Business plan for Coffee Shop


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Business plan for Coffee Shop

  1. 1. Business Plan Sweet Coffee Shop Submitted by Job Thomas Roll No.8, Sem-5 MBA(PT) School of Management studies Cochin University of Science and Technology Cochin, Kerala, India PIN 682022 October 2012Business plan of Sweet Coffee Shop by Job Thomas 1
  2. 2. 1. Executive summaryCoffee shop is the flourishing business in Kerala. Coffee or Tea bar is a daily necessityfor local coffee addicts, a place to dream many things, a place to escape the dailystresses of life and just a comfortable place to meet your friends or to read a book, all inone. With the growing demand for high-quality tea or coffee and great service, SweetCoffee shop will capitalize inside School of Management Studies (SMS), CochinUniversity campus to build a core group of repeat customers. The culture will offer itscustomers the best prepared coffee/tea in the area that will be complimented withpastries, as well as free books that its patrons can read to enjoy their visit.The shop will operate a 50 square foot coffee bar near to the entrance of SMS building.The identified place can be obtained for lease for one year possible to get extension inthe upcoming years. The start-up funds available with owner is INR 50,000/-. It isexpected that the remaining capital of Rs.50,000/- will be obtained through commercialloans from State bank of Travancore.The business is expected to earn sales revenue of INR 175,000/- in the first year. SweetCoffee shop will strive to maintain a high gross profit margin and reasonable operatingexpenses. The projected sale and the profit are indicated in Figure 1. 160% 120% Year 1 80% Year 2 Year 3 40% 0% Sale Margin ProfitFigure 1. Project growth of sale and profit of Sweet Coffee shopBusiness plan of Sweet Coffee Shop by Job Thomas 2
  3. 3. 2. Business DescriptionThe coffee and tea consumption in the campus is very high. Sweet Coffee shop willserve students, teachers, ministerial staffs, laboratory staff and visitors are thecustomers of the campus. It is expected that the people from School of ManagementStudies and neighboring departments will be the loyal customers of the shop. An opinionsurvey conducted in SMS indicates that the proposed business plan is something peopleare waiting for. The quality and cleanliness will be the distinctive feature of the venture.The product share is indicated in Figure 2. Product share 17% 17% Coffee Tea Snacks 28% 38% StationeryFigure 2. Product share of Sweet Coffee shop3. MarketingThe projection of daily sales of Sweet Coffee shop for the given in Table 1. The totalexpected sale per day will be Rs. 15500/- . The expected daily profit is about 50 percentof the operating expenses. Table 1. Projected Daily sale Items Day-time Evening Total Coffee INR 1,000 INR 250 INR 1,250 Tea INR 1,500 INR 500 INR 2,000 Snacks INR 2,000 INR 750 INR 2,750 Stationery INR 1,000 INR 250 INR 1,250 TOTAL INR 5,500 INR 1,750 INR 7,250Sweet Coffee shop will offer its customers the best tasting coffee or tea beverages in thearea. This will be achieved by using high-quality ingredients and strictly followingpreparation guidelines. The store layout, menu listings and marketing activities will befocused on maximizing the sales of higher margin espresso drinks. Along with theespresso drinks, brewed coffee and teas, as well as some refreshment beverages, willbe sold in the coffee bar. Sweet Coffee shop will also offer its clients pastries, smallsalads and sandwiches. For the gourmet clientele that prefers to prepare its coffee athome, Sweet Coffee shop will also be selling coffee beans. The menu offerings will beBusiness plan of Sweet Coffee Shop by Job Thomas 3
  4. 4. supplemented by free books and magazines that customers can read inside the coffeebar Market share 10% Students 10% Faculty office workers 50% 20% Labstaffs 10% visitorsFigure 2 Market analysis results of Sweet Coffee shopSweet Coffee shop will focus its marketing activities on reaching the University studentsand faculty, people working in offices located close to the coffee bar and onsophisticated teenagers. The details of market survey are shown in Figure 2. The marketresearch shows that these are the customer groups that are most likely to buy tea orcoffee and snacks. The quality and cleanliness are other important factors to be used formarketing in well educated group of customers.Sweet Coffee shop will cater to people who want to get their daily cup of great-tastingcoffee in a relaxing atmosphere. Such customers vary in age, although the location isinside University campus, most of our clientele will be college students and faculty. Ourmarket research shows that these are discerning customers that gravitate towards bettertasting coffee or tea. Furthermore, a lot of college students consider coffee bars to be aconvenient studying or meeting location, where they can read or meet with peers withoutthe necessity to pay cover charges. For Sweet Coffee shop, this will provide a uniquepossibility for building loyal client base.4. OperationThe Sweet Coffee shop will be open with one working staff and one cashier cumaccountant. The sweet coffee shop is planned to operate at 50 square feet space roomavailable in the ground floor of School of management studies, CUSAT. The womenlabors are available in the locality to engage in the operation of the shop. The location ofthe shop is accessible to supplier’s delivery van and waste removal. The start-up fundrequirement is given in Figure 3.Business plan of Sweet Coffee Shop by Job Thomas 4
  5. 5. Start-up funding INR 60,000 INR 40,000 INR 20,000 INR 0 Total fund Assets Liabalities InvestmentFigure 3. Start-up fund plan of Sweet Coffee shop5. ManagementSweet Coffee shop is owned by Mr. JOB THOMAS, who holds a Masters Degree inBusiness Administration from Cochin University. Mr. Thomas has good managementexperience in owning similar shop near University campus. He had conducted a study invarious coffee shops, which is operating with significant margin. The customer feed backwould be the prime consideration in the development of the business. The person who isworking as cashier cum accountant will have to manage the labour, ordering inventory,dealing with suppliers, developing a marketing strategy and perform other dailymanagerial duties. A profit-sharing arrangement for accountant will be considered basedon the first year operational results. The personnel plan of Sweet Coffee shop is given inTable 2. Table 2. Personnel Plan Personnel Year 1 Year 2 Year 3 Cashier INR 60,000 INR 66,000 INR 72,600 Worker INR 48,000 INR 52,800 INR 58,080 Number of employees 2 2 2 TOTAL 108000 118800 1306806. FinanceSweet Coffee shop will capitalize on the strong demand for high-quality coffee. Theowners have provided the shop with sufficient start-up capital. With successfulmanagement aimed at establishing and growing a loyal customer base, the business willsee its net worth doubling in two years. Sweet Coffee shop will maintain a healthy 50%gross margin, which combined with reasonable operating expenses, will provide enoughcash to finance further growth.The profit and loss account is projected for upcoming three years. The sales, margin,expenses and profit are given in Figure 4. It is expected that the proposed product isprofitable in the first year. The profit is increasing in the upcoming years.Business plan of Sweet Coffee Shop by Job Thomas 5
  6. 6. INR 3,000,000 INR 2,500,000 INR 2,000,000 Year 1 INR 1,500,000 Year 2 INR 1,000,000 Year 3 INR 500,000 INR 0 Sale Margin Expenses ProfitFigure 4. Projected sale, margin, expenses and profit of Sweet Coffee shopThe balance sheet is projected for the upcoming three years. The projected asset,liabilities and capital are given in Figure 5. The growth of asset and capital is increasingsignificantly. The net worth of the business is increasing, which is the positive sign ofgrowth of the business INR 1,000,000 INR 800,000 INR 600,000 Year 1 INR 400,000 Year 2 INR 200,000 Year 3 INR 0 Assests Liabilities CapitalFigure 5. Projected assets, liabilities and capital of Sweet Coffee shop7. Critical-RisksThe neatness and the custom made coffee or tea would be core attraction of SweetCoffee shop. Milma booth stall will definitely be one of the major competitors because ofits established marketing and operational practices. However, despite of Milma boothstall entrenched market position, many customers favor smaller, independentestablishments that offer cozy atmosphere and good coffee at affordable prices.8. Harvest strategyStrategy will be focused at getting new customers, retaining the existing customers,getting customers to spend more and come back more often. Establishing a loyalcustomer base is of a paramount importance since such customer core will not onlygenerate most of the sales but also will provide favorable referrals. Sweet Coffee shopwill position itself as unique coffee bar where its patrons can not only enjoy a cup ofBusiness plan of Sweet Coffee Shop by Job Thomas 6
  7. 7. perfectly brewed coffee but also spend their time in an ambient environment.Comfortable sofas and chairs, dimmed light and quiet relaxing music will help thecustomers to relax from the daily stresses and will differentiate Sweet Coffee shop fromincumbent competitors. To speed up the customer service, at least two employees willbe servicing clients--while one employee will be preparing the customers order, theother one will be taking care of the sales transaction. All sales data logged on thecomputerized point-of-sale terminal will be later analyzed for marketing purposes.9. Milestone scheduleThe milestones are guidelines for each of the members should strive to achieve. Themilestones of Sweet Coffee shop is given below.MilestonesItem Quarter1 Quarter2 Quarter3 Quarter4Customer delight XXXXXXXXXXXXXXXXAchieve sale target XXXXXXXXXXXXXXXXImprovement in business XXXXXXXXXXXXXXXXBusiness plan of Sweet Coffee Shop by Job Thomas 7
  8. 8. 10. AppendixA1. Start-up RequirementsStart-up ExpensesLegal INR 5,000Stationery etc. INR 2,000Brochures INR 2,000Consultants INR 0Insurance INR 5,000Rent INR 1,000Remodeling INR 5,000Other INR 5,000 Total Start-up Expenses INR 25,000Start-up AssetsCash Required INR 10,000Start-up Inventory INR 10,000Other Current Assets INR 0Long-term Assets INR 15,000 Total Assets INR 35,000 Total Requirements INR 60,000Business plan of Sweet Coffee Shop by Job Thomas 8
  9. 9. A2. Start-up FundingStart-up Expenses to Fund INR 25,000Start-up Assets to Fund INR 35,000 Total Funding Required INR 60,000AssetsNon-cash Assets from Start-up INR 25,000Cash Requirements from Start-up INR 10,000Additional Cash Raised INR 0 Total Assets INR 35,000Liabilities and CapitalLiabilitiesCurrent Borrowing INR 20,000Long-term Liabilities INR 0Accounts Payable (Outstanding Bills) INR 0Other Current Liabilities (interest-free) INR 0 Total Liabilities INR 20,000CapitalPlanned InvestmentInvestor 1 INR 40,000investor 2 INR 0All other investors INR 0Additional Investment Requirement INR 0 Total Planned Investment INR 40,000Loss at Start-up Expenses (INR 25,000) Total Capital INR 15,000 Total Capital and Liabilities INR 35,000Total Funding INR 60,000Business plan of Sweet Coffee Shop by Job Thomas 9
  10. 10. A2. Profit and Loss Account (projected)Income Year 1 Year 2 Year 3Sales INR 1,740,000 INR 2,175,000 INR 2,610,000Direct Cost of Sales(0.65-.55) INR 1,131,000 INR 1,305,000 INR 1,435,500Other 0 0 0 Total Cost of Sales INR 1,131,000 INR 1,305,000 INR 1,435,500Gross Margin INR 609,000 INR 870,000 INR 1,174,500Gross Margin % 35% 40% 45%Expenses Year 1 Year 2 Year 3Payroll INR 130,680 INR 0 INR 0Sales and Marketing and Other Expenses INR 20,000 INR 20,000 INR 20,000Depreciation (0.3) INR 4,500 INR 4,500 INR 4,500Rent INR 1,000 INR 1,000 INR 1,000Maintenance INR 5,000 INR 5,000 INR 5,000Utilities/Phone INR 1,000 INR 1,000 INR 1,000Payroll Taxes INR 0 INR 0 INR 0Other INR 0 INR 0 INR 0 Total Operating Expenses INR 162,180 INR 31,500 INR 31,500Profit Before Interest and Taxes INR 446,820 INR 838,500 INR 1,143,000EBITDA INR 451,320 INR 843,000 INR 1,147,500Interest Expense INR 4,000 INR 4,000 INR 4,000Taxes Incurred (0.3) INR 134,046 INR 251,550 INR 342,900 Net Profit INR 313,274 INR 587,450 INR 800,600Net Profit/Sales 18% 27% 31%Business plan of Sweet Coffee Shop by Job Thomas 10
  11. 11. A4. Balance sheet (projected)Assets Year 1 Year 2 Year 3Current AssetsCash INR 328,938 INR 616,823 INR 840,630Inventory INR 29,500 INR 24,000 INR 18,500Other Current Assets INR 10,000 INR 10,000 INR 10,000 Total Current Assets INR 368,438 INR 650,823 INR 869,130Long-term AssetsLong-term Assets INR 15,000 INR 15,000 INR 15,000Accumulated Depreciation (INR 4,500) (INR 9,000) (INR 13,500) Total Long-term Assets INR 10,500 INR 6,000 INR 1,500Total Assets INR 378,938 INR 656,823 INR 870,630Liabilities and Capital Year 1 Year 2 Year 3Accounts Payable INR 15,664 INR 29,373 INR 40,030Current Borrowing INR 20,000 INR 20,000 INR 20,000Other Current Liabilities INR 0 INR 0 INR 0 Subtotal Current Liabilities INR 35,664 INR 49,373 INR 60,030Long-term Liabilities INR 0 INR 0 INR 0 Total Liabilities INR 35,664 INR 49,373 INR 60,030Paid-in Capital INR 40,000 INR 30,000 INR 20,000Retained Earnings (INR 10,000) (INR 10,000) (INR 10,000)Earnings INR 313,274 INR 587,450 INR 800,600 Total Capital INR 343,274 INR 607,450 INR 810,600Total Liabilities and Capital INR 378,938 INR 656,823 INR 870,630Business plan of Sweet Coffee Shop by Job Thomas 11
  12. 12. A5. Ratio AnalysisFinancial ratios Year 1 Year 2 Year 3Current ratio 10.33 13.18 14.48Inventory turn-over 38.34 54.38 77.59Debt/Net worth 0.10 0.08 0.07Return on tangible net worth 0.91 0.97 0.99Return on Assets 0.83 0.89 0.92 Financial ratios 80 60 Year 1 Ratio 40 Year 2 20 Year 3 0 Current ratio Inventory turn-over Financial ratios 1.00 0.80 0.60 Year 1 Ratio 0.40 Year 2 0.20 Year 3 0.00 Debt/Net w orth Return on tangible Return on Assets net w orthBusiness plan of Sweet Coffee Shop by Job Thomas 12