Business Plan For Start-Up Of Assessment Answer

Answer:

Introduction

The aim of this report is understand the business plan for the company which is going to operate its business in the market. The objective of this report is to identify the business opportunities for the company. The idea of business plan is like plans of business formulation. The business plan of the company includes approaching investors for the loans and funds. If the company is going to operate the business in partnership, then the business plan is necessary to measure the performance for achieving goals and objectives of the company (Egerton-Thomas, 2006). A proper business plan is helpful to know that what are the objectives the company has to meet and what is the situation of the company after the financial year. It also includes the actions which can be taken if objectives of the company are not met. In this report, a business plan is made for such company which is recently going to start the business. In the business plan, all the necessary aspects such as business plan analysis, financial analysis, opportunities, goals, and completion of the objectives are included. This business plan will be able to describe the entrepreneurial vision regarding operations and the strategy of the proposed company (Barringer, & Ireland, 2010).

Business plan analysis: Measuring Feasibility

Setting up a business is a very critical process for an entrepreneur and by the proper planning of setting up the business is most important for the success of the company. It is not enough to generate only idea of business plan. The idea of the business should also be feasible in some perspective such as market, legal and financial perspective. So it is important to analyze the business plan of the company before implementing. The business plan should be analyzed in the term of market feasibility, human resource feasibility, technical feasibility and financial feasibility. In this report the idea of business plan is for start up a restaurant in Australia (Westhead, Wright, & McElwee, 2011).


t-align: justify;">Market feasibility

In the feasibility analysis, market analysis is the most important part. It gives the business idea related to product and service which will be offered to the customers. In the market feasibility test, there are some questions for implementing business idea such as does the business which is proposed sounds profitable, does the business has ability to compete with the competitors in the market, and what is the need of this business proposal etc. These entire questions can be answered by the analysis of market feasibility. The observation of market feasibility will be helpful in identifying the perceptions and opinions of buyers related to proposed business. By the research done on the customers group, the customers in Australia have appreciated the idea of the restaurant. The positive response of the customers towards the idea of opening new restaurant supports the market feasibility. So, from the customers’ view point, the proposal of the restaurant in Australia is a good and attractive proposal. By the positive response of the customers, it can be said that the business of the restaurant will gain profit and the demand of this restaurant will be increase in the Australian restaurant industry (Bowling, 2016).

Along with this, for analyzing market feasibility, there is important to look on the competition structure. The capital of Australia, Canberra is full of the good restaurants and there will be a great competition for the new business in the Australian restaurant industry. There is availability of every type of food such as Indian, America, Japanese, and Korean food varieties. It is very popular country for different foods. There are many famous food destination in the city Canberra i.e. Courgette Restaurant, Temporada, The cupping room, Aubergine and Morks etc. These restaurants are highly ranked by the tourists and visitors from different countries (visitcanberra, 2016). For testing the feasibility for the restaurant plan, the analysis of the competitors and their performance in market has been analyzed:

Table 1: Comprehensive study of competitors


Name

Food type

Theme

Service ratings

Food ratings

Venue ratings

Environ-ment

Price range

Courgette Restaurant

European

Romantic Ambience, business meetings

4.5

4.5

4.5

4

$6-$10 (reasonable and affordable)

Temporada

Contemporary, Australian

Special occasions, Bar scenes

4.5

4.5

4

4

$10-$15

The cupping room

International

Child-friendly, local food

4

4.5

4

4

$3-$10

Aubergine

European

Romantic, Special occassion

4.5

4.5

4

4.5

$6-$10

Morks

Asian, Thai

Child-friendly, romantic

4.5

4.5

4

4

$1-$4

Along with the analysis of competitors, the services of the restaurant include financial services, tourism, hospitality and many more services. There are high chances of growth in the Australian restaurant industry. The good economy of the country and well established tourism industry are the factors which indicate the success of proposed business plan. Restaurant is planned to open in Canberra and this is very important city for the business because this is the capital of Australia and it is also important city for overall economy of the Australia (Groucut, Leadley & Forsyth, 2004).

Technical feasibility

Technical feasibility of the proposed business plan includes the technical requirements that are needed for the operating the business in the market. The business plan for the proposed business should be planned effectively so that when the company will be able to face the difficulties while operating the business. There can be many difficulties in the business such as difficulties during the order, billing of the payments, viewing order history, and slow down the server etc. technical feasibility is the study of details of delivered products and services such labor, material, required technologies, and location of the business etc (Wolfe, 2016). The analysis of the technical feasibility can be done on the basis of some points:

Physical location- The proposed business plan is for the opening of restaurant in Australia.  The city for the restaurant is choosing Canberra, the capital of Australia. The reason of choosing this city is that the city is surrounded by different establishments such as many schools, banks, call centers, and many government places. Along with this, the city is the key of growth and success because of strong economy (Burk, 2007).

Labor:  For the operating of the restaurant, sufficient staff is required. The required staff would be head chef, Chef, Assistant cooks, Waiters, Reception and counter staff and Reception and counter staff. For the filling the staff, the hiring should be done by the public notice.

Materials: For operating the business of restaurants, there are requirements of some materials. The materials would be required i.e. office supplies, kitchen equipments, kitchen utensils, maintenance equipments, materials for advertisings such as hoardings, paints etc, furniture and fixture and store equipments (Newman, 2008).

Human feasibility

The main aim of human feasibility is to identify the availability of proper sills and sufficient resources so that the company can bring best services in the market. Analysis of human feasibility includes no-financial factors which are important for the business operations. There can be two main issues in human feasibility such as sufficiency of resources and management competence. For evaluating the sufficiency of resources, it is very important to identify non-financial resources which give idea to move ahead in the market (Godsmark, Garvey & Dismore, 2011). The resources for the new business can be support of government, quality of workforce, customers, competitors and suppliers etc. If there is no sufficient availability of resources, then the idea should be developed again. On the other hand, for evaluating management competence, the capabilities of the management team should be analyzed on the basis of their expertise to launch new business (Bangs, 2002).

If the customers are continuously arriving into the restaurant then a well maintained staff will be needed to provide the services. The description of staff can be:

Table 2: Required number of staff

Staff Name

Required number of persons

Head chef

1 (expert in ordered menu and food)

Chef

5 (expert in each food)

Assistant cooks

5

Waiters

10

Reception and counter staff

1

Manager

1

The main management team will be distributed between three parts such as administration, finance and marketing. Along with this, the growth of the company is also depending upon sales and marketing activities. The decisions of the company should be taken on the basis of the company’s mission and vision statements so the company will not face any difficulties in future (Hitt, Ireland & Hoskisson, 2007). The staff in the company should be recruited by the public notice about the recruitment process. The duties should be given to the staff members according to their knowledge, experience, abilities and creativity. Members of the restaurant should respect to each other. People in the company should build a better atmosphere to provide better customer services. This idea will be helpful for the current staff members as well as new members who will be hired by the company (Baraban & Durocher, 2010).

Financial analysis

The financial analysis of the proposed plan provides a framework of the business proposal to acquire funds. This element gives financial support to the proposed business plan. This financial plan is an estimation of required fund for the business operation of restaurant. It is estimated that the $300,000 will be acquired by short term loans and $50,500 will come from the owner of the business. It is assumed that the profit of the restaurant will be dependent on the nature of the growth (Dayananda, 2002).

Start-up funding: For start-up the restaurant, the fund will come from owner and short-term loans. The total fund for start-up is described below:

Table 3: Required fund

Capital

Amount

Owner equity

$50,500

Short term loan

$300,000

Total investment

$350,000

Start-up expenses

($275,500)

Total capital

$75,000

Total capital and liabilities

$75,000

Total fund

$350,000

Key assumptions: The financial plan of every company is based on some assumptions. For this proposed business plan, the key assumptions are as follows:

  • Australia is the country of high-growth economy and the average per day traffic in the city will be 567 individual.
  • It is assumed that there will be no expected changes in the popularity of restaurant.
  • Food for the two people in the restaurant will be in range of $20-$30. The average cost per head of meal will be $15 per meal.
  • The cost of alcohol per head will be $15.
  • It is assumed that the gross profit margin of the restaurant will be 30%.
  • It is assumed that the arrival of the customers in the bar section is 20% of total arrival in the restaurant (Best, 2010). Estimation of the sales revenue of restaurant is given below:

Table 4: Sales revenue

Year

2016

2017

                                                         Revenue of food section

Estimated customer per year

273510

314475

Revenue per head

18

20

Total revenue

4923180

6289500

 

Revenue of bar section

 

    

year

 

order

restaurant

year

food

2016

 

10

54702

547020

3654094

2017

 

10.5

62895

660397.5

4374347

Sales forecast: The sales forecast of the proposed restaurant for two years is described below:

Table 5: Sales Forecast

Sales Forecast

 

 

Year

2016

2017

Units

328,212

377,370

Sales value @$1000/unit

5,957,048

7,534,192

Sales policy

 

 

Cash flow on sales

5,957,048

7,534,192

Cost of goods

3,654,094

4,374,347

Supplier payment policy

 

 

Cash flow of cost of goods

3,654,094

4,374,347

Cash flow of the proposed project:

Table 6: cash flow

Cash Flow Forecast

 

 

 

Year

0

2016

2017

Cash Inflows

 

 

 

Cash from sales

 

5,957,048

7,534,192

Loan from directors

300,000

 

 

Share capital

50,500

 

 

Other external loans

 

 

 

Other cash inflows

 

 

 

Total cash inflow

350,500

5,957,048

7,534,192

Cash Outflows

 

 

 

Payment of materials

0

3,654,094

4,374,347

Operating expenses

 

 

 

Rent (premises)

9,000

65,340

71,874

Salaries and wages

0

380,880

438,012

Other expenses

0

110,214

121,434

Interest and bank charges

0

20,000

10,000

Other payments

0

0

0

Corporate tax

 

420,733

431,092

Survey cost in market

10,000

 

 

Other preliminary expenses

140,000

 

 

Capital expenditure

 

 

 

Plant and other expenditures

21,500

 

 

Repayments of finance

 

 

 

Loan repayments

 

100,000

100,000

Dividends

0

0

0

Total cash outflows

180,500

4,751,261

5,546,759

Summary

 

 

 

Net cash flow

170,000

1,205,787

1,987,433

Opening balance

0

1,907,233

3,113,020

Closing balance

170,000

3,113,020

5,100,452

 

Estimated profit and loss:

The statement of profit and loss is an estimated statement to calculate the total revenue, cost of goods and services, and total expenses which incurred during the business operation in a particular time period. The profit and loss statement identifies the capability of the business to generate revenue and profit. It is also known as the income statement. All the numbers used in the profit and loss statement is assumed for the business operations (Walker, 2007). For the business proposal of restaurant, the estimated profit and loss statement is given below:

Table 7: Profit & loss statement

Income and expenses

0

1

2

General expenses

 

110,214

121,434

Payable bank charges

 

20,000

10,000

Lease payments

 

0

0

Depreciation

 

2150

2150

Other expenses

 

 

 

Total expenses

9,000

578,584

643,470

Profit before tax

9,000

1,724,370

2,516,375

Tax (25%)

 

431,092

629,094

Profit after tax

 

1,293,277

1,887,281

Dividends

0

0

0

Transfer to reserves

 

1,293,277

1,887,281

 

Balance sheet

 

 

 

Assets

 

 

 

Fixed assets

 

 

 

Building

0

0

0

Furniture

21,500

15,050

12,900

Vehicles

0

0

0

Plant & Machinery

0

0

0

Net Fixed Assets

21,500

15,050

12,900

Current assets

 

 

 

Stock

211,957

364,529

0

Debtors

0

496,421

627,849

Cash

170,00 0

3,113,02 0

5,100,452

Other

 

 

 

Rent

9,000

65,340

71,874

Market survey cost

10,000

 

 

Other preliminary expenses

140,00 0

 

 

Total

540,957

4,039,309

5,800,175

Current liabilities           

 

 

 

Taxation

 

431,092

629,094

Total

 

431,092

629,094

Total assets-current liabilities

 

3,623,267

5,183,982

Liabilities

 

 

 

Share cap

50,500

50,500

50,500

Reserves

 

2,555,477

4,442,758

Total equity

50,500

2,605,977

4,493,258

Loans

300,000

100,000

0

Total

350,500

2,705,977

4,493,258

Break-even analysis: Break even analysis is the calculation of the volume of the sales for identifying the cost. In the analysis, lower sales volume indicates that the break-even point would be unprofitable and higher sales volume indicates that the break-even point would be profitable. The analysis is based on the relationship between the fixed cost, variable cost and selling price. By the analysis of break-even point in the restaurant, it will be identified that the restaurant is by how much sales, the restaurant will be able to gain profit (Wong, 2010). The break-even point can be calculated by the formula:

Break-even point= Fixed cost/ (selling price-variable costs)

Figure 1: Break-even point

The break-even point for the proposed restaurant is given in the chart which is estimating level of sales volume. It shows the project attractiveness for investment.

Payback period: Payback period is the technique of financial evaluation. It is used to analyze that in how much time, the company is able to return the loans and investments. It is also known as non-discounted technique. In this proposed business plan, to start-up the required fund is $350,000. The required capital will be recovered by gaining profit. To analyze the payback period for the proposed plan, the calculation is given below:

Table 8: Payback period

Year

Net profit

Cumulative net profit

2015

$143,258

$143,258

2016

$460,848

$604,106

2017

$879,710

$1,483,816

Payback period= 2+ (350,500-143,258)/460,846

= 2.4 years or 2 years and 5 months

Payback period of the company is low. So, it is a right business to be invested.

Conclusion (Assessment of business development proposal)

This report is based on the business plan of a restaurant which is opening in the city Canberra, the capital of Australia. For this proposal, market research has been done. For the success of the business plan, the feasibility of market, human resource, technical and financial has been tested. From the above analysis, it has been observed that the idea of the business plan is good and will be successful. The investment in the proposed plan will be profitable because by the break-even point and payback period, it has been analyzed that revenue of the restaurant will be good.

References

Bangs, H. D., (2002), Business Planning Guide, (9th). USA: Dearbourn Financial Publications

Baraban, R. S. & Durocher, J. F., (2010). Successful Restaurant Design. USA: John Wiley & Sons.

Barringer, B., & Ireland, D., (2010), Entrepreneurship (Successfully Launching New Ventures) (3rd), UK: Pearson Education Inc

Best, T. (2010), Low-Cost Marketing Strategies For Bars And Restaurants, UK: The Butler Publishing Group.

Bowling, D., (2016), Capital gains: the rise of Canberra's dining scene, accessed on 11th October 2016 from https://www.hospitalitymagazine.com.au/food/news/capital-gains-the-rise-of-canberra-s-dining-scene

Burk, M., (2007), Essential guide to marketing planning, UK: FT Prentice Hall - Financial Times

Dayananda, D., (2002), Capital Budgeting: Financial appraisal of investment projects, UK: Cambridge University Press. pp. 150.

Egerton-Thomas, C., (2006), How to open and run a successful restaurant, (3rd),  UK: John Wiley and Sons, Inc.

Godsmark, C., Garvey, M. & Dismore, H., (2011). Starting and Running a Restaurant For Dummies, USA: John Wiley & Sons

Groucutt, J., Leadley, P., & Forsyth, P., (2004), Marketing: Essential principles, new realities, UK: Kogan Page Limited,

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E., (2007), Strategic Management: Competitiveness and Globalization, (7th), OH: South-Western College Publishing

Newman, A., (2008). "The Feasibility of Opening One More Restaurant/Bar in San Luis Obispo." Unpublished Senior Project, California Polytechnic State University, San Luis Obispo

Visitcanberra, (2016), Canberra’s Culinary Scene Celebrates International Flavours, accessed on 11th October 2016 from https://visitcanberra.com.au/pages/canberra-culinary-scene

Walker, J. R., (2007), The Restaurant: From Concept to Operation, USA: John Wiley and Sons

Westhead, P., Wright, M., & McElwee, G., (2011), Entrepreneurship (Perspectives and Cases),IND:  Pearson Education Limited

Wolfe, L., (2016), How to Write a Technical Feasibility Study, accessed on 11th October 2016 from https://www.thebalance.com/writing-technical-feasibility-study-3515778

Wong, K. K., (2010), Approved Marketing Plans for New Products and Services, USA: iUniverse


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