I have selected a nursery because there is high demand in the UK as well that there is a reasonable amount of profit
SUMMARY
PEOPLE
I intend to employ on 3 to 4 employees along with my self and cater for approximately 12-20 kids once the business has established itself then I may decide to expand and cater for more children.
THE PRODUCT
I have selected a nursery because there is high demand in the UK as well that there is a reasonable amount of profit, which can be made if the business is planned out correctly. One of the main reasons why demand is so high is that more women then ever before are going to work, and therefore day nurseries provide a suitable environment for their children to be looked after in.
THE MARKET
One of the main reasons why demand is so high is that more women then ever before are going to work, and therefore day nurseries provide a suitable environment for their children to be looked after in.
PRODUCTION
Since my business is basically a service that is a day nursery hence there is no production involved it is the services, which I provide to my customers. I offer milk to the kids, if any of the kid needs milk I will be offering them, then there will be a rest room in which those kids who are tired can sleep in that room, the third service which I offer is playing, I will be having a room in which all the toys will be there all the kids can play there, my childminders will play with them, and the fourth service is giving the kids basic education.
EXPECTED PROFIT
For my business to be successful it is very important that it should make profit , so at the end of one year I will be making a profit of £2454 which shows that my business is going to do well, its just the starting as and when my nursery becomes popular among the people I thing it will be doing well and making more profit.
FINANCE NEEDED
As mentioned in financial and production plan I will be looking to obtain a loan of £5000 from the bank. If the bank rejects my application, then I will consider getting a sleeping partner so that I can apply again for lower amount. I could also find a partner and then half the investment. This is because currently I have personal savings of £3500 and could use £2500 of this to open my business with my partner. When discussing the plan with my father, he agreed to help whenever he could so the last report to raise finance would before him. This is because he has good credit rating with the bank and can obtain a loan for my business.
BUSINESS & OBJECTIVES
BUSINESS NAME Jingle Bells
ADDRESS Uxbridge Road, Ealing W 13
LEGAL STATUS Private Limited Company
Its advantages are:
* Limited liability will be there.
* Control is maintained.
* Easy to get finance.
* Less risk is there.
NATURE OF THE BUSINESS Nursery for Kids
Have 4 staff and I will be the head. The timings will be from 8 am till 6 pm from Monday to Friday.
START DATE 1st January 2005
MISSION STATEMENT "Jingle Bells Limited will be having a committed staff".
Will be attending needs of the customers.
Will have a good service.
SHORT TERM OBJECTIVE Jingle Bells will within the first twelve months of working:
* Increase profit by taking in more children in the nursery, and making a profit of £ 5000.
* My breakeven will be 573bookings in one year
* Achieve enough bookings.
* Will have 3 full time well trained staff.
LONG TERM OBJECTIVE Jingle Bells will within the first three years in Nursery:
* Establish the business name and reputation.
* Increase profitability to 15% by achieving more bookings.
* Achieve a market share of 10%.
* Expand the business by opening another branch if there is reasonable demand.
* Employ 2 more additional staff.
MARKET ANALYSIS
MARKET FOR MY PRODUCT
Market-The UK children's day nurseries market had worth 2.7 billion in 2003. Like the broader childcare sector, the children's nurseries market has grown rapidly in the last 10 years, and is now more than seven times the size than at the end of 1980s. Increasing demand for nursery services and general childcare from working mothers has driven market expansion. The key factors driving demand include delayed family formation, increased female work participation, and a shift in preferences from parents towards childcare and early year's education. Private individuals in the UK spent an estimated 2.2 billion on children's day care services in 2003.
Market Size
A total of 12,075 children's day nurseries in the UK provided 537,450 places for children between 0 and 5 years in January 2004. Average occupancy for the UK was 85%. Nursery sector capacity has more than quadrupled between 1990 and 2004, concentrated solely in the independent sector at a time when local authority provision has been decreasing, though it has started to grow again.
All this shows that there is a high demand for nurseries One of the main reasons why demand is so high is that more women then ever before are going to work, and therefore day nurseries provide a suitable environment for their children to be looked after in. The parents of children will be working people and will be basically upper and middle class parents, some of them will be part time and some will be full time.
The research which I have done for market and about childminders is attached in the appendix 2.
Customers-After analysing the children's day care market I have come to know that the children from the age o to 5 can attend private day nurseries. This is because when children reach the age of 3 in these nurseries they are then taught the national curriculum.
However, volunteer day nurseries can only provide for children the age's 0 to 3 this is because they do not teach the children the national curriculum and therefore the children attend nursery and reception in a primary school.
Parents who want their children to attend a nursery want to have easy access and do not want to travel too far in the morning to drop their kids off. Hence the following has to be considered. The target customers for my nursery will be parents who have got kids aged between 0 and 5 years because they will be the ones who will be willing to put their kids into my nursery. The people will be those who will be having good incomes so that they are able to pay for their kid who will be studying in my nursery and also who will be having good status, they will be basically middle and upper class people who will be bringing their children in my nursery.
Residential Market-this means that most parents would not use the nursery if it was more than 5 miles away from their house .As well as that I have to look at the average income in my area, which I tend to open my nursery in Ealing and see if the parents can pay the anticipated fees. Futher more how high is the demand in Ealing for private day nurseries and how likely is it for the parents to substitute a day nursery for nanny child minder?
Commuting Market-made up of people who will drive past or the nursery when they are going to work. This is so that it will be convenient for the parents to drop their children off in the morning and pick them up in the evening. Finally what are the major transport link near the nursery i.e. bus stop train station.
2001 Ealing borough Census results showed me :(www.ealin.gov.uk)
* Ealing total population 300948
* Average age in Ealing is 35.6 years old
* More people aged under 16 than 1991
* Ethnicity in Ealing 41.3%
* 31.7% households do not have access to a car or a van.
When looking at results above I can see that Ealing is very densely populated when compared to other areas in West London. This is good thing for my business because there is a larger market to target .An average age for resident living in Ealing is 35.6, this is lower than the countries average and therefore it could lead to younger parents and younger children furthermore the number of under 16 years old has increased in Ealing and hence there will be more children who may be suitable for the nursery.
London itself is very multicultural society. However; Ealing itself has ethnicity of 41.3%, this means that when marketing my service I will have to launch a marketing campaign that will attract all ethnicities and cultures. Finally more than 30% of the households do not have access to personal transport i.e. car or van therefore the location of the nursery must have transport links .For instance based near a bus stop or densely populated housing area.
Now I will loot at employment figures and an average income to decide what rate I could charge my customers. Furthermore I will then look at my competitor's price and see what the difference between the two is.
Employment in Ealing
Employment By Industrial Sector, 2002 - Ealing, West London, London and GB.
Ealing
West Ldn.
London
GB
Total No.
%
%
%
%
Agriculture, hunting and forestry
X
X
X
0.1
0.9
Fishing
X
X
X
0
0
Mining and quarrying
X
X
X
0.1
0.3
Manufacturing
2,313
0.6
8.3
6.5
4.2
Electricity / Gas / Water supply
X
X
X
0.2
0.5
Construction
6,149
5.3
4.0
3.3
4.5
Wholesale/retail trade; repair, etc
25,510
21.9
7.8
5.3
7.7
Hotels and Restaurants
6,919
5.9
6.5
6.9
6.5
Transport / Storage / Communication
0,335
8.9
4.7
8.0
6.1
Financial Intermediation
,267
.1
2.4
8.1
4.1
Real estate, renting, business activities
27,270
23.4
21.6
24.9
5.5
Public Admin/ Defence/ Social security
3,520
3.0
4.2
5.1
5.2
Education
7,201
6.2
5.5
6.4
8.4
Health and Social work
9,070
7.8
7.3
8.0
0.8
Other community/ Social Personal Service
6,590
5.7
7.5
7.1
5.2
Total
16,363
00
00
00
00
x=Confidential data - cannot be released
Source: Annual Business Inquiry, Nomis, ONS (c) Crown Copyright Reserved
Analysis of table
There are nearly 117000 employees in Ealing who either full time or part time jobs. The most popular form of employment in Ealing is in business services. (23.4%) This then closely followed by the retail and wholesale sector (21.9%). In Great Britain15.5% of employment is in the business services sector hence there is a difference of nearly 8% when compared to Ealing.
There are 12 boroughs in London and only three have higher employment percentage in retail and wholesale trade than Ealing. This is a good sign because it means Ealing is not doing to badly on employment. However, property prices are very high and therefore it means some people can buy a house and must rent. Furthermore this leads them to have less money to spend and it could result in my nursery having to reduce rates considerably.
PRIMARY RESEARCH
E1 Questionnaires-For my Primary Research I got the questionnaires filled, as they are an effective method and allow the business to ask specific questions from the customers. It can then see what the response of the customer was before making any judgement. The questions I designed are specifically related to my service. I got my questionnaires filled from Ealing high street as my nursery will be in Ealing only, went to different people and firstly asked them if they have a kid who is between 0-3 years if they said yes then only I asked them to fill the questionnaires. The questionnaires and the graphs are attached in Appendix 3.
Analysis of Questionnaire-
My questionnaire was based on people who had children aged 0 to 5. Hence everybody who answered the questions had a child between that age group. If the candidate did not then their questionnaire was cancelled, as they were not a suitable for the research I was looking for.
From the people I questioned 45% said they would need a private nursery 5 days a week, so there is a demand for it.
55% of the people would prefer a better changing facilities and other snacks, along with this having a safe environment is the most important quality for the parents followed by keeping child safe and happy.
At present the parents mostly used the services of Asquith court followed by Saplings.
Most parents said they would require the services of the nursery in February.
I received a 80% response from parents that they would be interested in sending their children to a day nursery. The other 20% did not want their children to attend a private nursery. So overall I can use this as a big positive because there seems to be high level of interest.
8% of people said that they did not have access to their own transport. I have to keep this in mind when situating my nursery. This is so that it should have reasonable transports links, or be accessible for customers.
80% of the candidates were in full time employment. The remaining 20% were unemployed or in part time employment. This seems good because if the number of full time employees increased then it will mean that more people will need some one to look after their children.
80% of the candidates said they would prefer a day nursery than a nanny to look after their children. Once again I can use this to my benefit because the majority would use my service instead of a nanny.
85% of the candidates said they could recommend a friend or a relative who may be interested in sending their child to a day nursery. This also sounded well because if customers recommend my service to others it will mean a higher turnover and possibly more profit for the business.
I received an overwhelming response from candidates saying that sending children to day nursery was one of the best methods to introduce children to the concept of learning. A small minority did not agree with us.
9%of the candidates said they would be willing to pay between £0-100 per week for their children to attend a day nursery. However 21% said they would be willing to pay £101-200 and 70% of people are willing to pay £201+, so I will be keeping my price as £201, since 70% of people agree to this price.
Now that I have completed my questionnaire and have analysed it, I believe that there would be demand for my service and that I should go ahead with opening a nursery. However social and political topics in the future could have a great influence to my business.
Face to face Interviews-For my primary research I also had face-to-face interviews with the customers as I thought it is a useful method to interact with the public, and find out their views of a nursery in their area.
SECONDARY RESEARCH
E1 For secondary research I used the following sources, which were quite helpful for my business.
Newspapers-With the help of financial times I was able to learn about the economy as well about the competitors.
Government-I was able to get information from ONS (Office for National Statistics), DTI (Department of Trade and Industry) that was quite helpful as it gave me information about employment in Ealing.
Internet-I used this source as it's a invaluable research tool and was able to get useful information about the market and its competitors.
Books-I used this source, as I was able to get ideas on topics such as: designing a plan, legal implications, and recruitment.
Pest Analysis on Day Nurseries
C1 The pest analysis may sound very strange however many businesses carry it out to find out what external factors can affect the business. The Pest analysis stands for:
> Political
> Economic
> Social
> Technological
Political-There are many political factors that can affect the market of a day nurseries. This is because external factors such as war or terrorist attacks can cause paranoia amongst the public and they can loose faith in the services being offered to them. What's more is that there are many legal factors that can affect the recruitment for employees. Currently today an employee at private day nursery must have several qualification or must have taken certain courses from them to be legally qualified.
There are several employment polices in the UK which I must follow to operate legitimately. For instance employment regulations such as the Sex Discrimination Act are followed worldwide. However different countries have their own age and minimum wage regulations. I must not break any of these laws otherwise I could face legal action. The current government is introducing subsidised childcare costs/benefits
I should follow those subsidies only.
Economic-Currently, the UK'S economy is battling its way out of an economic recession. Therefore with the rate of a family's income and the state of economy will greatly determine how much I can charge per child. The rate of inflation will also affect the rate I charge because if prices go up then it will mean that I have to increase how much I charge.
The amount of import and export will affect the amount of wealth leaving and entering the UK.Therefore if there is unbalance it will affect my business and how much I charge.
At the moment an average salary for nursery worker is based in the region 12 to 15 thousand pounds. If there were a shortage of workers or the pay went up then it would mean that I would have to pay more to a worker and possibly charge customers extra.
Social-There are many social factors that can affect the looking after of children. This is because recent topics such as paedophilia and child abuse may put of some people from putting their children in day nurseries because they may lose faith.
Some workers who haven't got the legal qualifications must not be recruited if discovered it could become a major media topic and possibly dent the market heavily.
Recently parents have been advised to spend more time with their children at young age and do basic learning activities. Parents who don't have time will be more eager to send their children to a day nursery so that they can don't miss out on their learning.
Furthermore research (Harralambos and Holborn Sociology themes and perspectives fifth edition) has proved that more women single parents are going to work than ever before. As well as that generally more women are going to work than ever before. Therefore their children would require a place to be looked after in. Finally family values have changed dramatically, in previous years most family's had a strong bond and these days some families don't have a strong enough bond. For instance strong bonds grandchildren being looked after by their grandparents .Yet these days this is not always the case hence parents have to find other alternatives.
The research about the social trends is in Appendix 4.
Population Growth
Since around 1650, the world human population has grown massively, at an increasing rate until recently, from some size of the order of 500 million, to over 6 billion now.
Demographic Transition
In the 'industrialised' or 'developed' world, during this period of growth, national populations have largely completed going through what is called the 'demographic
Transition'. The UK population is projected to increase from 59.6 million in 2003 to 65.7 million in 2031. Population growth is expected to continue beyond that date, peaking around 2050 at nearly 67 million and then gradually starting to fall. All this shows that with the increase in population there will be increase in the number of kids hence more people will be sending their kids to nurseries.
All the research, which I have done, based on demographic policies, trends in birth, change in family size, population movements is in Appendix 4
Source://www.population-growth-migration.info/index.php? Page=population.html
Technological-The technological factors can be the invention of new toys if any new toys or any equipment is being introduced then the nursery has to adopt that because no parent would want there child to be using old fashioned toys or equipment.
THE COMPETITION
Day Nurseries are more in demand than ever before. Therefore many small firms have seen a gap in the market and have tried to expand.
Below is a list of all the major private day nurseries: as you can see that the market leader is 'Asquith Court'. It ...
This is a preview of the whole essay
Source://www.population-growth-migration.info/index.php? Page=population.html
Technological-The technological factors can be the invention of new toys if any new toys or any equipment is being introduced then the nursery has to adopt that because no parent would want there child to be using old fashioned toys or equipment.
THE COMPETITION
Day Nurseries are more in demand than ever before. Therefore many small firms have seen a gap in the market and have tried to expand.
Below is a list of all the major private day nurseries: as you can see that the market leader is 'Asquith Court'. It occupies 60 nurseries in 1999 and its main rival is Kinderquest who has 38 nurseries. Busy bees are another name to watch out for because it has 23 nurseries yet expanding regularly.
There is a market for new comers such as:
Saplings: 3 Nurseries
Kindercare: 2 Nurseries
The Birrell Collection: 5 Nurseries.
These new comers have relatively small market share. Although demand is high and therefore they too could expand a lot more.
Chart for Competitor Analysis
Jingle Bells
Asquith Court
Kinderquest
Busy Bees
Price
£200
£250
£270
£210
Service Quality
Good
Very Good
Good
Very Good
Availability
8 am- 6 pm
8am - 6pm
8 am - 6 pm
8 am - 6 pm
Customers
Parents
Parents
Parents
Parents
Reputation
New
Good
Mixed
Good
Location
Ealing
Ealing
Ealing
Ealing
Special offers
None
None
None
None
All of the nurseries listed above occupy children aged from 0-5 because they all teach by the National Curriculum and are inspected by OFSTED.
TARGET CUSTOMERS
C1 The target customers for my nursery will be parents who have got kids aged between 0 and 5 years because they will be the ones who will be willing to put their kids into my nursery. The children will be basically from upper class and middle class parents who will be coming in my nursery as the rates, which I have, are reasonable which both these class of parents can pay.
LIKELY DEMAND
C1 As after doing my questionnaires I can see that there is likely demand for my
A1 service as all the questionnaires I have got filled are from candidates who have
Kids aged between 0 and 5 years.
12 MONTHS PROJECTED SALES
C1 Expected Turnover for the first 12 months is £2654 based on 573 children
A2 Sales break-even figures
£37046 (Total Overheads)
_______________________ X 100 = 82,324
45% (Gross Profit Margin%)
MARKETING PLAN
MISSION STATEMENT
> "Jingle Bells Limited will be having a committed staff ".
> Will be attending needs of the customers.
> Will have a good service.
To produce a business plan for a new product or service. This business plan includes:
> A market analysis for the product or service.
> A marketing plan.
> A production and quality assurance plan.
> A financial plan, including a spreadsheet or similar document produced using IT.
> An evaluation of all components of the plan.
Marketing Objectives
Marketing objectives are very important for every business as they reflect and contribute to the achievement of the overall business objectives hence my business objectives are:
Jingle Bells will within the first three years in Nursery:
> Establish the business name and reputation.
> Increase profitability to 15% by achieving more bookings.
> Achieve a market share of 10%.
> Expand the business by opening another branch if there is reasonable demand.
> Employ 2 more additional staff.
Where are we now?
After conducting my market research I have come to a conclusion that there is reasonable demand for the type of business I am planning to open. This is because in my questionnaire I have managed to establish the fact that parents both single and married parents are willing to send there to a private day nursery.
The market itself is in the growth stage and has not yet matured. This is useful towards my business because it shows that there is a larger chance for the business to be successful than it would be when entering a matured market.
I found out in my market research that Salaries in London were higher than anywhere else in the country; once again this meant that more people could afford to pay rates, which I am going to charge.
My market research also showed me that small and medium sized businesses could also be targeted because some employees may have to limit their hours of work so that they can look after their children. However, they may extend their hours of work if they sent their children to my private day nursery.
The major competitors in my market are: Asquith Court, Busy Bees and Princess. They can be found on my list of competitors, which I found when conducting my market research. I will try to look at how they do things and which methods they use and then use the best ones for my nursery.
Finally I have discovered the major political economic social and technological factors that affect my business when operating successfully. What 's more is that there are some factors which I have no control and therefore advance precautions may be suitable.
Where do we want to be?
Once the business is ready to open, I will want the following to be achieved in the early stages (1-2yrs)
> Establish the business name
> Break even
> Having a small promotion campaign running in selected areas
> Having a stable and strong work force
> Increase the number of children to highest ever after 1year
> Increase market share
> Expand the business by opening another branch if there is reasonable demand.
Once the business has established its name it will mean repeat business form existing customers and the customers introducing friends. Futher more a good reputation may also result in competitor's customers coming to my nursery.
It 's essential for my business to break even otherwise it will result in bankruptcy, further more the main incentive of the business is to make a profit and this is only be achieved once the business break evens and progresses further.
Having small promotion campaign in local areas will result in raising awareness amongst the public and possibly attract new customers. Futhermore It will help people remember the business for the future, if they ever need to use it.
A strong and stable workforce will mean that the children can build good relationship bond with the workers and not need to readjust regularly. Futhermore the business will run more efficiently with a stable work force because staff will be more experienced and have good relationship with each other.
After a year the business will be well established and the major goal would be to increase the number of children. This will also result in increasing market share and possibly making more profit. If there is an excessive demand then I may also consider expand the business and opening another branch or alternatively expanding the existing one if possible. Hopefully this too, will result in a larger market share and more profit.
How are we going to get there?
Strategy and the four P'S (Product, Price, Place, Promotion)
I will have to consider the four P's when deciding to form a strategy for my business. This is because the strategy will help me target certain customers and try to maximise the success of the business.
The four P's are:
> Promotion
> Price
> Product
> Place
These 4P's are crucial because it's them that will have a big impact on the customers. This is because each P will determine to some extent how much money my business takes in.
E2 Product-My particular product is a service .The service is accommodating
C1 children aged between 0to5.Futhermore,once they reach the age of 3 they will
be taught by the national curriculum.
Throughout their stay the children will be developing their coordination skills and learning the alphabet as well as numbers. Each child will have a chance to sit down with a member of staff once a week and have one to one with them. This could range from private reading to games and discussing problems or issues.
There will be events in the school holidays such as painting and trips for kid's aged 3+. As well as those parents who wish to come in at some point to watch their children learn are most welcome.
I will try to look at teaching methods used by competitors and see which methods can be useful to me .The nursery will open in the morning at 7:30 am so that children can be dropped in the morning by their parents. However the learning itself will start from 9 am .The nursery will close at 6pm.The long operating hours will allow more flexibility to parents.
There will be a number of breaks and lunchtime for children to relax; this is not to say that they are going to be working all day long. Mainly because they will be taking part in fun and educating activities. However, lunch times and breaks will allow them to recover and have rest.
The Product Life Cycle
A product life cycle shows the four stages that all products go through in their lifetime. However the amount of time they take to get to each stage and how long they stay there depends on the level of success they achieve .The four stages of production life cycle are:
> Introduction Stage
> Growth Stage
> Maturity Stage
> Decline Stage
Introduction
The introduction stage is when a product is newly introduced to the market and wants potential customers to hear about it. It tries to raise awareness by focusing mainly on the four P's (Product, Pricing, Distribution, Promotion). My business has already passed from the growth stage as there are a number of day nurseries which people are aware of hence my nursery will be new in the market but people already know about it.
Growth
The growth stage is when the product has made an impact on the market and is building customers regularly. It now looks forward to the maturity stage. My business is on the growth stage because it has made a impact on the market but it still has to build up customers.
Maturity
The maturity stage is when the product has reached its peak. However now it looks to remain there with high and regular sales with existing customers. My business is at the growth stage since its new in the market hence it will need time to come to the maturity stage.
Decline
The decline stage is when the products demand falls and is not wanted by many. At times the product might be taken of the market due to poor rate of success. Since my business is new hence it's at the growth stage so after 6 months only I can say where does my business stand.
The day Nursery market is reached the growth period and has not yet by far matured; this is because demand for day nurseries is growing rapidly day-by-day. Mainly because more single parents and women are going to work hence they need a place for their children to be looked after in. Furthermore there is a shortage in some parts of the UK for day nurseries. It's passed through the introduction period because day nurseries are chosen over nannies today as I found out in my market research; because children can learn and play at the same time.
I will look around my local area and see where the most suitable location would be to base my day nursery. What's more is that day nurseries face indirectcompetion from Crèches. For instance some offices, gyms and leisure places have special areas to look after children while the parents can be alone.
On the whole I still believe that the Nursery still has few years to go until it can mature, as well as that if events such as sexual harassment or poor learning for children take place in a day nurseries then it could mean it will face decline period.
SWOT Analysis
This method is used to find Strengths, Weekness, Opportunities and Threats within my business. Futhermore I can see which areas are doing well and where improvements can be made. It also allows me to hunt for nay opportunities that may be around.
Strengths-The fact that I have drawn up a business plan for my business will allow me to form a base for all the different aspects that I may come across when planning my business. What's more is that the market research that I have conducted will help me greatly, due to the fact that I will have a better understanding of the market and the hazards that lie in it as well as the opportunities. I have a good understanding regarding other areas of business that I have learnt in my other units; this too should be very helpful .My market is in the growth section in the product life cycle, therefore I may come across more opportunities and chances of success than I would if my market was matured.
Weaknesses-With any new businesses there are areas, which will affect the rate of success. For instance entering the new market is always difficult and can sometimes result in business not establishing them properly and possibly going bankrupt. It will take time for me to gain a reasonable amount of customers because some aspects of the promotional campaign may not be as successful. The competitors whom I am competing against will hold a strong share in the market hence it will be complex to compete against them directly in the early stages of the business. Therefore my main objective would be to establish the business and breakeven.
Opportunities-As mentioned before, my market has not yet matured and so it will be easier to find or attract customers than it would be in a matured or declining market. More women and single parents going out to work which would also allow me to explore the market and possibly gain more customers. Furthermore I can approach employers or employees and make them aware about the service that I provide which could be useful in the future.
Threats-New businesses face the threat of not covering their costs and can sometimes dig themselves deep holes. I will be cautious regarding this issue and therefore will only go ahead with the business if there is a reasonable chance of success. In addition to this my competitors will also be a threat to the business. Current affairs such as child abuse and pedophilia may put people off from sending their children to day nurseries.
In conclusion to the SWOT analysis above I can conclude on the fact that there will be a considerable amount of threats and weaknesses, which I must also make sure that the strengths and opportunities are maximized to make the business stronger.
Ansoff Matrix
Ansoffs Matrix revolves around four different catrgories. Each category tells the business what should be its next move. This is because the four stages: market Penetration, Product Development, Market Development and Diversification lead the business to another direction.
Market Penetration-is selling a larger quantity to the existing customers of the business. This is not applicable to my business as my business is selling the current product to the new customers.
Product Development-is introducing new products to the business existing customers. This is also not applicable to my business as my business is selling the existing product to the new customers.
Market Development-is selling the current products to new customers. I will be starting a new product hence I will be selling an existing service but to new customers
Diversification-is going to a new market and selling new products. This is also not applicable to my business as my business is the current product to new customers.
A diagram to show Ansoffs Matrix:
I will be starting a new product hence I will be selling an existing service but to new customers. This is known as market development. Although I could vary certain aspects of the service in the future (Product Development).If business becomes a success then I may move on to penetrate the market by reducing the price and trying to expand and increasing the number of children.Futhermore I may choose to diversify in another market if my current market fails, or I see a gap in another market.
Distribution & Place - Goods and services are often available in many E2 places depending on the demand by the consumers. My particular service is
C1 going to be based in areas of west London. This is because my primary
research (questionnaire) resulted in a promising response.
The site itself will be split up into different areas. For instance a play area for the ids, learning area, lunchtime break area, toilets and seating area and fire exit.
To add to that flooring will be carpet and the nursery itself will have brightly coloured walls so that it appeals to the children.
The seating area will have cushions on which the children can sit on and there will be area in the kitchen, which will accommodate any food or drink bought in by the children. However, the children will be provided with food and drink from us.
Price -In most products, price is the key influence of purchase. Private Day E2 Nurseries are seen as higher class of early learning with a cost. Families who
C1 are on low income may not be able to afford it. However, I will try to charge
A2 below my competitor's rates and try to encourage more people to put there
children in my Day Nursery.
Some day nurseries charge per week and I will start off doing the same however, if need to be I may charge per session and make sure that the highest quality is offered to both the parents and children. In result the business will build up a good reputation, this. Once the business has regular customer then I may become more flexible during holiday periods.
The amount I charge will also depend on the number of kids there are to a worker. This is because if there are only one or two kids to a worker, then the price for each kid will be high. However, if there are four to six kids to a worker, then the price will be much lower. Another factor for price is, the equipment children use to build there learning and coordination skills. This is because if each child has his/her own mini computer then the rates charged will be higher than if they use just books and toys.
Overall I feel that I can charge just below my competitor's rates (market penetration) because the market researched has proved that this type of market is in the growth period, therefore there is reasonable demand for the service I am going to provide.
Promotion-Without promotion not many people will hear the service I am E2 offering. Therefore it's absolutely essential that I choose the best methods to
C1 promote the business and the business name. However, I must consider the
cost and justify it against the effect it will have on the business. For instance it will be pointless to do random leaflets, mainly because most people will not be interested in the service being offered .I must also remember that as the opening date is coming closer, much more money is pumped into marketing since I would want people to hear the business. Hear are some of the methods that are available to me.
Television-The adverts are a very useful method because it will give me a chance to show the internal view of the nursery. However, I will not be using this method because it will cost too much and not be effective enough. This is because the advert will be seen nationally, however my business is based in West London, and those who see advert in other areas such as Manchester will not be able to use the service as they live to far away.
Internet-This method has become common in the last few years. This is because in the previous years not many people used the Internet.However, when advertising on the Internet will use graphics of toys and bright colours to make it attractive as well as have an e-mail link and telephone number for booking or enquires. A website is often cheap to set up and extremely useful. Therefore I will consider this to be one of the main marketing tools to promote the business.
Newspapers and Magazines-In the early stages of the business I may consider advertising in pregnancy magazines or women's health magazines. This is because as my market research proved earlier on that more women are going out to work than ever before. Therefore their children require a place to be looked after in. Overall I think I will use this method at some stage.
Radio-adverts are useful when they are to the point and get the message across to the listener. I will not be using this in the early stages of the business, however, I could use this method once I carry out extra market research and discover what radio stations my potential customers listen to.
Billboards and Posters-Are one of the slightly cheaper methods. The two are very similar however billboards are much bigger and eye cathching.the method is useful because a picture can be shown of the service, which is one offer. Nevertheless if it doesn't appeal to the public then it will be a waste of money and time. Therefore it's critical that the poster and billboards are designed carefully. The location of the posters and billboards will have great impact on the response. This is because if they are not in an eye-catching location then not as many people will see them.
Leaflets-Are going to be one of the major tools and I am going to use to promote my service this is because, I will get leaflets put through the doors in the local area as well as being given to young and middle aged women in high streets. The method itself is cheap and cost effective.
TABLE FOR ADVERTS
MEDIA
WEEK-1
WEEK-2
WEEK-3
WEEK-4
TOTAL TIME ADVERTISED
TOTAL COST
Local Newspaper
7
7
7
7
28 days
200
Magzines
Once in the monthly issue
100
Leaflets
7
7
7
7
28 days
700
Total Cost
3000
Explanation- I am going to advertise in local newspaper for 1 month so everyday I am going to give a advert about my nursery, the second media which I am going to use is to advertise in women health and pregnancy magazine, since they come out every month hence one month before my nursery starts I am going to advertise in these magazines, the third media is to give out leaflets in west London basically in Ealing because my nursery is in west Ealing so if I give out leaflets in that area then the people will be aware about my nursery. I am also going to have my nurseries website in which all the details will be there so any one who wants to access it can do so and find out the details which they want, this is going to cost me # 2000, hence my total cost for advertising will be £ 5000.
The research of the costs of advertising in different media I have attached in Appendix 5.
PRODUCTION AND QULAITY ASSURANCE
PREMISES FOR THE PROVISION OF NURSERY SERVICE
E3 Front Aspect View Uxbridge Road Han well W7
Commercial
*TO LET*
*FIRST AND SECOND FLOOR OFFICES*
*1200 SQFT*
*NEWLY DECORATED*
*NEW CARPETS*
*FLEXIBLE TERMS*
A first and second floor suite of offices situated on the Uxbridge Road opposite the Clock Restaurant. The premises have been recently decorated and also benefit from new fitted carpet. Ideal for any-professional business such as a solictors. Available immediately.
£10,000 Per Annum
Uxbridge Road, Ealing W13
Own entrance, stairs to first floor.
First Floor
Office 1
Size: 300 sqft.
Front aspect
Kitchen: fully fitted
Second Floor
Office 2
Size: 400 sqft.
Rear aspect
Office 3
Size: 400 sqft
Rear aspect
Office 4
Size: 400 sqft.
Rear aspect
Terms: Lease via Negotiation
Outgoings £300 per month to cover utilities and business rates.
Site Location (Land)
The above is a reasonable location for me to base my private children's day nursery because it's ideally located and can accommodate 12-20 children. This figure was discovered in my market research. I believe 12-20 children will be enough to cover costs and make my business a success. Futhermore it's based on Uxbridge road and therefore there are vital bus links. What's more is that there is a free car park opposite my selected premises.
The premises rent is £10,000 per annum and rates are £300 a month to cover utilities and business rates.
£10,000 divided by 12 equals £833
Therefore each month rent will be £833 and £300 rates so in total it will be £1133 a month.
The plan of my premises is in Appendix 6.
RAW MATERIALS OR EQUIPMENT
E3 There will be several pieces of equipment, which I would need to purchase
A2 before the nursery is opened. I will have an opening budget of £3000 to spend
on toys for the children. The toys will be purchased for all ranges. I have visited the Early Learning Centre website (www.elc.co.uk) and have ordered a catalogue as well as printing a few samples which are in appendix 2.To add to that I have registered with the ELC and will obtain 10% discount for each purchase I make from them. All the toys bought will be used to educate and develop coordination skills. This is because my market research proved that parents would want their children to learn these skills when attending a private nursery.
I will also need to purchase sitting equipment for the kids as well as small desks where they can draw and learn to write on. Futhermore I must buy reasonable stationary such as coloured pencils and paper that children can use while learning and having fun.
For staff I have to buy seating and admin equipment so that they can work as efficiently as possible. Finally there must be seating in the main reception for the visitors. The seating for the adults and staff plus equipment can be bought from office world which is in appendix 2 .The equipment for the kids will have to be bought from different place such as ELC.Overall, I believe £800 should be enough to cover the costs.
However, I will have to allocate another £600 to purchase a computer for the nursery that will keep details of all the children and emergency contact details. Futhermore, these details will be backed up on paper in a separate file. The computer can be ordered through Dell at (www.dell.co.uk)
The premises is fully carpeted, and the kitchen is fully refurbished therefore this will save me money, however, to make the nursery look nicer I will have a few posters and some flowers at the reception and some showpieces. I believe I will need £100 to cover these costs. The show/decorative pieces can be purchased from normal high street shops like Woolworth's.
SERVICE DELIVERY
E3 My particular service is not actually delivered to the customer such as
takeaway would do or a pizza shop. Instead customers will have to come to my service. I will allow £5000 to a local promotional campaign involving leaflets being given out that will help people become aware of it.
Production/Finance/Marketing
Inputs Transformation Process Output Outcome
Efficiency Doing things right=Effiency
(Minimum input for maximum output)
Effectiveness Doing the right things = Effectiveness
The diagram above shows the Service Delivery of my day nursery, its starts with inputs which includes the premises, it will have some space where the stock will be kept such as all daily stuff, it will also include the man hours that is the labour, will also have cash and capital that is the money coming by my customers, will also include all the information which the customers require such as prospectus which will include all the details and will also have details about the customers service, the next box includes the service process that is all the services which my nursery provides to its customers, the first will be customers satisfaction which is that my staff will make sure that all the customer needs should be satisfied and what all changes which the customers want should be done so that the customers do not have any problems, the third box includes the output that is the number of bookings I will be having in my nursery and then finding out how much profit is my nursery making which will show whether my nursery is doing well, if not then I have to find out what more can be done so that my nursery does well, the final box includes the outcome that is are the customers satisfied with the service which my nursery provides if not then have to make sure what all the customer wants and do accordingly.
First Floor
Reception Receptionist Phone Bookings Arrival
Kitchen
Second Floor
Room for 0-3 year kids Room for 3-5 year kids Room for break and lunch times
First Floor:
Office one: will be the main reception area where parents /guardians can come to drop and pick up their children. There will be a receptionist sitting in the reception and a phone will be kept so that she can make appointments with the parents for the bookings and also if any parent wants a prospectus or wants to ask any information they can ask from the receptionist. When the parents come to drop their kids they will drop them in the receptionist and one of the staff will be taking them to their rooms from their only. Furthermore there will be seats that parents can use to sit on if they wish to wait for a small period. There will be kitchen, which will be used by the staff.
Second Floor:
Will have a room for children aged 0-3 years old and the learning activities will take place in this area, it will also have room for children aged 3-5 years old and the learning activities will take place in this area. This will also have a room which will be the largest area in the premises and will be used for break and lunch times as well as there will be a small area where children can leave their coats and bags in the morning or lunch boxes.
LABOUR NEEDED, WHAT THEY DO
E3 In my nursery there will be 4 employees including me, I will be the head who
will be in charge of everything then there will be one assistant manager who will assist me in the work and there will be two more assistants who will take care of the kids.
The general rule is that 1 adult can be allocated to a maximum of kids. However, in my nursery I will have 1 adult to 4 kids (batch production due to age group). Therefore at first I will have four employees and see if I need to recruit more or reduce the hours of existing ones. Four children to 1 employee is reasonable as I feel the children will be given more attention and will benefit than they would if it were 1 employee to six children.
Each employee will be paid an hourly wage of £6.50phr.This is a competitive rate because an average employee in a nursery in Ealing is paid £6 to £8 an hour as I found out in my market research .If an employee works full time then they will earn:
> 40hr times £6.50= £250
> £250 times 4 employees= £1000 a week.
TIMING/SCHEDULING NECESSARY TO MEET
STOCK REQUIREMENTS
E3 Since I am doing a service so there will not be anything else apart from milk
C1 that will be delivered to me, I will be getting milk every morning at 8 am in
A2 order to feed the kids, I have to make sure the milk should be delivered at.
time every morning
NURSERY PREMISES & MANAGEMENT
E3 The premises will be divided as the following:
First Floor:
Office one: will be the main reception area where parents /guardians can come to drop and pick up their children. Furthermore there will be seats that parents can use to sit on if they wish to wait for a small period.
The Kitchen: will have normal kitchen utensils and a lock on the door to prevent children from opening it.
WC: will be fitted in so that children and staff can use it.
Second Floor:
Office two: will be for children aged 0-3 years old and the learning activities will take place in this area.
Office three: will be for children aged 3-5 years old and the learning activities will take place in this area.
Office four: is the largest area in the premises and will be used for break and lunch times as well as there will be a small area where children can leave their coats and bags in the morning or lunch boxes.
Insurance and Security
The Premises must have insurance and be secure at all times. I will have to have annual insurance policy so that I am fully insured. Futhermore I will have a security alarm so that the police can be called when intruders break into the nursery.
Below is a quote from an insurance company: www.insuranceservices.c.uk
Call 0808 100 8238 for your free no-obligation survey (www.adt.co.uk) this is the number I called to obtain a quote from ADT to find out how much I will be charged. They said: that they will charge me £300 to install the alarm and £1.98pence per day, thereafter for monitoring it.
So total = £1.98 times 365= £722.70p per year.
QUALITY ASSURANCE
QUALITY CONTROL-RAW MATERIALS
E3 I have to make sure the parents have been provided with good service and the
children are taken good care of then only my business will expand as by giving good service the parents will be happy and will recommend their friends and relatives to bring their children to my nursery as the children are taken good care of.
QUALITY CONTROL-MAUFACTURING
The staff, which I recruit, should be well qualified so that they can take good care of the children and what all needs to be done should be done correctly so that the parents are happy with the services which my nursery provides, n they should not complain about anything.
QUALITY CONTROL-FINISHED GOODS
Have to make sure that all the things should be done well, the children should be taken care of properly so that the parents feel happy about it. The services are provided well to the parents and also make sure the staff looks after the children properly at all times.
I will have three major points of sale. The first one is parents/guardians coming to reception and paying for their children to come to the nursery. The second one is to go on line and book via email. Finally third option is to phone up the nursery and book the children in. All these methods will have a batch production linked with them. This is because their will be two separate age groups 0to3 and 3 to5.
LEGAL CONSTRAINTS
There are several regulations and laws that my business must follow when recruiting employees from my nursery. The four basic work acts are:
> The Race Relations Act 1976
> The Sex Discrimination Act 1975
> The Disability Discrimination Act 1995
> The Equal Pay Act 1970
The Race Relation Act 1976
My business must comply with this act in three different ways this is because they are three different types of discrimination that can take place. Direct discrimination takes place when one person is treated more favourably then someone else. Indirect discrimination takes place when it seems that everyone is being treated the same however when looking closely it shows that a certain group is not treated the same. Finally Victimization occurs when an employee who has supported another employee that has been discriminated by being a witness in hearing is discriminated. My business must make sure that this does not happen by paying close attention and each employee is given the chance to comment if they feel that any sort of discrimination is taking or has taken place.
The Sex Discrimination Act 1975
This act is one of the oldest ones that have been introduced. It was enforced so no sexual discrimination can take place. My business believes in equal opportunities and therefore no discrimination must take place against staff regarding their sex. My business's belief's are that each and every staff member disregarding their sex must be treated the same. Once again I must make sure that none of this takes place. Employees can put a case forward if they feel any activity, which has taken place, does not comply within the act.
The Equal Act 1970
This is the oldest act out of the four. It was introduced due to women being discriminated for doing the same jobs as men but being paid less. My business makes sure that this does not happen because it pays both men and women the same hourly rate for the same job.
The Disability Discrimination Act 1995
This act was introduced to protect those with disabilities or a physical disadvantage, which they may be suffering from. For instance employees on a wheelchair will not be able to look after small children or move around continuously.
The Other Regulations are that:
> Employees must have completed a full First Aid work
> Have no criminal conviction against children.
> Be prepared to be inspected by OFSTED, both the employees and the business.
> Be registered with national authorities.
Health And Safety
Employees will be given clear talk on Health and Safety when employed. They will be given specific instructions in emergency situations. They will also be told that they must keep the premises clean (including kitchen) and suitable for children. As well as that, they must make sure that there are no dangerous objects that can pose a threat to children or themselves.
If the employees do not oblige the above then I will be held responsible. Therefore they will either be told to oblige these or not recruited.
Other factors to be considered are:
> Basic Food Hygiene
Suitable for childminders and nursery and school staff, recognised by OFSTED, RIPH certified, this "online" course is split into bite-sized modules that can be completed in your own time from your own PC.
> Maternity Practitioner
Suitable for experienced carers wishing to progress into Maternity Nannying who have previously had newborn experience or nannies wishing to gain some newborn skills.
> Child Protection
Suitable for nursery staff, teachers and childminders this course includes
> Recognising and Preventing Childhood Illnesses
Suitable for parents and all carers, this 2-hour workshop provides information on common aliments, signs and symptoms.
> Managing Challenging Behaviour
Suitable for nursery staff, teachers and childminders will help you find more appropriate and enjoyable ways to manage young children.
> Sleep Management
Suitable for parents and all carers, this workshop enables you to have general understanding of common sleep problems and how to prevent them.
> Baby Massage
Suitable for parents and all carers, this two hour practical workshop teaches you general massage techniques for soothing childhood ailments and assisting you to bond and relax with your new addition.
Information on legislation, signs and symptoms, policies and procedures.
Source: www.tinies.co.uk
RESOURCES NEEDED
C1 PREMISES £
Office Rent 1133
EQUIPMENT
Fixtures and Fittings 2500
Toys 3000
TV, Video 3000
Other items in play room 1000
OFFICE EQUIPMNET
Staff seating, Admin
Equipment and seating in the reception 800
Computer 600
Telephones 250
Stationary 300
PROMOTION 5000
START UP MATERIALS
Flowers and Showpieces 100
______
Total 14683
______
Explanation of Resources Needed
I would be needing money for all the resources which I will require in order to run my nursery so listed above are the resources which I will need starting with premises since I have taken a place on rent so I will be paying my rent monthly which will be £1133 per month, then I will require some equipments for my office hence have listed that such as toys, TV , video, then in order to make people aware of my business I will have to do some promotion so I will be spending £5000 on doing promotion like advertising in newspapers , magazines and also I will be wanting some decorating stuff so for that I will be spending £100.
Financial Plan
Now that I have carried out my market research, compiled my marketing plan and have concluded my production plan. I will now go on to my financial plan, which consists of five different areas.
> Cash Flow Forecast
> Balance Sheet
> Trading Account
> Profit and Loss Account
> Appropriation Account
> Breakeven
Summary of Costs and Expenses
When conducting my market research I discovered that I should accommodate between 12 to 20 children a week .My market research showed me that I should charge in the region of £150 to £250 per week. This rate will include the children attending the nursery full time (five days a week 9am to 6pm). What's more is that the nursery will feed the children.
Initially I will charge £150 per child so that the business can breakeven not struggle to find customers if I was charging £200 to £250.I hope to have 12 children signed on through promotion before the nursery opens.
£150 multiplied by 12 children= £1800 per week and £200 per month. The business will have a opening balance of £500 from my personal savings so that it can over come any small financial difficulties it may face during its opening.
The rent for the business premises is £833 a month plus there are rates of £300 a month, so in total it will be £1133 a month.
The other expenses are based on a stationary (e.g. paper pens pencils), children's food. These will vary compared to the number of children I have attending the nursery. This is because more children will result in higher expenses. Overall I hope to have more children in the holiday periods (e.g. summer).
Each staff will be paid £250(£6.50 an hour) a week and will work 40 hours. The nursery is open 45 hours a week and each day consists of 9 hours. So staff will be working 8 hours a day with a 1-hour lunch break. Overall I wish to have 4 employees and me.
4 employees= £1000 a week wages or £4000 a month. Personally I wish to draw £1000 to £1200 a month and possibly more during busy periods. I will have a monthly loan repayment of £250.
Finally I will also have a business account over draft limit of £1500 a month from the bank. Therefore if need be, I can brow £1500 a month to cover expenses.
PROJECTED 12-MONTH CASH FLOW
CASH FLOW FORECAST
E4 The following page will consist of my cash flow forecast, which I have
A2 designed for 1 year. Each area of the Cash flow forecast has been explained
above. The main purpose of this cash flow forecast is to help me judge the amount of cash that would be flowing through the business and which areas I may need to focus on more e.g.(reduce costs)furthermore it can help me observe other areas such as sales and targets that are set at the beginning of the year. Finally the main incentive being that the business does face a financial crisis.
CASH FLOW FORECAST
Explanation Cash Flow
The main purpose of this cash flow forecast is to help me judge the amount of cash that would be flowing through the business and which areas I may need to focus on more e.g.(reduce costs)furthermore it can help me observe other areas such as sales and targets that are set at the beginning of the year. Each month there is a different amount as sometimes there will be more spending and somewhere there will be less, apart from the rates, rent and loan rest everything keeps increasing or decreasing because the rent is fixed and also the loan which I have taken from the bank. Inorder to start my business I need a loan hence I will be taking £3000 from the bank as loan and then will be paying back £ 250 each month for 12 months, It is very essential for me to take loan from the bank as I need money to start my business, hence I will be paying back the bank each month. I need money in the starting only hence will be taking loan in the beginning and then as my business starts then I will be getting money as and when I will be having bookings. Overall I believe that my business does have a successful cash flow forecast, however, I must remember that it's only a forecast and there may be situations that I may have not considered which I will discuss later on.
ANNUAL BUDGETS
£
RAWMATERIALS
E4 Toys 3000
C1 Equipment 800
A2 Computer 600
SERVICES
Flowers & Show pieces 100
MARKETING
Promotion 5000
PREMISES
Rent 9996
BANKING $FINANCE
Monthly Loan 3020
WAGES & SALARIES
Monthly 48000
_____
TOTAL BUDGET 67516
_____
Explanation of Annual Budgets
In order to have a successful business I have to allocate a budget for my business hence above I have made a annual budget for my business for example how much I will be spending on promotion, how much I will be paying my staff, monthly rent and also have allocated some amount for expenses all this is for one year.
Calculation of capital, sales and expenditure budget is in Appendix 5
PROJECTED PROFIT &LOSS
THE PROFIT AND LOSS ACCOUNT
This will help look at how much profit or loss the business makes at the end of the year. This type of account has three parts linked to it, which are:
> Trading Account
> Profit and Loss Account
> Appropriation Account
TRADING ACCOUNT
The trading account looks at the amount of revenue and overheads that have taken place .The profit and loss account looks at the net figure from the two; it could be either positive or negative number. Finally the appropriation tax looks at the things like corporation tax. Although I haven't actually started to trade my business, I cannot have an accurate profit and loss account. Therefore the results are based from my cash flow forecast.
APPROPRIATION ACCOUNT
This is the final part of the part of the profit and loss account .It takes in to consideration all the taxation and the figure left at the end shows the net profit made by the business. This profit can then be used by the business in a number of ways. Such as giving employees bonus or saving the profit for any financial crisis that the business may go through in the future.
PROFIT AND LOSS DEC 2005
£
E4 INCOME FROM CLIENTS 88200
C1 ADDITIONAL INCOME 500
A2 TOTAL INCOME 88700
LESS: COST OFSALES (49000)
GROSS PROFIT 39700
LESS EXPENSE
RENT 9996
RATES 3600
OTHER EXPENCES 6850
DRAWINGS 13600
LOAN 3000
TOTAL COST (37046)
NET PROFIT BEFORE TAX 2654
TAX (200)
NET PROFIT AFTER TAX 2454
Explanation of Profit and Loss A/c
The Profit and Loss account is very important for all the businesses as it tells you where does your business stand so it is very important for my business in order to find out at the end of one year how did my business do in one year and also where does my business stand if you have made profit then it shows that the business is doing well but if it's a loss then have to think about what all needs to be done so that the business does not make any loss. I have calculated my profit and loss at the end of one year my income from clients comes to£88200 and I get £ 500 as additional income so my total income comes to £88700 and after taken out all the expenses I make a profit of £2654 and if I take out tax which is £ 200 then I am left with £2454 as my profit which shows that my business is going to do well.
PROJECTED BALANCE SHEET
BALANCE SHEET
A business uses a balance sheet to show where its revenue is coming from and where it's going .the balance sheet must balance so that the Inland Revenue can see that the business is paying the right amount of tax and not hiding income. My balance sheet will show where my revenue comes from and where it is spent.
BALANCE SHEET DEC 2005
£
E4 FIXED ASSETS
PREMISES 0
FIXTURE AND FITTING 3000
EQUIPMENT 5000
____
8000
____
CURRENT ASSESTS
STOCKS 500
DEBTORS 550
CASH AT BANK 2654
3704
LESS: CURRENT LIABILITIES
TRADE CREDITORS 0
TAXATION 0
LOAN 250
DIVIDENDS 0
RENT 833
RATES 300
OTHER EXPENSES 750
(2133)
WORKING CAPITAL (CA-CL) 1571
NET CURRENT ASSETS = (WC+FC) 9571
LESS: LONG TERM LIABILITY 0
___
NET ASSETS 9571
___
FINANCED BY
CAPITAL 7117
NET PROFIT 2454
____
9571
____
Explanation of Balance Sheet
A balance sheet is very important for all the business's as we can see at the end of each year where does our business stand hence I have also made a balance sheet to see where does my business stand, after calculating all the things my net assets and my capital comes out to be equal which shows that my business is going to do well.
BREAKEVEN ANALYSIS
BREAKEVEN
Every single business wants to breakeven at least and then go on to make a profit. The breakeven chart shows the business how much it has to sell for it too breakeven (cover it costs). It considers the both the fixed and variable costs. For my particular business the breakeven chart will show me how many children I must accommodate each week so that I could cover my costs.
This is the equation used to find the breakeven point:
Per Unit
I am going to charge £150 per week to accommodate each child. I will allow £5 expenses a week for each kid for things such as refreshments. Therefore the contribution will be £145.
Price -Variable Cost=Contribution
Fixed Cost
_________ = Breakeven
Contribution
£150-£5= £145
83026
______ = 573 Bookings
£145
573 divided by 52 weeks =11 Kids/Week.
Total Cost = Fixed cost + Variable cost
= 83026+5=83031/52= 1597
Total Sales = 150 x 11kids=1650
Fixed cost = 83026/52=1596
This means I have to look after 573 kids each year for my business to breakeven. Alternatively I have to look after 11 children a week. This seems achievable because my market research showed me that I could accommodate 12-20 children a week.
E4
Explanation of my Break-Even
A2 I have made a graph above showing my Breakeven that is where the sales and
the total costs meet is my break even after calculating I have found out that I will be looking after 11 children a week which is quite good and it will be easier for my staff to look after these children, as and when the number of children will increase then I will increase the number of staff.
FINANCIAL REQUIREMENTS
FINANCE REQUIRED
E4 As mentioned in financial and production plan I will be looking to obtain a
A2 loan of £5000 from the bank. If the bank rejects my application, then I will
consider getting a sleeping partner so that I can apply again for lower amount. I could also find a partner and then half the investment. This is because currently I have personal savings of £3500 and could use £2500 of this to open my business with my partner. When discussing the plan with my father, he agreed to help whenever he could so the last report to raise finance would be him. This is because he has good credit rating with the bank and can obtain a loan for my business. I will also require finance for paying my staff and also to pay for the equipments.
FINANCIAL MONITORING
In order to monitor my finance I will be having a junior clerk who will be monitoring my accounts at the end of each year to see whether I have done my accounts properly and if there are any mistakes been made then he can rectify them. I will check my cash flow regularly and also my budgets in order to locate any financial crisis in future and be prepared for it.
ASSETS AVAILABLE FOR SECURITY
The assets, which are there for security, will be fixture and fittings and equipment that comes to a total of £8000, all this amount will be security for my business, which is quite good as if any problem comes then I can use these assets.
SERVICE DATA
SERVICE 1 - The fourth service will be providing the kids the basic education.
SERVICE 2 -the second service which I will be giving to the kids is having a room for them to sleep , all those kids who will be there the whole day will be wanting to rest as they will be tired playing whole day , hence whenever any kid is tired then the childminder can make them sleep in that room.
SERVICE 3-The third service which I will offer is I will be having a separate play room in which there will be plenty of toys with which the kids can play the childminders are going to assist them.
SERVICE 4- The service which I will be offering will be giving milk to the kids, whenever any kid is hungry or they want milk then I will be giving them milk
PERSONNEL
SENIOR STAFF- The senior staff will be the assistant manager who is going to assist me in the work of the nursery; she will be a qualified and experienced childcare professional and will hold a recognised childcare qualification including NNEB, PPA, BTec, and NVQ,this staff will be doing more of work and will be the second person after me.
OTHER STAFF-The other staff will include 2 more people who are going to have these qualifications as my assistant manager and they will look after the kids in the nursery, like feeding the kids or playing with them.
VIABILITY & JUSTIFICATION
VIABILITY OF THE BUSINESS
E5 This project will be successful because it is based on market research as I did
primary research that is I got the questionnaires filled from my potential customers which showed that there is demand for my business , I did some secondary research like with the help of financial times I was able to learn about the economy as well about the competitors, I was also able to get information from the ONS(Office for National Statistics) which was quite helpful as it gave me information about employment in Ealing. I also used the internet to do my research as it's a valuable research tool and was able to get useful information about the market and its competitors; I also used books as I was able to get ideas on topics such as designing a plan, legal implications and recruitment.
FINANCIAL VIALIBILITY OF THE FINANCIAL PLAN
C2 Although my business has yet not started to trade, I can look at my:
> Cash Flow Forecast
> Balance Sheet
> Trading Account
> Profit and Loss Account
> Appropriation Account
> Breakeven
> Financial Ratios
And say that it will be worth me going ahead with my business plan so that I can start up my private children's day nursery. This is because my market research in marketing plan helped me develop a cash flow forecast. Although there are one or two periods when my business may have a negative cash flow, I can overcome this problem with my overdraft which I have available from the bank. To add that I have included all the expenses and staff wages .My personal drawings/wages will depend on the amount of trade that takes place. This is because in busy periods I will draw out more from the business and draw less when it's not so busy. In December I have considered giving my employees a Christmas bonus. This is shown on the cash flow forecast because each employee receives a £250 bonus, there are four employees so in total its £1000 extra for me to pay out. Hence the wage bill for that month is £5000 and not £4000.Finally my cash flow forecast also includes my loan repayment to the bank. Overall I believe that my business does have a successful cash flow forecast, however, I must remember that it's only a forecast and there may be situations that I may have not considered which I will discuss later on.
When looking at balance sheet initially I have a positive figure for my net current assets and also my net assets and my capital employed match with each other However, the main reason being that my particular type of business does not hold much stock. Hence I will not own as much assets as another business would. The two major things my business owns is fixture and fittings as well as the equipment. There will also be a small amount of food and stationary equipment as my current assets, which is used by employees and to feed the children. Nevertheless I have an overdraft limit with the bank, which I would use when I require a small financial boost. The overall figure for total assets is positive so once again this proves to me that it's worth going ahead with my financial plan.
The Trading account, Profit and Loss account and Appropriation account all interrelate with each other. The Trading account for my business shows that the total income (from cash flow forecast and marketing plan) is much larger than cost of sales. Nevertheless we must also consider other costs such as: rent, rates and utility expenses. The profit and loss account provided me with a positive figure once the expenses were taken away from the total income. From then on I had a net profit figure before tax. The appropriation of the account deducted the amount of tax and finally I was left with net profit of £2564 so once again it seems that the business can be a success and its worth going ahead with the plan.
My break-even analysis showed me that I need to look after an average of 12 children a week so that I can cover my expenses and break even. As mentioned before the figure directly interrelates with my market research findings. This is because my market research gives me a reasonable demand for the service I am going to provide. If I have an increase in customers then I will consider employing more employees. Alternatively if the business is going through a rough patch then I will reduce the hours for each employee.
The six different financial ratios that I have carried out for my business have showed me the following:
Current Ratio-has showed me that the business owns more assets then its liabilities (current ratio 1.73). Although my particular type of business does not hold much stock but the major assests are fixtures and fittings as well as equipment. We must also put the cash in the bank.
Acid Test Ratio-shows that the business can do well because this time stock was excluded hence the end result being 1.50.If the result was under 1 then there may have been some doubts with going ahead with the business plan.
Gearing Ratio-shows that the business is 90% dependent on external finance. However this will only be for the first year because the loan I have taken out will be paid to the bank and the business should be able to support it and not rely on the external source of finance.
Returns on Capital Employed Ratio-will definitely encourage investors to invest within the business. This is because my figure of 48% shows there is an extremely high return. However we must consider that the business only needs £5000 to get started off, an then the following year I may just spend £2000 to upgrade the equipment.
Net Profit Margin Ratio- proves that a 2.9% margin is available for my chosen type of business. It's a reasonable net profit margin because the calculations include the deduction of all the overheads such as rates and rents, wages as well as other expenses. Alternatively if the net profit margin was in the region of 0-1.5%. Then I may reconsider my decision of opening my business.
Gross Profit Margin Ratio-shows that the business has a 45% margin. However, rent and other overheads bring the margin down. Nevertheless, there is still a reasonable amount left over, which has encouraged me to go ahead with my plan.
Obstacles that my business may face
With any business before and after its starts to trade there are surprises and obstacles, which it may face. Sometimes they are beneficial to the business while at other times they are harmful to a business. I will be looking at obstacles, which will either halt the opening of the business and those, which will affect the business once it has started to trade in a negative way.
Sources of Finance-As mentioned in financial and production plan I will be looking to obtain a loan of £5000 from the bank. If the bank rejects my application, then I will consider getting a sleeping partner so that I can apply again for lower amount. I could also find a partner and then half the investment. This is because currently I have personal savings of £3500 and could use £2500 of this to open my business with my partner. When discussing the plan with my father, he agreed to help whenever he could so the last report to raise finance would before him. This is because he has good credit rating with the bank and can obtain a loan for my business.
Not Enough Customers-My market research showed me that there is a reasonable demand for my particular type of service, because it's still in the growth stage in the
Product life cycle. However, I am not guaranteed a certain amount of customers because there are several factors that can effect people using my service. Futhermore only research showed me that there was demand. I will only find out for sure the level of demand once I start to trade. The solution for low turnout is pumping more into promotion and making people hear about my service as well as the value for money they will receive if they buy into my service. I will not be lowering prices instantly because if I lower them instantly then it will be very hard in the future to rise prices back up.
Marketing Campaign Fails-If the marketing campaign fails then I will look at my existing methods used (leaflets and questionnaires) and see how effective they were. It may just be that I haven't targeted the right type of people at the right place. Alternatively I may have to adapt to new methods such as door-to-door sales.
Employee Leaves-If an employee decides to leave then I will have to recruit another one. This could be very easy, because I may get a good response by advertising in the local paper. Alternatively I may not receive a good response hence I will have to reconsider the advertisement methods. I could go to a local job agency or to one, which specialises in child day care jobs.
Dissatisfied Customer-There will be times when a customer may not be happy about the service, which I am providing. Therefore I will train each staff to handle this situation by taking the customer into a quite place and listen to what his/her complain is. I will look at the complain and try to do my best to avoid it happening in the future. Futhermore when the business starts to trade three months in. I may consider giving a questionnaire to the customers to find out what they think of my business.
New Local Competitor-At the moment there are not nay major local competitors, therefore, someone may decide to open another day nursery near to my premises. I will then have to look at holding to on my existing customers and maximise the level of service. To add that I could launch another marketing campaign while the new business is setting up and lower my prices for short period so that more people hear about my business.
Market Forces-I will not have any control or influences on market forces. Therefore I will have to adapt to market forces. For instance if the child day care market is going through a rough patch, then the businesses main objective will be to survive and break even.
VIABILITY & JUSTIFICATION
APPROACH TAKEN TO THE CONSTRUCTION OF THE PLAN
E6 In order to plan if my business will be successful or not I did primary research
and also I did secondary research both these researches helped me a lot. I also went to the banks and got their business plan by the help of which I was able to do my assignment. I also used the Internet to do my research by the help of which I was able to find out about my competitors.
JUSTIFICATION FOR THE APPROACH TAKEN TO THE CONSTRUCTION OF THE PLAN
C4 In order to plan if my business will be successful or not I did primary research
A3 in which I got the questionnaires filled from my potential customers to find
out whether there is a market for my business or not and those questionnaires helped me a lot as I was able to find out what are the needs of my customers and then planned my business accordingly. I also did secondary research by the help of which I was able to find about my competitors and whether there is a demand for my business, both the primary and secondary research helped me a lot. For my secondary research financial times helped me a lot as I was able to learn about the economy as well about the competitors, I was also able to get information from the ONS (Office for National Statistics) which was quite helpful as it gave me information about employment in Ealing. I also used the Internet to do my research as it's a valuable research tool and was able to get useful information about the market and its competitors; I also used books, as I was able to get ideas on topics such as designing a plan, legal implications and recruitment. I also went to the banks and got their business plan by the help of which I was able to get ideas for my business. I also have prepared my self for smooth running of the business and made arrangements for alternatives in case of problems such as short of staff, lack of finances, marketing etc.
ALTERNATIVE APPROACHES CONSIDERED FOR THE PLAN
C4 In order to make my business a success I used all the sources I could use but as
much as we do still we need more to do so that our business is a success. Hence I could have done more research in depth and found out more about my services and done the alternative changes. In case a staff is not there then I will be prepared to have a alternative staff to take over the class so that the smooth running of the business can be maintained. If on the basis of the cash flow forecast there is short of finance in future then I can arrange an overdraft facility with my bank so that every day running of business is not affected. All the rules keep changing for nurseries hence the research, which I did, was done before starting my business, but the rules keep changing so now there may be some things, which I have not included in my business.
EVALUATION
EVALUATION OF MY BUSINESS PLAN
LIQUIDITY
C3 The term liquidity means the speed or ease in which the businesses assets can
be turned into cash without suffering any major capital loss. In my business context the only major assets will have, are the equipment for the children and staff. This is because unlike some business does not hold large sums of stock other than stationary and food for the children. Therefore this will mean owing fewer assets. Furthermore the business owning minimal stock will mean that less cash will be tied up in the business.
Now I will look at Current Ratio. This will show me the relationship between the current assets and the current liabilities.
Formula: Current Assets
___________
Current Liabilities
December: £3704/£2133=1.73
Most business aim to have a current ratio of 1.5 to 2.This is so that they have enough cash to run the business and cover its costs. However, businesses don't want to hold on too much cash because they will get taxed heavily or the cash can be invested in other areas to make more money. However, when looking at my businesses current ratio we can see its 1.73.This seems very good because it shows my business owns more than it owes, nevertheless my business does not hold to much cash otherwise I will get taxed heavily.
The Acid Test Ratio- looks similar to the current ratio, although this time stock is excluded.
Formula: Current Assets-Stock
__________________
Current Liabilities
December: £3704-£500/£2133=1.50
In this case the acid test ratio is reasonable because stock is excluded from the calculation and hence it makes the outcome a lot better, mainly because my business does not hold much stock. Therefore we can see that the business is
doing well and can over its costs. Unlike the current ratio equation above shows that the business is holding on too much stock.
The Gearing Ratio- shows where the business raises its capital from and how it's funded.
Formula: Loan Capital + Preference Share Capital
_________________________________ X 100
Total Capital (Loan Preference +Equity
£5000/5500 x 100=90%
From the figure above we can see that the business is funded 90% by external capital. However, this will not be the case as time goes on. This is because the £5000 loan taken out by me is for the equipment that will be used by the kids and staff. Therefore, once the loan is paid back by me then the business will fund itself independently due to the fact that there will be no shareholders and no loan repayments to the bank. Nevertheless, there may be times when I may need to raise capital for different purposes (e.g. expansion, or financial crisis).
The Return on Capital Employed Ratio -shows how much one can make if they invest in the business
Formula: Profit on ordinary activities before tax and interest
__________________________________________ X 100
Capital employed
£2654/5500=48%
The calculation above shows that for every pound invested, you'll make £0.48p on top so therefore this means that many people will want to invest in the business due to the high returns, however the main reason for this high return is because the business only needs £5000 to be started of, where in some cases thousands of pounds need to be invested for a business to open.
The Net Profit Margin Ratio -shows the business how well it's covering its expenses and going on to make a profit. If a business has low expenses and high turnover then the higher net profit margin will be.
Formula: Net Profit before Tax
_________________ X 100
Turnover
£2654 + £88700 x 100 = 2.9%
A 2.9% net profit margin seems very reasonable because it means that every pound invested will mean that I make 2.9p (3 pence) profit after all the expenses except tax. So once again this seems very reasonable and many investors will be encouraged to invest in the business.
The Gross Profit Margin Ratio- shows the amount of profit made on sales turnover. The gross profit margin does not look after other expenses.
Formula: Gross Profit
_________ X 100
Turnover
£3970/£8820 x 100 = 45.0%
This is an extremely good gross profit margin because it means that an investor will receive nearly 1-1/2 times on their initial investment. However, other things to consider are expenses, rents and rates etc. Which will affect the netprofit. As well as that a high net profit will result in higher taxation. Therefore the final net profit after tax will be much lower to the initial gross profit.
Now that I have constructed my business plan I will look back at areas where I feel I have done well and areas that could be adapted next time round. As mentioned at the beginning of my plan had three ways of constructing my business plan:
> Form a plan from a bank.
> Follow teacher's instructions.
> Create my own one.
I used ideas from a banks business plan and followed the teacher's instructions to create my own one. I believe this suited me best because if I followed a step-by-step guide then my business plan would not have my own input and I wouldn't have a good enough understanding of my business plan. Futhermore this method allowed the plan to be more flexible and relevant to my particular type of business. This is because each business plan must directly be related to a business and not just a summary of different businesses. I structured my business plan in a way so that I can understand all the different aspects involved both internally and externally to my business. However, if I followed a step-by-step guide then I would have not been able to do this. Finally I was able to communicate with the teacher with a lot more confidence because I knew my business plan inside out.
The disadvantages from constructing this business plan are the following:
This was my first time that I had constructed a business plan; therefore, I was inexperienced and created common mistakes. To add to that my project is just a plan and there will be no real cash involved so this might have decreased the intensity at which the plan was put together in. Although my primary research showed me that there was a demand for my particular type of business, I could not expand to great lengths. The main reason being; time constraints and not having money to employ people to carry out my market research. Therefore I had to go out myself and carry it out. It was difficult to find a reasonable site at first, but when I visited a few estate agents it became clearer to me and eventually found a suitable site at www.adamsproperty.co.uk.
I used several sources of information and some were useful than others. For instance some Internet sources had the exact data (local labour market information: www.isc.gov.uk) while other sites had irrelevant information. I visited
Busy Bee Crèche in Hounslow and learnt a lot more about the equipment and layout needed to start up a private children's day nursery.
One major positive aspect of my business is that there is very little money tied up in stock, Futhermore the initial investment of £5000 should be enough to get the business started and then following years I will only need to spend £2000/3000 to upgrade existing equipment. In my financial plan I said I would need a £5000 loan to get started. This is because some businesses needed large amounts of start up cash to start trading.
If I were to reconstruct my plan then I would go about it a similar fashion, but make a few changes. For instance I would research my market much more intensively which will allow me to produce a much more detailed plan. What's more is that I may discover new things about my business/market, which may encourage or even discourage me from going ahead with my plan. I would also concentrate much more on promotion. And draw a budget for the promotion activities. This is because in my plan I did not look at promotion in too much detail. Therefore next time I would concentrate more on the layout of posters/flyers/leaflets/questionnaires. Finally I would consider researching a lot more about my area where I am going to trade. This is because I have looked at west London in detail but have not researched Hanwell in great detail.
Overall I believe that my business plan is good enough to obtain loan from a bank. This is because my market research showed me that there is a gap in the market and a good chance of my business succeeding .As mentioned before I do not need a large amount of capital so once again this should make my business proposition to the bank even stronger. The fact that I have not a built up credit rating with the bank may affect my chances of getting a loan. Nevertheless, I can emphasise the fact that my businesses unique and demand levels are high. Finally I believe that I can go on to succeed with my business and possibly expand in the future. Alternatively if my market is declining then I may diversify into another market.
MARKETING, PRODUCTION AND FINANCIAL ALTERNATIVES
A1 I have described above the various techniques that I have adopted regarding
my marketing production and finance apart from those mentioned above.
Marketing
I could have for my marketing research got more questionnaires filled which would have given me details in depth about my competitors and also whether there is a demand for my business.
Production
For my production, which is basically my services, which I offer to my customers, now I offer two services first one is to feed milk to the kids and the second one is to have a separate room for the kids where they can sleep. But other alternatives can be that I could have offered them a transport facility that is we could have picked and dropped their kids, which could have been an added value for my customers, another service can be that I could have offered snacks to the kids.
Financial
For the financial part the alternative can be now I have taken loan from the bank but instead I could have taken loan either from a family friend or a relative. This would have reduced the pressure of paying back the loan with interest on fixed intervals.
If any problem occurred in my business then it would affect my whole business that is it will affect the marketing plan, production plan and also financial plan for which then I would be looking for alternatives to solve the problem and bring back things to normal again.
BLOGRAPHY
www.ealing.gov.uk
www.busybee.com
www.tinies.com
www.dfes.gov.uk
www.keynote.co.uk
www.bradford.ac.uk
www.ncma.org.uk
www.tameside.gov.uk
www.electronictimes.com
www.ons.gov.uk
www.isc.gov.uk
www.londonwest.org.uk
www.google.co.uk
www.yahoo.co.uk
www.adamsproperty.co.uk
www.nannyjob.co.uk
www.laingbusson.co.uk
www.babysitter.co.uk
www.statistics.gov.uk
www.population-growth.co.uk
www.aassoc.org.uk
www.person.com
Busy Bees Crèche based in Hounslow
Castle Estate Agents
Early learning store Ealing Broadway
Mention Books
21/02/05 Business Planning-Unit-6