot of money. People are starting to think more about what they eat and so to produce fast food that is healthy would be good for the business. This idea would certainly result in higher profit margins. Also for healthy food people are prepared to pay that little extra.
The traditional role was that the man was the only earner is the household. This stereotype has long changed where men and women are both earners. This means that a large proportion of households now have two incomes. This is also good for my business as two wage earners means people have more money to spend due to the two earners in the household.
The population are starting to live longer due to them looking after themselves by exercising and eating healthily. This has been proven by rises in life expectancy in the UK. This shows people are living longer. This is also a good factor for my business because if more people are around then I have a wider target audience.
Environment is also an issue for my business. To protect the environment and stay on course with the rest of the nation for getting more greener then I could use recycled packaging or use bio degradable packaging. This would help protect the environment. The packaging may also be cheaper or more expensive because its recycled or recyclable but I think the shop has a moral duty to protect the environment in as many ways as it can.
Technological factors
This can be a major advantage for the business as it has helped many businesses’ globalise. It can make tasks within business easier and more efficient.
As I am producing sandwiches on a small scale then there is no use for technology to make sandwiches for me. I produce too little sandwiches and of different varieties to have technology help produce them for me.
A technological factors that can be very useful to my business would be internet banking. This would allow me to manage my account online. It would also give me 24 hours access to my account. From this I can make sure there is enough money to pay suppliers and the bank etc. Mobile phone number of staff will also allow them to communicate to arrange meetings etc.
5.0 Conclusions
- Recommendations
I would go ahead with the idea of opening a sandwich shop in Huddersfield. I think the idea has been feasible. From all the sections from the very beginning i have thought that this idea could work. The market is very competitive and i think in years to come it will expand and grow. It has the potential for small sandwich shops to make high profits due to Huddersfield been such a large and growing Town. Also Huddersfield has 3 colleges and 1 University whci means there ia always alot of young people around. The secondary education is based quite centrally in Huddersfield and as alot of students and general public are always in the town centre then i can benefit from this. the competitors have been researched thorougly and i was pleased to find that i think this sandwich shop would work in the HD1 area. The accounts were also encouraging as in the first year after all fixed costs were paid out then i still managed a profit. This was only small but i had spent several thousands on start up costs. Also i have a loan that i am paying back over 3 years. After the 3 years i expect higher profit margins. I also expect this as the loan will be paid back and also i expect the business to have estabilished a reputable name for the business.This reputaion i hope will get regular customers for the business and increase sales due to more regular people buying from the shop. If i was to estabilish a reputable name for the business then word of mouth advertising will also help as more people will be told about the business. This may increase sales which will result in higher profit margins for the business.
Bibliography
Appendices
I will now show some scans of the research I have done into what my suppliers are selling.
The following pages are my accounts for the business.