I have also included a map of where the business could hopefully be set-up. As you can see the business would be set directly in the heart of Caerphilly where many people shop. The Castle Court shopping centre houses many big name shops.
WHAT TYPE OF MUSIC DO PEOPLE PURCHASE?
This type of question is useful for understanding what type of music people are currently interested in. Although it is usually quite obvious as to the music people are interested in, I can however discover whether or not people like other types of music, what music would be purchased the most as well as what music should be played in a shop of this nature. An example of this kind of useful knowledge is a about a music shop in the town of Newport. The shop is generally plays and sells a lot of hardcore rock music. They have therefore segmented this area of the market because they know that people like this kind of music.
To find out what type of music people regularly purchase from the Caerphilly area, I will obtain answers from my questionnaire.
HOW MUCH MONEY DO PEOPLE REGUARLY SPEND PER CD?
This sort of answer will be useful because I can work out how much the music should be sold for rather than charging them at to little or to high prices. This can then work in to projected sales that will be part of my finance section. Prices will be discovered through the use of a questionnaire.
SHOULD ANYTHING ELSE BE SOLD?
Many shops not only sell CD’s but they also sell products ranging from posters to magazines to LP’s to clothes. I will try and discover whether or not there is a market for these types of products in the Caerphilly area and make a choice as to what music should be sold. Once again details of will be obtained from questionnaires that I have employed.
In this chapter I have included the results from my market research. These include information obtained from the questionnaires that I have sent out. This chapter is also a collection of secondary research in reference to the questions that I asked in the previous section.
Altogether I managed to get 40 results back from my questionnaire. This was mainly done by sending the questionnaire out by email to friends and family who lived in and around the Caerphilly area. I also gave them to people who didn’t have email addresses such as neighbours, other friends and relatives.
Below is various criteria results that I have obtained. These results are useful, as they will tell me who filled out the questionnaire, their age and where they lived.
Who replied to the questionnaire?
From these results you can see that a majority of the people that were used in my questionnaire research were mainly men. The importance of the sex of the person is very important as men and women have different opinions, likes and dislikes, purchases etc.
This chart is important because it shows me where people live. These will relate a lot to the results of the questionnaire e.g. where people shop and how often they purchase from Caerphilly.
Is there an opportunity for the development of a music shop in Caerphilly?
As you can see from the chart above titled “Where people live” 64% of the people question live in a 3-mile radius of Caerphilly. This knowledge is useful because I can guess that these people will pass through Caerphilly or spend time in Caerphilly. With an inclusion of the shops, many people are tempted to stay there and purchase from the area.
The chart below is results from question 4: Which town/city do you regularly shop from?
The question was quite open as I allowed people to tick all town/city’s that they shopped at. The results ended up showing that many people shop in Caerphilly out of the people that I interviewed. This is good knowledge, as I know that 37% of the people that I interviewed will shop in Caerphilly.
The chart below is results from question 6: Do you feel there is a need for a music shop in Caerphilly?
The results of this questionnaire are promising because many believe that there is a need for a music shop in Caerphilly. These people clearly think that there is a niche in a market. This niche can be filled by the investment of this music shop. However I need to discover whether or not people would prefer to shop at my music shop or prefer to go somewhere else.
The chart below is results from question 9: Would you prefer to go to a music shop than WHSmith or Woolworth’s?
At present the only music shops in Caerphilly at the moment are Woolworth’s and WHSmith. Both these are large companies with a good reputation selling a varied range of music, videos, stationary, magazines and books. However over 90% of people would prefer to purchase music in a shop selling CD’s etc rather than go to a shop with an established name.
In the chart below I also discovered that people regularly purchase music from music stores and not other places. For example people would rather go to a shop like Virgin or Hitman (a popular shop where I live) than somewhere like Woolworth’s or WHSmith.
Which shops do you purchase music from? Tick all that apply.
The question above asked each person to tick all shops where they purchase music. All these shops are accessible from Caerphilly and therefore people may shop from there.
Many people didn’t like to shop from WHSmith and Woolworth’s. This is significant as many people wont buy from these shops and would therefore like to go somewhere else.
A new CD shop in Caerphilly would very much fill this niche in the market. Therefore I believe there is an opportunity for this kind of business. From the questionnaire I have learned:
- People don’t like going to places like WHSmith or Woolworth’s.
- Many people shop or pass through Caerphilly on a regular basis.
- Over 92% fell there is a need for a shop in Caerphilly.
- Would prefer to buy music from a music shop and not someplace else.
Can the business maintain itself in the market?
From information received in the previous chapter the possibility of a music shop maintaining itself would seem very like.
If you look at the results from question 6 (Do you feel there is a need for a music shop in Caerphilly) 62% said that there was a need for one. Many people also said that they would prefer to purchase music from a music shop rather than go to a shop such as Woolworth’s or WHSmith.
Below I have done a competitor analysis of these two particular sites. The purpose of a competitor analysis is to discover the competition that the music shop business would have. With this analysis I can then make a sufficient judgement on what the competition is in the market and whether or not a music shop could maintain itself.
WHSmith Analysis
- They got mass appeal because of the products they sell.
- Very well known for quality service (good reputation)
- The particular site is at a prime location.
- Sell a variety of products that include: CD’s, magazines, newspapers, and stationary.
- Are able to advertise.
- They are a financially sound company.
- They regularly use promotions on many of their products.
- Offer a “bonus card” where customers get points on their purchases
- Prices are generally high with CD’s and multimedia
- People above 25 generally purchase music from their shops, as younger generation prefer specialised music shops.
- They can afford to sell at higher prices because of their reputation.
- They will be able to introduce new products and services in to the market, and in turn provide better services.
Woolworth’s Analysis:
- They sell huge variety of products including clothes, DVD’s and confectionary.
- Have a mass appeal to a variety of ages.
- They have strong financial backing.
- Can introduce products into their shops with out threat of much failure.
- Good service and reputation is usually associated with them.
- Prices are usually fair.
- Prime location on the new Castle Court area.
- They can regularly advertise through mediums of TV and newspapers.
- WHSmith are key competition to what they sell
- Are able to sell products at prices without worry of any problems of not selling them.
Conclusion:
The two particular businesses are similar in many ways. They are financially strong, can offer promotions, are able to set trends in prices and are both at key locations where the market is generally limitless to the type of products they sell.
In many ways looking at the competition it would seem difficult for a CD shop to succeed. However, many the prices in these shops can be quite high. The atmosphere inside is usually fast paced and queuing times can take forever. As found out in my questionnaire (question 9) many people also don’t like purchasing music from WHSmith and Woolworth’s and would rather go to a shop specifically selling CD’s such as Hitman or HMV.
To answer the question on whether or not the business can maintain itself I would have to say yes. People would like to see a CD shop in Caerphilly and would rather opt to buy their music from there rather than go to places such as WHSmith or Woollies. However, if I faith can be put in the hands of sufficient customers the business should maintain itself providing that overheads do not way down the business succeeding.
What types of music do people purchase?
In my questionnaire I asked people what type of music they listened. Below are the results of the question:
What music do you regularly purchase?
From the information shown by this question, many people preferred Pop, Rock, Punk and Dance.
The people asked in the questionnaire were many people aged between 15-40 years old. Therefore the answers I have received here will reflect the age groups.
This information here is very useful as it can help determine a number of things:
- What CD’s that I will need to stock
- Which music will sell the fastest
- What type of music would I need to play in the shop to attract customers
How much money do you regularly spend per CD and do you purchase anything else?
Below are the results for the question: How much do you regularly spend per cd in shops?
From the information obtained by this questionnaire the majority of the people asked said that they regularly pay £10 - £13 per CD. No one said that the regularly pay a different price, unless they were copied. This information is important because I can work out how much I would need to sell CD’s for. In my finance section I would also need to look at the mark-up of each CD and whether or not suitable profits can be made.
However there are also many other factors that I need to consider here. Many companies now offer special promotions on their products. Below I have listed a few that many companies now tend to use.
As you can see many of the bigger name companies are able to offer very good deals on music. People were buy one cd and get one free at HMV. This kind of information wouldn’t have been shown in my questionnaire.
Virgin were also able to offer a special CD signing by the Manic Street Preachers which is a very good way to promote their products and get people into their shop.
Below are the results of question 14: Do you purchase anything else in a music store? (tick all that apply)
From the data supplied in the questionnaire many people have bought in the past at music shops; posters, DVD’s, clothing and single CD’s. I would therefore consider selling some of these products in the future in order to cover a wide range of services for customers.
If I were to set-up straight away I would probably decide upon selling posters and single CD’s to begin with, as they are generally cheap purchases with a good return rate. DVD’s and clothing may come in later, and I would conduct further market research to discover how well the sale of products would be and whether or not I could compete against other traders.
The other products weren’t as popular generally because they felt it would be better to purchase specific products such as games and calendars at more specific shops targeted at selling that product. Therefore I would not consider selling them at the current time.
Marketing results finishing note and targeting audience:
As you have seen my results from market research clearly show positive ideas and results. Many people felt happy to purchase from a record shop and would prefer to go there rather than purchases from places like Woolworth’s or WHSmith. The results clearly show a clear gap in the market, and if a record shop can be implemented with good low operating costs the business should be able to compete with competition and hold itself against others.
The shop will try to target to people of all ages. It would need to be able to be a shop that plays popular music of a broad range and supply up to date music as well music of past generations. However I feel the shop would need to be able to stand out and be different from shops like WHSmith and Woolworth’s in order to appeal to the minority of groups who don’t shop at these places. These people I discovered would therefore be teenagers and youngsters. They would therefore be my main target audience.
The name of the business would be called SoundPrice. It is name that conveys, “Music is being sold here” and “good prices”. I feel that this name would be suitable for this type of record shop as it sounds appealing to all ages unlike WHSmith or Hitman which are both old fashioned and doesn’t give people details of the type of shop.
However, currently a conclusion cannot sufficiently be made yet on whether or not the business would be a success. This is because I would need to look at the many financial aspects of the business. By looking at these I can then forecast whether or not the business can cover costs and survive in the market place. I will look at this in my finance section.
To aid me in my finance section I was able to send a letter to the owner of “Hitman” records in Newport. This small but similar shop to the one Caerphilly has been very successful. In the letter I was able to ask him various questions that involved where he received his stock from and the number of people he employs. I have included the information-received from the owner on the next page.
There are many factors that help determine whether or not a business will go boom or bust. One of these factors that determine this is how successful the business will be their finances. In this chapter I will look at various financial aspects that the business I intend on setting up will face. Altogether I will include in this chapter:
- Estimated finance to set up the business
- Estimated fixed costs and variable costs
- Prices of products and the mark-up price
- Location of the business and it’s direct overheads because of the place e.g. rent
- Predicted cash flow
- Profit levels
- Predicted break-even point
By looking at these I can hopefully determine whether or not the business is feasible and can be successful.
FINANCING THE BUSINESS
To help finance the business, the best option would be to organise a bank loan with the bank. This would allow me to lend the money, and then pay back monthly across a certain period of time.
On looking at the financial figures below I have decided that it would be a good idea to take a bank loan of £7,000. This money would more than likely pay for the costs of setting the business. The money left over would help finance through out the year while the business picks-up.
Using an online source of information I went to the MBNA loans site who specialise in business quotes. This is the information that they supplied me with:
£7,000 36 months
£256.15 repayment per month
Total repayment £9221.40
From the information I received, the costs that the business would incur over the 36-month period would be £256.15 per month. This would be able to cover the costs of the business at the start and wouldn’t be too much to pay each month.
START UP AND OPERATING COSTS OF THE BUSINESS
Renovating Costs:
The shop will also require various amounts of renovating because the shop is not fitted properly. Using various websites and resources form relatives and people I have inquired with I have created a table of the typical renovating costs that are likely to be incurred.
From the information in the table the total costs will amount roughly to £1,345. However there are usually additional costs otherwise known as sundries. I will therefore round the total costs up to £1,400. This is my second cost.
Stock Purchases – CD albums
For the business to start up, I will need to purchase enough stock in order to supply customers with the goods and services they need. As stated I was able to obtain information from a friend who works at the Hitman record shop in Newport. They were able to tell me of a supplier in the Chepstow area called Kingdom Records. The company work on a trade credit when selling CD’s and require retailers to pay back the stock received within 40 days.
To gain more information I contacted Kingdom Records who told me that they sell CD’s at various prices. They gave me these examples. New CD’s are sold as shown below:
I was told that the many prices for the CD’s vary entirely. They also wholesale CD’s that have been out for many years and therefore offer discount prices. Kingdom Records also sell old CD’s singly in order to remove unwanted stock. They will regularly sell to retailers at the price £1.80 per CD. However they will sell with bulk orders to ensure they don’t sell directly to consumers.
The manager (Carl Andrews) at Hitman records recommended me on selling the music that is popular at the moment. He told me that as soon as sales begin, to purchase the past music that I think would appeal to the target audiences that the shop is trying to appeal to. I was also informed that it is always to keep a look out for the deals that the wholesalers regularly give as a way of shifting the stock.
With recommendations from Carl, I would likely decide on selling the albums that are currently in the top 40 charts. Because the Top ten have more appeal to consumers I will probably get in stock of 16 CD’s per title. This would work out:
£105 (16 CD’s) x 10 titles = £1,050
To complete purchases of new CD’s in the 40 chart I will then buy 8 CD’s per title. This is because they will not have as much mass appeal as the top ten chart:
£55 (8 CD’s) x 30 titles = £1,650
I would also be interested in purchasing other music in order to increase the services. Information about the special offers that the Kingdom Records offer were supplied from my questionnaire I gave to the Hitman owner. They were deals that included selling at various albums in packs such as 8 Nirvana CD’s for £35 and Tom Jones CD’s for the same prices.
Supposing I would make 20 purchases of these type of deals (ensuring that they were popular with the target audience):
£35 per pack x 20 = £700
Total costs for CD albums are = £3,400
Stock purchases – CD singles
Kingdom Records are also a supplier of cd singles. As stated in my market research many people have purchased CD singles in the past. Because of this I decided that I would sell CD singles as part of the service the shop would provide. Below are the prices they charge for packs of single CD’s.
I will likely buy 12 of each top 10 CD titles and purchase 6 of each 30 singles in the list of 10-40 chart. Below are the costs:
Top Ten - £30 x 10 CD titles = £300
11 – 40 chart £15 x 30 CD titles = £450
CD’s are usually only popular at the time they are released, so I will not pursue in buying any titles from the past.
Total costs for CD singles are = £750
Other Stock:
As discovered in my market research I learnt that many people have also purchased CD’s from record shops in the past. I will therefore be selling these.
From the letter I sent to the owner of Hitman Records, he informed me that he regularly purchases posters from GB Posters. I was able to contact the company via their website (www.gbposters.co.uk) and they were able to supply me with information that would benefit me in my research.
For a box of posters that can be put on display the costs are £100. This includes 4 types of posters with 10 of each one. The costs for each one works out at £2.50 each, and are then usually sold on for £3.99 giving a good enough profit if they sell. I would probably buy 3 display boxes for the shop of posters that are popular at the time. This costs works out to £300.
Total start up costs:
As you can see the total costs for starting up the business will work out to £5,850. These include renovating costs and costs of purchasing stock.
POTENTIAL CASH FLOW FOR THE NEXT YEAR (starting January)
The purpose of a cash flow forecast is to project whether or not a business can succeed in the year or potential time ahead of them. It will take into account the profit and losses of a business as well as overheads and sales revenue.
For my cash flow, the business will be very new and so the figures will have to be a rough estimate as to how the record shop will succeed. Currently I am looking at the business to make a loss during the first few months. This is because the business will face various expenses incurred from start-up costs. However following a rough few months I hope the cash flow will potentially show to me a profit and not a loss.
On the next page is my projected cash flow. Below I have shown details of where these figures have come from.
Wages:
To gain a better understanding of the type of wages to pay staff that I would employ, I used information provided by the manager of the Hitman record shop because the ideas that I would have for the shop in Caerphilly would be very similar.
Monday to Friday (10am to 6pm) = myself (£1,200per month) and second assistant (£700)
Saturday (10am to 6pm) = myself and two part time staff both on £4.10 per hour.
Sunday (10pm to 4pm) = assistant and two part time staff both on £4.10 per hour.
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Cost for two part time staff on Saturday and Sunday per month = £458
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Myself and part time assistant per month £1,900
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Total wage costs £2,358
Stock:
As I am considering the development of a record shop, it is important to keep stock up to date. With new releases of albums and singles every week I would therefore be making purchases on weekly basis.
As stated in the start up costs the business would incur charges of £105 for 16 new album CD’s. Currently there are 4 to 5 on average popular albums that hit the top 40 chart each week. I would therefore make these purchases each week.
£105 x 5 (CD titles) = £525 per week or £2,100 per month
I would also make purchases of singles. I have again looked at the top 40 chart which shows that there is roughly 8 popular songs that get into the chart each week. I will therefore make those purchases in order to keep up with stock.
£30 x 8 (CD titles) = £240 per week or £960 per month
The total costs per month for stock purchases will be roughly £3,060
Gas, electricity, water and telephone bills:
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Gas – this is regularly paid every three months. The main use of the gas supply will be to keep the shop warm and will not be used for any other reasons. I was able to phone British Gas who stated that for a small business that operates 54 hours a week with no more than 5 radiators would charge an amount of £93. This includes a business charge and customer service anytime of the year.
- Electricity - I have looked on the Internet and was provided with information for businesses about electricity provided by Swalec.
I tried contacting Swalec but was unable to get a reply. I have therefore estimated at the cost per year for a record shop in Caerphilly. The shop will consume very little electricity. There will only be lighting and computer operation costs that will be significantly high. I therefore decided to use the two bedroom flat figure that was given. £164 a year, paid out on a quarterly basis.
- I was unable to obtain any information about water costs and charges.
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Using a website they were able to provide me with information about the costs and charges that a business would use. Question involved how often you use the phone and do you make international calls.
As you can the lowest costs will be £58. This is charged to the bill every three months. I will therefore use this as an estimate for my cash flow.
Total gas, electricity, telephone rates will be £315 per year
Insurance rates
I found it quite difficult to learn about the insurance rats the business would incur. However I learnt that there are many factors that determine the rates of insurance. These were: shop location, design of shop, goods being sold, attractiveness, security (CCTV and shutters), equipment, flooring and number of customers. I managed to get in contact with the owner of the Hitman record shop who said that his insurance costs amount to over £4000 a year. The shop and ideas I have will be similar to his so I will use that as a rough estimate for the business.
Bank Loan:
As shown in my sources of finance section I would be taking out a bank loan whereby I would need to make repayments of £256.15. This is another fixed cost that I will be withdrawn throughout the year on a monthly basis.
Rent:
From my location section of the project the costs per annum for renting the shop will be £20,000 per year. This can be paid on a monthly basis at £1,670.
Sundries:
Sundries are minor costs in the business. These could be anything from postage, pens, till rolls and paper. As you cannot put a firm idea on the costs, I will estimate at £10.
Sales:
From the information that I obtained form the owner of Hitman Records, he told me that his profit levels change throughout the year. For example at times leading up to and after Christmas he regularly makes in excess of £12,000. The winter months are generally his lowest times of income in the year where he can make a profit of £8,000. This is because demand isn’t as high than other time of the year. However the summer months usually make up for the loss because many people are taking holidays and have time to spend money.
RESULTS OF CASH FLOW CHART
The estimated cash flow shows that the closing bank balance by the end of the year will be £15,924.
January – The first months profit will be £1,588. This is because the sales revenue generated is £10,000 after New Year spending. Closing bank balance is £1,588.
February – First big costs are incurred because of insurance. The net cash flow therefore shows a loss of £-354. However, closing bank balance from last month, helps give a closing bank balance of £1,234.
March – Sales revenue are again £8,000. The first of gas, electric and telephone bills are paid, but overheads don’t exceed the revenue giving a profit for the month and a closing balance of £1,688.
April – Profits are the same. Closing bank balance brought forward helps give a closing bank balance of £2,333.
May – Net cash flow comes to £-354 because of expenses occurred by insurance. However the closing bank balance from last months brings the closing balance to £1,797. This gives a loss for the month.
June – As informed by the owner of the Hitman music, the business begins to make more of a profit into the summer months. This gives a new sales revenue of £9,000 and helps push the net cash flow up to £1,454 and the closing balance to £3,433.
July – Profit continues to rise. This helps the closing bank balance move to £5,079.
August – Costs are incurred from insurance of £1,000 leaving a net cash flow of £646 which helps push closing profits to £5,725.
September - Costs are very much the same and only change because of bills. The closing bank balance of £5,725 is brought forward to this month that is added to the net cash flow to give a final balance of £7,197.
October – This shows similar results to before as profits have dropped to £8,000 because demands are less. This gives a net cash flow of £646 and a closing balance of £7,825.
November & December – The two months are suggested to be the most profitable for the business because of the Christmas season. Net cash flow profits have risen to over £3,500. The final closing back balance for the year is £15,924. This money will then be carried forward into the next year and become part of Januarys opening bank balance.
HOW EFFICENT IS THE BUSINESS?
By using various sums I can determine how well the business is doing with the current costs its got. For each sum I will use the totals for the year:
Gross Profit
Sales revenue £110,000 per year
Cost of Sales £ 36,720 per year
Gross Profit £ 73,280
£73,280 x 100 = 66.7%
£110,000
The gross profit margin is very high for the business. It is proof that the business is capable of generating enough sales from the goods that have been bought. With the high gross profit margin it should allow the business to cover the overhead cost more easily.
Net profit
Gross Profit £73,280 per year
Overheads £56,356 per year
Net profit £16,924
£16,924 x 100 = 15.4%
£110,000
The 15.4% shows that the overheads are far too much. When compared to the total of 66.7% over 51% of the business profits are being used. It would therefore be a good consideration to try and lower the costs because I will not be generating enough profit.
Although the business is able to generate enough profit from the sales (66.7%) the business begins to be un-efficient when overheads have been included. This gives a total loss of 51% of the gross profit.
Conclusion on cash flow
The results on the results of the cash flow show positive things for the business. Although on certain months the net cash flow of the business drops a little, the closing bank balance for each month is a positive number. This can only be good for businesses trying to set-up.
However there are limitations to cash flow.
- You’re not taking in to account changing rates and costs with businesses. An example would be depreciation of CD prices.
- It’s only estimated sales revenue – different shops vary in the amount of customers. You don’t know whether or not the shop can be successful.
- Not all costs are accounted for in the report – water bills.
- Some costs are purely speculative because sufficient answers could not be found. The phone bills may vary consistently – how often are you going to use it?
- I may need to advertise through the year if things don’t work so well. Costs in the cash flow aren’t accounted for
- There are always chances of the shop needing updating or renovating – extending perhaps.
- What if problems arise with the electricity? This may involve hiring out electricians.
Although a cash flow forecast can be very good for giving businesses an idea of their profit and losses for the year, it is merely a speculation and estimate of what may happen. For a business to go into the first year without any background figures such as projected sales revenue to work on, the chances of cash flow being correct will be very little.
In this section I will take an in-depth look at the results figures and estimations that I have pulled together I this report so far. I will analyse the effect of the business and its effectiveness.
To do this I will use a SWOT analysis. This method is a way of helping management make decision about the business, find out where it’s going, the current position and the strengths, weaknesses, opportunities and threats that it currently has. By doing this it will allow me to look at many aspects of the business.
Strengths
- There are good transport links such as rail and bus. Caerphilly also supplies sufficient parking. All this can help bring customers to the shop.
- There is a clear gap in the market because there is no other record shop in the Caerphilly area. The nearest record shop at a prime location is in Cardiff.
- The shop is a good size with plenty of room for storage and office space.
- There is a lane and space at the back of the shop for deliveries.
- Cash flow shows positive results, where by the end of the year the business would be in profit of over £15,000.
- Customers would prefer to shop at a record shop rather than some place like Woolworth’s and WHSmith.
Weaknesses
- There are many costs that are high for the business. These include rent, wages and insurance.
- Not getting enough stock in the first few months may slow the business down because we cant provide music to everyone’s tastes.
- The business is currently un-recognised on a local level, and therefore doesn’t have a reputation to help with sales.
- There’s no CCTV security or shutters.
Opportunities
- I can seize the current market with the development of the shop because there is no other shop like it. Because this is the only record shop in Caerphilly there is the opportunity of making more of a profit. This is compared to setting up a business in Cardiff where competition is high.
- As the only music shop in Caerphilly it has the chance to gain a good reputation in the area. If it does it can therefore control the market if other business decide to set-up a music shop in Caerphilly.
- We can capitalize on the other business reputation in the area. This is especially the case with more and more big name companies coming to the area.
Threats
- The area is a place of vandalism. This could prove a threat to the shop.
- Certain times in the year not as much profit is being.
- Various competitors such as Woolworth’s and WHSmith are capable of lowering prices and offering deals on their products. They also have a reputation and therefore capable of pooling in more customers.
- Danger of inflation in the next few years because of global threats.
- Rising cost of minimum wages may push up insurance rates.
- Although Caerphilly is consistently growing, many people also prefer to go to places such as Cardiff who offer a much-varied selection of products and services.
The SWOT analysis is very good as it allows me to look at a number of areas and situations that business currently has and may have in the future.
The business has much strength and traits that would help bring success. As stated in my market research I discovered that people would prefer to go to a record shop rather than a place like WHSmith or Woolworth’s. If the results that are shown in the market research prove to be correct the business should have no problems with customer relations and sale.
I very much believe that the main contributing factor to any businesses success is the location. It is important because if the shop couldn’t reach its target audience the shop may not survive.
The location of the business I have chosen, as stated for many reasons, is in a prime location. The transport links are brilliant and the size is very good. However the costs for the shop seem to be too high. The renting for the shop is around £20,000 per year. This diminishes a lot of the business profit that can be used for the development of the store. Other costs that are high were the insurance rates because the location is in a dangerous area.
I was also very limited in my choice for the sort of shop I would have wanted to rent. Currently there is only one suitable shop in the area that is available for lease. However there are many shops that do become available throughout the year. These could be shops that may have lower rent costs and insurance. By not being able to wait for the chance to find out other locations, I was therefore limited to just the one.
As stated though, the business would be able to do well at the location. Perhaps in the future though, if another location with decreased overheads became available it may be a good idea to move location.
From the information shown in my finance section I discovered, that the business would be capable of making a profit of over £16,000. This figure would only be possible if estimated costs remain the same. However, as always the case business cost change all the time. For example, one month may require less stock than the next and the next month may require purchasing more stock. This would change the results shown in the cash flow.
Cash flow is also very much speculative and should not be completely relied on to estimate the businesses future. Although the closing bank balance sum of £16,924 is very good it could drop severely because of change. I have however tried to get the results as realistic as possible in order to get as accurate result as possible. Although the total net profit/closing balance for the year will be very unlikely to be exactly £16,924, the actual figure shouldn’t be to far off that amount.
I was also limited on the type of information I could collate in my finance section. The business will primarily be selling albums, single CD’s and posters. Therefore I found it quite difficult to create a break-even chart to show when I can make a profit per month. If I was a business only selling bells for bikes, it would be easy to work out the break even because that would be the only product being sold.
Although the £16,924 result proves to be very good this could be made a lot better. At the moment the net profit margin 15.4%. This is very low for the business. This would require amending main of the overheads in order to generate a high profit.
From looking at the ideas and information that I have collated and created I believe that a record shop in Caerphilly would be a sound and productive idea. I would generate enough profit and profit the community with an alternative place to buy music.