Business Plan

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1.0 Literature review 2.0 Business plan 2.1 Business summary: 2.2 Mission statement 2.3 Critical risks and problems 2.4 Profits and Cash Flow Forecast 2.5 References 1.0 Literature review Creativity is the greatest asset for an entrepreneur. All great businesses derive their success to creativity. It is the soul of entrepreneurship. According to Mahamaya Ananta (2008), “Entrepreneurs have no particular cast or creed. They are found in all corners of the world. The degree varies according to their environment, education and infrastructure around them, social value systems and moral ethics”. With proper entry strategy, many young people from educational institutions become Entrepreneurs. It starts with a creative idea which is developed and put in to practice eventually becoming a great investment. Entrepreneurs are characterized by courage and confidence. They take risks and invest in fields that could either lead to bankruptcy or excellence. According to Dean Robb (2004), “Creativity is the spark of life, the vitality that stirs human desires to improve, be wiser and have positive impact on others”. In virtually all human activities, creativity is the basis of ensuring that the desired accomplishments in life are fulfilled. The will power and believe that creativity is fundamental to success is a strong tool to eradicate poverty, for poverty is a general believe that nothing can be done. It is important for people to train themselves to be creative, inventive and obtain entrepreneurial skills to eliminate poverty. To stimulate the inventive spark takes enthusiasm, ideas and willpower. Dean Robb (2004) further states that, “Entrepreneurship is an important element within the world economy in that it is the process where an individual or a small group envisions, invents and implements a plan that creates a new venture” This practice is also important in businesses. Through it, persons, businesses and organizations are bound to think spiritually, morally and realistic dimensions of private enterprise. Entrepreneurs should deal with and maintain creativity the same way they handle any other asset. Creativity depends on brainpower, skill, capacity, and skill of a person. To be creative requires propensity to take risks, courage and determination to succeed. Creative people are risk takers. Creativity is a self driven inspiration in an individual to do something that brings maximum satisfaction to him in any field. Positive attitude towards various issues bears high creativity. According to Maharaj (2008), “With positive emotion, creativity is high while negative feelings lead to lower motivation hence low creativity. It is important to involve other people who have a role to in order for a creative idea to flourish. In business, flexibility and the necessary adaptation to a changing environment requires high levels of creativity. This is because entrepreneurs are faced with abrupt changes that may be disastrous to their business if they are unable to adapt or change swiftly to new developments in the market. They have to be creative enough for their businesses to survive. In business, the secret to success if doing things or offering unique services that no one else has offered in the market. Consumers need commodities that they believe can bring change to their lives, and not necessarily what they have been using year after year. This calls for new and creative ideas time after time. Dean Robb (2004) observes that, “To succeed in business is to be creative in your role. Growth in business demands creativity. It is what will separate you from the competition”. Consumers are always observant to check what is new in the market. In the competitive business environment, every one wants to attract as many customers as possible; more than any other competitor. Equipped with creativity, entrepreneurs are capable of attracting more and more new customers while keeping the old through providing them with the desired quality goods and services. They are able to present new goods and services continuously in the market. Lack of creativity is detrimental to marketing of products. Creativity adds value to products at all levels of production. This includes incorporating new ideas in manufacturing, branding, advertising and distribution. Dean Robb (2004) further states that, “There is so much power in creating from what you’re passionate about. And tapping into your right-brain intuition through movement and creativity helps connect you to that passion”. Creativity is the heart and the soul of a business. It is the basis of the uniqueness of a business. It is what customers look for while trying to differentiate between two businesses that look similar in their eyes. Mark (2005) argues that, “Creativity is the ability to look past old, normal solutions and see the challenges in new ways and then to come up with new solutions”. This argument postulates that challenges and problems are not new. They have existed throughout the life of human beings. The solution lies with creative minds, which through their inventiveness will find a lasting solution to the problem, and lead the others to follow the same route for a successful end. According to Mark (2005), “Creativity has always been an important business skill, but in this turbulent economy it is essential. The rules of the game change constantly now. The pundits can’t decide whether to celebrate or begin mourning our economic future” today’s business has no clear passageway for prosperity. The changing environment presents uncertainty that needs to be taken care of through prudent ideas projected towards sustainability and achievement of set goals. Creativity is the only way to survival of the business. It improves the competitive advantage of the business over competitors. In many cases, human beings tend to disregard their creative abilities. People fail to realize that creativity is inborn, and that every one is creative. It happens that creativity of individuals is suppressed by social cultural norms that lower the chances of somebody ever utilizing the creativity within. Bruce (2006) argues that, “Creativity is not just the domain of a talented few. We are all creative. You may not even think you are creative, but that is not true. Creativity is our birth right; it is part of what makes us human”. Being creative requires self sacrifice and determination. Any one who wants to become creative in business needs to understand the facts about creativity. There is need to know the process by which one can become creative, weighing oneself against other creative businesses that have prospered due to creativity. Bruce (2006) states that, “Creativity must be deep down in the core of the entrepreneurial enterprise and should be safeguarded like a precious jewel”. Creativity is the foundation of business strength and the fountain for captivating products and improvement. Bruce (2006) further states that, “The ultimate wellspring of organizational creativity is social diversity—i.e., internal variety or differentiation and the more diversity, the more potential for creativity”. It is an important tool for genuine and dedicated individuals who work towards achievement of the business goals. According to John F. Kennedy (2001) “Building a creative business takes more than using some techniques now and then. Creativity must become part of your culture, how you interact with and see the world and how you relate to each other”. It is important to note that creativity in business does not mean introducing new products in the market all the time. It is something that should be carefully planned and analyzed in order to ensure that the new products or services introduced in the market satisfy customers’ needs. Creativity should begin in the planning process; it is of utmost importance to analyze the strengths, weaknesses opportunities and threats that exist in the business environment (SWOT analysis). This analysis is a fundamental step towards establishing a basis for creativity. Wilkes (2007) states that, “it is necessary to use the SWOT analysis for assessing each competitor as well as the business environment”. A creative entrepreneur uses SWOT analysis for creativity purposes. He will be able to identify the starting point whereby improvement of products and services will be formulated to suit the current market demand and if possible challenge if not out do the other competitors. Wal-Mart (1990) states that, “Creativity in strategic planning is required, while understanding the entrepreneur’s own competence, Values and Resources” this understanding may assist in establishing the position of the business, and the factors that may hinder success. It is also important in order to establish whether the requirements for successful creativity are available, and whether the business is competent enough to undertake the new inspiration. With this knowledge in mind, value addition and resource mobilization for the business will be focused. It also helps to ascertain whether the business is in its current status due to lack of various competences, and whether their improvement can add value to the business. Many businesses fail due to the inability to establish their weaknesses and threats in the planning phase. Wilkes (2007) further states that, “The best way to implement a creative plan for product marketing is to have a record of your historical (say last year's) sales results (including selling and advertising costs if appropriate and available) on a spreadsheet”. The last and most crucial stage in business creativity is to establish a stable market for the goods that the business produces. It is meaningless for a business to produce goods and services only to lack market. Proper marketing is what determines profitability of the business. The cost of marketing should not exceed the production cost. A creative plan for advertising and marketing assists in boosting the sales volumes hence increased profits. An entrepreneur can maximize profits by providing customers with access to a variety of services. This form of creativity helps in utilizing the available space for maximum usage. Murray Brown (2007), states that, “Because the new laundries are bigger than in the past—often 3,000 or 4,000 square feet—overhead is higher, and owners are looking for ways to cover the cost”. This can be covered through providing other services such as; computer services, offering soft drinks and mail services. These extra services require small rise in production expenses because the rental fee has already been paid. Clients benefit by the availability of a number of services all in one convenient locality. Paul (2007) states that, “with tighter competition and utility bills growing. Everybody wants to squeeze as much money as possible out of their space. Looking for an extra service that will work is always on their mind.” According to Norman (1991), “Laundry owners have recognized that customers prefer to visit Laundromats with a more pleasant atmosphere”. He further states that, “Many Laundry owners are building kids’ centers, holding music concerts, giving away coffee, and hiring attendants who are friendly and helpful”. This is a creative idea that can make a business unique. It brings more enthusiasm in the business. Market segmentation is an important factor to consider when providing services. Customers from varying social and economic status have different needs. It is therefore necessary to provide services to give the customers the best for their money. This can be known through adequate market research and determined creative mind. Creativity does not necessarily mean the use of very expensive innovation. Davis (2006) further cautions; “Don't start with expensive assets that might impress, but draws temptation to others”. It is important to begin with a small room and essential significant tools that will reduce the initial capital outlay. A predictable sum will make more productivity than devoting an enormous outlay without predictive computation of the definite amount required. A profound computation of anticipated earning through the business is also significant. At the early phase, the entrepreneur should be in charge of the business so that he can focus on various activities. This is important in order to nature the creative ideas to maturity. Charley (2007) advises that, “It is important to start the business by distributing large number of business cards to make others aware of your businesses services”. Web advertising is a creative tool that is essential in awareness creation for customers to know about the new business and products. It is therefore necessary to create a simple web page for people to read online. This is an appropriate advertising method as the world is developing tremendously in the field of Information Technology. Creative ideas should not be left to waste. They should be incorporated in the business as a tool for management and business development. PART TWO 2.0 Business plan Business name: Oman Laundromat Address: Broadway street Los Angeles Website: www.Omanlounderers.com Proprietor: Oman Business form: Wash and clean dry cloths/ Laundry 2.1 Business summary: Laundry business is viable in any area where people need to wear clean clothes. It is facilitated by the fact that in the quest for improved standards of living, people are working hard leaving them with little time to allocate to other activities. This presents an opportunity for entrepreneurs in the laundry business. The business involves receiving, washing and folding customers’ garments and sending back to them or the customers collect them from the premises. The business environment has few competitors who must not be ignored. Their strengths and weaknesses have been analyzed in order to develop a working entry and marketing strategy to maximize profits. The feasibility analysis was done and it revealed the market place needs, placing the viability of the business as high. The unexploited opportunity presents a potential for a profitable laundry business. However, there are several hindrances that could hamper the development of the business. These have been analyzed in detail and possible solutions identified. Growth opportunities have been identified and possible ways of utilizing them have been identified. The business targets a steady growth while implementing growth strategies and trying to counter the problem of competition. The mission statement is clear and the objectives have been set in order to accomplish the goal of establishing a profitable laundry business in Los Angeles. The target population has been identified so that the marketing strategies can be developed to suit the consumers. Business strengths and weaknesses have been analyzed in order to assist in developing ways to capitalize on strengths and minimize weaknesses. The pricing mechanism has been identified, whereby they are set 65% mark-up which is healthy in the formative stages of the business. It will later be raised to a mark-up of 80% mark-up after the first year to maximize profits. Acquisition of equipment has been well planned. The machines will be modern with high extraction speeds and the store is of a high capacity. The source of funds has been identified to ensure that the business is not insufficiently funded. Business environment risks have been identified and analyzed to ensure that the business does not fail to unpredicted eventualities. Cash flows for three years have been predicted to assist in planning. The staffs have been distributed to cover all the areas of operation. These include even the extra services that the business is going to provide to its consumers such as car wash, sale of soft drinks, internet services and the children’s playground. With all these in place, the business is set to start operating. Market place needs Every body needs clean clothes, but not every one is able to own a laundry machine. This makes the laundry business a viable venture to provide the highly needed services. With the current rise in the population of working families in Los Angeles, the demand for laundry services is increasing day by day. This is because the working parents have little time left for household chores and the time consuming laundry work. Laundry businesses are mushrooming in the city’s posh residential areas. Many entrepreneurs have not yet noticed the potential of the laundry business in the middle class residential area. There are only few launderers established and their capacity is low. This business intends to establish in this area to provide the highly desired services in this area as well as utilize the available opportunity presented by the situation. It also presents an opportunity for growth of the business. Barriers to entry The major problem that the business might face is the high cost of laundry equipment. Currently, a medium size Laundromat will require around $180,000 to $300,000. A Multi-Solvent Dry Cleaning Machines (size 30) is costing from $24,000. The price is far too high for the small sized machine. This raises the initial capital outlay if several machines will be purchased. Secondly, the price of renting business premises in Los Angeles is high. A suitable store for dry cleaning business costs around $8,000 per month with an initial rental deposit of 10 months. This translates to $80,000 as deposit. With these figures, it is clear that a large capital outlay is needed in order to start the laundry business. Another cost that may hinder business development is the rising cost of electricity and water. Electricity bills may go up to $12,000 per month and water bills up to $8,000 per month. These high prices raise the production cost which in turn will be added to the cost of the laundry services to the consumer. Growth opportunities There are many opportunities for the business to expand. The working group represents the largest percentage of the growing economies. This is the most important group for the business. The demand for laundry services is rising as the country becomes more industrialized hence offering employment to many people. The laundry business is hardly affected by inflation or changes in the stock market. This is because however the state of these external factors, people will always need laundry services. This is the strength behind the laundry business. The fact that few businesses are operating in the same area presents a good opportunity to exploit the market. More over, more and more people are being engaged in jobs due to the rapid industrialization taking place. This leaves them with little time to allocate to household chores, family obligations and laundry. Market for the business is therefore guaranteed and growth is supported. With educated, dedicated and experienced working team, the business will focus on research and development in new services to boost the sales volume. 2.2 Mission statement The aim of this laundry business is to establish a profitable business in Los Angeles that matches the modern laundry industry. Objectives 1. To institute reliable laundry system that satisfies customer needs 2. To provide extra services to consumers to ensure that most of their needs are met in one suitable location 3. To establish a stable market for the laundry business Target population and market expansion Los Angeles has a working population of around 5 million people. Most of them are middle aged and are accompanied by their children while attending to laundry activities. It is therefore important to provide a small children’s play ground to keep them busy as they wait for their parents. Most of the working customers have vehicles. This is the reason why it is necessary to establish a car wash just adjacent to the laundry. Apart from attracting more customers to the business, the car wash will be generating some extra revenue for the business. Customers need launderers who provide plenty of other services. The business will provide services such as sale of soft drinks, vending of laundry bags and internet services. This is because many customers may need to access the internet as they wait for their garments. There are several competitors working in the same field. However, Analyzing and finding ways to counter the strengths of the competitors is important in order to help in strengthening the business. Competitors’ strengths and weaknesses Their strengths are summarized in the following table. Competitor Strength How to counter the strength I & M Launderers Five dry-cleaning machines capable of serving 2,000 garments per day. Purchase a state of the art machine that can produce the same capacity. Down town launderers Have already won the confidence of many customers through offering timely services Offer timely services and provide extra services to attract more consumers for the business Dry-cleaning center Offered a bank loan recently to expand the store and purchase more equipment Source enough funds for the proposed business. The business will also capitalize on the competitors’ weaknesses to ensure that it provides the best services to its customers. The following is an analysis of the competitor’s weaknesses: Competitor Weakness How to capitalize on weakness I & M Launderers Use old fashioned machines that can not remove all stains Purchase hi-tech machine that is capable of removing all stains Down town launderers No extra service offered except laundry Provide more services to attract more customers to the business Dry-cleaning center Purchased premises with no room for expansion Establish the business in a place with enough room for expansion Business strengths and weaknesses There are various strengths and weaknesses that may have an impact in the functioning of the business. These are analyzed in the table below: Business strengths Capitalizing on these strengths The business will be offering extra services such as internet access, play ground for children who accompany their parents and will also be selling soft drinks Ensure that these extra services are offered effectively to assist in paying off some of the expenses The business has enough initial capital outlay Ensure that a very good entry strategy is laid out and that the capital is utilized maximally. There is market for the business Build the confidence of consumers through provision of high quality services. The marketing strategy is strong. It will involve marketing through the business website and brochures Reach a wide range of people through advertisement Business weaknesses Addressing the weaknesses The business is a start up and therefore may suffer from unfair competition from the already existing similar businesses Ensure a steady growth coping with the present competition through research and improvement of products The rising cost of electricity may hinder provision of cheaper services Set prices at a level where the business does not run at a loss while offering services at a reasonable price Competitive advantages From the feasibility assessment, it was established that the few similar businesses in existence hardly satisfy the enormous need for laundry services. They are also using old fashioned equipment that hardly produces to their expectations. The business has a competitive advantage in that it will posses the most modern equipment that is able to handle a large capacity and provide the best services to consumers. The business is being established at a time when employment opportunities are increasing and therefore will be able to compete with other businesses with less hassles. The business will be able to thrive in the competitive market due to several factors. These include; 1. Experts in marketing will spearhead the marketing department in collaboration with Information Technology experts 2. The working team will be working together to ensure that the business succeeds to achieve its goals 3. Offering extra services will ensure that customers find satisfaction at a suitable location hence will find it time saving to seek services of the business. 4. Purchase of modern equipment will facilitate production of high quality services. Marketing strategy Marketing will involve a lot of advertising and service promotion. The most important tool for advertising will be the internet. The business website (www.omanlounderers.com) will be used to advertise and conduct service promotion. Transportation of garments to and from the premises will be offered free of charge to customers seeking services thrice a week. This will ensure a permanent relationship between the regular customers and the business. Customers will also be allowed to leave their garments in the morning while going to work and pick them in the evening as they go home from work. This will create a smooth way to handle customers’ needs. It will also be easy to make payments and travel arrangements through the internet hence customers do not necessarily have to appear in person to make payments. New products will be advertised in the website and customers will have an opportunity to comment on the services offered by the business, and state the way they would like to be served. Most of the marketing funds will be used for sales promotion and advertisement within the business. These will come in terms of offering free samples to customers and brochures. Brochures will be an important tool for advertisement. These will be issued to customers every time they seek the services of the business. Advertisement through television and radio will also be used to create awareness to the customers. Signs and posters for advertisement will also be used. These will be elected in major streets and roads. These will ensure that motorists capture a glance at the posters. Newspapers and magazines will also be used to pass information to potential customers. A magazine titled “Laundry tips: how to keep your garments shinning” will be launched and will be the property of the business. It will contain pictures of nice, clean well folded garments and highlights of procedures of laundry. The magazine will also direct readers to the business premises. It will be costing cheaply, just to cater for its production. Pricing Prices will be set such that the mark-up will be 65% in the formative stages. However, the mark-up target is 80% after 1 year where it should stabilize over the next 3 years. The prices will also depend on external factors such as electricity cost and also the prices of services offered by close competitors in the business. As the country’s economy grows, customers will be in a capacity to pay more for services offered. This will have a positive impact on pricing. From the feasibility analysis, research showed that the esteemed customers opt to pay more for services of a higher value than paying less for goods and services of a lower value. They also tend to value goods according to their cost. Those of a higher cost are deemed to be of a higher value. High value services will be presented to the customers and the prices will be set a little bit higher than those of close competitors. Business premises and equipment The selected area is strategically located and is the most suitable for the business. Nearness to the main road will make it a popular spot for many customers. The business premises will be adequate for machines, drying area and enough for customers to take care of their washed and their unwashed clothes during delivery and collection. The store in Los Angeles will be leased for the first 3 years after which permanent premises will be purchased. The store will be 2500 square foot. This will have a wash capacity of 900 pounds and 1100 pounds of drying capacity. The dry-cleaning machines will be purchased locally to reduce additional costs that may occur due to purchasing it from far such as transportation. The Los Angeles Credit Traders association will provide 3 washing machines worth $30,000 each on hire purchase. The initial deposit will be $40,000. The rest of the amount will be paid in 24 monthly installments. There will be three 60 pound washer-extractors in the store. They will be front-loading washer-extractors which have a high extract speed. The tumblers will be 45-pound stack tumblers. These will provide the desired services for maximum profit. The business will be using the recent machines that use a swipe system. With this system, the customers need only to swipe their cards to begin the laundry process. Credit will be issued for them to feed in their cards. Other necessary equipment will be purchased locally. The tumblers and washers will be of sufficient size to allow adequate space for washing and drying. The area around the store will be sufficient for a car wash and children’s play ground both of 600 square foot. There will also be 200 square foot for internet room and café. Staff A marketing expert will be engaged in order to assist in strategizing on marketing plans. The marketing manager will be responsible for all the marketing needs and sales promotion for the business. There will be 5 workers in the store. These will be adequate for providing effective services to the consumers. The machines are automatic hence do not need so many people to operate them. 3 people will be working in the car wash, one person in the internet room to assist the customers and 2 people to offer drinks at the café. High levels of hygiene will be maintained in the café to ensure customers are offered clean drinks. There will also be 1 person to look after the children in the playground to ensure they play safely. Turn over The predicted turn over will form the target for production. It will be possible to maximize profits if the target is achieved. Item Amount (USD) Laundry services 2,557,142 Car wash 275,714 Internet services 32,856 Soft drinks 50,000 Total 2,915,712 Profit The business will strive to work towards achieving the predicted profits. These will form a guideline to the business operations and expectations. Item Amount (USD) Profit on laundry services 1,707,142 Profit from Car wash 74,214 Profit from Internet services 20,000 Profit from Soft drinks 30,000 Total profit 1,831,356 Funding requirement The funding requirement was reached after a critical analysis of the various suppliers of equipment. The supplier of the equipment is the one offering the best quality equipment at the most reasonable price. Item Amount(USD) 1 Three 45-pound stack tumblers 69,000 2 Three 60 pound washer-extractors 90,000 3 Rent 15,000 4 Computers 8,400 5 Car wash pump 1,800 6 Play ground equipment 2,400 7 Café equipment 2,400 8 Stock 90,363 Total funding requirement 279,363 Source of funding Funding is the fundamental factor that determines the prosperity of the business. Fund raising has been done and there is sufficient capital to start the business. Funding is expected to come from several sources as represented by the table below; Source of funds Nature of fund Amount (USD) 1 Personal contribution Personal 50,000 3 Contribution from parents Gift 140,363 4 Bank loan Loan (1 year period) 39,000 5 Credit Traders Association Loan 50,000 Total funding 189,000 2.3 Critical risks and problems Marketing risks The business is prepared for environmental problems and risks. Competition is the greatest risk of all. This is because other entrepreneurs may find the thriving business profitable than any other existing business and tend to venture in to it duplicating the same services. The upcoming businesses could be at an advantage because they try to out do the existing ones through learning from experience of those already in business. They therefore tend to enter in to the business with vigor and upgraded and extra services. The consumers are mainly gratified by being offered new services every time, even if there is only a slight difference from the original ones. This poses unbalanced competition between the existing business and a newly established business. The business will first enjoy the advantage of providing new services to consumers. These will be a bit different from the already existing laundry business for example, other launderers within do not offer car wash services, internet services, soft drinks and children’s playground. This is a crucial entry strategy. However, the new establishments that will come after the business has become profitable will imitate this strategy and put some more weight in them so as to attract more customers. Although this might happen, the marketing strategy has been organized such that there will be continuous and sufficient market research to ensure that the business is able to make positive developments any time a change occurs in the customers’ tastes and preferences. Market research will form the foundation of the business’ prosperity. It will ensure that the business is able to change faster than the competitors to suit the market needs. With experienced and dedicated working team, coupled with the use of Information Technology in marketing, the marketing strategy will be achieved. Advertisement will be an important asset for the business. The marketing risk is therefore moderate. Financial risks Many businesses fail because of lack of sufficient capital to be able to change swiftly with the changing customers’ needs. This reduces the competitive advantage of the business hence a reduction in customers. Within five months of operation, the business will be eligible for a second bank loan. This will ensure that the business has adequate capital to cope with any change in the business environment. The loan will also assist in developing new services and purchase new equipment. The financial risk is therefore moderate. Development risk Development highly depends on technological advancement. Each year, new technology is emerging. New businesses tend to enter in to the market with the most recent technology. This raises their competitive advantage leaving the older businesses using obsolete equipment. This laundry business will be able to upgrade its equipment every year to match the emerging competitors and improve on service delivery. This lowers the development risk. The development, growth and expansion strategies have been laid out and perfectly match with the business environment. The strategies have taken care of future un-expected events. With the current industrialization, more people are getting employment hence business growth and development is assured. Social risks In the social context, the business is generally acceptable and does not pose any threat to environmental health. Instead, it improves on peoples’ lifestyles. It therefore has high chances of survival. Security is guaranteed and hence there is no social risk. Economic changes The laundry business is normally not affected by some economic factors such as inflation. However, it may be affected by unemployment. With the rising industrialization in the country, employment levels are increasing to the advantage of the business. 2.4 Profits and Cash Flow Forecast Forecast profit and loss account for year 1 Business: Wash and clean dry cloths/ Laundry Period: October 2008 to October 2009 Sales $2,900,000 Less direct (variable) costs Wages $20,000 Raw materials $1,084,300 Carriage on raw materials $7,800 Total direct (variable) cost $1,787,900 Gross profit $1,112,100 Fixed costs Salaries $57,000 Office rent $60,000 Operation license $9,200 Insurance $2,700 Depreciation $20,800 Advertising $20,760 Transport/fuel $27,600 Communication $5,200 Maintenance and repair $30,000 Postage bills $7,200 Electricity bills $44,000 Miscellaneous expenses $8,200 Total fixed costs $292,660 Net profit $819,440 Less drawings $225,600 Profit ploughed back in the business $593,840 Break even point = sales × Total fixed cost Gross profit $2,900,000 × $292,660= $763,163 $1,112,100 Cash flow forecast for year 1(×1000 USD) Month Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Sales 241.6 240 240 238.9 242.6 239.6 240.7 244 250 245 248 248 Capital 189 200 Payments (×1000 USD) Salaries 4.75 4.75 4.75 4.6 4.5 4.68 4.76 4.76 4.5 4.8 4.8 4.76 Office rent 5.0 (Paid Once an year) Operation license 9.2 (Paid once an year) Insurance 2.7(Paid once an year) Advertising 1.4 1.32 1.4 1.21 1.5 1.4 1.5 1.7 1.4 1.8 1.6 1.4 Transport 2.4 2.8 2.2 2.1 2.7 2.4 2.9 2.7 2.9 2.7 2.6 2.1 Communication 5.2 (Paid once an year) Maintenance and repair 2.2 2.0 2.03 2.07 2.13 2.05 2.07 2.0 2.11 2.22 2.04 2.08 Postage bills 7.2 (Paid once an year) Electricity bills 3.2 3.2 3.5 3.2 3.8 3.4 3.32 3.37 3.391 2.37 2.36 3.39 Loan plus interest 4 4 4 4 4 4 4 4 4 4 4 4 Miscellaneous expenses 0.3 0.3 0.4 0.4 0.38 0.51 0.68 0.33 0.41 0.64 0.77 0.32 Capital purchases 23 5 24 30 6 2 2 4 5 2 2 3 Stationery 3 1 ___ ___ ___ 3 2 ___ ___ 1 1 ___ Total 73.55 28.37 42.28 47.58 29.11 23.44 23.23 22.86 23.8 21.53 21.17 21.05 Cash balances (×1000 USD) Opening balance 6,000 6,520 7,280 6,690 6,500 6,250 5,800 6,450 6,710 7,290 8,640 8,600 Closing balance 6,520 7,280 5,640 6,500 6,250 5,600 6,450 6,510 7,100 7,820 9,000 9,230 Forecast profit and loss account for year 2 Business: Wash and clean dry cloths/ Laundry Period: October 2008 to October 2009 Sales $2,950,000 Less direct (variable) costs Wages $20,000 Raw materials $1,084,300 Carriage on raw materials $7,800 Total direct (variable) cost $1,837,900 Gross profit $1,112,100 Fixed costs Salaries $54,000 Office rent $60,000 Operation license $9,200 Insurance $2,700 Depreciation $20,800 Advertising $20,760 Transport/fuel $27,600 Communication $5,200 Maintenance and repair $30,000 Postage bills $7,200 Electricity bills $44,000 Miscellaneous expenses $4,200 Total fixed costs $285,660 Net profit $826,440 Less drawings $200,600 Profit ploughed back in the business $625,840 Break even point = sales × Total fixed cost Gross profit $2,950,000 × $285,660= $64,216 $1,112,100 Cash flow forecast for year 2 (×1000 USD) Month Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Sales 241.6 240 240 238.9 242.6 239.6 240.7 244 250 245 248 248 Capital 189 200 Payments (×1000 USD) Salaries 5.75 5.75 4.75 5.6 5.5 5.68 4.79 4.96 5.5 5.8 5.8 5.76 Office rent 5.0 (Paid Once an year) Operation license 9.2 (Paid once an year) Insurance 2.7(Paid once an year) Advertising 1.4 1.32 1.4 1.21 1.5 1.4 1.5 1.7 1.4 1.8 1.6 1.4 Transport 2.4 2.8 2.2 2.1 2.7 2.4 2.9 2.7 2.9 2.7 2.6 2.1 Communication 5.2 (Paid once an year) Maintenance and repair 2.2 2.0 2.03 2.07 2.13 2.05 2.07 2.0 2.11 2.22 2.04 2.08 Postage bills 7.2 (Paid once an year) Electricity bills 3.2 3.2 3.5 3.2 3.8 3.4 3.32 3.37 3.391 2.37 2.36 3.39 Loan plus interest 4 4 4 4 4 4 4 4 4 4 4 4 Miscellaneous expenses 1.3 0.2 0.3 0.3 0.48 0.31 0.38 0.23 0.41 0.24 0.77 0.32 Capital purchases 23 5 24 30 6 2 2 4 5 2 2 3 Stationery 3 1 ___ ___ ___ 3 2 ___ ___ 1 1 ___ Total 31.5 32.7 42.18 48.48 26.11 24.24 22.96 22.96 24.71 20.13 26.17 18.7 Cash balances (×1000 USD) Opening balance 6,000 6,520 7,280 6,690 6,500 6,250 5,800 6,450 6,710 7,290 8,640 8,600 Closing balance 6,520 7,280 5,640 6,500 6,250 5,600 6,450 6,510 7,100 7,820 9,000 9,230 Forecast profit and loss account for year 3 Business: Wash and clean dry cloths/ Laundry Period: October 2008 to October 2009 Sales $3,000,000 Less direct (variable) costs Wages $20,000 Raw materials $1,094,300 Carriage on raw materials $10,800 Total direct (variable) cost $1,125,100 Gross profit $1,874,900 Fixed costs Salaries $60,000 Office rent $60,000 Operation license $9,200 Insurance $2,700 Depreciation $20,800 Advertising $30,700 Transport/fuel $27,600 Communication $5,200 Maintenance and repair $30,000 Postage bills $7,200 Electricity bills $44,000 Miscellaneous expenses $8,200 Total fixed costs $305,600 Net profit $1,569,300 Less drawings $100,600 Profit ploughed back in the business $1,468,700 Break even point = sales × Total fixed cost Gross profit $2,900,000 × $292,660= $763,163 $1,112,100 Cash flow forecast for year 3(×1000 USD) Month Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Sales 241.6 240 240 238.9 242.6 239.6 240.7 244 250 245 248 248 Capital 189 200 Payments (×1000 USD) Salaries 4.75 4.75 4.75 4.6 4.5 4.68 4.76 4.76 4.5 4.8 4.8 4.76 Office rent 5.0 (Paid Once an year) Operation license 9.2 (Paid once an year) Insurance 2.7(Paid once an year) Advertising 2.4 2.32 2.4 2.21 3.5 2.4 2.5 2.7 2.4 3.8 2.6 1.4 Transport 2.4 2.8 2.2 2.1 2.7 2.4 2.9 2.7 2.9 2.7 2.6 2.1 Communication 5.2 (Paid once an year) Maintenance and repair 2.2 2.0 2.03 2.07 2.13 2.05 2.07 2.0 2.11 2.22 2.04 2.08 Postage bills 7.2 (Paid once an year) Electricity bills 3.2 3.2 3.5 3.2 3.8 3.4 3.32 3.37 3.391 2.37 2.36 3.39 Loan plus interest 4 4 4 4 4 4 4 4 4 4 4 4 Miscellaneous expenses 0.3 0.3 0.4 0.4 0.38 0.51 0.68 0.33 0.41 0.64 0.77 0.32 Capital purchases 23 5 24 30 6 2 2 4 5 2 2 3 Stationery 3 1 ___ ___ ___ 3 2 ___ ___ 1 1 ___ Total 52.9 25.37 43.28 48.58 27.01 24.44 24.23 23.86 24.71 23.53 22.17 21.05 Cash balances (×1000 USD) Opening balance 6,000 6,520 7,280 6,690 6,500 6,250 5,800 6,450 6,710 7,290 8,640 8,600 Closing balance 6,520 7,280 5,640 6,500 6,250 5,600 6,450 6,510 7,100 7,820 9,000 9,230 2.5 References 1. Bruce (2006), “Business accounting: A guide to establishing a laundry business” West view Press, Inc.: Boulder, Colorado. p.23-24 2. Chapman A. (2008), “Business Plans and Marketing Strategy” New York: Lippincott.inc.p.66-91 3. Charley (2007), “Principles of micro-economics”. Dutton: New York, 1993. p.76 4. Davis (2006), “Business plans for small scale entrepreneurs”. New York: Lippincott. p.46 5. Dean R. (2004), “Small businesses for sustainable development” Duke University USA.p.99 6. Feldman R. (2008): “Business Plan: the road to Successful Businesses”. West view Press, Inc. Boulder, Colorado, 1994. p27 7. Mahamaya A. (2008), “The entrepreneurs Hand Book”. California press.inc.p.46 8. Maharaj D. (2008), “California and the world of Business” Los Angeles Times, 27 Sep 2008 Copyright 2008 Los Angeles Times 9. Mark (2005), “The Long way to Success in Business”. New York: Lippincott.inc.p.86 10. Murray B. (2007), “Successful Businesses: An overview of Business Plans”. New York: Lippincott. p.22 11. Norman (1991), “How to write Strategic Marketing plans, Business plans and Sales plans”. New York: Lippincott, 1991. p29 12. Paul (2007), “Laundry Business: The Unexplored Treasure”. Boston: Little, Brown.p.66 13. Wal-Mart (1990), “Corporate Philosophy and the Aims of Business Operations”. Berkeley, CA: University of California Press, 1991.p121 14. Wilkes (2007), “Fundamental Organizational Planning Stages”. Boston: Little, Brown, 1991.p78

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