Entrepreneurship Rubrics - Case Study Example

Executive Summary The paper highlights a business plan for a new coffee café in the name of Russet café. The café will serve gourmet coffee, espresso and drip coffee, lattes and smoothies in Kansas region. The report carries out a feasibility analysis to find out the chances of succeeding the business. It is seen that the market is saturated and very competitive which has resulted in little margin. The importance of the business depends on the ability of the business to have the store in perfect location so that footfall can be increased. Further the store will require manpower which includes both skilled and unskilled. Training will have to be provided time and again so that they remain motivated and carry out the responsibilities perfectly. Further, the financial feasibility shows that the venture can be carried out as it will ensure returns and the cost will be covered. On the whole the business looks prospective and presents an opportunity through which better return for the owner would become possible. The technical analysis highlights the importance of point of service as the employees will come in direct contact with the customers and understanding their needs and wants will help to ensure better business opportunities. Thus, the venture seems to a profitable one and investing in the venture will provide good results in the future. Table of Contents Introduction 3 About the Business 3 Market Feasibility 3 Technical Feasibility 5 Financial Feasibility 6 Human Resource Feasibility 10 Conclusion 12 References 13 Appendix 14 Introduction This report looks towards presenting a business plan for a new coffee venture which will look to provide freshly brewed coffee to its coffee lovers. The report in the beginning provides an idea about the business which is followed by market feasibility, technical feasibility, financial feasibility and human resource feasibility. This will help the readers to understand the reason for undertaking the venture and the manner in which it will be profitable for them. This would thereby provide important information through which the working mechanism can be developed. About the Business The coffee venture will start in the name of Russet coffee and will provide its customers with gourmet coffee, espresso and drip coffee, lattes and smoothies in Kansas region. The pastry which will be offered to customers will keep on evolving and changing but will mainly have muffins, breads, cookies, scones and rolls. The pastries will be procured from a local bakery to ensure freshness and consistency in taste. The store will have a seating capacity of 40 persons and will be given a modern look with all the comforts so that the experience of customers drinking coffee multiplies. This will be matched by a calmer environment and facilities which will look to meet the different needs and requirements of customers so that they become satisfied with the level of service. Market Feasibility The US coffee industry is huge and has about 20,000 stores with a revenue of over $10 billion. The industry is highly concentrated and the top 50 players contribute around 70 percent of the revenues. The industry is highly competitive and the profits for individual organizations largely depend on the place where the store is opened, the service level, the different products being offered and the overall ambience. A look at the surrounding distance of 5 miles shows that there are around 37 businesses which are involved in the coffee industry and have revenues around $54 million. Out of the 37 stores 8 stores are small which has around 15% market share and Russet coffee will be fighting to capture the same market share and segment of customers (Meike & Ulrich, 2012). The number of people consuming coffee is increasing as coffee beverages makes around 83.3% of the total hot beverages served in the country. Despite a slowdown people continue to drink coffee and the market is expected to grow at an average annual rate of 2.7%. The rate is slow as the coffee market is already matured and innovations in the coffee industry are required to bring about a change in the perception of consumer drinking coffee. In addition to it around 54% of the people start to consume coffee when they between 13 and 19 years of age whereas another 22% start drinking coffee between the age of 20 to 24 years. This makes a total of 76% people start drinking coffee by the age of 24 thereby providing a huge market as the young population is slowly growing (Alan, Sakhi, Arabella, Elizabeth & Karen, 2009). Russet coffee is looking to attract customers based on service quality and something new which the customers will get. They expect to attract the top three segments of customers which are around 39% of the population. This includes younger families, singles and educated personnel. The overall business model is competitive as both local and international players are actively participating in it. This will require that Russet coffee looks at identifying the mechanism through which they will be able to develop a better market understanding (Dreezens, Martijn, Tenbu¨lt Kok & Vries, 2005). The overall the barrier of entry is low and the changing business environment provides an opportunity to maximize business. Since, the market size is huge and the market is growing at a sluggish pace the risk is high but having individual stores which looks at innovation will help to improve the chances of being successful. Technical Feasibility Russet café will look at using technology in a proper way so that customer experience can be improved. The business will use technology on different areas through which business performance can be improved. The organization will use internet and concentrate on point of sale for the customers. The overall focus will be towards understanding customer needs at point of sale so that their needs can be met. The business will look to procure pastries and snack items from a local bakery. The prime reason for choosing a local bakery is that it will ensure continuous supply. The product procured will be fresh and will help to meet the different needs of the customers. Coffee beans will be procured from different suppliers after testing them (Hughner, McDonagh, Prothero, Shultz & Stanton, 2007). This will help to ensure consistency in quality and will also provide an opportunity through which better coffee will be provided to the customers. The business will further focus towards point of sale which will require having trained and qualified personnel who understands customer needs and wants. The entire focus will be towards understanding the customer as sale will take place after understanding the customer need and the entire focus will be at point of sale (Meyerowitz, 2009). Further the business will also focus on ensuring that no credit is provided and meeting the customer expectations will be a priority. The business will also look towards ensuring that the required licence is obtained from the concerned authorities. Special care will be taken to have strategies where fire extinguishers will be placed so that in case of mishap appropriate steps can be taken. Further, all the legal formalities will be carried out so that business doesn’t fall into difficulties and are able to meet all the requirements of the business. Financial Feasibility The financial feasibility will help to understand whether the venture will be profitable or not and the manner in which it will help to serve the needs of the business. The financial feasibility is based on the assumption that the sale will increase by 5% in the second year and 10% in the third year. Further, the salary that the owner will take will be very small as the business would require funds and it is understandable in the beginning years. In addition to it researches have shown that cafes on an average earn a gross profit of 85% whereas a net profit of 3% which has been used in the financial analysis. The start up cost which the business will have to incur has been provided in the appendix as it helps to understand the initial investment which the business would need. It is seen that the start up expense would be around $152,875 the details of which are in the appendix. The start up finance will be mostly managed by the owner as the person is wholly responsible for the business and all profits accrue to him. The sources and use of funds for the business will be through Source of Funds Amount Owner Fund 22875 Loan 130000 Total 152875 Use of Funds Amount Fixed Asset 124000 Operating Capital 28875 Total 152875 It is clearly evident that the owner will inject his own fund and raise the other part from the market through commercial loan. No shares will be issued and the entire risk will be borne by the owner. The break even analysis which provides the minimum units which has to be sold to ensure profits is as The breakeven analysis shows that the café will have to sell 25430 numbers of units to cover all its cost. Selling more than that will help the business to earn profits and ensure better return for the owner. It is also analyzed that the business will be able to sell more than the stated limit as on an average cafes sell more units if they are positioned at good locations. The future profits which the business is expected to garner from the project is as Profit & Loss Statement Year 1 Year 2 Year 3 Income Total Income 675400 711500 784500 Expenses Advertising 8800 9600 9600 Insurance 3600 3600 3600 Legal Fees 816 816 816 Rent 24900 24900 24900 Repairs 2200 2400 2400 Supplies 9548 10416 10416 Telephone 4800 4800 4800 Utilities 14400 14400 14400 Depreciation 18514 18514 18514 Total Expenses 87578 89446 89446 Net Profit (Loss) 587822 622054 695054 The profit and loss statement shows that the business will be able to make profits as the overall cost is fixed and is low which makes the venture attractive as it will ensure that the cost are easily covered. The manner in which the business will be able to manage its cash flow is as Cash Flow Year 1 Year 2 Year 3 Opening Cash Balance 8000 39891 120553 Sales 675400 711500 784500 Total Inflow 643509 711500 784500 Outflows 643509 630838 737574 Closing Cash Balance 39891 120553 167479 The cash flow statement shows that the business has sufficient liquidity which will enable them to meet the daily expenses easily. Having proper cash flow will ensure that the business will be better managed and the organization won’t face a liquidity crunch. The balance sheet for the owner will look as Balance Sheet Year 1 Year 2 Year 3 Assets Current Assets Cash 39891 120553 167479 Prepaid Expenses 12875 12875 12875 Other assets 8000 8000 8000 Total Current Assets 60766 141428 188354 Fixed Assets Improvements 71725 71725 71725 Furniture 14000 14000 14000 Equipment 38275 38275 38275 Total Fixed Assets 124000 124000 124000 Less: Accumulated Depreciation 18514 37029 55543 Total Assets 166252 228399 256811 Liabilities & Owner Equity Payable 109362 86336 60645 Total Liabilities 109362 86336 60645 Owner Equity Stock 22875 22875 22875 Retained Earning 34015 119189 173291 Total Owner Equity 56890 142064 196166 Total 166252 228399 256811 The business will have a sound financial performance as the overall analysis shows that the venture is a profitable one. The financial analysis shows that the chances of business being successful is high and will thereby ensure that the owner investment will be safe. The business to be successful has to look at find a good place to open the café so that the overall chances of being successful increases. Human Resource Feasibility To meet the needs and expectations of customers’ special efforts are being taken by having quality human resource personnel. The business based on the needs will look towards hiring people so that customer experience can be enhanced. The business will be wholly owned by the owner who will have 100% stake in the business. Since, the business relies on point of sale system so the mechanism will look at generating daily accounting and cost activity reports. To meet the needs of customers the business will look at hiring 1 manager, 5 baristas and 2 part time servers. The organization plans to increase barista in the next year by hiring 1 more person. Based on the skills and technical knowhow the people will be compensated differently and is as Position Year 1 Year 2 Year 3 Manager 65,000 65,000 72,000 Full Time Barista 50,000 50,000 50,000 Full Time Barista 50,000 50,000 50,000 Full Time Barista 50,000 50,000 50,000 Full Time Barista 50,000 50,000 50,000 Full Time Barista 50,000 50,000 50,000 Full Time Barista 50,000 50,000 Part Time Employee 21,500 5,000 21,500 Part Time Employee 21,500 21,500 21,500 Total Personnel Cost 358,000 391,500 415,000 The overall cost which Russet coffee will incur has been shown. In addition to it the business would require a gate keeper, accountant, cleaner, sweeper which will be hired as per the needs and requirements of the business. These employees will be compensated fairly and would be a very small percentage of the total cost that the business will incur. The organization will also undertake training programs so that employees can sharpen their skills so that it helps them further. This will be matched by having special incentives for employees so that they become motivated time and again. Both the process will be continuous and will be carried out after certain time interval so that employees become more committed and are able to carry out the different roles in a better way. Conclusion The paper highlights a business plan for a new coffee café in the name of Russet café. The café will serve gourmet coffee, espresso and drip coffee, lattes and smoothies in Kansas region. The report carries out a feasibility analysis to find out the chances of succeeding the business. It is seen that the market is saturated and very competitive which has resulted in little margin. The importance of the business depends on the ability of the business to have the store in perfect location so that footfall can be increased. Further the store will require manpower which includes both skilled and unskilled. Training will have to be provided time and again so that they remain motivated and carry out the responsibilities perfectly. Further, the financial feasibility shows that the venture can be carried out as it will ensure returns and the cost will be covered. On the whole the business looks prospective and presents an opportunity through which better return for the owner would become possible. The technical analysis highlights the importance of point of service as the employees will come in direct contact with the customers and understanding their needs and wants will help to ensure better business opportunities. Thus, the venture seems to a profitable one and investing in the venture will provide good results in the future. References Alan, D., Sakhi, K., Arabella, H., Elizabeth, A., Karen, L., 2009. Nutritional quality of organic foods: a systematic review. The American Journal of Clinical Nutrition, 24 (5), pp. 187-194 Dreezens, E., Martijn, C., Tenbu¨lt P., Kok, G. & Vries, N. 2005. Food and values: an examination of values underlying attitudes toward genetically modified and organically grown food products. Appetite 44: 115–122 Hughner, R., McDonagh, P., Prothero, A., Shultz, C. & Stanton, J. 2007. Who are organic food consumers? A compilation and review of why people purchase organic food. Journal of Consumer Behaviour. 6 (2), pp. 94-110 Meike, J. & Ulrich, H. 2012. The mandatory EU logo for organic food: consumer perceptions, British Food Journal, 114 (3), pp.335 - 352 Meyerowitz, S. 2009. Organic foods are higher in key minerals and plant compounds and lower in unhealthy nitrates. Cancer Research, 52 Supp, pp. 87-98 Appendix Start Up Expenses Amount Insurance 4800 Rent 2075 Supplies 2000 Advertising 4000 Initial Cost 8000 Cash in hand 8000 Total Expense 28,875 Start Up Assets Amount Leasehold Place 71725 Equipment 38275 Furniture & Fixture 14,000 Total 124000 Total Start up cost 152875 Read More