Businesses Plan Project for Coffee Shop - Research Paper Example

Table of Contents Table of Contents 1 Business Plan 3 Executive Summary 3 Business Idea 4 Ownership 4 Liabilities and Risks 5 Management Team 5 Organizational Chart 6 7 Figure 1: Organizational Chart 7 Information System 7 Value Chain 7 Figure 2: Value Chain Model for Proposed Business 8 Marketing Analysis 8 Target Market 8 Proposed Business Location 9 Competitors Analysis 9 Pricing Strategy 10 Table 2: Price List of Coffee Lounge 12 Promotional Activity 12 Porters Five Forces Model 13 Figure 3: Five Forces Model 15 SWOT Analysis 16 Success Targets 18 Long Term Goals 18 Business Plan 19 Figure 2: Business Model 20 Product Offerings 20 Financial Analysis 21 Start Up Costs and Expenses 21 Table 1: Start Up Costs and Expenses 22 Sales Forecast 22 Assumptions for Sales Forecasts 23 Table 3: Sales Forecasts for the Year 2011 25 Table 4: Sales Forecasts for the Year 2012 26 Table 4: Sales Forecasts for the Year 2013 27 Balance Sheet for First Year 28 Profit and Loss Statement for 3 Years 29 Cash Flow Statement for First Year 30 Notes to Projected Financial Statements 31 Financial Ratio Analysis 32 Table 5: Financial Ratios 33 Break Even Analysis 33 Personal Financial Statement 34 Works Cited 35 Business Plan Executive Summary Our consultancy firm has developed the business plan upon the written request of the owner of the company. The business plan has been prepared after a careful in depth analysis of similar businesses and the market in which the proposed business will be operating. The business plan provided in this report is related to the opening of a coffee and confectionaries shop in the area of California. The owner of the proposed business is a sole proprietor. The proposed name for the said business is Coffee Lounge which will serve high quality coffees and confectionaries. The business plan report will include detail analysis of the proposed business, its strategy and targeted market. Furthermore, the report will provide useful financial analysis for the funding requirements and projected financial statements of the company. Lastly, the owner’s personal financial statement has been included for reference purpose only. Business Idea The proposed business will be opened under the name – Coffee Lounge with a business tag line “everyone loves a good cup of coffee”. The proposed business is unique in its offerings as it will not just be a coffee shop which will serve highest quality of brewed and blended coffees and confectionaries but it will also include a flower kiosk which will be set up on the premises of the coffee shop allowing customers to make purchases of flowers for their loved ones. In this way the business aims to attract more customers who can enjoy the refreshing environment of the coffee shop which will be designed in a way to promote the overall theme of the proposed business. The uniqueness of the business idea will allow customers to experience a personal touch with highest levels of service and product choices. The coffee shop will also install open Wi-Fi hotspot which will allow customers to access internet while having their coffees and other delights to be served in the coffee shop. Ownership Our client is Mr. John Cusack who has requested us for the preparation of the business plan for a coffee shop. The owner of the business has a strong financial background and has been in the business of food retailing for more than 11 years. His other businesses include a company which is engaged in import of food items from neighboring countries of the U.S. and it distributes these food items to big retail chain stores throughout the U.S. He has a well diversified managerial and financial experience which will surely be an asset for the new business. The personal financial statement of Mr. John Cusack for the year ending 2009 has been included in the financial analysis of the business plan which clearly highlights his strong financials and a healthy net worth of $845,000. The financial statements of his other companies are not included in this report which could further support his credentials as a successful businessman. Liabilities and Risks The proposed business is faced with several risk factors which could undermine its sustainability and profitability in the long run. These risk factors are related to the business idea itself and the demand for coffee products. The pricing is very crucial in this respect as it is highlighted the market in Los Angeles already intensified by the existence of a large number of coffee shops and to make an entry into such market can be difficult and to a great extent risky. The economic conditions in the U.S. have worsened over the last couple of years and the market is not likely to improve drastically which could affect the probability of success of the proposed business. As incomes and savings of households decline the consumer spending on coffees has also decline sharply which has led to major brands such as Starbucks closing down their outlets throughout the U.S. and internationally. The proposed business will be funded from the investor’s private equity therefore there are no liabilities at the start up of the business. The supplies for the business operations will be purchased on credit from suppliers. Supply contracts are yet to be signed with different reliable suppliers. The outstanding payable amount at a point in time will be the liability of the business. If in case of solvency the business can sell off its assets to pay back suppliers their outstanding amount. Management Team The company will be under direct administration of Mr. Cusack who will be handling the accounts and finances of the coffee shop. The company will also hire a shop manager who will be experienced in handling daily affairs of the coffee shop. The manager will also ensure that the coffee shop is well staffed and all activities of the coffee shop are operating smoothly without any interruptions and the supplies are sufficiently maintained at all times. The manager will report directly to the company’s owner. As the proposed business is a start up for the company’s owner therefore the management team is only restricted. Organizational Chart The following organizational chart depicts different positions within the company and coffee store. As outlined in the previous section the management team only comprises of two individuals. In addition to these two individuals the store will hire four individuals for in store activities. These will include one full time chef, one kitchen and warehouse helper and two waiters. Figure 1: Organizational Chart Information System The store will have an information system installed on the computer that will be set up in the back office. The information system will be chosen from a list of reliable vendors and purchased off the shelf which will connect the data entry at point of sale to the back office system which will record data in suitable format for reporting. Regular back up will be taken from the back office system to be stored in the owner’s other facility. The control over the point of sale will be the responsibility of the store manager who will be making entries into the front end system. While on the back end the company’s CEO will only be authorized to enter data or make alterations if so required. The computer will be password protected and no unauthorized entries will be allowed for this system. Value Chain The proposed coffee shop will serve collection of coffees and coffee beans to be acquired from different supplies in other countries such as Brazil and Kenya. There are also risks associated with the procurement of flowers from suppliers in the U.S. which are residing in European countries. The aim of the business is to provide the best quality of products and services therefore supplies are sought from different reliable sources. The value chain for the proposed business model could be depicted in the following manner: Figure 2: Value Chain Model for Proposed Business Marketing Analysis Target Market The target market for the proposed coffee shop is Los Angeles, California. Los Angeles is one of the most happening cities of the U.S. and it is home to the U.S. film industry which brings lots of visitors and tourists from other cities and countries. The target market is characterized by its high density of population, large work force and outdoor eating habits of the people living in the city. The population of the Los Angeles County is 9.8 million and majority of the population within the age bracket of 18-65. Individuals between the age of 18 and 65 are the targeted customers who are marked with high income at disposal and attitude towards drinking coffee as part of their daily routine. The population is ethnically diverse with all races living in close circles. The median household income is $53,494 which is relatively higher than other counties in the U.S. however there is also almost 14% of the entire county population living under poverty (U.S. Census Bureau). Los Angeles is a host to the largest number of coffee shops with almost 801 coffee brands serving millions of customers every year (ZD Net). Proposed Business Location The proposed site location is Silver Lakes, Los Angeles which is a host of several night clubs and restaurants. There is large number of visitors and tourists coming to this area for pleasure and sightseeing every year. Competitors Analysis There are major international coffee brands in the Los Angeles County. Brief profiles of major competitors of the proposed coffee shop are provided in the following: LAMILL Coffee Boutique LAMILL Coffee Boutique is considered to be in direct competition with the proposed business. The reason for this is that the location which is under assessment and pending for decision by the company’s owner is same as that of this coffee store. The coffee boutique not only serves great coffees but also gourmet fare and desserts which are popular amongst not only the local residents but also tourists who visit Silver Lake for its night life and restaurants (10Best.com). Starbucks Starbucks is the largest international chain of coffee shops which was established in the year 1971 in the U.S. The chain of stores is serving all kinds of coffee beverages, coffee beans and confectionaries. The company has adopted a strategy which allows variations in the product offerings according to the location of the store. The company has a product profile which varies according to the location of the store (Starbucks). The company has its own stores in the Los Angeles Country and also licensed stores which are not operated by Starbucks (Winter). Krispy Kreme Krispy Kreme is another famous brand name which is one of the oldest US companies that was established in 1937. The company’s major market concentration remains in the US and also its neighboring country Canada. The company operates through a chain of stores throughout the US which are offering a great variety of donuts and coffees to its customers. The company has one outlet in the Los Angeles Country on Crenshaw Boulevard which has a large number of customers every year (Krispy Kreme). Other competition In addition to the big names in the coffee industry there are 801 brands of coffee shops which are serving all types of coffees, espressos and confectionaries which makes the market well saturated but at the same time it indicates the increasing potential in the market which has allowed such large number of coffee vendors to do business and stay profitable in tough competitive environment. Pricing Strategy In order to formulate prices for different products to be offered the proposed business has adopted a pricing strategy which is based on the business strategy of the company which is to keep the prices affordable and in line with the industry standards. This is done so to attract more regular customers and tourists who visit California in large numbers every year. These groups of customers are inclined drinking coffee as a part of their daily routine and are not put off by higher or even lower prices. It is fully understood that for such customers the quality of coffee offered and services they receive are of the highest value. The following table enlists different products and their respective prices per unit which the café will be offering to its customers. Products Average Price $ Coffee 4.10 Espresso 5.50 Seasonal Delights 4.25 Sandwiches 6.50 Pastries 2.80 Pies 4.35 Cakes 3.25 Flowers 4.50 Table 2: Price List of Coffee Lounge Promotional Activity The focus of the promotional activity for the proposed business will be the uniqueness of the concept which is integrated in the store by combining the flower shop and coffee shop. The interior decoration will be made in such a way that it promotes the overall theme of the store where a menu displaying the choice of flowers will be put on each table to attract customers’ attention. The suggested promotional activity that could be carried out by the company to communicate with the potential customers and help in creating awareness of product, immediate traffic and establishment of brand image is listed below: Online: The company will have its own informational and commercial website through which the company will carry out extensive promotion. This website will also allow customers to make advance bookings for tables. In addition to the company’s own website promotional activities and advertisement will be placed on different websites, online blogs and social networking portals. Advertising Channels: Promotional activities through physical advertisement banners and pamphlets will also be carried out which allow much more personalized advertisement of the coffee shop and its products. The printed form of advertising could result in better response from tourists who certainly make use of printed information. Public Relations: Developing public relations and promotion through established contacts is viewed as much more result oriented than advertisement (Kotler and Keller). The company’s owner has strong industrial and commercial relationships and can therefore seek out public relations to attract customers. Also the company will strive for better results through participations in trade shows and various local social events. Porters Five Forces Model In order to provide an overall view of the proposed business its framework could be analyzed using Porters Five Forces Model (Quick MBA). The analysis is summarized in the form of the following figures highlighting major influences on the success of the proposed business. Figure 3: Five Forces Model SWOT Analysis SWOT analysis of the proposed business highlights its internal strengths and weaknesses and also opportunities and threats that exist in its external environment (Quick MBA). Strengths The company’s owner has a well diversified experience of doing business. The owner of the company is financially strong. The owner has strong commercial relationships. The company will have no borrowing from the bank that implies higher solvency. The business of the coffee shop is a unique one which combines a flower shop and a coffee shop. The coffee shop will serve highest quality of coffee from coffee beans acquired from the best sources. The menu to be served to customers will have delightful offerings that can attract large number of customers. Weaknesses The company’s owner does not have experience in running a coffee shop business. The company is a sole proprietorship which implies certain limitations for the business and its possible expansion. The sole proprietorship can have limitations in terms of its ability to raise funds from borrowing. The information system proposed for installation in store has its limitations and may not serve the accounting and reporting objective sufficiently. Opportunities The coffee shop market in the Los Angeles County is one of the largest in the U.S. which allows new entrants to seek new business. The large workforce associated with the corporate sector, film industry and large number of tourists visiting the city every year offer great opportunities for the business. The coffee shop can add more products and variations in it’s the present suggested menu. The company can open additional stores in the Los Angeles County or other neighboring countries of the Californian state. The coffee shop can offer attractive promotional offerings to attract potential customers. The proposed site for opening of the coffee shop has an extravagant night life and thousands of tourists come to visit this area and also eat from numerous restaurants already doing good business in the locality which suggest good opportunities for the proposed business as well. Threats The weakened economic conditions of the U.S. have forced customers to pull back their spending on coffees and confectionaries. The market in the Los Angeles County has a large number of coffee brands and shop which makes it difficult to penetrate and earn profits. The competition from major coffee retailers can be fierce some which can result in cut back in prices making it difficult for smaller business to compete. The business will be dependent on suppliers for acquiring coffee beans and other products which could halt the business if any of the supplies fail to comply with the contract terms. Success Targets The success of the proposed coffee shop will be dependent on the following success factors identified by the company: Uniqueness in store layout Versatility in products and services to be offered High Quality Competitive pricing Excellent customer service Customer Relationship Management Efficiency in value chain All these success targets are set out to achieve the long term goals of the company as laid out in the next section. Long Term Goals The company has also set out its long term goals which are to in line with its objective from other business that is to achieve a strategic position in the food retail industry. The company aims to do this by investing in developing a recognized and reputable brand name for its new venture. The company also expects to expand the business in the near future to other counties of California. Moreover, if the business proves to be a successful and profitable one then the company may also opt for expansion in other states of the U.S. Business Plan The following figure surmises the different elements of the business plan prepared for Coffee Lounge. Figure 2: Business Model Product Offerings The following products and services will be offered by Coffee Lounge: Coffee & Coffee Beans The main product category to be offered by the café will consists of instant coffee, specialized brewed coffees, both hot and cold coffees and coffee beans specially packed in labeled packaging. These coffees will be offered to customers in skimmed, whole or soy milk. Espresso Drinks Another favorite product category that will be offered to customers has all sorts of espresso coffee such as mochas, cappuccino, Latte, Macchiato and other delicious tasting espresso drinks. Seasonal Delights This product category will comprise of fresh seasonal juices and non-alcoholic fruit cocktails. The offerings under this category will be changed on a regular basis. Sandwiches The coffee shop will also offer great options of sandwiches to its customers. Few of the options on the menu would be Club sandwiches, Cuban sandwiches, Bierock, Finger sandwiches etc. Pastries The coffee shop will have its own baking equipment which will be used to offer baked delicious pastries using special recipes from different countries. This product category will include dark chocolates, cocoa and cheese cream pastries with beautiful garnishing on them. Flowers The flower kiosk that will be placed on the premises will offer a whole range of fresh flowers which will also be put on display within the store. Financial Analysis Financial Analysis is an integral part of the business plan for the proposed business which presents details of different financial considerations made for the report. Start Up Costs and Expenses The proposed business will be carried out at a rented property and the entire floor space will be renovated along with the installation of equipment necessary for the operations. Also back office will be maintained where computer will be placed for recording and accounting of the business operations. The following table provides listing of the assets required for the business along with the expenses which the café will be required to spend before the start up. Start Up Costs and Expenses   $ Assets   Furniture 8,000.00 Fittings 2,300.00 Equipment including Utensils and Crockery 1,900.00 Baking Oven 3,300.00 Refrigerators 1,300.00 Coffee Machine 700.00 Coffee Grinder 350.00 Computer 425.00 Espresso Machine 2,900.00 Sandwich Maker 250.00 Blender 80.00 Dish Washer 1,400.00 Ice Maker 500.00 Cash Counter 750.00 Expenses Start Up Inventory 2,500.00 Advertising and Marketing Promotion 2,500.00 License and Permit 450.00 Advance Rent 10,800.00 Professional Fees 2,400.00 Managers Salary 15,000.00 Website Development 500.00 Table 1: Start Up Costs and Expenses Sales Forecast Sales forecasts are prepared to estimate the projected sales revenues from the business operations. Sales forecasts are prepared on the basis of the price decided for each product to be offered by the new proposed business – Coffee Lounge and the projections regarding the quantities of each to be sold over the next 3 years period. Assumptions for Sales Forecasts Each product has an expected sales volume in the first month of the opening of the coffee shop. It is expected that the growth in the sales volume will remain under pressure due to the current economic conditions which are on the downside and are not likely to improve drastically over the period of projections. The projections of sales volume are based on the assumption that sales will grow at a rate of 0.5% every month in the first year. The overall growth is expected to be 5.64% in 2011. However, this is expected to decline by 1% from the 13th month to the 18th month. With rigorous marketing it is expected that the sales will be up by 2% every month till the end of the second year period. The overall growth is expected to be 7.10% in 2012.As the economic conditions are expected to stabilize in the third year the sales are expected to grow by 1% every month till the end of the 36th month. The overall growth is expected to be 11.57% in 2013.The following tables present expected sales revenue for the three years period from the date of commencement of the business. 1st Year $ 87,935 Growth Rate 5.64% Months Price Total Qty 1 2 3 4 5 6 7 8 9 10 11 12 Products                             Coffee 4.10 Cup 5,551 1,843 1,852 1,862 1,871 1,880 1,890 1,899 1,909 1,918 1,928 1,937 1,947 Espresso 5.50 Cup 5,551 2,475 2,487 2,500 2,512 2,525 2,537 2,550 2,563 2,576 2,589 2,602 2,615 Seasonal Delights 4.25 Cup 1,234 425 428 430 432 434 436 438 441 443 445 447 449 Sandwiches 6.50 Unit 1,234 650 653 657 660 663 666 670 673 676 680 683 687 Pastries 2.80 Unit 3,701 840 844 848 853 857 861 866 870 874 879 883 887 Pies 4.35 Unit 1,234 435 437 439 442 444 446 448 450 453 455 457 460 Cakes 3.25 Unit 1,234 325 327 328 330 332 333 335 337 338 340 342 343 Flowers 4.50 Unit 370 135 136 136 137 138 138 139 140 140 141 142 143       20,107 7,129 7,164 7,200 7,236 7,272 7,309 7,345 7,382 7,419 7,456 7,493 7,531 Table 3: Sales Forecasts for the Year 2011 2nd Year $89,247 Growth Rate 7.10% Months Price Total Qty 1 2 3 4 5 6 7 8 9 10 11 12 Products                             Coffee 4.10 Cup 5,634 1,928 1,908 1,889 1,870 1,852 1,833 1,870 1,907 1,945 1,984 2,024 2,064 Espresso 5.50 Cup 5,634 2,588 2,563 2,537 2,512 2,486 2,462 2,511 2,561 2,612 2,664 2,718 2,772 Seasonal Delights 4.25 Cup 1,252 445 440 436 432 427 423 432 440 449 458 467 476 Sandwiches 6.50 Unit 1,252 680 673 666 660 653 646 659 673 686 700 714 728 Pastries 2.80 Unit 3,756 878 870 861 852 844 835 852 869 887 904 922 941 Pies 4.35 Unit 1,252 455 450 446 441 437 433 441 450 459 468 478 487 Cakes 3.25 Unit 1,252 340 336 333 330 327 323 330 336 343 350 357 364 Flowers 4.50 Unit 376 141 140 138 137 136 134 137 140 142 145 148 151       20,407 7,455 7,381 7,307 7,234 7,162 7,090 7,232 7,376 7,524 7,674 7,828 7,984 Table 4: Sales Forecasts for the Year 2012 3rd Year $102,275 Growth Rate 11.57% Months Price Total Qty 1 2 3 4 5 6 7 8 9 10 11 12 Products                             Coffee 4.10 Cup 6,456 2,085 2,106 2,127 2,148 2,170 2,191 2,213 2,236 2,258 2,280 2,303 2,326 Espresso 5.50 Cup 6,456 2,800 2,828 2,856 2,885 2,914 2,943 2,972 3,002 3,032 3,062 3,093 3,124 Seasonal Delights 4.25 Cup 1,435 481 486 491 496 501 506 511 516 521 526 532 537 Sandwiches 6.50 Unit 1,435 735 743 750 758 765 773 781 788 796 804 812 820 Pastries 2.80 Unit 4,304 950 960 969 979 989 999 1,009 1,019 1,029 1,039 1,050 1,060 Pies 4.35 Unit 1,435 492 497 502 507 512 517 522 528 533 538 544 549 Cakes 3.25 Unit 1,435 368 371 375 379 383 386 390 394 398 402 406 410 Flowers 4.50 Unit 430 153 154 156 157 159 161 162 164 165 167 169 170       23,386 8,064 8,145 8,226 8,309 8,392 8,476 8,560 8,646 8,732 8,820 8,908 8,997 Table 4: Sales Forecasts for the Year 2013 Balance Sheet for First Year Balance sheet prepared for the first year of business operations provides a view of company’s financial position on 31 Dec 2011. The balance sheet provides details of company’s assets, liabilities and equity that the owner will invest in the company. Coffee Lounge Projected Balance Sheet as of 31 Dec 2011 $ $ Non-Current Assets Furniture 6,000 Fittings 1,725 Baking Oven 2,475 Refrigerators 975 Coffee Machine 525 Espresso Machine 2,175 Dish Washer 1,050 Cash Counter 563 4,313 Current Assets Cash 14,498 Receivables 25,000 Inventory 10,000 49,498 Total Assets 53,810 Current Liabilities Trade Payables 3,810 3,810 Total Liabilities 3,810 Net Total Assets 50,000 Equity Capital 50,000 Total Equity 50,000 Profit and Loss Statement for 3 Years Profit and loss statements for 3 years have been prepared based on the estimations of sales volume over the 3 years period. The variable cost i.e. cost of sales and other variable overheads are estimated based on the analysis of other business in the same industry. Depreciation charge of assets is provided as a note to the financial statement. Coffee Lounge Projected Profit and Loss Statement   $ $ $   2011 2012 2013 Sales Revenue 87,935 89,247 102,275 Cost of Sales Opening Inventory - 10,000 7,000 Add: Purchases 34,000 24,000 27,000 Less: Closing Inventory (10,000) 24,000 (7,000) 27,000 (8,500) 25,500 Operating Income 63,935 62,247 76,775   Depreciation (8,668) (3,872) (2,798) Salaries (15,000) (15,000) (15,000) Wages (10,000) (12,000) (12,000) Electricity (2,500) (2,500) (2,500) Gas (3,000) (3,000) (3,000) Insurance (1,435) (1,435) (1,435) Professional Fees (2,400) License Permit (450) (450) (450) Website Expenses (500) Profit before interest and tax 19,983 23,990 39,592 Social Contribution (2,997) (3,599) (5,939) Profit before tax 16,985 20,392 33,653 Income Tax (2,599) (3,120) (5,149) Net Profit 14,387 17,272 28,504 Cash Flow Statement for First Year Projected cash flow statements prepared for this report highlights cash inflows and outflows from the business. An indirect approach has been adopted to derive changes in the cash flow from operating activities. Projected cash flows for Coffee Lounge are provided below: Coffee Lounge Projected Cash Flow for the year ending 31 Dec 2011 Cash flow from operating Activities Net Profit 14,387 Add Depreciation 8,668 Changes in Working Capital Increase in Receivables (25,000) Increase in Inventory (10,000) Increase in Payables 3,810 Net Operating Cash Flow (8,136) Cash flow from investing Activities Purchase of Fixed Assets (27,366) Net Investing Cash flow (27,366) Cash flow from financing activities Investment by Owner 50,000 Net Cash Flow 14,498 Cash at the beginning of the period - Cash at the end of the period 14,498 Notes to Projected Financial Statements The above financial statements are forecasted using Generally Accepted Accounting standards (GAAP). The depreciation of different assets is provided as follows for the three year period. Depreciation Cost Year 1 Year 2 Year 3 Furniture 8,000.00 (2,000) (1,500) (1,125) Fittings 2,300.00 (575) (431) (323) Equipment including Utensils and Crockery 1,900.00 (1,900) Baking Oven 3,300.00 (825) (619) (464) Refrigerators 1,300.00 (325) (244) (183) Coffee Machine 700.00 (175) (131) (98) Coffee Grinder 350.00 (350) Computer 425.00 (425) Espresso Machine 2,900.00 (725) (544) (408) Sandwich Maker 250.00 (250) Blender 80.00 (80) Dish Washer 1,400.00 (350) (263) (197) Ice Maker 500.00 (500) Cash Counter 750.00 (188) (141) (105) (8,668) (3,872) (2,798) Basis for Depreciation Charge Furniture 25% Reducing Balance Fittings 25% Reducing Balance Baking Oven 25% Reducing Balance Refrigerators 25% Reducing Balance Coffee Machine 25% Reducing Balance Espresso Machine 25% Reducing Balance Dish Washer 25% Reducing Balance Cash Counter 25% Reducing Balance Financial Ratio Analysis Based on the projected financial statements for the proposed business the following table provides financial ratio analysis under three main categories of ratios namely liquidity, profitability and solvency. The financials ratios are based on the financial figures which developed for the proposed business based on the assumptions set out in the above business plan. However, there are certain figures which may seem to be irregular to the users of this report but they are well justified with a view of personal business. Ratio Analysis   2011 Liquidity Ratios Current Ratio Current Assets / Current Liabilities 12.99 Quick Ratio Current Assets - Inventory / Current Liabilities 10.37 Net Working Capital Current Assets - Current Liabilities 45,687.87 Receivables Turnover Net Revenue/Accounts Receivables 3.52 Average Collection Period 365/Receivables Turnover 103.77 Inventory Turnover Cost of Sales/Inventory 2.40 Average Inventory Period 365/Inventory Turnover 152.08 Solvency Ratios Debt to Equity Ratio Total Liabilities / Total Equity 0.08 Profitability Ratios Gross Profit Margin Gross Profit / Net Revenue 72.71% Net Profit Margin Net Profit / Net Revenue 16.36% Asset Turnover Net Revenue / Total Assets 163.42% Return on Equity Net Profit / Total Equity 28.77% Return on Assets Net Profit / Total Assets 26.74% Table 5: Financial Ratios Break Even Analysis Break even analysis determines a level of business operation at which sales are generated by the business which covers both variable costs and variable overheads. Therefore suggest break-even point where: SALES – VARIABLE COSTS – VARIABLE OVERHEADS = NIL Break Even Analysis of Coffee Lounge   Total Per Unit       $ $ Break Even Point $ Units Sales 87,935.29 4.37337 67,952.50 15,538 Variable Cost (24,000.00) -1.1936 (24,000.00) Variable Overheads (43,952.50) -2.1859 (43,952.50)   19,982.79 0.99 - The above table implies that if the business sells 15,538 units of its products in the first year then it will be able to cover its costs and any additional sales will contribute to the profit of $0.99 per unit sold. Personal Financial Statement The owner of the proposed business is a sole proprietor. His personal statement for the fiscal year ending 2009 is provided below. The funding required for the proposed business will be raised from the private equity of the owner of the company. It is sought by the owner of the company to keep it debt free in its start up and may seek out additional funds through borrowing for further expansion. Equity of $50,000 will be invested in the company by the owner which is reflected in the balance sheet of the proposed business. Personal Financial Statement Assets Cash - Checking Accounts 123,000 Cash - Savings Accounts 250,000 Certificates of Deposit 50,000 Life Insurance 25,000 Personal Property (Car) 23,000 Retirement Funds 143,000 Real Estate 265,000 Total Assets 879,000 Liabilities Current Debt (Credit Card) 7,000 Notes Payable 11,000 Taxes Payable 15,600 Total Liabilities 33,600 Net Worth 845,400 Works Cited 10Best.com. LAMILL Coffee Boutique. 2010. 23 January 2010 . Kotler, P. and K. Keller. Marketing Management (International Student). New Jersey: Pearson / Prentice Hall, 2008. Krispy Kreme. Home. 2010. 23 January 2010 . Quick MBA. Porters Five Forces Model. 2007. 23 January 2010 . —. SWOT Analysis. 2007. 23 January 2010 . Starbucks. "Company Fact Sheet." February 2008. Starbucks. 26 November 2009 . U.S. Census Bureau. Los Angeles County, California . 17 November 2009. 23 January 2010 . Winter. Starbucks in Los Angeles County. 2006. 23 January 2010 . ZD Net. Los Angeles has the highest number of coffee shops, Seattle has the highest penetration. 31 March 2005. 23 January 2010 . Read More