Download - BUSINESS PLAN
PLAN OUTLINE1.0 Executive Summary1.1 Mission1.2 Keys to Success1.3 Objectives2.0 Company Summary3.0 Products and Services4.0 4.0 Market Analysis Summary5.0 5.0 Strategy and Implementation Summary6.0 6.0 Management Summary7.0 7.0 Financial Plan8.0 Appendix
Executive Summary
The Spot is a new night club that will focus onattractingthe students of Technical University of Mombasa, with a student population that exceeds 22,000andgrowing by 15% each year. Thenight clubwill be located one block away from the main campus.The area already hasthree bars that have been thriving for the past 10 years.Each establishment has long lines waiting for entry each weekend. Recently, commercial space has become available next to the campus whentwo adjacent businesses relocated.The Spot will consolidate this space into a 5,000 square foot night club. The location is on the main street most often used by students.Once opened, the Spot will have the exceptional management team to guide its success. The Spot's three owners, Hope Mwarome, Jill Morse, and Zadock Odhioambo, have over 5 years of night club management experience between them. Hope has been the manager of Tom's Landing, the most popular bar in the university area, for the pastfive years.Jill and Zadock are co-owners of Olympus, a popular downtown night club that has dominated the city's club scene for the pastfour years.
1.1 MissionIt's not the lights; it's not the liquor; and it's not the sound. It's the people!And its the FUN! Successful nightclubs are based on an accurate understanding ofthe corecustomers. The mission of the Spot is to create a nightclub environment that satisfies the changing tastes and expectations of our core customers; i.e. college-age women. If the women come, the men will follow. In order to achieve this goal, we must constantly improve our response to the customers' entertainment needs.
1.2 Keys to Success Provide exceptional service that leaves an impressionwith our core customers. Consistent entertainment atmosphere and product quality. Managing our internal finances and cash flow to enable upward capital growth. Strict control of all costs, at all times, without exception.1.3 Objectives Capitalize on excellent location opportunity. Launch the venue with a highly publicized grand opening event in thespring ofYear 1. Maintain tight control of costs, operations, and cash flow through diligent management and automated computer control. Maintain food costs below 33% of food revenue. Maintain total beverage costs below 25% of beverage revenue. Exceed Kshs1 million in annual sales by the third year of plan implementation.
Company Summary
The key elements of The Spot are:1. Focus on attracting college-age women.The company will focus on design and musical themes that have mass appeal to college-age women.2. Location.One of the major advantages that the Spot will have over its competition will be its location next to the university campus.3. Exceptional service.In order to reach and maintain a unique image of quality, the Spot will provide attentive and friendly service.
2.1 Start-up SummaryThe Spot has three owners Hope Mwarome, Jill Morse, and Zadock Odhiambo, whowill each invest Kshs70,000.
Start-up Funding
Start-up Expenses to FundKshs112,500
Start-up Assets to FundKshs97,500
Total Funding RequiredKshs210,000
Assets
Non-cash Assets from Start-upKshs20,000
Cash Requirements from Start-upKshs77,500
Additional Cash RaisedKshs0
Cash Balance on Starting DateKshs77,500
Total AssetsKshs97,500
Liabilities and Capital
Liabilities
Current BorrowingKshs0
Long-term LiabilitiesKshs0
Accounts Payable (Outstanding Bills)Kshs0
Other Current Liabilities (interest-free)Kshs0
Total LiabilitiesKshs0
Capital
Planned Investment
Hope MwaromeKshs70,000
Jill MorseKshs70,000
Zadock OdhiamboKshs70,000
OtherKshs0
Additional Investment RequirementKshs0
Total Planned InvestmentKshs210,000
Loss at Start-up (Start-up Expenses)(Kshs112,500)
Total CapitalKshs97,500
Total Capital and LiabilitiesKshs97,500
Total FundingKshs210,000
Start-up
Requirements
Start-up Expenses
LegalKshs2,000
Stationery etc.Kshs500
ConsultantsKshs0
InsuranceKshs1,000
RentKshs4,000
Research and DevelopmentKshs0
Interior RefitKshs30,000
Expensed EquipmentKshs20,000
Air Cond. UpgradeKshs5,000
Audio/LightingKshs10,000
Bar Equipment/SupplyKshs10,000
Fees and PermitsKshs7,000
Bathroom UpgradesKshs5,000
Initial MarketingKshs3,000
Opening Salaries DepositsKshs15,000
OtherKshs0
Total Start-up ExpensesKshs112,500
Start-up Assets
Cash RequiredKshs77,500
Start-up InventoryKshs0
Other Current AssetsKshs0
Long-term AssetsKshs20,000
Total AssetsKshs97,500
Total RequirementsKshs210,000
2.2 Company OwnershipThe Spot has three owners, Hope Mwarome, Jill Morse, and Zadock Odhiambo.Hope Mwarome has a BS in business administration from State University.She successfully managedthree bars over the past 10 years. She is currently in his fifth year as manager of Tom's Landing, the most popular bar in the university area.Jill Morse holds a BA in marketing. She has held marketing positions with Nike and Sony before starting the Olympus nightclub with Zadock Odhiambo in 2009.Zadock Odhiambo has aBS in business administration. Before co-owning the Olympus, Zadock managed two successful nightclubs, the Arena and the Power Plant, over a 10 year period.Products and Services
The Spot represents a unique opportunity;create ahigh energy, dance-theme venue that will cater to college-age women. The development's central location, demographics, and lack of direct competition are major advantages to this project. The new venue will specialize in high-energy themes and will offer beer, wine and an array of liquors and mixed drinks. In addition, the venue will sell nonalcoholic beverages such as soft drinks, juices and bottled water. A "casual" food menu consisting mostly of appetizers and small entrees ranging in cost from 300 to 500kshs will also be available. The initial hours of operation will be 6:00 P.M. to 5:00 A.M., seven nights a week. The establishment will draw primarily from the student population at TUM while attracting guests and visitors from outside the area as well.Market Analysis SummaryThe Spot will focus on college-age women who are looking for a high energy, fun nightclub environment to socialize and dance. Of course, we are also focused on college-age men but it has been our observation that the club scene is driven by where women choose to spend their money when they go out with friends. At present, none of the local bars create an environment that is responsive to the entertainment demands of this core customer group. This also extends to the areas surrounding theuniversity that we expect will attract new customers to the Spot.4.1 Market SegmentationOur target market segmentation is divided between college-age women and men in and around the State University.
Market Analysis
Year 1Year 2Year 3Year 4Year 5
Potential CustomersGrowthCAGR
College-age Women15%22,00025,30029,09533,45938,47815.00%
College-age Men10%20,00022,00024,20026,62029,28210.00%
Other0%000000.00%
Total12.70%42,00047,30053,29560,07967,76012.70%
Strategy and Implementation SummaryOur strategy is simple; we intend to succeed by giving our core customers (college-age women)exactly what they want in a nightclub.5.1 Competitive EdgeThere are three elements to The Spot's competitive edge.The first is the location which is in easy walking distancefor the entire university community. The area around The Spot is already a regular place students gather to socialize in the evening.The second is the exceptional management team that has extensive experience and success managing nightclubs and bars.The third is our focus on attracting our core customer in every aspect of our planning. The Spot will have the following to attract and retain our core customers: A larger ladiesroom area.Beyond its traditional uses, it's also a place of social gathering and conversation. As a result, wewill add additional square footage to this part of the venue including a couch, TV, music, and plenty of social space.
Floor design.No doubt, females are more observant of design, and the impression it conveys, than males are. Therefore, careful considerationwillbe put into everything from colors, to fabrics, and materials.
Music.This is a critical one. We will hire DJs who have the best satisfaction rate with the female clientele.5.2 Sales StrategyThere will bea grand opening weekend May 2015, which the cover charge will be waved for all women customers.We will then establish a traditional Ladies Night, every wednesday.The cover charge will be Kshs150. This is cheaper than the downtown clubs.Our sales strategy is to open earlier and provide entertainment to bring in an early crowd before 10 P.M. Comedians and Comedy Acts will be booked into the early evening time slot. We will also have contests sponsored by businesses and products that are marketing to our core customers.5.2.1 Sales ForecastAs the followingtable shows, we intend to deliver sales of Kshs550K in the first year, and double that by the third year of the plan.
Sales Forecast
Year 1Year 2Year 3
Unit Sales
Cover19,50036,00042,000
Drinks56,00068,00075,000
Food14,00025,00033,000
Entertainment13,60017,00022,000
Total Unit Sales103,100146,000172,000
Unit PricesYear 1Year 2Year 3
CoverKshs10.00Kshs10.00Kshs10.00
DrinksKshs3.00Kshs3.00Kshs3.00
FoodKshs7.00Kshs7.00Kshs7.00
EntertainmentKshs8.00Kshs8.00Kshs8.00
Sales
CoverKshs195,000Kshs360,000Kshs420,000
DrinksKshs168,000Kshs204,000Kshs225,000
FoodKshs98,000Kshs175,000Kshs231,000
EntertainmentKshs108,800Kshs136,000Kshs176,000
Total SalesKshs569,800Kshs875,000Kshs1,052,000
Direct Unit CostsYear 1Year 2Year 3
CoverKshs0.00Kshs0.00Kshs0.00
DrinksKshs0.75Kshs0.80Kshs0.86
FoodKshs2.45Kshs2.62Kshs2.81
EntertainmentKshs4.00Kshs4.28Kshs4.58
Direct Cost of Sales
CoverKshs0Kshs0Kshs0
DrinksKshs42,000Kshs54,570Kshs64,401
FoodKshs34,300Kshs65,538Kshs92,565
EntertainmentKshs54,400Kshs72,760Kshs100,751
Subtotal Direct Cost of SalesKshs130,700Kshs192,868Kshs257,717
Management SummaryThe management team is a strong one.Together we share a single vision: to provide a unique and entertaining experience through exceptional service.6.1 Personnel PlanThe followingtable shows forecasted personnel needs for the first three years.Personnel Plan
Year 1Year 2Year 3
ManagerKshs50,000Kshs68,000Kshs72,000
BartendersKshs120,000Kshs120,000Kshs120,000
CooksKshs65,000Kshs70,000Kshs73,000
CleaningKshs38,000Kshs40,000Kshs42,000
DJKshs25,000Kshs30,000Kshs35,000
Serving StaffKshs50,000Kshs60,000Kshs70,000
OtherKshs0Kshs0Kshs0
Total People01212
Total PayrollKshs348,000Kshs388,000Kshs412,000
7.1 Important AssumptionsThe table below presents the assumptions used in the financial calculations of this business plan.
General Assumptions
Year 1Year 2Year 3
Plan Month123
Current Interest Rate10.00%10.00%10.00%
Long-term Interest Rate10.00%10.00%10.00%
Tax Rate0.00%30.00%30.00%
Other000
7.2 Break-even AnalysisOur Break-even Analsysis is shown in the following table and chart.
Break-even Analysis
Monthly Units Break-even10,220
Monthly Revenue Break-evenKsh56,482
Assumptions:
Average Per-Unit RevenueKsh5.53
Average Per-Unit Variable CostKsh1.27
Estimated Monthly Fixed CostKsh43,527
7.3 Projected Profit and LossThe following table and chart will show the projected profit and loss for The Spot.
Pro Forma Profit and Loss
Year 1Year 2Year 3
SalesKsh569,800Ksh875,000Ksh1,052,000
Direct Cost of SalesKsh130,700Ksh192,868Ksh257,717
Other Production ExpensesKsh0Ksh0Ksh0
Total Cost of SalesKsh130,700Ksh192,868Ksh257,717
Gross MarginKsh439,100Ksh682,133Ksh794,283
Gross Margin %77.06%77.96%75.50%
Expenses
PayrollKsh348,000Ksh388,000Ksh412,000
Sales and Marketing and Other ExpensesKsh22,900Ksh25,000Ksh27,300
DepreciationKsh2,618Ksh2,856Ksh2,856
Leased EquipmentKsh33,000Ksh40,000Ksh40,000
UtilitiesKsh3,600Ksh3,600Ksh3,600
InsuranceKsh12,000Ksh12,000Ksh12,000
RentKsh48,000Ksh40,000Ksh40,000
Payroll TaxesKsh52,200Ksh58,200Ksh61,800
OtherKsh0Ksh0Ksh0
Total Operating ExpensesKsh522,318Ksh569,656Ksh599,556
Profit Before Interest and Taxes(Ksh83,218)Ksh112,477Ksh194,727
EBITDA(Ksh80,600)Ksh115,333Ksh197,583
Interest ExpenseKsh42Ksh250Ksh0
Taxes IncurredKsh0Ksh33,668Ksh58,418
Net Profit(Ksh83,260)Ksh78,559Ksh136,309
Net Profit/Sales-14.61%8.98%12.96%
7.4 Projected Cash FlowThe following table and chart are the projected cash flow for three years.
Pro Forma Cash Flow
Year 1Year 2Year 3
Cash Received
Cash from Operations
Cash SalesKsh512,820Ksh787,500Ksh946,800
Cash from ReceivablesKsh45,082Ksh81,127Ksh101,504
Subtotal Cash from OperationsKsh557,902Ksh868,627Ksh1,048,304
Additional Cash Received
Sales Tax, VAT, HST/GST ReceivedKsh0Ksh0Ksh0
New Current BorrowingKsh5,000Ksh0Ksh0
New Other Liabilities (interest-free)Ksh0Ksh0Ksh0
New Long-term LiabilitiesKsh0Ksh0Ksh0
Sales of Other Current AssetsKsh0Ksh0Ksh0
Sales of Long-term AssetsKsh0Ksh0Ksh0
New Investment ReceivedKsh0Ksh0Ksh0
Subtotal Cash ReceivedKsh562,902Ksh868,627Ksh1,048,304
ExpendituresYear 1Year 2Year 3
Expenditures from Operations
Cash SpendingKsh348,000Ksh388,000Ksh412,000
Bill PaymentsKsh289,115Ksh407,976Ksh500,717
Subtotal Spent on OperationsKsh637,115Ksh795,976Ksh912,717
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid OutKsh0Ksh0Ksh0
Principal Repayment of Current BorrowingKsh0Ksh5,000Ksh0
Other Liabilities Principal RepaymentKsh0Ksh0Ksh0
Long-term Liabilities Principal RepaymentKsh0Ksh0Ksh0
Purchase Other Current AssetsKsh0Ksh0Ksh0
Purchase Long-term AssetsKsh0Ksh0Ksh0
DividendsKsh0Ksh0Ksh0
Subtotal Cash SpentKsh637,115Ksh800,976Ksh912,717
Net Cash Flow(Ksh74,213)Ksh67,651Ksh135,587
Cash BalanceKsh3,287Ksh70,938Ksh206,525
7.5 Projected Balance SheetThe following is the projected balance sheet for the three years.
Pro Forma Balance Sheet
Year 1Year 2Year 3
Assets
Current Assets
CashKsh3,287Ksh70,938Ksh206,525
Accounts ReceivableKsh11,898Ksh18,271Ksh21,967
InventoryKsh15,593Ksh23,009Ksh30,746
Other Current AssetsKsh0Ksh0Ksh0
Total Current AssetsKsh30,778Ksh112,218Ksh259,238
Long-term Assets
Long-term AssetsKsh20,000Ksh20,000Ksh20,000
Accumulated DepreciationKsh2,618Ksh5,474Ksh8,330
Total Long-term AssetsKsh17,382Ksh14,526Ksh11,670
Total AssetsKsh48,160Ksh126,744Ksh270,908
Liabilities and CapitalYear 1Year 2Year 3
Current Liabilities
Accounts PayableKsh28,919Ksh33,945Ksh41,800
Current BorrowingKsh5,000Ksh0Ksh0
Other Current LiabilitiesKsh0Ksh0Ksh0
Subtotal Current LiabilitiesKsh33,919Ksh33,945Ksh41,800
Long-term LiabilitiesKsh0Ksh0Ksh0
Total LiabilitiesKsh33,919Ksh33,945Ksh41,800
Paid-in CapitalKsh210,000Ksh210,000Ksh210,000
Retained Earnings(Ksh112,500)(Ksh195,760)(Ksh117,201)
Earnings(Ksh83,260)Ksh78,559Ksh136,309
Total CapitalKsh14,240Ksh92,799Ksh229,108
Total Liabilities and CapitalKsh48,160Ksh126,744Ksh270,908
Net WorthKsh14,240Ksh92,799Ksh229,108
7.6 Business RatiosThe Ratios table below outlines important ratios for this night club. The last column, Industry Profile, is derived from the Standard Industrial Classification (SIC) Index code 5813, for Drinking Places.
Ratio Analysis
Year 1Year 2Year 3Industry Profile
Sales Growth0.00%53.56%20.23%1.90%
Percent of Total Assets
Accounts Receivable24.71%14.42%8.11%4.60%
Inventory32.38%18.15%11.35%3.10%
Other Current Assets0.00%0.00%0.00%44.60%
Total Current Assets63.91%88.54%95.69%52.30%
Long-term Assets36.09%11.46%4.31%47.70%
Total Assets100.00%100.00%100.00%100.00%
Current Liabilities70.43%26.78%15.43%28.20%
Long-term Liabilities0.00%0.00%0.00%23.10%
Total Liabilities70.43%26.78%15.43%51.30%
Net Worth29.57%73.22%84.57%48.70%
Percent of Sales
Sales100.00%100.00%100.00%100.00%
Gross Margin77.06%77.96%75.50%42.30%
Selling, General & Administrative Expenses91.67%68.98%62.55%23.40%
Advertising Expenses3.86%2.74%2.47%2.40%
Profit Before Interest and Taxes-14.60%12.85%18.51%2.80%
Main Ratios
Current0.913.316.201.14
Quick0.452.635.470.74
Total Debt to Total Assets70.43%26.78%15.43%51.30%
Pre-tax Return on Net Worth-584.67%120.94%84.99%5.20%
Pre-tax Return on Assets-172.88%88.55%71.88%10.60%
Additional RatiosYear 1Year 2Year 3
Net Profit Margin-14.61%8.98%12.96%n.a
Return on Equity-584.67%84.65%59.50%n.a
Activity Ratios
Accounts Receivable Turnover4.794.794.79n.a
Collection Days576370n.a
Inventory Turnover10.919.999.59n.a
Accounts Payable Turnover11.0012.1712.17n.a
Payment Days272827n.a
Total Asset Turnover11.836.903.88n.a
Debt Ratios
Debt to Net Worth2.380.370.18n.a
Current Liab. to Liab.1.001.001.00n.a
Liquidity Ratios
Net Working Capital(Ksh3,142)Ksh78,273Ksh217,438n.a
Interest Coverage-1,997.23449.910.00n.a
Additional Ratios
Assets to Sales0.080.140.26n.a
Current Debt/Total Assets70%27%15%n.a
Acid Test0.102.094.94n.a
Sales/Net Worth40.019.434.59n.a
Dividend Payout0.000.000.00n.a