Business name & Location

The name of the venture planned to be established will be ‘Dark Roast’ that will be a coffeehouse located in Sydney in Australia. The business will mainly to provide the residents a unique experience while having coffee. This is aimed to be achieved by offering uniquely flavored coffee drink that they can drink while sitting in a relaxed environment. The coffee is planned to be established near a shopping mall within Sydney for attracting people to come and relax after being tired of shopping. The establishment of the coffee house is selected for the business venture as it is aimed to offer new and unique type of atmosphere to the people in the coffeehouse that they might not have experienced in the past. The business venture also has large chance of being successful as it is planned to be established near shopping centre that targets large number of crowds (Pinson, 2008).   

The coffee house will be the first of its kind providing a relaxed and comfortable atmosphere to the people for socializing and interacting with each other. The infrastructure of the coffee house will be developed in such a manner so that customers visiting receive high enjoyment and relaxation. The designing of the coffee house will be unique in the sense by featuring stained glass decoration, glasswork and unique design dining’s. The staff members involved in preparation of the coffee will be highly trained and experienced professionals for providing customers delicious coffee. It will adopt the use of high quality equipment and ingredients for delivering higher quality coffee drinks to the customers in comparison to the competitors (Blackwell, 2017).

The coffee house will provide higher quality coffee products to the customers. In addition to this, it will also provide complementary food items such as pastries, cookies, fruit juices and ice tea drinks to the customers.

The economic growth and development of the country presents a positive state of market for the success of the business venture planned to be established. The high chances of success for the coffee house can be attributed due to following factors:

• Highly affluent local population
• High tourist activity
• Increasing students population for gaining higher education
• Location within one of best state of the country

The target market segment of the business will be local residents, local businesses, students and travelers. The key strategy is to develop an atmosphere within the coffee house that appeals largely to these target customers by providing them delicious coffee (Hazelgren, 2005).

Dark Toast will be private owned company shared by five members having equal shares. It is registered as Limited Liability Company with government to have ease of business and to limit the liability of all the members who have invested in the business. Limited Liability Company can be regarded as the corporate structure in which the members do not possess any personal liability for meeting its debt obligations. It integrates the characteristics of both the partnership and sole proprietorship and this enables the company to have tax benefit. It can be regarded as simplest way of structuring the business to protect its personal assets from any losses. As such, the business venture planned to be established will be a limited liability company that will help in reduction of financial risk to the owners of bearing the losses (Finch, 2013).

• It is highly expected there will growth in the business for next 20 years especially demand of coffee will increase in upcoming years. It seems that there will be no saturation point in the business for next few years.
• There will be constant growth of 10% for next 5 years and it will be divided evenly throughout the year.
• Demand of coffee Dark Roast will rise throughout the period of 5 years due to marketing performed by the members. It is expected that marketing expenses will be around 5% of the total sales (Davies and Crawford, 2011)

Proposed Business Structure

Before starting the business there are multiples expenses such as buying or lease out the space for carrying out the business, buying the long term assets, arranging the working capital and other expenditures like legal expenses.  Below table will elaborate further about the expenses incurred in various assets:

(Sellars, 2009)

In addition to above expenses it is expected that there is requirement of working capital that includes inventory of $ 30000, cash of $15000 and other current assets of $ 12000. The total assets amount to $273000 which is financed partially by members and partially by the long term loan from bank bearing interest rate of 12%.

Key Assumptions drawn for the financial plan

• It is expected that in first year of sale will be approx 20000 units and sale price per unit will be $ 7.5. It is expected that sale volume will rise 10 % annually.
• Direct material will be 15% of total sales, labour or salaries will amount $24000 per year. There will be no change in labour or salaries during five years.
• Advertisement expenses amount to 5% of sales annually and there will no change during the five years (Samonas, 2015)
• Depreciation will be calculated at 15% on written down value basis on equipment and furniture and 25% on software on written down value basis.
• Lease rent will be paid at 10000 $ per year with no change during the five years.
• Interest on bank loan is paid annually at the end of each year
• Tax rate is approx 30% annually calculated on profit before tax.
• All the sales are made on cash basis and expenses are paid for each year in same year and there will be no account receivable and account payable at the end of each year. It means all cash is collected a paid as it arises and in same period.
• Cost of capital of the business is anticipated at 8 %

It is important draft the Proforma of profit and loss statement in order to estimate cash outflows and inflows from the business. Profit and loss statement provides overview of business income and expenses. The below budgeted profit and loss statement shows income and expenses that will be earned by Dark Roast in upcoming five years:

Formula: Present value of cash inflows less present value of cash outflows (Hiduke, 2013)

• Bank Loans: The venture project can be financed through using the debt sources such as gaining funds through bank. The criteria includes past record of applicant’s credibility and assurance of repaying the loans on the basis of business plan developed. In this context, the potential source of finance that can be utilized for funding the venture project can be Enterprise Finance Guarantee. This involves gaining funds from the government for carrying out regular operational activities. The scheme ensures that viable businesses secure the working capital so that their entrepreneurial idea can be converted into reality (Brigham and Michael, 2013).
• Venture Capital: This type of financing options involves realizing funds through equity sources such as gaining funds from investment banks and other financial institutions. The investors gain private equity stake in startup companies having strong growth potential. Thus, this type of financing can be regarded as an investment funding in which money from different private investors are realized by a start-up company to meet its capital needs.
• Creditor Finance: This type of financing options involves gaining resources form the suppliers on credit in return of promise to meet the obligations in the future context by repaying the amount due. The creditors in this type of financing option can be family or friends who provide support for an entrepreneur to establish the business plan developed into reality (Bromwich and Bhimani, 2005)   
• Bank Overdraft: This can also be regarded as a major source of financing available for funding the entrepreneurial venture. The bank overdraft can be regarded as an extension of credit that is provided by the bank that enables an individual to withdraw the money even if there are no funds in the account. The business is required to pay interest on the amount of overdraft used and is regarded as a potential source of short-term funds that can be utilized for meeting the temporary cash shortage (Damodaran, 2011).

Conclusion

Thus, it can be stated that development of business plan is essential to be developed for converting the potential idea of a venture project into reality. The business idea planned to be established in the present context is Coffee House in the prime site location of the Sydney. It has been assessed on the basis of the projected profit and loss for the venture project that it will be a profitable business option that is expected to provide good returns in the future. This is supported by the positive state of economic growth within country due to large tourist and students visiting the country on yearly basis.

References

Blackwell, E. 2017. How to Prepare a Business Plan: Your Guide to Creating an Excellent Strategy, Forecasting Your Finances and Producing a Persuasive Plan. Kogan Page Publishers.

Brigham, F., and Michael C. 2013. Financial management: Theory & practice. Cengage Learning.

Bromwich, M. and Bhimani, A., 2005. Management accounting: Pathways to progress. Cima publishing.

Damodaran, A, 2011. Applied corporate finance. John Wiley & sons.

Davies, T. and Crawford, I., 2011. Business accounting and finance. Pearson.

Finch, B. 2013. How to Write a Business Plan. Kogan Page Publishers.

Hazelgren, B. 2005. Your First Business Plan: A Simple Question and Answer Format Designed to Help You Write Your Own Plan. Sourcebooks, Inc.

Hiduke, G. 2013. Small Business: An Entrepreneur’s Business Plan. Cengage Learning.

Pinson, L. 2008. Anatomy of a Business Plan: A Step-by-step Guide to Building the Business and Securing Your Company’s Future. Aka associates.

Samonas, M. 2015. Financial Forecasting, Analysis, and Modelling: A Framework for Long-Term Forecasting. John Wiley & Sons.

Sellars, D. 2009. Business Plan Project: A Step-by-Step Guide to Writing a Business Plan. Business Expert Press.