Minis Bakery is a Start-Up Bakery Business - Essay Example

? Mini’s Bakery Business Plan Executive summary Mini’s Bakery is an owner managed sole proprietorship business that is expected to be profitable in the first year of its operations. The business is expected to fill the need among low and middle income earners for bakery products in Chelsea. There is expected to be a steady growth in sales for the twelve month period of approximately 10% per month and this will be attributed to the booming market for bakery products in the area. In addition to the proprietor there will be a complement of ten employees consisting of bakers, sales and marketing, accounting and administrative personnel. The business is expected to utilise technology as a driving force in the future development of its operations. Introduction Mini’s is a start-up bakery business that seeks to provide some of the most demanded bakery products in Chelsea. The business establishment is expected to attract the attention of the local customers through the provision of quality cupcakes and scones. The bakery is driven by the need to provide quality products and it is aspired that a strong market position will be built in the first six months of operations. It is expected that such position will be facilitated by the wide experience of the proprietor in this business and the seemingly low competition in the area. As such, Mini’s Bakery seeks to offer its products at the most competitive prices in the industry and will target both the low and middle income earners as well as tourists. The business The business will be established as a sole proprietorship with the owner having responsibility for operations with the assistance of employees. The sole proprietor has wide experience in both business management and bakery affairs and is therefore well suited to manage the affairs of the business as it seeks to establish a strong presence in the area. For a start, the proprietor will hire three full time bakers who are well versed in all types of breads and cakes in addition to seven other staff who shall handle the other operations within the business. The products to be offered will initially comprise of cupcakes and scones but new products will gradually be added to the line in response to market demand. In order to increase its turnover, the business will engage in both wholesale and retail business and will therefore sell directly to the consumers in addition to other retailers. The keys to a successful operation are quality products and competitive pricing (Finell, 2007, pp.45). Market The market for bakery products is booming in the Chelsea area. Across the country, the market for scones and other types of cakes has been increasing steadily, thus providing the perfect opportunity for the business to grow its market share effectively. The increased demand for these products has been necessitated by an increase in the consumption of hot beverages. The focus of Mini’s bakery is to establish a large customer base which will ensure its success. In this regard, an effective marketing campaign will be launched in the area in order to make the residents acquainted with our products (Park, 2006, pp.23). The residents in the locality will be the initial target market. In any case, the major focus of the proprietor is to establish a steady source of revenue for the business in order to ensure its stability. The area is normally frequented by tourists and it is expected that revenue from tourists will comprise approximately 30% of total revenue. Success is dependent on the production of quality products accompanied by good hospitality (Brown, 2004, pp.56-7). Financial consideration A total of ?200, 000 will be needed for the start-up operations of which ?160,000 will come from the personal savings of the sole proprietor. The rest of the capital will be borrowed from the bank and is payable over a five year period. It is hoped that this money will be sufficient to buy the initial machinery and equipment as well as provide working capital. It is anticipated that the business will experience a growth in revenue each year which will subsequently provide much of the capital needed for the growth and expansion of the business. In this regard, it is expected that the total sales in the first month of operations will be approximately ?200,000 with a growth rate of 10% per month as shown in the sales budget in Appendix 1. The business is expected to be profitable with a projected net profit of approximately ?670,000 in the first year of operations, a feat that not many business start-ups can boast about. The projected profit and loss account is shown in Appendix 1. The business does not anticipate any major cash flow challenges as it is expected to have a balance of approximately ?92,000 at the end of the year (Lynn, 2009, pp.72). The table in Appendix 2 shows a list of expenses projected for the business in the first month of operations. Mission The focus of Mini’s bakery is the provision of quality cupcakes and scones at the most competitive prices in order to meet and exceed the expectations of the customers. Market analysis and summary The business will focus on meeting the demands of the local residents in addition to the many tourists who frequent the area throughout the year. In terms of market segmentation, major emphasis will be placed on both the middle and lower income earners. The local residents will ensure a steady source of revenue for the business while sales to visitors will approximate to 30% of total revenues. In order to totally address market needs and increase sales revenue, the business will seek to introduce hot coffee as part of its product line. Competition There is a low level of competition for the business in Chelsea due to the scarcity of quality bakeries in the area. Most of Mini’s competitors purchase products from other bakeries for resale. The business will utilise technology effectively in its operations and so enable consumers to view and purchase the products from the comfort of their homes. It is however expected that the entry of Mini’s Bakery into the area will definitely attract similar businesses and subsequently increase the level of competition. The business will however use various competitive strategies including quality, pricing and location to address this challenge. Conclusion The management of Mini’s Bakery has done the necessary research in the Chelsea area to determine how well the business is capable of doing within its first year of operations. Driven by the marketing skills of the business’ sales personnel and the provision of quality products, it is expected that the target will be met. It is also expected that the business will be profitable in its first year as shown by the financial information in Appendix 1. Appendix 1 Mini's Bakery Projected Income Statement Year Ending February 2014   ? ? Sales 4,276,857 Cost of Goods Sold:   Purchases 3,592,560   Less: Closing inventory 718,512     2,874,048 Gross profit 1,402,809 Less Expenses:   Rent 30,000   Salaries 288,000   Advertising and Promotion 213,843   Commission 85,537   Deprecation 16,000   Insurance 8,000   Motor vehicle expenses 3,000   Interest on Loan (5%) 2,000   Stationery & Office Supplies 1,440   X-Mas Bonus 24,000   Miscellaneous 1,200   Utility Bills 60,000     733,020 Net profit 669,789           Mini's Bakery Projected Balance Sheet As on February 28,2014   Cost Accumulated Depreciation Net Book Value   ? ? ? Fixed Assets   Machinery & Equipment 30,000 6,000 24,000 Motor vehicles 50,000 10,000 40,000   80,000 16,000 64,000 Current Assets   Stock 718,512   Receivables 228,249   Cash and Bank 112,602     1,059,363   Current liabilities   Payables 239,662   Accrued expenses 16,412     256,074   Working Capital 803,289 Net Assets 867,289     Financed by:   Capital   Opening Capital 160,000 Add Net profit 669,789   829,789 Long Term Liabilities:   Bank Loan 37,500   867,289         Mini's Bakery Cash Flow Statement March 2013 to February 2014   March April May June July August September October November December January February Total   ? ? ? ? ? ? ? ? ? ? ? ? ? Incomings   Capital 160,000 160,000 Bank loan 40,000 40,000 Sales 120,000 212,000 233,200 256,520 282,172 310,389 341,428 375,571 413,128 454,441 499,885 549,873 4,048,607 Total incomings 320,000 212,000 233,200 256,520 282,172 310,389 341,428 375,571 413,128 454,441 499,885 549,873 4,248,607     Outgoings   Machinery and Equipment 30,000 30,000 Motor Vehicles 50,000 50,000 Purchases 84,000 176,400 194,040 213,444 234,788 258,267 284,094 312,503 343,754 378,129 415,942 457,536 3,352,898 Rent 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 30,000 Salaries 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 288,000 Advertising and Promotion 10,000 11,000 12,100 13,310 14,641 16,105 17,716 19,487 21,436 23,579 25,937 28,531 213,843 Commission 4,000 4,400 4,840 5,324 5,856 6,442 7,086 7,795 8,574 9,432 10,375 74,125 Insurance 8,000 8,000 Motor vehicle expenses 250 250 250 250 250 250 250 250 250 250 250 250 3,000 Loan repayment 208 208 208 208 208 208 208 208 208 208 208 212 2,500 Interest on loan 167 167 167 167 167 167 167 167 167 167 167 167 2,000 Stationery & Office Supplies 120 120 120 120 120 120 120 120 120 120 120 120 1,440 X-Mas Bonus 24,000 24,000 Miscellaneous 100 100 100 100 100 100 100 100 100 100 100 100 1,200 Utility Bills 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 55,000 Total outgoings 209,345 223,745 242,885 263,939 287,098 312,573 340,596 371,421 405,329 466,628 483,656 528,791 4,136,005 Net incoming/outgoing 110,655 (11,745) (9,685) (7,419) (4,926) (2,184) 832 4,149 7,799 (12,187) 16,229 21,082 112,602 Cash b/f 0 110,655 98,911 89,226 81,807 76,881 74,697 75,529 79,678 87,477 75,290 91,520 91,520 Cash c/f 110,655 98,911 89,226 81,807 76,881 74,697 75,529 79,678 87,477 75,290 91,520 112,602 112,602     Assumptions:   1. All monthly sales are 60% cash and 40% credit receivable in the following month   2. All Purchases are done 50% cash 50% credit payable n the month following   3. Commission is 2% of sales   4. Advertising and promotions is 5% of sales   5. Commission and utility bills are paid a month in arrears   6. Depreciation on machinery and equipment as well as motor vehicle is calculated at a rate of 20% per annum           Mini's Bakery Purchases Budget March 2013 to February 2014       Percentage March April May June July August September October November December January February Total   ? ? ? ? ? ? ? ? ? ? ? ? ? Purchases 168,000 184,800 203,280 223,608 245,969 270,566 297,622 327,384 360,123 396,135 435,749 479,324 3,592,560         Payments:   Month of purchase 50% 84,000 92,400 101,640 111,804 122,984 135,283 148,811 163,692 180,061 198,068 217,874 239,662 1,796,280 Month following 50% 84,000 92,400 101,640 111,804 122,984 135,283 148,811 163,692 180,061 198,068 217,874 1,556,618 Total payments 84,000 176,400 194,040 213,444 234,788 258,267 284,094 312,503 343,754 378,129 415,942 457,536 3,352,898     Receivables 84,000 92,400 101,640 111,804 122,984 135,283 148,811 163,692 180,061 198,068 217,874 239,662 239,662                               Mini's Bakery Overheads Budget March 2013 to February 2014   March April May June July August September October November December January February Total   ? ? ? ? ? ? ? ? ? ? ? ? ? Rent 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 30,000 Salaries 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 288,000 Advertising and Promotion 10,000 11,000 12,100 13,310 14,641 16,105 17,716 19,487 21,436 23,579 25,937 28,531 213,843 Commission 4,000 4,400 4,840 5,324 5,856 6,442 7,086 7,795 8,574 9,432 10,375 11,412 85,537 Deprecation 1,333 1,333 1,333 1,333 1,333 1,333 1,333 1,333 1,333 1,333 1,333 1,333 16,000 Insurance 667 667 667 667 667 667 667 667 667 667 667 667 8,000 Motor vehicle expenses 250 250 250 250 250 250 250 250 250 250 250 250 3,000 Interest on loan 167 167 167 167 167 167 167 167 167 167 167 167 2,000 Stationery & Office Supplies 120 120 120 120 120 120 120 120 120 120 120 120 1,440 Utility Bills 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000 X-Mas Bonus 24,000 24,000 Miscellaneous 100 100 100 100 100 100 100 100 100 100 100 100 1,200 Appendix 2 List of expenses and capital expenditure in the first month of operations Rent 2,500 Salaries 24,000 Advertising and Promotion 10,000 Commission 4,000 Deprecation 1,333 Insurance 667 Motor vehicle expenses 250 Interest on loan 167 Stationery & Office Supplies 120 Utility Bills 5,000 Miscellaneous 100 48,137 Cost Machinery & Equipment 30,000 Motor Vehicle 50,000 80,000 References Brown, D. R. (2004). How to Open a Financially Successful Bakery. Ocala, Fla.: Atlantic Publishing Group. Finell, D. (2007). The Specialty Shop: How to Create Your Own Unique and Profitable Retail Business. New York: AMACOM. Lynn, J. (2009). Start Your Own Restaurant and More: Pizzeria, Coffeehouse, Deli, Bakery, Catering Business. 3rd ed. Irvine, Calif.: Entrepreneur Press. Park, W. B. (2006). Bakery Business. Boston: Little, Brown and Co. Read More