Business Planning and Structures

The main structures that shall be examined in the context of this venture are: partnerships, joint ventures, companies, trusts and sole partnerships. For the purposes of the investments under consideration, there could be a number of structures that might be applicable for each but not all will be necessarily as efficient. The most probable structure that might be utilised to facilitate each investment is as follows - implement the retail business as a sole trader, farm as a partnership or joint venture, joint venture or company for the speculative mining venture and set up a trust or company for the long term investment portfolio. The rationale will be elucidated below.

A Retail Business

The retail business is usually associated with being a sole trader owing largely to the fact that there are few legal formalities, negligible costs and relatively simplified direction taxation associated with its establishment. Further, any profits made will be used entirely at the sole trader's discretion, so theoretically speaking, the father could install himself as the sole trader and distribute profits at his appraisement. The negatives, of course, lie in the fact that it would be difficult to raise a large amount of capital and, more importantly, should anything untoward occur, there is unlimited liability on their part. For a retail business, this would be ideal, however, should it become a large, on-going concern, perhaps incorporation would be more advantageous, for example if one needs facilitation for franchising. Also, should the father or sole-trader die, the business will also end which is not necessarily in keeping with the implicit intentions of the formation of the business. A partnership might have been successful but in the context it might be unwise given that it would be easy for taxation problems to arise with distributions among the children, although financing the venture would be much easier.

A Farm

If the family is considering primary production as an investment, the optimal structure for operation would probably be a partnership although a joint venture may also be used. The advantages of operating as a partnership are that there are no partnership taxes to be paid, only individual income tax, the ability to borrow more capital than a sole trader and the fact that partnerships are informal and inexpensive to establish. On the downside, there is, similarly to a sole trader, unlimited liability for the partners and each partner is responsible for every other partner's liability, should the business investment fail. There is also the same issue of the partnership being dissolved upon the death of either of the parents assuming they are both partners. As mentioned above, each of the partners is an agent for another, a situation which could be financially perilous given that the children may not have sufficient business acumen to conduct a farm and any failure will be felt by all the partners. One option, given these circumstances a limited liability partnership could be a viable alternative since these require a minimum of one general partner and one silent, thus the mother and father could be general partners and the children silent partners. Consequently, they will have no role in the conduct of the partnership and no ability to bind the firm as would be normally the case.

The alternative to operating in partnership would be to establish a joint venture - the parents could invest money in an another entity who concerns related to farming which has knowledge, equipment and infrastructure in place. The advantage of this is that despite a potentially exceedingly complex relationship being created, it is possible to arrange exactly how the association will operate, most of the details being settled in the agreement between the parties. Further, liability can be limited solely to the area of operation that the family would be engaged in, it being imperative to avoid partnership liability. Thus, the family could utilise any of the other joint venturers' skills and assets and be only responsible for their own area yet also have the assistance of another party in whichever areas are deemed necessary for assistance and adding to the economies of scope associated with the farming project.

A Speculative Mining Venture

Since the nature of the venture is fraught with risk, any structure that can reduce risk will be the best to adopt. The obvious choices here are to operate as either a company or as a joint venture. The benefits of the joint venture have been discussed above although the benefits are perhaps even more evident here, in that liability is strictly differentiated so given the high risk of the project. Conversely, since the risks are being shared, so are the profits so the returns will also be relatively lower, but the complimentary knowledge and resources should increase the potential for success. The main differentiation between this and a partnership is that with the joint venture the material will be shared rather than the profits which would cause a partnership to be created which would be undesirable owing to the speculative nature of the project, hence, higher risk for the family.

The other obvious option, although not necessarily exclusive from the joint venture discussed prior, would be the formation of a company on the behalf of the family. An choice might be to give all six members of the family equal shares or give the parents a larger proportion of shares and distribute the remainder accordingly. Given the risky nature of the venture it would be unlikely that a large number of third parties might want to invest but there is, at least, the ability with this structure to facilitate this easily. The most important aspect of the formation of the company, however, is the limited liability aspect. The inherent risk makes it crucial to limit the possible downsides to the largest realistic extent. The company also has other more general benefits to the family, the first of which being perpetual succession. The company does not die until it is deliberately wound up which is advantageous should anything unforeseen occur to the parents, who are presumably the directors of the company. An incorporated structure is also advantageous for acquiring financing although since it would be a small company, creditors would be likely to secure guarantees from the directors so limited liability would be essentially eliminated. The flexibility for a company is high, however, which is useful given the fact that it would be a family company, at least in its opening phase. A variation on the company is the no-liability company (or NL company) which section 112 of the Corporations Act dictates must be a mining company and this purpose must be in the company's constitution. As the name suggests, the company owes no liabilities but also lacks contractual rights to retract calls on shares. This set-up recognises the speculation associated with mining and thus minimises investor risks although obtaining debt financing might be challenging.

A Long Term Investment Portfolio

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A Long Term Investment Portfolio

The most efficacious structure for this project would probably be to implement a trust, although a company would also conceivably work. There are basically two relevant trusts here, those being fixed, discretionary or unit trusts. A fixed trust will secure the entitlements of the beneficiaries in terms of interest or capital of the trust. The unit trust is basically a subsection of the fixed trust. The unit trust differs in that the proportionate interests of beneficiaries are measured in terms of the number and types of units held. The discretionary trust allows the trustee to exercise a wide discretion as to beneficiaries and will minimise tax through judicious distribution between the children since they will have lower marginal tax rates. The trust, regardless of type, will not be flexible, however, there should be little difficulty in obtaining finance. It is not simple to create a trust, requiring a trust deed and frequently the formation of another company to act as trustee. The trustee will be liable primarily but there is a right of indemnity against the trust property.

Catering firm business plan

Executive Summary

This plans main aim is to provide a strategy, which enables the start up and running of a successful catering firm. The value proposition for this project is customers will use this catering firm because all the food used to make meals will be organic offering the customer a healthy way of eating. People will use this service as it has been recognized in the media that eating organic foods is just one way of maintaining a healthy life style. This will give us a competitive advantage against rival catering firms, as many firms do not offer an entire organic range of meals. The advantage for this firm over substitute products is that customers would have to buy from food stores and make the food themselves, this firms aim is to target customers that do not have the time to do this. The target market for the business will be wealthy professionals who do not have time to cook their own food and live in and around Manchester City centre.

At this stage the project is in the early stages of development. Market research is being carried out to find out such things as what sort of meals customers want, and how much to charge for particular meals. The founder of the business is Ellen Okotie who has many years of experience of cooking and using organic foods, and also bring her own special range of African cuisine which may further the business’s competitive advantage over other firms. There are relatively low start up costs for the business as Ellen will work from home to start with as basic cooking equipment and a refrigerated van are the only big capital outlays which can be funded by Ellens own personal savings.

A few conclusions can be drawn from this plan. Research shows there is a market for the service and that everything could easily be put into place to enable the start up and running of a successful firm. To make sure the firm survives though, a loyal base of customers would need to be built up to make sure the firm was not just simply ran out of the market by competitors. Also the firm needs to stick to a focus strategy so that it gains a competitive advantage against competitors, by focusing in on their own niche market the firm will have a better chance of beating competitors as they will be able to concentrate on developing their own product and service while larger firms would have compete more broadly over the entire market.

Introduction

This plan has been constructed for the purpose of starting up a catering company. The idea of the business was developed by Ellen Okotie a child protection officer with the NSPCC. The idea is basically to provide a service to people who want high quality organic meals delivered to their door. The plan developed by myself is largely based upon a marketing theme, it provides analysis of the current environment in which the catering industry operates and an analysis of the current situation the firm finds itself in. Then the business plan itself which suggests the route which the firm should take to make it successful.

1.1 Legal issues

To start up first of all we have to register at company’s house, which will come at a cost of £20. Company accounts must be produced every month or else the firm could be fined. The company will register as an unlimited company under the name pure and simple as long as no other firm has this name. Other regulations we must comply with include health and safety laws and will face regular inspections from health a safety officer.

1.2 The Market Defined

As a company Pure and Simple are entering the market for home delivered food. As with every market there are niches and this firm is entering the niche market of catering for people who want healthy food which is grown organically. As growing food organically is expensive that will reflect in the type of customer the firm gets so the firm believes its target market are young professionals who have the money to afford this food but have limited time available.

2.0 Analysis

2.1 Situation analysis

As a firm we are a micro business starting up in the catering industry with only one employee for the time being so to activate a good marketing plan is going to be essential to the firm. There are 2 parts to a situation analysis, which are the internal and external environment. They will be evaluated through the use of a swot analysis.

2.1.1 Strengths:

Ellen is an experienced cook and is coming into the market with new and fresh ideas
The firm is small and easily manageable
The firm are focusing in on the organic food market solely allowing full concentration on this area
The target market is on our doorstep
As the business are an unlimited company we do not have to produce detailed financial information meaning our competitors do not get a good insight into the running of the business

2.1.2 Weaknesses:

Ellen has no previous experience of starting a business up.
There is only one member of staff at the moment so that will limit the development of the firm as you can only do so much with one person
Large capital outlays are not possible at this time as Ellen is sinking her savings into the business although there is an opportunity to gain a loan against her house.
At this stage the premises for the firm is limited in space because Ellen just has her home kitchen meaning big orders maybe a problem.
If things go wrong Ellen will be expected to pay debts of the business as it is an unlimited company.

2.1.3 Threats:

Market in UK still heavily dependent on discretionary consumer spending, which can be affected by an economic downturn or low consumer confidence. (source mintel)
External factors such as foot and mouth, the weather, and transport can affect consumer spending. (source mintel)
Employment in catering highly seasonal meaning a large proportion of labour is contracted and part-time workers. (source mintel)
Rival firms such as Jenkinsons catering and Ellie Jay catering these firms are market leaders in our area and cut under cut us.

2.1.4 Opportunities:

Trend developing for healthy fast food as people eat out more but they are not eating well. (source mintel)
Consumers becoming more comfortable with the concept of home delivered meals which is a positive sign for growth. (source mintel)
Consumers more health aware following recent food scares i.e. BSE, Ecoli and salmonella poisoning.(source mintel)
Consumers increasingly want to know where the food they are eating is coming from.( source mintel)
Trend towards in-home leisure, which is highly beneficial for the home delivery market. (source mintel)
Restaurants and contract catering companies still achieve annual growth rates above the food industry average. (source mintel)
UK has highest proportion of ‘dinkies’ which are dual income households with no children according to euro stat which looked at 12 European countries between 1992-2000. (source mintel)
Young men are not getting 5 portions of fruit and vegetables a day and less than 10% of men and women aged 25-34 are getting their 5 a day quota.

Figure 1 percentage of people eating 5 or more portions of fruit and vegetables a day

2.2 P’s Analysis

2.2.1 Product: The service and products we provide are vital to the success of our business if we do not satisfy the customer with this then other elements of our marketing mix will be in vein. Our end product is the food served up to our customers there will be wide range of food available mainly cooked meals. The meals will all be organic as we aim to satisfy health conscious customers and we have an alternate menu of African cuisine as an alternate option for our customers. The food will be of high quality, as we will use fresh ingredients that are of the highest standard. Our brand name will be ‘pure and simple’ as it is important to have a brand that reflects the high quality of our product and that so our target audience can identify us as having a high standard of product. As young professionals this will fit in with their lifestyle and image, as they are a wealthy group of people. If we offer a good service then we will be able to gain brand loyalty this is extremely important to us as a small firm because if we can achieve this then word of mouth from satisfied customers it will help with sales.

2.2.2 Place: At this stage the firms premises will be at Ellen’s home in the suburbs of Manchester a 10-minute drive from the city center were our target market lie. As already explained this will save money in the form of fuel and allow more time to keep up with demand. As this is the case we will be able to meet our objective of a fast and efficient service. The suppliers to the business will be unicorn supplying us with organic food, based in alderly edge, barbican and Alan Jackson’s meats based in alderly edge. Which is again close to her home meaning the distribution channel between her and the supplier is very short and the raw materials the food can be received quickly.

2.2.3 Price: For setting our price we have used the marketing model of the 3 C’s to come about with the price we feel is right for us and for the customer.

Our costs need to be took into account first of all as if we can’t cover our costs then the business will gain no profit. The next point we had to consider was competitors prices and prices of substitutes. Research we have done indicates that a basic 3-course meal will be charged at around £30, which is going to be slightly more expensive than competitors in the catering industry. The reason for this though is we are offering a service nobody else does differentiating from our competitors by using only organic ingredients thus giving us a competitive advantage. Our prices will also be higher than our competitors due to organic food being more expensive. Prices of substitutes could be a problem as you can acquire the same sort of meal by buying ingredients from the supermarket for a lot cheaper. This though is of course a lot of hassle for some people with little time on their hands so we believe through the research we have done they will pay for the service and the higher standard of cooking from us. This is were the customers assessment of unique product features comes into play. As our products our organic health conscious people will find this an extremely attractive feature. Due to our target market having a large disposable income the cost of the product is not going to be the most important thing. “From a consumer perspective, it is not the cost that matters, but the perceived value.”( Brassington and Pettitt, 2000 , pg391). This is the principle, which will be adopted for Pure and Simple.

2.2.4 Promotion: As we do not have a large budget for promoting our service we will have to rely on cheap and free ways of promoting our service and our brand. What money we do have will be ploughed into decoration of our containers, which we serve food in making sure ‘pure and simple’, is clearly marked out and that the firm’s slogan is also on. As pure and simple is our company name and our brand which customers can recognize. We will also advertise our name on the company van, as the van is driving round areas were our target market is based it is good advertisement. Word of mouth though is our biggest promotion tool we are relying on our high quality service and products too purseude customers we are the service to use. If customers tell their friends about us that is the best form of advertising as friends trust each other more than advertisements. We will have one sales promotion for the 1st 6months which will be a 10% discount on future purchases this will increase the likelihood they will use us again. Another possibility is press releases were the business could ring up the local paper and tell them of the start up of the business or special promotions happening. The paper may come down and write an article if it thinks it will make interesting or useful reading. This would be free advertising reaching a wide range of people and probably the target market. This would be an especially good idea when the papers have little to write about as the papers still have to fill their columns with some news.

2.2.5 People: At the moment Ellen is the only staff but as the business grows she hopes to take on more chefs. Ellen is an experienced cook who specializes in African cuisine.

2.2.6 Process Management: This is the way customers are dealt with and from the moment of initial contact right through to the follow up and after sale services. All customers will be dealt with politely and courteous as you would expect and Ellen will be dressed smartly but casual when presenting the food so the customer feels comftable in the presence of an outside person coming to their home. After the customer has been served they will receive a follow up letter thanking them for their service and offering a small discount for return business to boost sales. This will make the customer feel valued and will increase the chances of return business.

2.2.7 Physical Evidence: This feature of the service mix is not really needed for us as we have no premises were customers will come. Ellen will just need to be dressed well like I said before to create a relaxed atmosphere between her and the customer.

2.3 Porters 5 Force analysis:

This method of measuring competition in an industry measures 5 competitive forces. They are industry competitors, bargaining power of suppliers, bargaining power of buyers, potential entrants to your industry, and substitutes for your product/service.

Figure 2 Porters 5 Forces Model.

2.3.1Suppliers: For a small catering firm such as this supplies will come from local food outlets. In this situation buying from suppliers like unicorn means stable prices because food outlets have to compete on price against each other this leaves the consumer or buyer in a fair position were reasonable prices for cooking materials will be available all of the time except in extreme circumstances.

2.3.2 Buyers: The Company will be targeting young professionals with large disposable incomes meaning this service is less price sensitive and more about higher quality service that the buyer is bargaining for. There is no threat of the buyers using backward integration i.e. making their own food. As this would mean the market did not exist so the buyers are in a strong position if this service is not of good quality as they can choose to buy of a competitor.

2.3.3 Potential Entrants: In the catering industry barriers to entry are not that high so the threat of potential entrants is high. According to Porter (1980) there are 6 major barriers to entry, which are economies of scale, product differentiation, capital requirements, switching costs, access to distribution channels, and cost disadvantages independent of scale. As in most industries larger firms enjoy economies of scale as they have more money and custom to buy in bulk leading to discounts from suppliers. Product differentiation involves issues such as customer loyalty to brands and how recognizable products are to people. The firms in our market are not as well recognized as firms say in the clothing market i.e. Nike. If you went out in the street and asked people to name a catering company I doubt many people could. The point of this is we have a better chance of gaining customers new to the market i.e. Graduates/people coming into money. But this is also true of other companies so when we get established we need to promote ourselves more to stem the threat of more entrants into the market. You do not need high amounts of capital to start up in this industry as food is a cheap raw material and operations costs are not too high so this again leaves threat of entry high. Switching costs are costs that occur that at first you may not need i.e. advanced equipment. This will not act as a barrier in our industry as you can go into catering without the threat of too many switching costs, as operations are mostly simple. Access to distribution again does not provide barriers to entry as food can be sourced very easily at reasonable prices in this country. Cost disadvantages independent of scale will mean more established firms have cost advantages but this will not deter entrants as profit can still easily be made by smaller firms.

2.3.4 Substitutes: The threat of substitutes is very high in the catering industry as food can be provided in other ways much more cheaply. Supermarkets provide the same sorts of foods we will be using but at a much cheaper price. In a recession we would instantly have to review our service, as the service we provide is a luxury service. If the country is in economic turmoil substitutes become a very real threat, as people will be trying to save money they will opt for the cheaper option of buying from the supermarket. As long as people are cash rich, want to eat well, and have little time then we can stem the threat of substitute products.

3.0 The Business Plan: When first undertaking a business plan the question do we have a market? has to be asked. In this case from the analyses gathered I would have to say yes. Information like there is a trend for people eating out more as they have little time and consumers becoming more comfortable with the concept of home delivered food suggests there is a market for this service.

3.1 Objectives

Sales- In the 1st year of trading the aim of the business will be too gain a steady flow of sales of which can be built on in following years. After 5 years though the business will be hoping to achieve sales in the region of £75k -£100k
Market share-As we can not find a business doing the same thing as us we have found our selves in a market niche which we intend to be market leaders in and own the 100% of this market for the time being at least.

Product Awareness- Reach 10% of target audience within a year of opening and 50% within 5 years.
Customer Satisfaction- Achieve 10% customer retention within 1st year but after 5 years 60% customer retention
Distribution-Establish and maintain an efficient and reliable delivery service

3.2 Target Market

As mentioned in the description of the venture the target market will be young professionals. Although the main aim will be to target this group of people our marketing activities may cater for others who could afford this type of service and the possibility of dinner parties for many is an attractive possibility.

Young professionals have been targeted for a few reasons. First off all most young professionals earn good salaries. This is due to firms paying good money to get the best young and qualified people into their firms. The UK has the highest proportion of ‘dinkies’ in Europe as already mentioned in the SWOT analysis which means these dual income house holds have plenty of money to spare to spend on luxuries such as this service. As the food being delivered is not going to be cheap it is important our target market can afford our service without having to think about the cost too much. Secondly through our research we have discovered a large number of young city workers take residence in flats, which mainly reside in the city center. In the last 10 years city centre living in Manchester has become much more fashionable as posh new flats have been springing up all over the city center and will continue to do so for at least the foreseeable future. The main driver behind Manchester’s urban development is the central Manchester development corporation who in 1988 were put in charge of 60% of new development projects by Manchester City council (www.manchester.com). Flat blocks include the edge apartments and no1 deansgate both prestigious in their own right. This is of great advantage to us as our target market is grouped together which will save Ellen time as she can get from client to client quicker and will also save fuel as most journeys will be within the centre of the city.

The next reason for our choice of target market is the time young professionals have on their hands. As young workers strive to further their careers as well as having an active social life there life becomes packed and leaves very little time for small but necessary things like cooking. This is were the service comes in and offers the young professional high quality food ready to eat on their table when they get home leaving time for other things they have planned. Finally we have posed the question do young professionals know how to cook/cook well? Possibly living away from home for the first time or still not having learnt to cook properly at university, young professionals may not be as good at producing high quality meals as more experienced and older people in society.

3.3 Strategy

Ansoffs Matrix Figure 3:

Existing Products New Products

3.3.1 Product Development: This will be the growth strategy for the firm as we are entering an existing market offering a new service. The new service being food delivered to your door using only organic food. As our product is off up most importance to the business everything about it has to be in order. To help achieve such objectives as customer satisfaction and product awareness the firm needs to make sure things like quality packaging are in place. Also constant research needs to be carried out to make sure the customer is getting what they want.

3.3.2 Focus Strategy: This strategy is all about serving a particular target market very well. This is the best strategy for our firm as we are selling a relatively expensive service and product. Due to us implementing this particular strategy we will be able to become much more efficient and effective than our competitors who are competing in a wider market (Porter, 1980).

There are a whole range of substitute products for eating, which can be done at much less, expense so we have to make sure we serve our target audience well. If we don’t reach are target audience who are wealthy people our promotion efforts will be useless if we reach say a family with a combined income of £400 a week or less. If we achieve the aim of this strategy i.e. a better or more desirable product then we may be able to higher the price of our service meaning higher sales and meeting our sales objectives. Also we will be able to achieve the objective of reaching 50% of our target audience in 5 years as we will be promoting our service only in areas were we think our target audience are.

From the government statistics it is known that young adults are not getting enough fruit and vegetables. This is useful information to the business as the firm is producing meals which are using many different types of organic vegetables. By letting the customer know you are contributing to a healthy life style for them the customer feels they are being served well. The fact people are not getting enough fruit and vegetables can be used as a marketing tool for example ‘get your 5 a day’ used as a slogan. This could be printed on all forms of advertising available to the firm letting the customer know what they can get by eating healthy. A promotional leaflet could also be given to customers highlighting the benefits the healthy meals available could have for them. By putting this sort of strategy in process the firm would be focusing in on the health benefits the firm provides and by focusing on this area business could be took from rival firms who are concentrating on their catering service as a whole rather than a part of it giving pure and simple a competitive advantage in the area of healthy and organic foods.

Another factor enabling the business to focus on its target market is its close proximity to both suppliers and customers. This is very important as to achieve customer satisfaction food needs to get to the customer quickly and still be of good quality. Mintel reports show that customers do not like to be kept waiting for service and 70% of consumers buy again if they have been treated well. If the firm can be on time regularly and provide good customer service the edge may be gained over larger catering firms who may struggle to be on time with a larger order book and a wider market to serve. This will hopefully gain the loyalty of the firm’s target customers. Also printing a set menu and distributing it around office blocks and high class flats will be done by the firm in yet another attempt to inform the firms target market of what is on offer.

3.3 Finance

I have based my sales figures on the fact that Ellen wants to make her business grow at a fast rate and took into account the high growth rate catering firms are currently enjoying. It is very difficult to achieve accurate projections but I feel these figures are easily achievable if Ellen sticks to her focus strategy and provides a professional service I can see no reason why the firm will not meet these projections. Manchester’s city center wealth is growing according to the Mintel website and since our target market lives there we will meet these projections easily. Costs of sales have been estimated on prices from the barbican delicatessen and the unicorn organic food store. Overheads have been calculated after looking at Ellen’s current bills and then adding on estimated costs. Fuel costs have also been estimated as a rough guess. As we go from year 1 to year 5 overheads and fuel do not go up at a constant rate as we will have more custom meaning we will be able to get more use out of our facilities. I.e. we will be able to put more meals in one oven or be delivering to 3 houses on the same journey instead of 1. Wages have been calculated taking into account Ellen is working part time for the 1st few years and that extra staff will be needed as the business grows. Telephone bills have been estimated by looking at Ellen’s current bills and then making estimation on them.