Business Plan for Expanding a Small Business - Assignment Example

? Business Plan for Expanding a Small Business Introduction Growth of a business depends on strategies and management plans laid down during its start. When a business grows its services, the owner may wish to expand it in order to provide more services to their customers. They lay down strategies to market their business and also develop financial business plans that enable them to reach the goal of their business. The plan entails the financial strengths or weaknesses of the business, and plans aimed at ensuring a ensuring their growth. This essay outlines a financial plan for expanding an established coffee shop, and develops a marketing strategy for the business. Summary This coffee shop named UNIK started in 2010 and operates from a small room, which hosts 25 customers once. Its goal is providing coffee lovers with a place where they can enjoy their time with friends as they take some coffee. The limited space has challenged the business because there is a rising demand for services provided by the shop. Due to this rising demand, it aims at expanding its operations by opening a bigger shop to capture new and maintain its present customers. The average annual sales the shop makes totals to $240,000 and expects to double the sales once it opens the second shop. The estimated cost of expanding the shop amounts to $480, 000, and the business already has $340,000, aiming to get the balance through a loan from the Royal Bank, equity financing, and borrowing from friends. The following is an outline of the financial plan for expanding the business. Expansion Cost Estimates Item Total Estimated Cost Equity Investment Shop Location Deposit and Hiring of rental house cost $120,000 Machinery Cost of buying more cooking utensils and machines $180,000 Legal Issues Acquiring License and other legal documents $10, 000 Coffee Shop furniture Chairs and Tables $ 60,000 Human Resource Cost of more labor force & 50,000 Other Items Entertainments like televisions and radios $60,000 Initial Cash on Hand $340,000 Total Start-up Cost $480,000 Required Start-up Finance $140,000 Guerilla marketing strategy for UNIK Coffee Shop Guerilla marketing strategies are those simple low-cost marketing practices that businesses use to market their products. Marketing enables a business to venture well in the market and depends on the strategies used. Small coffee shops serve different groups of people and can establish a powerful community reputation through their services (Ingram, 2013). Coffee shops have the most common encounter with people and their advertising needs to be more subtle than any other business. The following are some of the guerilla marketing strategies that UNIK Coffee Shop will use. Product and service development- this is ensuring that the quality of coffee and services provided to customers satisfy their needs. The shop aims at making sure that it creates a customer-friendly service provision, and through advertising to customers through word-of-mouth it retains and invites new customers (Ingram, 2013). The shop will also provide other services like free Wi-Fi and installing electric socket outlets near each table to give customers who use laptops access to power. Other strategies include hosting book fairs or poetry readings in the shop. These strategies aim at ensuring UNIK shop gives its customers services that other shops do not offer. Digital Advertisements- currently, technology has brought a number of changes in the business industry. This results from many businesses engaging in the use of information technology to meet their customers. UNIK coffee shop aims at using a number of information technology means to advertise its new coffee shop. First, it will practice database marketing because it is one of the effective methods used due to its availability (Levinson & Woods, 2007). Once customers get into the business’ database, they will receive information regarding monthly or quarterly offers from the business. The database will help in marketing because, the shop will send email messages to customers encouraging them to stop for a cup of coffee and maybe snacks (Wagner, 2013). The message will request them to mention a secret password in the message of an offer or introduce an offer for two who exchange the password. This encourages customers to invite another customer to join the shop’s database, and through these offers, it will effectively market itself. UNIK coffee shop also intends to use the press to market its business. This is because of the accessibility of many press media, which include televisions and radios. This aims at letting the press advertise the shop’s services during their shows or even publish them in their newspapers or magazines (Wagner, 2013). The shop also aims at participating in daily trends in coffee and tea over the media in contributing to new ideas in articles that concern coffee and tea. The expertise ideas the shop gives will more media coverage on it. The shop is also eyeing at using the social media as a marketing strategy because of its accessibility, given the advancements in technology. The shop’s Facebook and Twitter accounts will send friend request to customers or ask them to like or follow the page, and in return give them an offer. This will create the shop’s familiarity among the public and increase its sales revenue. Another appropriate guerilla marketing strategy that UNIK intends to use is branding or using logo. This involves wearing branded T-shirts, caps or shirts, a method that is effectively in the market as a promotional tool (Levinson & Woods, 2007). The shop aims at ensuring the logo appears almost everywhere to draw people’s attention. When people see workers from the shop wearing branded shirts, they will want to know more about the shop’s location and the services it offers, and in the long run they turn to be customers. Another strategy of marketing is working in close connection with other businesses. For example, the shop will give branded cups to a nearby office to market its brand and services (Wagner, 2013). The other strategy that the shop intends to use is to guarantee customers' efficiency of services provided. This will work in conjunction with identifying working hours and days to ensure customers' access services at the appropriate time. All the above guerilla marketing strategies will see UNIK coffee shop advertise its services effectively to its customers. Most Appropriate location for the second coffee house The UNIK Coffee Shop will be located on the ground floor of a Trade Centre Building located at the 124 Mount Auburn Street, at Harvard University in Cambridge. The reason for opening the shop in this area is because of the commercial street that brings together students from the university and other people coming to do business. Among the advantages that the shop will enjoy are adequate access to water, electricity and other infrastructure, which make it easy for the business to establish in the area. The building has a clean interior design with modern decorations, which will portray the quality of coffee and snacks offered by the shop. This establishes the shop as one among the best places where people can relax as they enjoy their coffee and share with friends. Availability of electricity will act as an attraction for the university students, who would wish to use their laptops while at the same time enjoying their coffee. It will also power advertisement signs like lights displaying the shop’s name, drawing attention of those passing by. The location gives business workers who come from job tired to have an opportunity to relieve their stress by passing by and having a cup of coffee. Also, the shop has clear window displays that allow passerby peep into them and see people as they enjoy their beverages. This will act as marketing or advertisement tool for the business, as the passersby may also wish to pay a visit. Plan for securing sources of debt financing for this new shop Considering the expansion budget, the business has a deficit of $140,000 that it needs to ensure appropriate funding. The business intends to get this money from two sources; one it will apply for a $100,000 loan from Royal Bank, and borrow the remaining $40,000 from friends and equity finance. In order to finance the expansion, the shop will acquire the $100,000 from the bank through applying for a loan of the same amount. The business will give the first shop as collateral for the loan given that banks accept them for loans (Seidman, 2005). It intends to pay the loan in installments of $ 25, 000 per month for four months together with the interest. The business intends to acquire the remaining amount needed for expansion from equity financing and borrowing from friends. The already acquired assets from the first coffee shop will cater for repayment of borrowings from friends. The business intends to use these plans because they have proved to be effective methods of financing small businesses, which have no strong capital base (Mac, 2010). However, regardless of the business’ age, collateral is a requirement for securing debt financing, and businesses seeking to expand their operations, though they might lack adequate assets provide personal assets as collateral (Baker & Martin, 2011). This is what UNIK coffee shop aims to do to expand its operations. Reference Baker, H. K., & Martin, G. S. (2011). Capital structure & corporate financing decisions: Theory, evidence, and practice. Hoboken, N.J: John Wiley & Sons. Ingram, D. (2013). Coffee Shop Marketing Strategies. Retrieved on December 11, 2013, from http://smallbusiness.chron.com/coffee-shop-marketing-strategies-10413.html Levinson, J. C., & Woods, T. (2007). Guerrilla marketing for franchisees. Garden City, NY: Morgan James. Mac, B. C. (2010). Resourcing small and medium sized enterprises: A financial growth life cycle approach. Heidelberg: Physica. Seidman, K. F. (2005). Economic development finance. Thousand Oaks, Calif: Sage Publications. Wagner, N. (2013). Coffee House Guerilla Marketing Strategies. Retrieved on December 11, 2013, from http://smallbusiness.chron.com/coffee-house-guerrilla-marketing-strategies-66746.html Read More