Business Plan

Word count: 1002

 1. Description of the business:

Brief description The business is a small coffee house located in a campus in a

business. college in Australia. There are many reasons behind the
consideration of such location for running the business. It is
found that college students have great affinity and taste
towards coffee and coffee culture is blooming at remarkable
rate in colleges in Australia.
Form of organisation The organisation will operate as a small business enterprise
and will offer coffee products to prominent customers, which
are college students.
Goals Short/Long Short term goals of the business include to cross the break-
even point as soon as possible so that investments likely to be
made by the owners can be obtained back.
Long term goals of the business include acquiring
sustainability and emerging as the biggest company near the
college campus that offers coffee products.
Personnel/roles As marketing manager in the organisation, my role will be to
involved enhance the popularity of the business by developing and
implementing productive marketing strategies.

2. Marketing plan:

Prospective of the It can be said that the location of the business can be a perk to
Business in current the organisation as it is likely to be noticed by thousands of
location and possible students and other potential customers every day. For this
expansion. reason, the organisation may expand it business to other
locations after acquiring significant growth and development
in the current business market.
Advertising efforts Coffee products offered by the organisation will be marketed
(quality and ease and advertised through various means. There will be immense
 availability of the focus on the advertising of products though flyers, radio,
product, etc.; media: newsletters and many other channels. In this manner, a
flyers, radio, newsletter, content strategy will be considered to showcase best features
etc.) of the products and attract the customers.

3. Operating Plan:
Sales/customers

Potential/contracted Customers The potential customers targeted by the coffee shop

will include the college students, who love to
consume coffee on daily basis. In addition to this,
people from old age will also be the prominent
customers of the company.
Potential/contracted Suppliers Considering the suppliers targeted by the business in
Australia; it can be said that raw material suppliers
located at nearby places will be considered. This
approach will reduce the cost of transportation of raw
material to the company.
Other customers (potential In addition to college students, people living in the
communities to be your nearby communities will also be targeted as potential
customer) customers in the organisation. These may include
children, grownups and old aged people from all
walks of life.
Future expansion In future, the business of the company will be
expanded to other markets in Australia, which may
include prominent colleges located in Sydney,
Melbourne and many more.
 4. Environmental management plan:

Environmental concerns It can be said that waste production is one of the

biggest environment concern that should be managed
by the coffee shop business in Australia. Use of
plastic cups and coffee mugs may produce non-
biodegradable waste in large qualities and
organisations working for environmental cause may
target the business.

5. Financial plan - Sources of capital/equity:

Initial investment by owners each The owner will make an investment of $100000
and total for starting up the business. It can be said that
there can be two owners of the business of which
each will have equal contribution in the
organisation.
Loans , for expansion etc. When do In addition to the investment made by the owner,
you think you would have enough loan from financial institutions operating in
cash inflow to pay an instalment of a Australia will also be acquired to run and expand
loan (if the business. The business has significant
any). probabilities of success due to which different
instalments of the loan acquired from financial
institutions can be paid easily. Cash inflow will
be high in the business because of high sales.
Start-up costs The total start up cost of the coffee business in
Australia will be $500000.

6. Financial plan-Projected Financial

Performance: Sales/Customers

Estimated monthly sales to the The business of the coffee shop will focus on
contract customers : acquiring the monthly sales of 5000 units to the
contracted customers. This figure is set high
 Purchases/Suppliers

Estimated monthly inventory 2000 units

purchases from the contract
suppliers:
Terms of payment to suppliers $5000

Purchase price of inventory $20000

 Expenses

Selling Expenses
Rental expense – monthly $3000

Wages – monthly $10000

Utilities – monthly $5000

Supplies/ other expense - monthly $20000

Marketing/ Advertising - monthly $10000

Insurance (yearly in advance as $2000

prepayment or monthly if applicable)
Terms of payment $5000

General & Admin Expenses

Rental expense – monthly $3000

Salaries – monthly $10000

Utilities – monthly $5000

Supplies/ other expense - monthly $20000

Depreciation of equipment, machinery, $30000

etc – monthly
Insurance (yearly in advance as $2000
prepayment or monthly if applicable)

Cash Budget
Particulars First Month Second Third First Quarter
 Month Month
Receipts  
Investments by onwer 100000 100000
Loan from Bank 500000 500000
Collections 35000 35000 35000 105000
Total Receipts 635000 35000 35000 705000
Payments  
Equipment
Acquisition 500000 500000
Selling expenses 3000 3000 3000 9000
Wages 10000 10000 10000 30000
Utilities 5000 5000 5000 15000
Payment to Supplier 5000 20000 20000 45000
Marketing Expense 10000 10000 10000 30000
Insurance 2000 2000 2000 6000
Total Payment 535000 50000 50000 635000
Net Amount 100000 -15000 -15000 70000

Income Statement
Particulars First Month Second Month
Sales Revenues 35000 35000
Cost of sales 35000 35000
Gross Profit 0 0
   
Selling Expense 3000 3000
Marketing Expense 10000 10000
Insurance 2000 2000
Depreciation 30000 30000
Profit Before Interest and Tax -45000 -45000
 Balance Sheet
  First Month Second Month
Assets  
Current Assets  
Cash and cash equivalents 100000 15000
Other Current-Assets 85000
Total Current Assets 100000 100000
   
Non-Current Assets  
Property, Plant and Equipments 470000 440000
Total Non-Current Assets 470000 440000
Total assets 570000 540000
   
Liabilities  
Current Liabilities  
Borrowings 15000
Trade payables 15000 15000
Total Current Liabilities 15000 30000
   
Non-Current Liabilities  
Borrowings 500000 500000
Total non-current Liabilities 500000 500000
Total Liabilities 515000 530000
Net Assets 55000 10000
   
Equity  
Capital 100000 100000
Net Loss -45000 -90000
Total Equity 55000 10000

Ratios

Ratio Formulae  
Profitability    
PAT Margin PAT/Sales -129%
Gross profit Margin Gross Profit/Sales 0%
     
Liquidity    
Current Assets/Current
Current Ratio Liabilities 3.33
Quick Ratio Quick Assets/Current 0.50
 Liabilities
     
Operating Capability    
Working capital Turnover
Ratio Sales/Working Capital 0.50
Assets Turnover Ratio Sales/Average Assets 0.06
     
Financial Flexibility    
Debt Ratio Liabilities/Assets 0.98
Debt-Equity Ratio Liabilities/Equity 53

Viability of Business
To check the viability of business, financial ratios such as profitability, liquidity, operating
and financial are calculated. The Profit after tax margin of the business is negative 129
percent at the end of second month, whereas the Gross profit margin is standing at zero. The
gross profit margin is zero because sales revenue and cost of sales are equal. In contrast to
gross profit margin, the PAT margin is negative because of depreciation cost, marketing
expenses and increased cost of sales. As far as short-term financial position is concerned,
Current ratio is standing at 3.33, which means current assets are 3.33 times than current
liabilities, and quick ratio is 0.50. Having seen the liquidity ratio, business can survive in
short-term. As far as the long-term solvency of business is concerned, its Debt ratio is 98
percent, which means its assets are majorly financed out of the debt. As far as debt-equity
ratio is concerned, its debt-equity ratio is 53 which are too high. Business has acquired the
equipment for $500000 by taking loan which took the debt ratio to 98 percent. Therefore, to
survive in long run business will have to increase its sales revenue so that it can service its
debt. As far as operating capability is concerned, its assets turnover ratio is 0.06 which means
business is generating sales revenue of $0.06 out of $1 asset. Having seen the assets turnover
ratio, one thing can be said that it has not generated as much sales as it should have
generated. Working capital turnover of the business is .50 after two months. Hence, Viability
of business in short run is not concern but in long cannot fully dependrun its viability is
questionable.