Business Plan Assignment: Strategic Planning For A Cup Of Joy

Question

Task:
Business Plan Assignment Task
You are required to produce a costed business plan for a new business launch. The plan can, within reason, be based upon any area of business activity. The business plan must contain the following key elements:

1. A summary of the business idea, an analysis of the risks that the business will face and the source(s) of initial funding for the business.
2. An outline and discussion of the key fixed and variable costs.
3. A budgeted profit forecast for the first year of operation.
4. A budgeted cash flow for the first year of operation.
5. Calculation of the breakeven point and margin of safety.
6. Key performance indicators (KPIs) to monitor progress towards business goals.
7. Recommendations based on the results of your analysis above.

Answer

Introduction to the context of Business Plan Assignment
A business plan is a detailed written document that states how a start-up business shall carry out its operations by defining its objectives and the procedure to be carried out in achieving its goals. A business plan is known to be a detailed well-written roadmap for the business from the viewpoints of marketing strategy, financial planning and operational activities (Chang, 2017). Start-up companies usually prepare a business plan underlining the key factors to get off the foundation and attract investors to pour money into the business venture.

Summary of the Business Plan
A Cup of Joy is a start-up café based on the coffee roaster to offer a range of premium coffee and espressos. A Cup of Joy will be located in Oxford Street in London. A Cup of Joy shall be opened as an LLC by its two founders John and Mary, to re-live the classical Italian traditions and coffee recipes to meet the demand for the people for premium coffee. A Cup of Joy highlights its three main key to success factors that shall derive a competitive advantage to the business in comparison to existing market participants in the UK coffee industry. At first, A Cup of Joy is required to develop the finest grade of coffee from the suppliers. Secondly, establish a high-end customer service system that shall exceed the expectation of the customers and lastly, employing cost management strategies. The financial and budgetary control shall help A Cup of Joy to eliminate unnecessary expenses.

Mission
The mission of A Cup of Joy is to deliver the finest selection of a variety of coffee that is unconventional. The café shall use a high-grade coffee roaster to prepare coffee that can surpass all its competition. The high-end customer service and homely atmosphere at the café shall be a perfect combination for the unique product.

Vision
The vision of A Cup of Joy is to expand its business within other cities in the UK as well as venture into international countries through multiple café chains.

Objectives
The objectives of A Cup of Joy are to create brand awareness and excellent customer services that shall promote high sales and high profits. A Cup of Joy shall use the following strategies to meet its objectives-

• Preparing a unique menu to offer a different and wide variety of coffees
• Promote the classical Italian coffee roasting methodology for increasing its market share and penetrate into the market using the finest raw materials
• Offering excellent customer services that shall outreach the customer's demand in delivering the best services in the city

Cost Structure

Table 1: Total Cost Analysis

Table 2: Initial Cost

Table 3: Start-up Funding Summary

Table 4: Raw materials used and prices

Forecasted P/L Statement

The table above shows the projected profit and loss for the café in the first year of operations. With the expected revenue and expenses, the company shall run into a loss throughout the period. It is due to the reason of overriding operating expenses in comparison to the revenue likely to be earned. Initially the café is required to make multiple sources of expenses that cannot be set-off from the slow-earning revenue causing a high loss margin throughout the 12 months.

Forecasted Cash Flow

The forecasted cash flow statement elaborates the sources of cash inflow and cash outflow to the café in the first 12 months. The company is expected to generate sales from April with an increasing trend. In the first three months, the café shall need to implement marketing strategies to able to recognise itself as a unique café in the Oxford Street of London. However, from the first month itself, the café shall bear expenses in the form of cash spent on activities and utility bill payments. In the past 12 months, the net cash flow remained slow and negative hence indicating that the net cash inflow is lower than net cash outflow.

Break-even Point and Margin of Safety

The break-even point analysis shows the production level where the total cost of the production is exactly equal to total revenue earned. In other words, it is a situation of no profits no loss. A Cup of Joy shall derive its break-even point in the month of November on the first year of its business. The approx. break-even point is 16.0379 units which means, the café needs to make sales revenue of 12018 to achieve the break-even cost from the operating activities. According to the principles of break-even analysis, for start-up business, the BEP is usually high as the café needs to incur high cost during the initial period. The margin of safety is a point where the company must re-stock its raw materials to prevent stock-out situation.

Key Performance Indicators
The following are the key 5 KPIs for a café business-

Employee Retention Rate: This KPI can correlate with the level of productivity to track the success or failure of A Cup of Joy. It is % of the employees that remain with the business over a specific period (Rashidet al., 2018). Usually, café business faces an alarming rate of employee turnover, and it causes problems with the hourly employees, which is highly preferred by A Cup of Joy’s owners.

RevPASH: It is the Revenue Per Available Seat Hour that determines the time as the main criterion. The café industry uses RevPASH to assist the café owner in gaining an insight into the effectiveness and efficiency of the business of every seat, generating revenue to the business (Torresand Costa, 2018).

% of labour cost: Labour cost is the % of how much the café is incurring against the employee cost during a period. Labour cost indicates high improvement in cost minimisation by making minor changes in the cost structure (Turnerand Endres, 2017). For instance, a difference in 1% of the labour cost shall make a huge difference in sales revenue and profit maximisation.

Revenue by Employee:It is also known as the sales per head, wherein the café measures the sales per head at different hours during a specific date (Marsiwiet al., 2019). A Cup of Joy can track the sales per head during the peak hours like evening as well as revenue earned by employees per week, per fortnight and per month.

Table Turn Time: It shows how long a table is occupied by the guest to have their food at the café. It begins from the time the guest occupies the table till they leave (Mohamudet al., 2017). For start-up businesses like A Cup of Joy, higher money can be generated with a faster table turn.

Recommendation
As a new business, A Cup of Joy shall face tremendous market competition due to its location and numerous existing market participants in London itself. In order to highlight its key success factors, there are few strategic ways to remain strong in the competitive market-

Specialise: A Cup of Joy needs to gain specialised knowledge in the different types of coffee like espresso, cappuccino and a variety of characteristics of coffee beans. This shall cater to offer consumers along with the reason to choose a type of coffee with others.

Products: A Cup of Joy should serve not only coffee but also some food items that go well with coffee like muffins, sandwiches and many more.

Theme: A Cup of Joy must choose a specialised theme for the café that can add an aesthetic factor for capturing the curiosity of the customers.

Conclusion
It can be concluded that a business plan is an essential tool as it provides the entrepreneur with the ability to lay down their business goals and track down the progress of their business to mark growth. A formulation of the business plan is the first step of starting a start-up business. They are essential for attracting investors so as to determine if the business is on the right track and whether it is worth investing money into it or not.

Reference List
Chang, W.L., 2017. Online training for business plan writing through the World Café method: the roles of leadership and trust. Universal Access in the Information Society, 16(2), pp.313-324.

Marsiwi, C.K.K., Syah, T.Y.R., Pusaka, S. and Indradewa, R., 2019. Investment Feasibility Analysis in Financial Aspects of Startup Business In Lifestyle Combining Barbershop And Coffee shop Over PT. Jeeva Work Corporation. Journal of Multidisciplinary Academic, 3(4), pp.97-100.

Mohamud, S.S., Khalifa, G.S., Abuelhassan, A.E. and Kaliyamoorthy, S., 2017. INVESTIGATING THE ANTECEDENTS OF COFFEE SHOP CUSTOMERS'BEHAVIORAL INTENTIONS IN KUALA LUMPUR. International Journal on Recent Trends in Business and Tourism (IJRTBT), 1(4), pp.1-14.

Rashid, S.M., Cohen, D.A. and Ghose, K., 2018. An exploration on the process of brand identity building in the context of Malaysian cafe.

Torres, J.G.D.M. and Costa, P.L.D.O., 2018. World Café method integrated with QFD for obtaining the Voice of the Customer. Production, 28.

Turner, S. and Endres, A., 2017. Strategies for enhancing small business owners' success rates. International Journal of Applied Management and Technology, 16(1), p.3.