Business plan is a formal document which outlines the future course for any business venture (Butler, 2012). It outlines the goals, objectives, vision, purpose and aims of an organisation (Hiduke, 2013). It also outlines the reasons for these goals and objectives and the methods and strategies of achieving these goals. For a new business venture, business planning helps to assess the environment and the business situation (de Pablo, 2013). Additionally, it helps in assessment of market feasibility, financial feasibility and technical analysis. It also helps a new business firm in assessing the resources which are required to set up the business.
The following business plan tries to help set up a new firm in the café industry through an analysis of market, finance, resources and human resource needs
The Business Concept
The name of the new Café has been kept as ‘The Bean Palace’ and its location has been decided to be Melbourne city. The business will start with a single café restaurant offering coffee in various flavours and snacks like sandwiches, cakes and cookies. The business would like to create an image of a friendly café which can be frequented with family and friends to celebrate or to have an enjoyable outing. The café would be opened in a location where there is a large residential colony and a college in the vicinity. These would help generate customer base for the café.
The Business Objectives
A situation analysis helps any new business firm to assess its own strengths and weaknesses and the opportunities and threats posed by the industry and the market (Aaker & McLoughlin, 2010). This analysis also helps a firm to assess its strengths which can be used to counter the threats and use the opportunities to full advantage (Rigby, 2011). A small business venture of a café and restaurant can be a profitable business if proper planning is done to launch it. Following is a situation analysis for a new café in Melbourne.
Situation Analysis for The Bean Palace
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Strengths · High quality product with use of best coffee beans and snack ingredients · Good infrastructure with picturesque surroundings · Airy and fresh ambiance where students and professionals can sit and relax and even work along with having coffee. · Well trained staff to make and serve the coffee and other ingredients. · Approachable location. Near to important college and residential colony. |
Weaknesses · Heavy investment into setting up a premise and paying a skilled staff · Heavy marketing cost needs to be incurred to attain customer attention. · Less experience with running a new business · Lower prices initially may lead to less revenue. |
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Opportunities · There is demand for café and restaurant in the area as people look for nearby place for relaxation and discussions. · Not many small cafes offer free WIFI so that is a huge market opportunity · Not many small cafes have good food items inclusive in the product offering · Very few cafes go with high quality coffee beans in their ingredients · Most high-profile café have exuberant prices which makes customer look for a place where product quality is good and prices are moderate |
Threats · Large amount of competition from big and small café firms in Melbourne · Some very big firms in the business-like Starbucks with immense market and financial power · People do not consider coffee as healthy so that can affect potential customer attraction for the café. |
Made by Author (2018) Adapted from (IBissWorld, 2018) and (Prepair for Australia, 2018)
Discussion of the Market assessment and Marketing Plan
Market feasibility analysis helps in undertaking market research to determine potentiality of a new business venture. (Rigby, 2011). Following is a feasibility analysis for the new café business
Size and Growth rate of the market- Due to a hectic lifestyle people want to have a nearby place where they can relax with a cup of coffee and enjoy with friends (IBisWorld, 2015). Hospitality industry as a whole is growing rapidly because of people’s need for recreation (Bankwest, 2018). The hospitality industry growth rate was at 7.1% in 2015. The Government is also giving incentives to hospitality industry by giving incentives to small and medium.
enterprise (Bankwest, 2018). The café industry growth was around 5.1 % in 2014-15 and is expected to grow on similar lines (IBissWorld, 2018). 75% of population of Australia like to drink coffee and do not want to go to trouble of making it at home. Additionally, coffee culture in Australia is such that people like to go to small local cafes rather than the large coffee brands. (IBisWorld, 2015). Therefore, good product along with high demand can give competitive advantage to the business along with being lucrative for the investors.
Market Capacity and fulfilment of customer demand and creation of value
Australians love coffee and it is a $ 4.3 Billion industry (IBisWorld, 2015). There are many large firms in the coffee business like Starbucks, however demand for coffee is ever rising. Additionally, it has been found in research that people prefer smaller local cafes to the big international chains (IBissWorld, 2018).
This is because of exuberant prices of these big firms. Independent cafes and coffee shops are preferred. No big coffee chain has more than 5% market share (IBissWorld, 2018) This shows the hold of smaller cafes in the marker is high. Additionally, the market has not reached full capacity as the demand for coffee is growing at a very good rate and customers demand for hospitality is rising. (Evens, 2015) Therefore, market capacity is good for the firm to establish a new business.
Customer location and expected customers – Customers are expected to come from areas of vicinity like the college students and the families from the nearby residential areas. The customer base should be enough initially to be profitable
External Factors affecting market growth- Major external factors which can affect market growth are government regulations pertaining to customer health and safety, employment regulation, ingredient quality and safety and waste disposal norms (Evens, 2015). High competition with big and small firms is also a major external factor. Therefore, The Bean Palace will have to undertake marketing activities to succeed in the market. Marketing techniques like sales promotion, public relations and customer relationship management would be useful.
Barriers to Entry- Industry specific barters like Start-up cost of setting a new infrastructure is one of the major barriers to entry in this industry (Hiduke, 2013). Additionally, heavy dependence on suppliers is another major barrier. Therefore, the new café will have to focus on acquiring infrastructure, equipment and staff.
The Marketing Plan- Creation of Brand and Segmentation, Targeting and Positioning
The Brand Name- Brand is any name symbol or logo with which a firm or its products get identified or recalled by the customer (Brown, 2016). The café venture has chosen the name ‘The Bean Palace ‘for its café. A steaming coffee mug with coffee beans spilled around will be the logo. The brand will try to position itself as a high-quality low-priced café where one can feel relaxed
The target market- Target market is the market which has been identified by the company to sell its products (Ferrel, 2012). Target market for ‘The Bean Palace’ would consists of students, professionals and families in the age group of 20-50 within the middle-income range.
Positioning- Positioning is the image of the product or the service that a firm wants to create in the mind of the customers (Ferrel, 2012). Positioning is the perceived value of the brand. The new café needs to focus on its strengths like its product quality and its ambiance while creating the brand image. Focus on service quality and atmospherics of service delivery will help in creating a positive brand image. Therefore, The Bean Palace will have a quality focused image This will increase competitive advantage as high quality will appeal to customers.
The market segment- The firm will use demographic segmentation strategy and will segment the market based on income size, age and family size. Prices will be kept low for middle income groups and students (Ferrel, 2012). The market can also be segmented based on lifestyle and where special offers on coffee can be given to students and young professionals. Demographic and lifestyle segmentation will help the firm in catering to the needs of the customers. Mostly students need a place near to college where they can sit and relax. Additionally, families and friends also need a place where they can drink a cup of coffee and relax. The Been Palace can address this need by providing airy and fresh ambiance with quality product.
Marketing Plan and Promotional Strategy
As there is lot of competition in the market the firm needs to create awareness through marketing strategy (Ferrel, 2012). As the budget of the start up is low it can use print advertising with Ads in newspaper. It can also use pamphlets in newspapers to increase awareness about the new café. Additionally, marketing techniques like billboards and hoardings can be used to spread awareness (Belch, 2011).Sales promotion techniques of giving free offers or discounts on larger orders can also increase initial sales. Through these measures the new firm can increase footfalls into the café and create customer value by making them aware of a good product.
Discussion of the Infrastructural and Technical Assessment of the business
Like any other hospitality and food services business, café business is also heavily dependent on infrastructure and technique or recipe of making the products (Evens, 2015)
Technology Development- The Been Palace needs to fix ingredients value and quality of each coffee cup and other snacks that are available for sale. Quality control in ingredients and recopies will help the firm in catering high quality coffee to the customers (Evens, 2015). Good production techniques can get more customers leading to value for both customers and investors.
Café industry functions in the service industry. Therefore, it suffers from homogeny and inseparability aspect of services (Bateson, 2010). In such a case quality of service delivery is very important to create differentiation (Bateson, 2010). Therefore, café ambiance and catering staff is of great importance. Ambiance should be relaxing and staff should be qualified. Therefore, it is important to invest in an infrastructure which can provide relaxing ambiance to customers along with areas where they can sit and work and chit chat.
Options for product development- The Bean Palace intends to sell high quality coffee in different varieties like café latte, expresso and others. It also intends to sell various eatables like cakes, cookies and sandwiches along with the coffee.
Laws and Regulations Required for the Business-
All regulations applicable to hospitality and food services industry are also applicable to the Bean Palace cafe (Evens, 2015). Competition and consumer Act 2010 binds the firm to to protection of consumer health and holds that no ingredients should be used which are harmful to human health (Government of Australia, 2018). The firm also has to abide by the food standard code. Additionally, workforce health and safety norms have to be followed (Government of Australia, 2018). Working hours, pay, and safety regulations for the workforce needs to be abided to. Any kind discrimination towards any gender, race or ethinicity is prohibited under Australian Laws (Government of Australia, 2018). Additionally, the firm needs to use safe waste disposal methods under environment protection legislation.
Sustainability, moral and Ethical issues- The firm should be ethical in its conduct and always provide safe and healthy products to its customers. Additionally, the firm should try to be ethical in terms of waste disposal (Hiduke, 2013). This will help the firm in being sustainable. Also, staff should be respected and trained to be efficient and effective. (Butler, 2012).
Discussion of Human Resource Needs
Like any other service industry café business is extremely dependent on work force because it is the workforce which creates and serves the product (Niehaus, 2010).Therefore, experienced, skilled and motivated staff is required (Butler, 2012)..
Technical and Management Experience Requirements- A café needs proper management to handle customers and day to day functioning (Niehaus, 2010). Therefore, a manager with a proper management qualification should be hired. This manager will oversee daily activities and report to the owners. Additional management staff will be hired to handle marketing and human resources of the café.
Ownership status- The Bean Palace will be a partnership firm jointly owned by Mr Smith and Mr Jones. The infrastructure of the café also belongs to the partnership firm,
Manpower Requirements- A proper recruitment policy will be formulated with job specification and description for each staff member. (Cooper, 2011). Jobs will be advertised in local newspapers and job portals. Fixed salary plus incentives for better performance will be paid to employees based on their knowledge, skillsets and experience. Performance linked bonuses will be given to those who show better efficiency and performance (Cooper, 2011). This will help in motivating and retaining the staff. Jobs will include Café manager, Receptionist, Hostess, waiter, cleaner and delivery boy.
Financing of the business
Financial strength is the backbone of any business venture (Butler, 2012). To become successful in the café industry, ‘The Bean Palace’ needs to look into its financial strengths. Additionally, it needs to pinpoint its costs and allocate budget and project its revenue expectations for the next few years.
Start-up Budget- Total budget allocated for the business amounts to $350.000 which will be raised through venture capital. Infrastructure premises for the café is already available with the owners. $ 50,000 has been allocated for its upgradation, interiors, décor and furnishing.
Revenue- Prices will be kept low initially so that more customers can be attracted and market can be penetrated (Butler, 2012). The price of coffee can be kept at $1 a cup as opposed to $3.5 of the larger cafes. Additionally, the price of food items should also be kept low. The firm should at least try to sell 100 cups per day along with food items worth 100$ per day. This would earn the firm 400$ worth of revenue per day. Which amounts to annual projected revenue of $146000. The firm should aim to increase revenue by 1% in the next year
Financial Dynamics- $10000 would be initially sent on marketing. $20000 would be spent on equipment purchase and another $ 35000 would be spent on staff acquisition, salaries and training in the coming year.
Investments- The start-up would be financed through venture capital and bank loans. The firm hopes to break even in three years.
Therefore, with the help of this business plan the new café venture can aim to create value for both the investor and the customer. It can also generate completive advantage by offering higher quality at lower price.
Conclusion
New business ventures can greatly enhance their capabilities by making a business plan. A business plan can give proper orientation in formulating various strategies. A good business plan can help a new business in identifying its key strengths and also help it in forming strategies which can add value for the customers and the investors and give the firm competitive advantage.
References
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Bankwest, 2018. Bankwest Future of Business: Report on hospitality.. [Online]
Available at: https://www.bankwest.com.au/content/dam/bankwest/documents/business/insights/focus-on-hospitality-2018.pdf
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Bateson, J. E. G., 2010. Services Marketing. NewYork: South-Western Cengage Learning,.
Belch, G., 2011. Advertising and Promotion: An Integrated Marketing Communications Perspective. Chicago: McGraw-Hill .
Brown, S., 2016. Brands and Branding. London: SAGE Publications.
Butler, D., 2012. Business Development: A Guide to Small Business Strategy. New York: Routledge.
Cooper, C. L., 2011. Human Resource Management in Small Business: Achieving Peak Performance. Cheltenham: Edward Elgar Publishing.
de Pablo, O., 2013. International Business Strategy and Entrepreneurship: An Information Technology Perspective: An Information Technology Perspective. Hershey: IGI Global.
Evens, N., 2015. Strategic Management for Tourism, Hospitality and Events. New York: Routledge.
Ferrel, O., 2012. Marketing Strategy. New York: Cengage Learning.
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Available at: https://www.business.gov.au/planning/new-businesses/legal-essentials-for-business
[Accessed 28 Sep 2018].
Hiduke, G., 2013. Small Business: An Entrepreneur’s Business Plan. New York: Cengage Learning.
IBissWorld, 2018. IBisWorld. [Online]
Available at: https://www.ibisworld.com.au/industry-trends/market-research-reports/accommodation-food-services/cafes-coffee-shops.html
[Accessed 28 Sep 2018Sep].
IBisWorld, 2015. Industry Report H4511b, Melbourne: IbisWorld.
Niehaus, R., 2010. Human Resource Strategies for Organizations in Transition. New York: Springer Science & Business Media.
Prepair for Australia, 2018. Cofee Culture in Australia. [Online]
Available at: https://www.prepareforaustralia.com.au/living-australia/food-eating/coffee-cafe.aspx
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