Expanding Business for Coffee Hot Cafe - Case Study Example

Expanding Your Business Outline a financial plan for your small business. In the first assignment, the business was purchased rather than starting. This is because after financial analysis on whether to buy or start a business was conducted, it was discovered that, the cost of starting a new business was substantially higher than the cost of purchasing an existing business. The most appropriate business that was purchased in this case is a coffee shop named as ‘Coffee Hot Cafe’. The reason for purchasing a coffee shop and not any other business is because, coffee shop was found to be easier to operate and at the same time deliver more profits at a minimal cost as compared to other form of business in the market. In addition, the initial capital outlay for purchasing an existing coffee shop was found to be affordable with the available capital without seeking debt financing which has higher leverage risk (Ward, 2014). The financial plan for Coffee shop will be summarized below into three financial statements namely: income statement, cash flow statement and balance sheet. The statement of financial position will comprises of all revenues/ incomes and expenses incurred in the previous financial year. The cash flow statement will provide the cash generated from financing and operating activities as well as cash outflow. Finally, the balance sheet below commonly known as statement of financial position will display the current and noncurrent assets of Coffee Hot Cafe as well as equity and liabilities of the business (Ward, 2014). COFFEE HOT CAFE INCOME STATEMENT FOR THE YEAR ENDING 31ST DECEMBER 2013 Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total REVENUE   1.Coffee $700 $650 $450 $500 $350 $500 $750 $560 $480 $720 $640 $1000 $7300 2.Tea $340 $470 $250 $400 $230 $420 $700 $380 $440 $600 $540 $850 $5620 3.Dessert $720 $550 $900 $690 $440 $600 $320 $245 $300 $250 $410 $750 $6175 TOTAL REVENUE $1760 $1670 $1600 $1590 $1020 $1520 $1770 $1185 $1180 $1570 $1590 $2600 $19095 LESS(-)EXPENSES 1.DIRECT COSTS Materials Equipment Rentals per day($6) ($18) ($18) ($18) ($18) ($18) ($18) ($18) ($18) ($18) ($18) ($18) ($18) ($216) Salary $20 per day (Owner) ($60) ($60) ($60) ($60) ($60) ($60) ($60) ($60) ($60) ($60) ($60) ($60) ($720) Furniture ($210) ($210) ($210) ($210) ($210) ($210) ($210) ($210) ($210) ($210) ($210) ($210) ($252) Cost of utilities ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($72) Supply cost of napkins, coffee, tea, cups ($60) ($60) ($60) ($60) ($60) ($60) ($60) ($60) ($60) ($60) ($60) ($60) ($720) 2.GENERAL AND ADMINISTRATION   Accounting and Legal Fees ($14) ($14) ($14) ($14) ($14) ($14) ($14) ($14) ($14) ($14) ($14) ($14)  ($168) Advertising and Promotion ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6)  ($72) TOTAL EXPENSES ($374) ($374) ($374) ($374) ($374) ($374) ($374) ($374) ($374) ($374) ($374) ($374)  ($2220) NET INCOME BEFORE TAXES $1386 $1296 $1226 $1216 $646 $1146 $1396 $806 $806 $1196 $1216 $2226  $16875 Less(-) 10% Income Tax ($138.6) ($129.6) ($122.6) ($121.6) ($64.6) ($114.6) ($139.6) ($80.6) ($80.6) ($119.6) ($121.6) ($222.6)   NET INCOME $1247.4 $1166.4 $1103.4 $1094.4 $581.4 $1031.4 $1256.4 $725.4 $725.4 $1076.4 $1094.4 $2003.4 COFFEE HOT CAFE CASH FLOW PROJECTIONS    Jan  Feb   Mar   Apr   May   Jun  Jul Aug Sept Oct Nov Dec               CASH REVENUE               Revenue from Products Sales $1760 $1670 $1600 $1590 $1020 $1520 $1770 $1185 $1180 $1570 $1590 $2600 TOTAL CASH REVENUES $1760 $1670 $1600 $1590 $1020 $1520 $1770 $1185 $1180 $1570 $1590 $2600               CASH DISBURSEMENTS  $1950            Cash Payments to Trade Suppliers ($60) ($60) ($60) ($60) ($60) ($60) ($60) ($60) ($60) ($60) ($60) ($60)   Salaries and Wages               Promotion Expense Paid ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6)  ($72)   Utilities Payments ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) ($6) TOTAL CASH DISBURSEMENTS  $1688  $1598  $1528  $1518  $948  $1446 $1698 $1698 $1108 $1498 $1518 $2528 OPENING CASH BALANCE  $1420  $1700  $1340  $1729  $1234  $1429 $1900 $1450 $1890 $1798 $1923 $1654 ADD: TOTAL CASH REVENUES $1760 $1670 $1600 $1590 $1020 $1520 $1770 $1185 $1180 $1570 $1590 $2600 TOTALS $3180 $3370 $2940 $3319 $2254 $2949 $3670 $2635 $3070 $3368 $3513 $4254 DEDUCT: TOTAL CASH DISBURSEMENTS  ($1688)  ($1598)  ($1528) ( $1518)  ($948)  ($1446) ($1698) ($1698) ($1108) ($1498) ($1518) ($2528) CLOSING CASH BALANCE  $1492 $1772  $$1412  $1801 $1306 $1503 $1972 $937 $1962 $1870 $1995 $1726 COFFEE HOT CAFE BALANCE SHEET AS AT 31ST DEC 2013 Non Current Assets Property Plant and Equipments $176400 Coffee Hot Cafe Investment Property $117200 $293,600 Current Assets Inventory $76200 Trade Receivable $109000 Cash and Cash Equivalent $56000 $190800 TOTAL ASSETS $484400 FINANCED BY: Ordinary Share Capital $20,000 Share Premium $48,800 General Reserves $114000 Retained Earnings $74400 Revaluation Reserves $104400 Total Equity $361600 LONG TERM LIABILITIES 4%Loan $30,000 Trade Payables ` $86800 Current Tax $280 Deferred Tax $320 Accrued Loan Interest $5400 TOTAL EQUITY AND LIABILITIES $484400 Develop a guerrilla marketing strategy for your small business. Guerrilla-marketing strategy entails promoting a product by presenting its messages from nowhere thereby, capturing the attention of consumers by creating a large impression before disappearing. Coffee Hot Cafe will utilize various Guerrilla marketing strategies to capture the attention of different customers as well as to increase sales and profitability. Among the strategies that will be utilized include. Media, marketing via events, utilization of giveaways, partnership, free demonstrations and word of mouth. Coffee Hot Cafe will influence the media to talk about their products; this will help to create awareness among the members of the public. The use of media may also involve inviting media people to an educative workshop on healthy eating. Further, Coffee Cafe may employ event marketing. This entails participating or supporting certain events such as soccer, volleyball and athletic games. Such events may help to create awareness about the company products (Sam Ashe-Edmunds, 2014). Giveaway strategy may involve donating to charity or offering free coffee during certain events so that consumers can be able to test and discover the goodness of the product. This strategy will make consumers to purchase the products offered by Coffee Hot Cafe. Partnership may involve promoting the products of other business that sell the similar products like yours. For example, Coffee Hot Cafe may promote products of its partners so that the partners can also promote their products. Coffee Hot Cafe may employ free demonstration strategy. This involves offering free talks and seminar that inform/educate consumers how they will benefit from consuming Coffee Hot Cafe products. Further the word of mouth and customer referrals especially on social media such as twitter and face book may greatly help to create awareness about the existing product to numerous consumers (Sam Ashe-Edmunds, 2014). Discuss the most appropriate location for a second store (an actual street address). Explain your reasoning. The most appropriate location for a second store may be selected after taking into consideration the following factors: cost/ affordability to start and operate a second store. This means that when purchasing an existing business it is vital to take into consideration the amount of capital that one can be to raise without opting debt financing. Secondly, customer’s cultural values and attitude should be taken into consideration because different customers have different attitude towards certain products. This may affect consumers buying behaviour and in turn affect organisation profitability. The Security of both the business and the customers should be taken into account because safety is an integral part for any successful organisation. Further, convenience in terms of customer’s accessibility should be taken into account. Therefore, after taking into consideration all the above factors, the most appropriate location was found to be adjacent to Unicaf University. The actual street address for this location was found to be 46 Makedonitissas Ave., 2414 Engomi, and Nicosia, Cyprus. The reason for selecting this location is because it is strategically located to a large institution that has many students and faculty members who will be customers of the second store to be established. Further, the place has ample security which means that the security of the store and that of customers will be maintained. Students and faculties members will have a place where they could buy Coffee Hot Cafe Products at customer cost friendly price (Ramsey, 2010). Outline a plan for securing sources of debt financing for your second store. Debt financing entails financing business capital requirements through borrowed funds whereby, one is supposed to repay the borrowed money (principle amount) together with the interest attached on that loan. In order to finance the second store, various source of debt financing will be utilized. Coffee Hot Cafe plan to employ bank loan, credit lines and debt instruments such as Municipal and corporate bonds, certificates of deposits, commercial papers and treasury bills. Prior borrowing the loan, the business will make an evaluation to determine the terms and interest rates charged by various financial institutions in order to make the most appropriate choice when selecting a financial institution. The business will also utilize debt instruments and commercial papers. Commercial paper entails documents such as promissory notes that are aimed at securing a loan. Further, Coffee Hot cafe will utilize leases and mortgages so that the second store to be established can have ample space for its operation (Vitez, 2014). References Ramsey, D. (2010). The Everything Guide to Starting and Running a Retail Store: All you need to get started and succeed in your own retail adventure. Cincinnati: F+W Media. Sam Ashe-Edmunds. (2014).Guerrilla Marketing Welfare Strategies. Retrieved :< http://smallbusiness.chron.com/guerrilla-marketing-warfare-strategies-46216.html >24th February 2014. Vitez.O. (2014).Sources of Debt Financing. Retrieved :< http://www.ehow.com/about_5285115_sources-debt-financing.html> on 24th February 2014. Ward.S. (2014).Financial Plan for Business Plan. Retrieved :< http://sbinfocanada.about.com /cs/business plans/a/bizplanfinanc.htm>on 22nd February 2014. Read More