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What-if and Contingency plan

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Introduction

What-if: What if analysis shows what will happen to my business if things change. It is useful for me as it allows them to prepare for these changes. If negative outcome occurs, then I would need to produce a contingency plan for these factors. A contingency plan is the action I need would take if the factors occur. One of the main factors that is likely to affect my business is if there is an increase in sales. If sales of my fast food restaurant increase than it would be beneficial for my business because it would mean I generate a larger profit and will allow me to meet my aims of increasing profit. From my profit and loss account, I can see that my net profit is �23,522 before tax which can become greater if my sales increase. Moreover an increase in sales will result in a better cash flow forecast which would benefit my business for the reason that my cash shows that I would be having cash flow problems at that beginning. This would then put my business in a stronger position when applying for the loan because bank managers have more confidence in my business because it is in a stronger financial position. From my primary research, I have gathered that my competitors mainly offer meal deals offering the chance for the customer to save money if they buy selected products together therefore in order me to compete with them, I will try offer similar promotions but at a lower price. This will allow me to meet my objectives of offering competitive pricing. As well as this, I will offer some promotions that are unique to my business for a chance for the customer to try out something new and different such as loyalty cards or student discounts. If my business were to experience an increase in then I would not need to carry out a contingency plan because it is a good thing. ...read more.

Middle

By doing this, I will have enough staff available to run my fast food restaurant in case any of them are not available. However there is one major problem with doing this which is my staff may rarely take days off which means the backup staff won't be given a chance to work. Furthermore, if I require more staff to work in my fast food restaurant, then I will place an ad in the newspaper or on the shop window. Like mentioned before it would be easy for me to recruit staff as more people are looking for jobs. If my business is short of skilled staff there are two options I do. The first option is to recruit well skilled staff but the drawback for doing this is that I would be required to pay higher wages as they are more skilled therefore it would increase my expenses and lead to a smaller profit. The second option is to send the current employees on a training course. By doing this, they will get the knowledge and skill to make and prepare the food in a high quality manner. This would be the better option as it will cost me less because it is a onetime cost whereas the wage increase will cost more in the long run. It also means that I am able to stick with the current employees I already have. Similar to the increase and decrease in sales, there are two affects in which competitors can have on my business. The first affect is that a competitor in the same location as me opens up. The other affect is if one of my local competitors closes down. If a new competitor opens up in the same location on my business then it will have a negative impact on my business. This is because I will gain fewer sales as potential customers will be going to them instead of my fast food restaurant. ...read more.

Conclusion

From my payback period, I will be able to pay back the loan I took out within 1 year and 38 weeks from the start of my business. I can perhaps try to reduce this period to 1 years and 25 weeks. By doing this, it would mean I would pay back less because loan companies usually charge interest rate per month and the sooner I pay back, the less interest I would be required to pay. According to the BBC, the current interest rate is 0.5%. This is a decrease from 1.1% from last year. The decrease in interest rate would also affect my business because I would be paying less on the amount I have borrowed and will therefore increase the amount of profit I will be making. A decrease in interest rates would allow me to meet my aims of increasing profit and it would allow me to meet my objectives of decreasing expenses. Suppliers may decide to increase their prices may any given time. This could be due to a number of reasons for example due to inflation, or in order for them to increase the amount of profit they make. This would affect my business because it would increase the cost of the raw materials it takes to make my products. An increase in cost of sales would reduce my gross profit margin because I would be making less gross profit per sale. Moreover, if my suppliers decide to decrease their prices, it would benefit me for the reason that it would decrease my cost of sales which would increase my gross profit margin. This would also increase my profit I make and allow me to meet my aims of increasing profit. My contingency plan if my suppliers increase their prices would be to find new suppliers because other suppliers may offer cheaper prices or offers that would reduce my business costs. Furthermore, I could buy in bulk which would save me money as suppliers offer a discount to customers to customers who buy many supplies at one time. ?? ?? ?? ?? ...read more.

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