- Can be sensitive to the needs of customers – since they are closer to the customer and will react more quickly, because they are the decision makers too.
- Can cater for the needs of local people – a small business in a local area like my restaurant can build up a following in the community due to trust – if people can see the owner they feel more comfortable than if the owner is in some far off town, not able to hear the views of the local community.
Sources:
On setting up this business, I spent £53,650 for the equipments and £15,000 for the fixtures and fittings. I also spent £500 for the promotion and £800 for the stocks of the first month, £50 for stationeries. The overall total for all of these is £70,000 and I have nothing left for the opening balance due to these expenses. The money that loaned from the bank is repayable for 8 years with a monthly payment of £971.49.
The money that I used for my legal forms and certificates came from my own pocket and not part of the required capital for my business. I spent £2000 for these legal forms of the restaurant.
Cash Flow Analysis
The £70000 capital for the setting up of this business was used for equipments, fixtures and fittings, stocks and promotion of the restaurant. Due to these start up costs, I started my cash flow with zero for the opening bank balance. The first month operation of the restaurant was fine and had £21,000 sales which means that the restaurant was earning more than £5000 every week on January. This figure is good because people easily recognised my restaurant and starting to get familiar with it. From February to April, the restaurant was continuing to have good sales and we had our highest sales of the year with £28,000 and started to gain profit. The sales for the month of June were also good with £27,000 worth of sales. However, from July to September, the sales of the restaurant started to decline due to the low number of customers coming in to the restaurant. Summer season is when people prefer going to pubs and bars rather than eating in restaurants. Most people of this season are on a holiday and out of the country or maybe at the beach. People prefer barbecue at home than to spend money to eat out. The restaurant recovered after summer and started to raise the sales with £22,000 by October and £24,000 by November. The sales on December were good because it is Christmas season and restaurants are really busy during this time. We earned £25,000 and quite recovered from the decline that the business had last summer. Overall, the restaurant went well and managed to earn profit even if this is just our first year. .
The wages that my employees are getting are much higher than any other employees. I give my employees decent wages because they work really hard and they are one of the reasons why the business is still operating. Another reason is that, working in a food business is not easy and sometimes you have you to work extra hours because of busy environment. The salaries of my employees are very competitive and can motivate them to keep up the hard work.
Cash flow is really important and helped me to monitor all the expenditures and the money coming in the business
Break Even Analysis
For the break even point of my business, I have chosen the month of May because this is the month where we got the highest sales of the year. I have a sum total of £15339.6 for the fixed costs of this month. The competitive selling price that we give to our customers is £30 per meal. We have a variable cost of £10 to produce this meal and have £20 profit. I have calculated the these figures using the break even formula,
Fixed Costs
BE =
Selling Price – Variable Costs
15339.6 15339.6
BE = =
£30 - £10 20
BE = 766. 98
The break even point for this month is 766.98 which means that the restaurant must have 777 number of customers to break even. As you can see on my break even graph, there are 2200 customers that visited the restaurant for the month of May.
For the first week of May, there are 100 customers that visited the restaurant. This means that the sales for that week is £3000 (100 x £30). For the second week, the number of customers started to go up with 400 customers visited the restaurant. The sales for this week is £12000 (400 x £30). The number of customers continued to rise for the third week of the month and there are 700 people that visited the restaurant with the total sales of £21000 (700 x £30). We got the highest number of customers for the month of May on the last week of this month. There are 1000 customers that visited the restaurant with the sales of £30000. To conclude, we reached the break even point at 777 out of 2200 customers.
