The part of the business plan will be dealing with the financial aspects which will be associated with the hotel business which will be established. The financial plan of the business will be discussing the financing requirements of the business on both long-term basis and quarterly basis. The financial plan is necessary so that the management can effectively decide from which sources the capital will drawn for the business as well the anticipated income and expenses which the business will be able to generate as the business progresses (Brooks & Mukherjee, 2013). The financial plan is essential as the management will be able to take crucial investment decisions and also judge whether the business plan is feasible or not in terms of financial aspects.
Resources and Finances Required
The projection of the resources both in terms of financial resources and other resources which are required for the start up and smooth running of the business are discussed in brief in coming paragraphs.
Financial Resources
The financial resources of the business refer to the funds or liquid cash which the management requires for setting up and running of the business (Alviniussen & Jankensgard, 2015). The major funding which will fuel the start up of the business will comprise of equity capital and loan which will be taken by the business which is shown to be Rs 7,336,000 and 7,336,000 respectively. The capital structure of the business will be made up of both equity capital and debt capital and the both are shown to be in equal ratio that is 50% for both equity and debt capital.
The above table shows the start up expenses of the business as expected by the management (Baker & Ricciardi, 2014). The preliminary expenses of the business which show land registration, licensing fees, and other costs which are necessary for the business are shown in the above table. In addition to this, the management will also be requiring certain immediate expenses which are working capital expenses as shown in the table above (Penner, Adams & Rutes, 2013).
Human Resources and Anticipated Room Bookings
The hotel business in a hill station will be requiring significant recruitment of employees who will be responsible for all the operation of the hoteling business. The owners of the Hotel business needs to recruits both management staffs and support staff for effective running for all operations (Zaitseva et al., 2016). The revenues of the business depend on the room sales of the business as it is the main product which is offered. A table showing anticipated room sales of the business is shown below
The room booking of the business is shown in the above figure. The estimation is shown for a period of 3 years quarter wise. The figure shows that the sales for double rooms during the first and second quarter is more than single room sales which suggest that management is anticipating more of family sales during this period. In the last quarter the sales for single rooms is much more and even for double rooms is more which suggest that these quarters are vacation periods for people.
Capital Expenditure
Items covered in Capital Expenditure
The capital expenditure requirements of the business refer to the investments which the management of the hotel will be undertake on the assets of the business which are furniture, equipment, premises, cookery items.
Legal Requirement
The legal requirements of the business refer to the licensing of the premises and the services which is offered by the business. The land registration, business registration and licensing fees are estimate to be included in the start up costs of the business.
Sales Forecast
The sales forecast of the business is estimated to be for the room services which is offered by the business and also other services which will be offered by the management of the Hotel.The average rent which will be charged by the business is shown to be Rs 3000 for the first two years and then in the third year there will be a hike in the rent charges of the hotel which is expected to be Rs 3500 in case of single room income which is earned for the business.
The maximum revenue which the business anticipates will be coming from double rooms which will be during the seasons of vacations. The other services which is offered by the hotel business is related to food and refreshments which is offered by the business (Kahn, 2014). The demand for the Hotel services in a hill station will be maximum during winters and hence the fourth quarter of a year is where the management anticipates maximum sales and revenue of the business.
Cash Flow Statement for Three Years
The cash flow statement of the business shows the cash position and cash inflows which the management can anticipate for the three years operation. A projected cash flow statement is shown.
The projected cash flow which is anticipated by the business will be comprising of cash from operating, investing and financing activities of the business. The main source of revenue or cash inflow is from cash sales for the room services which is offered by the company and the variable expenses are also shown under cash from operating activities. The cash from operating activities are estimated to be positive and the same is shown to be maximum in the third year as the management estimates to have a rise in demand of the business (Köseoglu, Ross & Okumus, 2016). There is no significant cash from investing activities and cash from financing activities except in the first year.
Income Statement
The projected income statement of the business shows the anticipated income and expenses which the hotel is likely to incur and the profit which is earned by the business (Guizzardi & Stacchini, 2015). The table below shows the projected income and expenses of the businesses.
The main source of revenue for the business is from room services and additional services which is offered by the hotel and also the additional services such as food and beverages, recreation.
Balance sheet
The projected balance sheet of the company is shown in the above table. All the start up assets of the business is shown in the balance sheet of the business (Finch, 2013). The current assets of the business comprise of cash which will be used by businesses for meeting the current obligations of the business.
Breakeven Analysis and Ratio Analysis
A breakeven analysis refers to the minimum sales in units or in Rs which the business needs to undertake for the purpose of meeting all the fixed expenses of the business and not incurring a loss. An analysis of Breakeven point.The fixed expenses of the business are shown in the above figure and the minimum revenue which the business needs to earn for reaching a no profit no loss situation in the business.
The key ratios which are depicted in the above figure comprise of net profit margin, current ratio and return on equity estimates. The net profit margin of the business is shown to have progressively increase and is shown to be much higher in fourth quarters of each year which is due to the anticipation of the business for higher sales (Alhabeeb, 2014). The current ratio of the business as per estimation will also increase as the name and reputation of the business expands which means the liquidity position of the business also increases. The return on equity will also be favorable as the profits earned by businesses are on a rise as per the anticipation of the management.
Reference
Alhabeeb, M. J. (2014). Entrepreneurial finance: fundamentals of financial planning and management for small business. John Wiley & Sons.
Alviniussen, A., & Jankensgard, H. (2015). Enterprise risk budgeting: bringing risk management into the financial planning process.
Baker, H. K., & Ricciardi, V. (2014). Investor behavior: The psychology of financial planning and investing. John Wiley & Sons.
Brooks, R., & Mukherjee, A. K. (2013). Financial management: core concepts. Pearson.
Finch, B. (2013). How to write a business plan (Vol. 35). Kogan Page Publishers.
Guizzardi, A., & Stacchini, A. (2015). Real-time forecasting regional tourism with business sentiment surveys. Tourism Management, 47, 213-223.
Kahn, K. B. (2014). New product forecasting: an applied approach. Routledge.
Köseoglu, M. A., Ross, G., & Okumus, F. (2016). Competitive intelligence practices in hotels. International Journal of Hospitality Management, 53, 161-172.
Penner, R. H., Adams, L., & Rutes, W. (2013). Hotel design, planning and development. Routledge.
Zaitseva, N. A., Larionova, A. A., Mekush, G. E., Mayorova, A. N., & Povorina, E. V. (2016). Methodological aspects of the financial justification of development strategies of hotel industry enterprises. International Electronic Journal of Mathematics Education, 11(7), 2559-2570.
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