This report discusses and thoroughly analyzes the business structure of the Venis Cafe and makes a detailed financial forecast for the business for the next three years. The report begins with the evaluation of the business model of the restaurant. The ownership structure of the business is discussed with issues such as capital contribution and issues of profit sharing since the business is a partnership of three people. The paper also discusses the sources of finance that the partners started the business with. The next section of this paper discusses the aims and objectives of the business and ways in which it fulfills the needs of the consumer. The paper discusses the physical location of the business and the contact details such as phone numbers and physical address. The management aspect of the business is also discussed with great focus on the organizational structure, qualifications of the management team and their level of experience. In the management section, the strengths and weaknesses of the management team are discussed (Keillor, 2007). Another important point in this section is indicating a garreteer who is the second line contingency who will repay the money in case the owner or owners die or are incapacitated.
The report also discusses the products and services offered by the business. This contains details such as the types of meals served in the restaurant and special treats and packages for customers. The markets for the business will be mainly the local population especially traders who carry out their business in the city. The suppliers’ fort the business will be selected competitively with the supplier with the capacity to supplier the highest quality goods and on time being the one to win the tenders. The final section of this entrepreneurial report contains forecast of financial reports of the business to help predict the financial future of the business. This is accompanied by an in depth analysis of the financial projections in order to add clarity to the report.
The business model for Venis restaurant is focused on fulfilling the needs of consumers who are health conscious. The restaurant will offer food which is very nutritious with an emphasis on organically produced food and food products. This idea is driven by evidence from research indicating that consumers are becoming very conscious of what they eat especially in UK. The demand for nutritious food which has not undergone in chemical procedures has been shooting in the recent years. This has majorly due to advice from health professionals and various researchers who have blamed unhealthy food and especially processed food for the increase in diseases such as cancer.
The model of Venis restaurant focuses on entering the industry with a cost leadership approach. When the business has gained a substantial number of customers, the prices for the products and services will be increased in order to help the business recover the initial investment and generate interest on capital by making good profits. It won’t take long for the business to review its pricing mechanism since the demand for the products is expected to be high which means that price is not a very vital determinant of demand. The business will also offer exception services that focus on the needs of every specific customer (Weinberg, 2009). This will help the business gain competitive advantage over its rivals in the industry. This is because most of the restaurants who offer the same products as Venis focus mainly on profits maximization since customers are many. In this process, they tend to lose focus on the need for customer satisfaction and customers feeling appreciated and well treated. This will be achieved by recruiting and employing highly trained and experienced staff who know how to deal with customers in this industry.
There is importance to analyze the external environment in which the business will be operating. This will help in preparing the owners of the business and the management in facing and overcoming the challenges that may exist in this industry. Environmental analysis also helps in determining the strengths and weaknesses of business in this industry. The industry trends and dynamics are determined in this stage. Venis restaurant will be operating in the hotel industry. The business will be located in the city of London. The industry is continuously growing and the expected future growth for the industry is very high. According to a report by PWC, hotel industry in most regions and cities in the UK, the pace of growth for the hotel industry is expected to grow but at a slower pace than in 2016. The report projects that revenue for the hotel industry is expected to grow by 2.4% in the year. The expected decrease in growth is mainly due to the uncertainty surrounding the exit from EU by the UK. London however being one of the biggest cities in the region is expected to not be affected so much by this factor.
The characteristics of this industry include high operation expenses with labor costs being very high. This is because it’s a service industry and therefore companies operating in this industry must rely on highly trained and experienced man power in order to adequately cater for the needs of the consumers. The importance of human resource in this industry cannot be over emphasized. Another significant characteristic of this industry is that there are many buyers and seller. This therefore means that Venis will be operating in perfectly competitive market. The products offered in this market are highly homogeneous but are differentiated through branding, marketing and services offered. There are several regulations in this industry. The major regulation in this industry includes health and safety standards where a person opening a restaurant is required to apply and obtain a certificate from the public health department (Christopher, 2016). The owners are also required to obtain licenses from the food and drug authority to ensure that all the safety standards are met in regard to the food offered to the public. The business also needs to pay business permit fees to both the local and the national government before beginning operations.
The competition situation in this industry is characterized by high levels of competition. The competitors in these industry businesses are fast embracing technology which helps in increasing efficiency. There are many competitors in this industry. The high number of competitors is due to a variety of reasons such as ease of entry into the business. The other factor contributing to the large numbers of competitors include high profit margins which attracts new firms to join the industry. Venis restaurant will however specialize in offering organically produced food especially traditional foods from different cultures across the world. The number of restaurant specializing in this sector however is very few. The business will therefore fill a very huge gap in this industry. The competition however is still increasing in this business and is expected to increase even more in future (Jackson,2013). The key factors in this industry include sensitivity to customer needs which is the core to the success of the business. Another key factor is the cost factor. The costs in this industry are high and therefore, proper management should be done in order to ensure efficiency in management of resources.
The financial forecast section of this report helps in analyzing the expected financial position of the company in future
|
Month |
Jan 13 |
Feb 13 |
Mar 13 |
Apr 13 |
May 13 |
Jun 13 |
Jul 13 |
Aug 13 |
Sep 13 |
Oct 13 |
Nov 13 |
Dec 13 |
|
Sales |
1,100 |
1,240 |
1,330 |
2,300 |
2,300 |
2,400 |
2,400 |
2,450 |
2,450 |
2,500 |
2,550 |
2,500 |
|
Sale of goods/services |
1,100.00 |
1,240.00 |
1,330.00 |
1,440.00 |
1,500.00 |
1,600.00 |
1,670.00 |
1,670.00 |
1,750.00 |
1,830.00 |
1,910.00 |
1,990.00 |
|
Sundry Income (e.g. Commission earned, franchise fees etc.) |
230.00 |
230.00 |
320.00 |
320.00 |
400.00 |
430.00 |
510.00 |
520.00 |
400.00 |
400.00 |
510.00 |
500.00 |
|
other incomes |
– |
20.00 |
10.00 |
35.00 |
110.00 |
234.00 |
175.00 |
130.00 |
134.00 |
130.00 |
140.00 |
150.00 |
|
Total Sales |
?2,430.00 |
?2,730.00 |
?2,990.00 |
?4,095.00 |
?4,310.00 |
?4,664.00 |
?4,755.00 |
?4,770.00 |
?4,734.00 |
?4,860.00 |
?5,110.00 |
?5,140.00 |
|
Sales Discounts given |
210.00 |
215.00 |
230.00 |
255.00 |
255.00 |
275.00 |
275.00 |
280.00 |
280.00 |
301.00 |
315.00 |
320.00 |
|
Sales Commissions paid |
55.00 |
64.00 |
67.00 |
110.00 |
110.00 |
114.00 |
114.00 |
115.00 |
115.00 |
120.00 |
124.00 |
127.00 |
|
Total Discounts/ Commissions |
?265.00 |
?279.00 |
?297.00 |
?365.00 |
?365.00 |
?389.00 |
?389.00 |
?395.00 |
?395.00 |
?421.00 |
?439.00 |
?447.00 |
|
Total Net Income |
?2,165.00 |
?2,451.00 |
?2,693.00 |
?3,730.00 |
?3,945.00 |
?4,275.00 |
?4,366.00 |
?4,375.00 |
?4,339.00 |
?4,439.00 |
?4,671.00 |
?4,693.00 |
|
Cost of Sales |
||||||||||||
|
Opening Stock |
600.00 |
1,100.00 |
1,065.00 |
10.00 |
290.00 |
540.00 |
570.00 |
370.00 |
36.00 |
– |
280.00 |
|
|
Stock Purchased |
1,500.00 |
1,300.00 |
670.00 |
350.00 |
2,400.00 |
2,090.00 |
2,420.00 |
2,150.00 |
1,900.00 |
2,200.00 |
2,140.00 |
2,000.00 |
|
1,500.00 |
1,900.00 |
1,770.00 |
1,415.00 |
2,410.00 |
2,380.00 |
2,960.00 |
2,720.00 |
2,270.00 |
2,236.00 |
2,140.00 |
2,280.00 |
|
|
Less Closing Stock |
600.00 |
1,100.00 |
1,065.00 |
10.00 |
290.00 |
540.00 |
470.00 |
370.00 |
36.00 |
– |
280.00 |
– |
|
Total Cost of Sales |
?900.00 |
?800.00 |
?705.00 |
?1,270.00 |
?2,120.00 |
?1,840.00 |
?2,490.00 |
?2,350.00 |
?2,234.00 |
?2,236.00 |
?1,860.00 |
?2,280.00 |
|
Gross Profit |
?1,265.00 |
?1,651.00 |
?1,988.00 |
?2,460.00 |
?1,825.00 |
?2,435.00 |
?1,876.00 |
?2,025.00 |
?2,105.00 |
?2,203.00 |
?2,811.00 |
?2,413.00 |
|
Expenses |
||||||||||||
|
General & Administrative |
||||||||||||
|
Bank charges |
0.90 |
1,1 |
2.00 |
2.00 |
3.00 |
2.50 |
2.50 |
2.00 |
2.00 |
2.00 |
2.00 |
3.00 |
|
Credit card commission |
3.00 |
3.00 |
3.00 |
3.00 |
3.00 |
4.00 |
1.00 |
2.00 |
2.00 |
2.00 |
2.00 |
2.00 |
|
Consultant fees |
6.00 |
6.00 |
6.00 |
7.00 |
7.00 |
7.00 |
7.00 |
7.00 |
7.00 |
7.00 |
7.00 |
7.00 |
|
Office Supplies |
68.00 |
12.00 |
22.00 |
20.00 |
17.00 |
17.00 |
20.00 |
21.00 |
20.00 |
20.00 |
22.00 |
21.00 |
|
License fees |
70.00 |
70.00 |
70.00 |
70.00 |
70.00 |
70.00 |
70.00 |
70.00 |
70.00 |
70.00 |
70.00 |
70.00 |
|
Business insurance |
30.00 |
30.00 |
30.00 |
30.00 |
30.00 |
30.00 |
30.00 |
30.00 |
30.00 |
30.00 |
$30.00 |
30.00 |
|
Etc. |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
|
|
Total General & Administrative |
?177.90 |
?121.00 |
?133.00 |
?132.00 |
?130.00 |
?130.50 |
?130.50 |
?132.00 |
?131.00 |
?131.00 |
?133.00 |
?133.00 |
|
Marketing & Promotional |
||||||||||||
|
Advertising |
280.00 |
110.00 |
70.00 |
|||||||||
|
Promotion – General |
80.00 |
70.00 |
60.00 |
30.00 |
30.00 |
30.00 |
30.00 |
30.00 |
30.00 |
|||
|
Promotion – Other |
||||||||||||
|
Etc. |
||||||||||||
|
Total Marketing & Promotional |
?280.00 |
?110.00 |
?70.00 |
?80.00 |
?70.00 |
?60.00 |
?30.00 |
?30.00 |
?30.00 |
?30.00 |
?30.00 |
?30.00 |
|
Operating Expenses |
||||||||||||
|
Newspapers & magazines |
45.00 |
45.00 |
45.00 |
45.00 |
45.00 |
45.00 |
45.00 |
45.00 |
45.00 |
45.00 |
45.00 |
45.00 |
|
Parking/Taxis/Tolls |
||||||||||||
|
Entertainment/Meals |
||||||||||||
|
Travel/Accomodation |
||||||||||||
|
Laundry/dry cleaning |
30.00 |
30.00 |
34.00 |
30.00 |
30.00 |
26.00 |
34.00 |
25.00 |
30.00 |
30.00 |
30.00 |
30.00 |
|
Cleaning & cleaning products |
||||||||||||
|
Sundry supplies |
||||||||||||
|
Equipment hire |
||||||||||||
|
Etc. |
||||||||||||
|
Total Operating Expenses |
?75.00 |
?75.00 |
?79.00 |
?75.00 |
?75.00 |
?71.00 |
?79.00 |
?70.00 |
?75.00 |
?75.00 |
?75.00 |
?75.00 |
|
Motor Vehicle Expenses |
||||||||||||
|
Fuel |
300.00 |
270.00 |
200.00 |
320.00 |
310.00 |
310.00 |
300.00 |
305.00 |
310.00 |
310.00 |
312.00 |
312.00 |
|
Vehicle service costs |
75.00 |
75.00 |
75.00 |
75.00 |
75.00 |
75.00 |
75.00 |
75.00 |
75.00 |
75.00 |
75.00 |
75.00 |
|
Tyres & other replacement costs |
600.00 |
|||||||||||
|
Insurance |
||||||||||||
|
Registrations |
||||||||||||
|
Total Motor Vehicle Expenses |
?375.00 |
?345.00 |
?275.00 |
?395.00 |
?385.00 |
?385.00 |
?975.00 |
?380.00 |
?385.00 |
?385.00 |
?387.00 |
?387.00 |
|
Website Expenses |
||||||||||||
|
Domain name registration |
||||||||||||
|
Hosting expenses |
||||||||||||
|
etc |
||||||||||||
|
Total Website Expenses |
||||||||||||
|
Employment Expenses |
||||||||||||
|
Permanent |
450.00 |
450.00 |
450.00 |
450.00 |
450.00 |
450.00 |
450.00 |
450.00 |
450.00 |
450.00 |
450.00 |
|
|
Salaries/Wages |
300.00 |
300.00 |
370.00 |
370.00 |
370.00 |
370.00 |
370.00 |
370.00 |
370.00 |
440.00 |
440.00 |
440.00 |
|
PAYE |
35.00 |
35.00 |
41.00 |
41.00 |
41.00 |
41.00 |
41.00 |
41.00 |
41.00 |
46.00 |
46.00 |
46.00 |
|
Superannuation |
12.00 |
12.00 |
12.00 |
12.00 |
12.00 |
12.00 |
12.00 |
12.00 |
12.00 |
12.00 |
12.00 |
12.00 |
|
Other – Employee Benefits |
22.00 |
20.00 |
22.00 |
20.00 |
20.00 |
2,528.00 |
25.00 |
30.00 |
18.00 |
10.00 |
20.00 |
24.00 |
|
Recruitment costs |
300.00 |
|||||||||||
|
Total Perm. Employment Expenses |
669.00 |
367.00 |
445.00 |
443.00 |
443.00 |
2,951.00 |
448.00 |
453.00 |
441.00 |
508.00 |
518.00 |
522.00 |
|
Casual |
||||||||||||
|
Salaries/Wages |
300.00 |
300.00 |
280.00 |
280.00 |
280.00 |
280.00 |
280.00 |
280.00 |
280.00 |
280.00 |
280.00 |
280.00 |
|
PAYE |
8.00 |
8.00 |
8.00 |
7.00 |
7.00 |
7.00 |
7.00 |
7.00 |
7.00 |
7.00 |
7.00 |
7.00 |
|
Superannuation |
||||||||||||
|
Other – Employee Benefits |
||||||||||||
|
Recruitment costs |
230 |
|||||||||||
|
Total Casual Employment Expenses |
?538.00 |
?308.00 |
?288.00 |
?287.00 |
?287.00 |
?287.00 |
?287.00 |
?287.00 |
?287.00 |
?287.00 |
?287.00 |
?287.00 |
|
Workcover Insurance |
12.00 |
14.00 |
14.00 |
14.00 |
14.00 |
14.00 |
13.00 |
14.00 |
14.00 |
14.00 |
14.00 |
14.00 |
|
Total Employment Expenses |
?1,219.00 |
?689.00 |
?747.00 |
?744.00 |
?744.00 |
?3,252.00 |
?748.00 |
?754.00 |
?742.00 |
?809.00 |
?819.00 |
?823.00 |
|
Occupancy Costs |
||||||||||||
|
Electricity/Gas |
18.00 |
17.00 |
15.00 |
18.00 |
20.00 |
10.00 |
21.00 |
22.00 |
21.00 |
21.00 |
21.00 |
22.00 |
|
Telephones |
7.00 |
7.00 |
.00 |
7.00 |
7.00 |
7.00 |
7.00 |
7.00 |
7.00 |
7.00 |
7.00 |
7.00 |
|
Property Insurance |
||||||||||||
|
Rates |
||||||||||||
|
Rent |
800.00 |
800.00 |
800.00 |
800.00 |
800.00 |
800.00 |
800.00 |
800.00 |
800.00 |
800.00 |
800.00 |
800.00 |
|
Repair & maintenance |
200 |
|||||||||||
|
Waste removal |
||||||||||||
|
Water |
10.00 |
12.00 |
12.00 |
12.00 |
14.00 |
14.00 |
16.00 |
17.00 |
18.00 |
18.00 |
16.00 |
16.00 |
|
Etc. |
||||||||||||
|
Total Occupancy Costs |
?835.00 |
?836.00 |
?834.00 |
?837.00 |
?841.00 |
?831.00 |
?1,044.00 |
?846.00 |
?846.00 |
?846.00 |
?844.00 |
?845.00 |
|
Other Expenses |
||||||||||||
|
Add an expense description here |
||||||||||||
|
Add an expense description here |
||||||||||||
|
Add an expense description here |
||||||||||||
|
Add an expense description here |
||||||||||||
|
Add an expense description here |
||||||||||||
|
Add an expense description here |
||||||||||||
|
Total Other Expenses |
||||||||||||
|
Total Expenses |
?2,961.90 |
?1,831.00 |
?1,863.00 |
?1,868.00 |
?1,860.00 |
?4,344.50 |
?2,031.50 |
?1,832.00 |
?1,824.00 |
?1,891.00 |
?1,901.00 |
?1,906.00 |
|
Month Net Profit / (Loss) |
-?1,696.90 |
-?180.00 |
?125.00 |
?592.00 |
-?35.00 |
-?1,909.50 |
-$155.50 |
?193.00 |
?281.00 |
?312.00 |
?910.00 |
?507.00 |
|
Total Year to Date Net Profit / (Loss) |
-?1,696.90 |
-?1,876.90 |
-?1,751.90 |
-?,1159.90 |
-?1,194.90 |
-?3,104.40 |
-?3,259.90 |
-?3,066.90 |
-?2,785.90 |
-?2,473.90 |
-?1,563.90 |
-?1,056.90 |
|
Venis restaurant |
||||
|
Profit and Loss Statement |
||||
|
For the Period ended Year One |
ended June 2019 |
|||
|
Income |
||||
|
Sales |
44,800 |
|||
|
Total Sales |
44,800 |
|||
|
Cost of Goods Sold |
||||
|
Opening Stock |
0 |
|||
|
Stock Purchases |
25,700 |
|||
|
Less Closing Stock |
3120 |
|||
|
Total Cost of Goods Sold(COGS) |
?22580 |
|||
|
Gross Profit |
22220 |
|||
|
Expenses |
||||
|
Advertising |
500 |
|||
|
Bank Service Charges |
120 |
|||
|
insurance |
500 |
|||
|
Payroll |
7000 |
|||
|
Professional Fees (Legal, Accounting) |
200 |
|||
|
Utilities & Telephone |
800 |
|||
|
Other: Computer Software |
480 |
|||
|
Expenses total |
9600 |
|||
|
Net Profit before Tax |
?12620 |
|
Profit and Loss Statement |
statement for third year of operation |
||
|
For the Period ended Year One |
ended june 2019 |
||
|
Income |
|||
|
Sales |
61,580 |
||
|
Total Sales |
61,580 |
||
|
Cost of Goods Sold |
|||
|
Opening Stock |
3120 |
||
|
Stock Purchases |
39,000 |
||
|
Less Closing Stock |
5200 |
||
|
Total Cost of Goods Sold(COGS) |
?36920 |
||
|
Gross Profit |
24660 |
||
|
Expenses |
|||
|
Advertising |
320 |
||
|
Bank Service Charges |
80 |
||
|
insurance |
500 |
||
|
Payroll |
7000 |
||
|
Professional Fees (Legal, Accounting) |
110 |
||
|
Utilities & Telephone |
500 |
||
|
Other: Computer Software |
180 |
||
|
Expenses total |
8690 |
||
|
Net Profit before Tax |
?15970 |
Projected balance sheet for Venis restaurant
|
FY-1 |
FY-2 |
FY-3 |
|
|
Current Assets |
|||
|
Cash |
10,500 |
11,000 |
12600 |
|
Investments |
|||
|
Inventories |
5,942 |
4,534 |
5250 |
|
Accounts receivable |
|||
|
Pre-paid expenses |
500 |
680 |
500 |
|
Other |
450 |
467 |
550 |
|
Total |
?17,392 |
?16,681 |
?18900 |
|
Fixed Assets |
|||
|
Property and equipment |
35,000 |
42,000 |
42,000 |
|
Leasehold improvements |
112 |
120 |
130 |
|
Equity and other investments |
600 |
550 |
780 |
|
Less accumulated depreciation (Negative Value) |
(100) |
(85) |
130 |
|
Total |
?35,612 |
?42,585 |
?43040 |
|
Total Assets |
?53,004 |
?59,266 |
?61940 |
|
Current Liabilities |
|||
|
Accounts payable |
1,150 |
1,400 |
1800 |
|
Accrued wages |
600 |
858 |
350 |
|
Accrued compensation |
80 |
220 |
260 |
|
Income taxes payable |
120 |
178 |
210 |
|
Unearned revenue |
240 |
180 |
34 |
|
Other |
30 |
30 |
26 |
|
Total |
2,220 |
2,866 |
2680 |
|
Long-term Liabilities |
|||
|
long term loan |
40,000 |
34,000 |
28000 |
|
Total |
40,000 |
34,000 |
28000 |
|
Owner Equity |
|||
|
Investment capital |
10,000 |
19,000 |
20000 |
|
Accumulated retained earnings |
784 |
3,400 |
11000 |
|
Total |
10,784 |
22,400 |
31000 |
|
Total Liabilities & Stockholder Equity |
53,004 |
59,266 |
61940 |
Projected cash-flow statement for Venis restaurant for the first three years of operation
|
CASH FLOW |
YEAR 1 |
YEAR 2 |
YEAR 3 |
|
OPENING BALANCE |
?0 |
-?4,306 |
?8,836 |
|
Cash incoming |
|||
|
Sales |
25,520 |
44,800 |
61,580 |
|
Asset sales |
7,800 |
2,300 |
0 |
|
Debtor receipts |
1,200 |
3,600 |
1,120 |
|
Other income |
3,450 |
8,800 |
1,280 |
|
Total incoming |
?37,970 |
?59,500 |
?63,980 |
|
Cash outgoing |
|||
|
Purchases (Stock etc) |
21,120 |
25,700 |
39,000 |
|
Accountant fees |
1,200 |
1,200 |
1,000 |
|
Solicitor fees |
|||
|
Advertising & marketing |
600 |
500 |
320 |
|
Bank fees & charges |
80 |
80 |
36 |
|
Interest paid |
120 |
110 |
110 |
|
Credit card fees |
80 |
50 |
30 |
|
Utilities (electricity, gas, water) |
180 |
110 |
90 |
|
Telephone |
180 |
160 |
120 |
|
Lease/loan payments |
6,000 |
6,000 |
6,000 |
|
Rent & rates |
8,000 |
8,000 |
8,000 |
|
Motor vehicle expenses |
1,200 |
800 |
600 |
|
Repairs & maintenance |
600 |
700 |
750 |
|
Stationery & printing |
90 |
110 |
80 |
|
Membership & affiliation fees |
|||
|
Licensing |
260 |
260 |
260 |
|
Insurance |
500 |
500 |
500 |
|
Superannuation |
120 |
120 |
80 |
|
Income tax |
146 |
158 |
158 |
|
Wages (including PAYG) |
1,800 |
1,800 |
1,800 |
|
More… |
|||
|
Total outgoing |
?42,276 |
?46,358 |
?58,934 |
|
Yearly cash balance |
-?4,306 |
?13,142 |
?5,046 |
|
Closing Balance |
-?4,306 |
?8,836 |
?13,882 |
|
Assumptions: |
|||
|
All figures are GST inclusive. |
There are several performance ratios that can be used in analyzing the expected financial performance of the organization. These ratios help in giving a clear insight to various stakeholders of the business. Information from financial ratios can be used by different groups such as investors, creditors, suppliers, financial institutions, and even the government. These ratios are very important for decision making purpose especially by the management and the shareholders of the business (Marich,2013). The following are the financial ratios which will be relevant when asking for additional funding from the NGO:
Year 1 Year 2
15180/23070=0.66 =66% 22200/44800=0.50=50%
Year 3
22660/61580=0.34=34%
The gross profit margin ratio of a business organization is calculated by dividing the gross profit with the total sales volume for the entire year. The ratio is used to determine the rate at which unit sales generates profits before expenses are catered for. According to information from Venis projected financial statements, the gross margin ratio of the business is decreasing from the first year going forward to the third year of operation. This is due to the strategy of the business which aims at beginning business with low prices so as to attract customers for the business. As the business gets more customers, the prices may be increased slightly in order to raise the profit margin so as to help recover the initial capital invested into the business. The increase in prices therefore explains the increase in gross profit margin ratio over the period under consideration.
The net profit margin is expressed by dividing the net profits by the total sales expressed as a percentage. This ratio is very important since it indicates how efficient a business organization is in transforming raw materials into final revenue. It shows how a business is able to minimize costs while at same time generating maximum income for the business. The following is the net profit margin ratio for Venis restaurant for the first three years;
Year 1 year 2 year 3
2876/23070=0.12=12% 12620/44800=0.28 15970/61580=0.25
The above information indicates that the net profit margin for the business will differ for the first three years with no specific pattern. The first year, the net profit margin is at12% and increases to 28% in the following year. Net profit margin is low in the first year due to high fixed costs which were required when starting the business. The net profit margin increases in the second year due to decrease in costs and increase in sales. In the third year, the NPF decrease due to various market dynamics such as increase in selling and administrative cost due the expansion of the business. The higher the NPM the more attractive the business will be.
Break even analysis
TR=TC
P×X=TFC+V×X
P×X-V×X=TFC
(P-V)×X=TFC
X=TFC/P-v
Where:
TFC is Total fixed cost
P is unit sale price
V is variable cost
TFC=16060
P=14
V=9
BER= 16,060/(14-9)=3212
The debt equity ratio measure risk position of a business. It is calculated by diving the total debt capital with the total owners’ equity.
Year 1 year 2 year 3
42220/10784=3.9 36866/22400=1.7 30680/31000=0.99
The debt equity ratio of the business is projected to keep decreasing over the years. This is due to ability of the business to repay its loans and creditors on time. The debt equity ratio is increasing also due to increase in retained earnings which increases owner’s equity. This is a positive indication to the lenders and investors that the business has the ability to repay its loans when they fall due.
The plan for Venis restaurant is to start the business an initial capital of ?500000. The business is designed to be a partnership between two people who are expected to contribute capital equally. The sources of funds for starting the business will from the owner’s savings and contributions from friends. Each of the partners is expected to contribute ?5,000 each at the start of the business. Of the remaining amount, ?30,000 will be a loan from a bank which will be paid within period of five years. The remaining amount of ?10,000 will be borrowed from a local charitable organization. The business is very conscious of its debts equity ratio and will be committed to meeting all its long term and short term financial obligations when they fall due. The loans will be obtained from financial institutions that offer credit at the lowest interest rates in the market (Ross, 2008).
This section is set to enable the entrepreneur to present their business idea to potential investors and precisely to the charitable organization which is offering loans.
Title: Presentation of the business plan in order to seek funding from the charitable organization.
Business name: Venis restaurant
The business will be named Venis restaurant. The name was chosen due to its general appeal and its easier for customers to identify the business with such a simple name.
Physical address: 56,890-London
Ownership model: Partnership
The new restaurant will be owned by two partners, Michael Keane and Alexis Cole. The partners will contributes capital equally and share profits and losses in the same ratio. The business is expected to operate according to the laid down laws and regulations governing operations of partnership in the country.
The business will require ?50,000 to start. The partners of the business are seeking an additional funding of ?10,000. The sources of the rest of the money are identified and the bank loan has already been processed. This report therefore aims at obtaining a loan amounting to ?10,000 that will be used to boast the business and help in implementing the business plan in order to generate revenue and create employment. Please consider the report and the projected financial statement in making a decision on the amount you will be willing to grant our business.
Conclusion
The report analyses the external environment of the industry in which the business will be operating. It identifies the strengths, weaknesses and opportunities that can be exploited by the business in future. The report also analyses the market conditions of the business in order to help the owners and the management in preparing adequately for the running of the new business venture. The final part of the report contains the projected financial statements of Venis to help predict the financial future of the business.
References
Ross, d. F. (2008). Competing through supply chain management: Creating market-winning strategies through supply chain partnerships. https:// j. (2010). Kellogg on marketing. Hoboken, n.j., wiley. https://www.123library.org/book_details/?Id=8488.
Marich, r. (2013). Marketing to moviegoers: A handbook of strategies and tactics. Carbondale, southern illinois university press.
Weinberg, t. (2009). The new community rules: Marketing on the social web. Sebastopol, o’reilly media, inc. https://public.eblib.com/choice/publicfullrecord.aspx?P=536620.
Keillor, b. D. (2007). Marketing in the 21st century. Westport, conn, praeger. https://ebooks.abc-clio.com/?Isbn=9780313086434.
Warwick, j. (2008). Eat london. London, filmer
Stickler, v. (2011). Business of restaurants. [place of publication not identified], grin verlag ohg.
Jackson, p. (2013). Food words: Essays in culinary culture. Oxford, berg.
Schlosser, e. (2012). Fast food nation: The dark side of the all-american meal. Boston, mariner books/houghton mifflin harcourtdx.doi.org/10.1007/978-1-4757-4816-1.
Christopher, m. (2016). Logistics & supply chain management.
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