Business start up costs will be low with higher value items required being leased. This in turn will help cash flow.
The worst expected cash flow exposure is that the cash flow will be effected during the winter months. This can be overcome by concentrating on commercial property and greenhouses. The success of the business will be dependent on repeat business; this will be aggressively followed up by treating existing customers as priority. Unforeseen problems such as illness or vehicle breakdown will be covered by insurance.
Another aim of Scowcroft Conservatory cleaning is to get a reputation after the first year so the business is able to expand.
Trading is expected to start on 1st September 2002.
The Market
Scowcroft Conservatory Cleaning will sell their services to the general public and local businesses e.g. restaurants with conservatories, with a large customer base. The market is looking for a service with high quality and low prices.
WF Cleaning are the competitors in the market place. There strengths against Scowcroft Conservatory Cleaning are:
This table shows that I will be able to convert people from WF Cleaning by having a lower price, a better location and being more flexible.
Market Plan
The service will be promoted by word of mouth, yellow pages or Thompson, local press, leaflet drops, posters, internet and stickers. I am willing to spend a large amount of money on advertisement so Scowcroft Conservatory Cleaning is well known before the business is started.
In general the proposed selling prices of Scowcroft Conservatory Cleaning will be lower than those of competitors. The reason for this is to attract customers away from the local competitor as soon as possible.
Potential customers will be encouraged to switch from their existing supplier by lower prices, introductory offers, better local presence, faster delivery, charismatic staff, niche market target and complete packages.
Once they are customers, people will keep buying the service of Scowcroft Conservatory Cleaning because of good customer care, top quality products, regular customer reviews, highly trained staff, the personal touch, good deals for customers and price guarantee’s. I think that this is the best market plan to get as many customers as posible.
Prices
I have decided to sell the service of Scowcroft Conservatory Cleaning at the price of £50 for each conservatory that is cleaned. I have chosen to sell the service at this price after market research. The competitor has a price of £65 for each conservatory that is cleaned. I think that this is the correct price because it is cheaper than the competitor, it doesn’t sound too cheap and I am still making a large profit.
Financing and Assets
Scowcroft Conservatory Cleaning will be financed in these ways:
This Table shows that the opening bank balance will come to a total of £5,500.
Scowcroft Conservatory Cleaning will operate from home and a vehicle.
Scowcroft Conservatory Cleaning will be using the following equipment:
The estimated set-up costs are:
On the next page there is a cash flow forecast of Scowcroft Conservatory Cleaning for the next year which shows the profit made after the first 12-month period.
Profit and Loss Account
This Table shows that the fixed costs are high but and the variable costs are low. The variable costs are low because the business is selling a service and not manufacturing goods. However the fixed costs are high because of wages. This can also be seen on the graph on the following page which also shows the costs for each conservatory that is cleaned so therefor the revenue can be shown and where the total costs line up with the revenue is the break even point.
The graph shows that to break even I will have to complete the cleaning of one conservatory if I make the estimated income for that year.
Conclusion
From the estimates of the cash flow I can see that this business will be a success because the business broke even early on and by the end of the first year the business had a large profit (assuming all of the targets are met). From the cash flow of the first year I can clearly see that the amount of profit is increasing greatly after each month in the first year. If this trend continues the business will continue to make greater profits in the following years which could lead to being able to expand the business and to introduce more employees.
The key to success for this business is that there is enough capital to keep the business running in the early months.
Form the profit and loss account I can see that during recession the business will only loose £8880 this could easily be reduced by cutting wage payments or increasing borrowings. In the profit and loss account I could also see that during a boom year I would be making a profit of £20,080, which is far greater the amount lost during recession. Therefore it is important to make sure that the business is fully established in the early months whilst turnover and output is low, this will ensure greater efficiency in later months.
From the profit and loss account I can see that I have exceeded the objective for the business, which was to break even in the first 12 months, by making a profit as well.
