Introduction
To ensure the success of any business in the competitive marketplace, it is important for the firm to develop appropriate and competitive strategies. It is because selection of the strategies influence in the establishment and success of the business in the competitive marketplace. From the paper, business of the Coffee shop in the USA is taken as a small business. Several key decisions and activities are analyzed and taken by the management of the firm to establish business of the firm in competitive market successfully (Seidman, 2005). In this, for ensuring the successful business of coffee shop, effective financial plan, marketing strategy and location will be found and developed. It is because these are important part of the business establishment and success of the business in the marketplace.
Financial Plan
Prepare the financial plan is also an important part of the business plan. It is because it includes profit and loss account, projected balance sheet and projected cash flow statement those are helpful to see the future of business in the competitive marketplace. This financial plan is formed on the assumption that the economy will be stable and major changes will be faced in governmental policies in the next three years (Seidman, 2005). These are as follows:
Profit and Loss Account: To prepare this statement, various figures including revenue from coffee shop activities, operating revenue, operating expenses and interest cost (see table 1). It is assumed that in the first year of the business launch, the firm will earn revenue of $50,000. In the next second and third year, revenues of the firm will increase as $100,000 and $150,000 respectively due to increasing number of coffee stores and using effective marketing strategies along with delivering quality products to the customers. In the operating expenses various expenses will be included as staff cost, supplies, marketing expenses and maintenance expenses (Internal layout and furniture of the shop). It shows the reason of increasing the profit of the firm from first to third year (Seidman, 2005).
Projected Balance Sheet: Coffee shop described about a company’s assets and liabilities through the balance sheet (see table 2). It is assumed that the company will have total current assets of $500,000, $800,500, and $10, 00,000 respectively. Similarly, it will have total fixed assets of $190,000, $190,000 and $190,000 respectively. It is also supposed that owners will contribute $100,000 in order to start the business. For business start up the firm will take a loan of $80,000. The firm will pay this amount in equal installment in the second and third year respectively. It will have earnings of $200,500, $400,500 and $800,000 respectively (Gruen & Howarth, 2005).
Projected Cash Flow Statement: Cash flow statement of the firm will define the inflow and the uses of the cash in the business in next three years. Some figures as total cash from operations and total cash out in this statement are based over the projected profit and loss account (Gruen & Howarth, 2005). In the first year, it is assumed that there will be start up cost of $80,000 that is an outflow of cash from the Coffee Shop (See table 3). Banks granted loans to the firm based over its financial projection that sustains as a reason of using these statements by the coffee shop.
Table 1: Profit and Loss Account
|
Particulars
|
Year 1 Amount $ |
Year 2 Amount $ |
Year 3 Amount $ |
Particulars
|
Year 1 Amount $ |
Year 2 Amount $ |
Year 3 Amount $ |
|
Operating Expenses |
$100,000 |
$115,000 |
$200,000 |
Revenue from selling coffee related items |
$50,000 |
$100,000 |
$150,000 |
|
|
|
|
|
Other Operating Revenue |
$25,000 |
$40,000 |
$60,000 |
|
Operating Surplus |
$10,000 |
$35,000 |
$80,000 |
|
|
|
|
|
Interest Cost |
$3,500 |
$5,000 |
$9,500 |
|
|
|
|
|
Net Profit |
$6,500 |
$30,000 |
$71,500 |
|
|
|
|
Table 2: Projected Balance Sheet
|
Assets
|
Year 1 Amount $ |
Year 2 Amount $ |
Year 3 Amount $ |
Liabilities |
Year 1 Amount $ |
Year 2 Amount $ |
Year 3 Amount $ |
|
Current Assets |
|
|
|
Current Liabilities |
|
|
|
|
Cash |
$435,000 |
$730,000 |
$900,000 |
Account Payables |
$35,000 |
$65,000 |
$70,500 |
|
Account Receivables |
$65,000 |
$70,500 |
$100,000 |
Total current Liabilities |
$35,000 |
$65,000 |
$70,500 |
|
Total Current Assets |
300,000, |
$600,500 |
$8 00,000 |
Long-term Liabilities |
|
|
|
|
Fixed Assets |
|
|
|
Loans |
$80,000 |
$40,000 |
0 |
|
Furniture |
$50,000 |
$50,000 |
$50,000 |
Total long-term liabilities |
$80,000 |
$40,000 |
0 |
|
Building |
$100,000 |
$100,000 |
$100,000 |
Owners Contribution |
$100,000 |
0 |
0 |
|
Machines |
$50,000 |
$50,000 |
$50,000 |
Earnings |
$200,500, |
$400,500 |
$800,000 |
|
Total Fixed Asset |
$190,000 |
$190,000 |
$190,000 |
|
|
|
|
|
Total Assets |
$500,000 |
$800,500 |
$10, 00,000 |
Total Liabilities |
$500,000 |
$800,500 |
$10, 00,000 |
Table 3- Projected Cash Flow Statement
|
1st year |
2nd year |
3rd year |
|
|
Cash in hand |
$400,000 |
$435,000 |
$410,000 |
|
Start-up-cost |
($80,000) |
0 |
0 |
|
Cash Contribution by Owner |
$80,000 |
0 |
0 |
|
Loan Proceeds |
$80,000 |
0 |
0 |
|
Total Cash from Operations |
$80,000 |
$105,000 |
$150,000 |
|
Total Cash Out |
($95,500) |
($110,000) |
($170,500) |
|
Payment of Loan amount |
0 |
($20,000) |
($40,000) |
|
Ending Balance |
$435,000 |
$410,000 |
$349,500 |
Guerrilla Marketing
The coffee shop is small business and does not have strong financial sources that force the firm to use cost effective marketing or promotional strategies. So, in this concern guerrilla marketing strategy will be used for promoting business of coffee shop in US market (Fullen, 2006). In this, low-cost unconventional means as graffiti, sticker bombing, flash mobs will be used for promoting or conveying ideas about the organizational products to the customers in the market. It is because the use of such unconventional means relies on time, energy and imagination rather than a big marketing budget that would be beneficial for small business (Covello & Hazelgren, 2006).
Use of unconventional means as a part of guerrilla marketing strategy would be beneficial for the company as it would work as interactive strategy that would help to reach at the target consumers. Key of using this strategy is to put the customers at the center of every step in the planning of marketing strategy (Fullen, 2006). It is because it helps the firm to develop understanding towards the customers’ needs and wants along with their perception towards the use of non-alcoholic beverage. In order to make a positive impact over the mind of customers in the US market, attractive and effective tools will be used to communicate with the customers and tell them about the organizational products (Levinson & Levinson, 2011). For this, various tools as coupons, discount offers, hosting events in the streets, effective internal layout of the coffee shop, giving thank you note to the customers, adopt tools for community benefits and many more will be included as marketing tools under the guerrilla marketing strategy. It is because such tools are effective and attractive (Covello & Hazelgren, 2006).
In this, benefits and quality of the coffee in terms of maintaining freshness among the people will be shown in front of the customers as a part of these marketing tools. It will help to attract the attention of the customers for being fresh and working without any tiredness. Similarly, use of these tools would be beneficial for the firm to communicate with the local customers at low cost within the available time period. It will increase the rate of profit and sales for the firm along with requiring a low amount of money to promote the product of the firm. As a part of this strategy, coupons and discount offer will be introduced in the month of February. It is because this is Customer Appreciation Month in US that would be beneficial for the firm to attract and increase customer base of it (Levinson, Adkins & Forbes, 2010). Before using such promotional tools as a part of guerrilla marketing strategy appropriate targets would be also mentioned in the business plan so that it becomes easy for the firm to establish its business (Levinson & McLaughlin, 2011). In this, business person, housewives, college students and old people will be targeted to provide coffee products. It is because this group of people prefers to take and use non-alcoholic beverage instead of taking other alcoholic beverages. So, this guerrilla marketing strategy would be beneficial for the firm as it will cover many important and relevant aspects those are important while starting a business at short level (Levinson & Levinson, 2011).
Location for Second Store
Location selection for the shape of firm is also an important element of the marketing strategy. It is because without placing shop at right place it would be difficult for the firm to reach at the maximum number of customers (Gitman & McDaniel, 2008). So, as a part of the marketing strategy, competitive and suitable location will be selected for second store so that it will become easy for the firm to reach at maximum customers. In this, a place to shop would be near the business places, colleges and apartments so that firm can reach at its target groups through providing its products to the target or needy people (Covello & Hazelgren, 2006).
It is because selection of this location is closely related to the target customer group that would help the firm to reach its customer base. With the taking advantage of this business plan in terms of increasing customer base and profitability level of the firm, second store of the firm will be also established for business expansion. For the next store, Pearl Street of New York is selected for the locating new store of the coffee shop. This street is the part of NY Route 32 and lined with bars, nightclubs, and entertainment venues such as the Times Union Center, the Palace Theatre, and the Capital Repertory Theatre (Moore, Palich & Petty, 2006). This place would be beneficial for the firm to open its store. It is because here all stores are available those offers alcoholic beverages but no one offer non-alcoholic beverage. So, it is an opportunity for the firm to open its store in Pearl Street. Hence, to catch this opportunity and increase the chances of business expansion and growth, this place would be beneficial to start and run the business (Gitman & McDaniel, 2008).
Plan for Securing Sources of Debt Financing
As the business is small and having low capacity to bear any loss. So, in this concern secured debt of financing will be selected for the firm as it makes sure to the security that involves in the form of collateral that ensures the loan will be repaired (Wolff, 2006). In this, home equity line of credit will be used as a source of financing as repayment terms in this fluctuates and interest rates also vary with the change in the index such as Wall Street Journal Prime. Additionally, credit cards, credit lines, term loans and convertible debts will be used as secured sources of debt financing. These sources will help the firm to gain finance to start a second store of a coffee shop in the US market (Gitman & McDaniel, 2008).
Conclusion
On the basis of the above discussion, it can be inferred that financial plan and marketing strategy both are an important part of the business plan. It is because these help the firm to sustain itself in the competitive marketplace.
References
- Covello, J.A. & Hazelgren, B.J. (2006). Complete Book of Business Plans: Simple Steps to Writing Powerful Business Plans. Sourcebooks, Inc.
- Fullen, S.L. (2006). How to Get the Financing for Your New Small Business: Innovative Solutions from the Experts who Do it Every Day. Atlantic Publishing Company.
- Gitman, L. J & McDaniel, C. D. (2008). The Future of Business: The Essentials. USA: Cengage Learning.
- Gruen, R. & Howarth, A. (2005). Financial Management in Health Services. USA: McGraw-Hill International.
- Levinson, J. C & Levinson, J. (2011). The Best of Guerrilla Marketing–Guerrilla Marketing Remix. USA: Entrepreneur Press.
- Levinson, J. C & McLaughlin, M. W. (2011). Guerrilla Marketing for Consultants: Breakthrough Tactics for Winning Profitable Clients. USA: John Wiley & Sons.
- Levinson, J. C., Adkins, F & Forbes, C. (2010). Guerrilla Marketing for Nonprofits. USA: Entrepreneur Press.
- Moore, C.W., Palich, L.E. & Petty, J.W. (2006). Small Business Management with Infotrac: An Entrepreneurial Emphasis. USA: Cengage Learning.
- Seidman, K. F. (2005). Economic Development Finance. USA: SAGE.
- Wolff, M. (2006). Sources of Financing: Debt and Equity. Retrieved from http://www.usheproduction.com/design/8020/downloads/4a.pdf