Financial plan

A financial plan is a broad assessment of a business current and future financial condition by using presently known variables to forecast future cash flows, asset values and withdrawal plans. The financial plans guides the business owner in identifying what needs to be done or changed to meet the objectives of the business. The business plan should be frequently updated to include the recent figures and the figures used to update future projections. Different statements are included in the financial plan. These include the income statement, balance sheet and the cash flow statement (Finch, 2013). The figures below represents the best three years period estimates statements of Qwik-Eats.

Income Statement

The above income statement shows the income and expenses of Qwik-Eats over a three years period. These are estimated figures, which will be frequently updated as the business run. Qwik-Eats will be employing five cooks and three waiters. Their expenses are included in the salary section of the income statement. Other expenses include water, electricity, licenses, miscellaneous expenses, repairs, startup expenses and any other minor expense that may come up. When you less the total expenses from the gross profit you get the net income (Finch, 2013). However, the net income is not fully in terms of cash or cash equivalents given that there are accounts payable and receivables included in the calculations.

Balance Sheet

The above balance sheet statement represents the valuable items of Qwik-Eats and the debts. The difference between the valuable items and the debts represent the equity. This is what the business worth at the specific year. This is just a three years projection, which will be updated from time to time to match with the real figures. However, the projection is based on the best estimates. This balance sheet represents the forecasted financial position of Qwik-Eats for the next three years. With frequent updating with real time figures, future forecasting will be more accurate.

Cash flow statement

The above cash flow statement demonstrates the cash and cash equivalents that will be moving in and out of Qwik-Eats. The positive cash flow indicates that Qwik-Eats current assets are increasing enabling the business to repay debts, other expenses and even expand the business. Items whose payment has not been done such as accounts payable and receivables do not appear in the cash flow. This is the distinguishing feature between the cash flow statement and the income statement.

Marketing strategy

The marketing strategy is the foundation on which awareness is created to ensure new customers are recruited while retaining the old customers. For Qwik-Eats, the marketing strategy will guide the products, culture, service mix and the pricing. The marketing plan puts a lot of emphasis on business customers, their culture and buying behavior. It also outlines the market share targeted by the business, and the approach to competing in the market. Our growth strategy will be through discounting, where the business will discount prices for regular customers (Scarborough, 2011). Also those who come with other customers will receive a discount. New customers will also receive a discount in the form of subsidized prices and discounts on more products.

The target customers for Qwik-Eats include students and the low-income earners especially the youth. They depend on the coffee shop as it offers their products at a relative low and affordable price that is quite friendly to their pockets. However, it is good to note that there is a coffee shop just around the business. The coffee shop is a potential competitor since if offers substitute products to our products. It thus poses a potential threat to the company. To attract customers from the coffee shop to our shop, the discounting strategy will be applied. This will involve giving the customers discounts based on the quantity purchased. The more the quantity, the higher the discount. This will attract more customers that are new and encourage the existing customers to purchase more.

However, the coffee shop can also offer the same kind of discounts as we are. To counter this, we will be portraying our products as more superior than any other shop in the vicinity. We will also ensure that our products are of high quality in terms of taste and nutrients to backup our superiority claim. Our business has a unique feature in that the youth who are our target customers are fond of snacks and junk food. Most of them are in school as well as in part time jobs leaving them no time to cook. The fact that most of them are not married nor financially stable to employ a house help accelerates the problem, but Qwik-Eats is here with a solution.

Based on the current technological advancement, social media will be an ideal place to do marketing. This is more so because we are targeting students and more so the youth who are the major consumers of social media. Digital posters, audio messages and video messages will be posted on social media websites such as Facebook, twitter, Instagram, Google Plus and others where many will access them widely. Again, posters, billboards, leaflets and bumper stickers around the neighborhood will also be used for advertisement. All this will, however, require finances. We are allocating six percent of the startup capital to marketing, which will be replaced by six percent of the annual profits in future (Scarborough, 2011). We will be employing casual laborers to spread leaflets and posters from time to time to save on the costs. We will also be arranging for nutritional talks in the neighboring schools to inform students about our products. The top management at no extra fee rather than their monthly wages will do such talks.

Appropriate location for a second store

The most appropriate location for a second store is 77 Massachusetts Avenue. This is because the avenue runs through different cities and towns such as Boston, Arlington, Lexington, Cambridge and others. Along this route, there are many institutions and schools such as Harvard University, Lesley University, Massachusetts Institute of Technology and Berklee College of music among others.

With line with our target customers who are students and the youth, in general, this street will offer high customer base. However, there are snack shops operating around the place. These are potential competitors given that they have already established themselves.. The same strategy of discounting where the business will discount prices for regular customers also those who come with other customers will receive a discount. New customers will also receive a discount in the form of subsidized prices and discounts on more products. Besides, billboards and proforma will be distributed to the different institutions in the Avenue.

Sources of debt financing

Debt financing involved borrowing money from any leader with an understanding that the amount will be repaid in future at an interest. Unlike equity financing, debt financing does not include any provision for ownership. To open the second store, we are planning to secure debt financing as capital.

Bank loan is the first source of debt financing we are considering with the initial business as collateral. Considering that our cash flow from the initial business is positive, any bank would be willing to grant us a loan payable in two to three years. We will consider the bank with the lowest interest rate considering whether the interest is calculated based on a reducing balance or the initial sum (Kotey, 1999). We are seeking to pay the lowest interest possible in the financial market. The loan will be repaid from the proceeds from the second store. However, we are considering the fact that the success of the store is not one hundred percent. In line with this, part of the proceeds from the initial business will be deposited in a fixed account to cater for any emergency that may arise with the bank loan. In case the loan is fully paid with no issues arising, the deposits can be used to expand the two stores or even open a third store.

It the idea of a bank loan fails, the second option is to borrow short-term loans from friends and relatives to be repaid at an interest. The proceeds from the initial business will be used to repay the borrowed money since they are short-term loans. However, borrowing from friends and relatives may limit the amount of loan available. In line with this, we are considering registering in government programs that fund to promote the growth of small businesses. Most of these programs involve debt financing at subsidized interest rates and are good for our kind of business. Such public loans are usually available for expansion since they require one to be running a business already (Kotey, 1999). This fits our resume since the initial business will be up and running. However, we are working to put more emphasis on the bank loan, which looks more promising given that we have a running business as collateral.

References

Finch, B. (2013). How to write a business plan (Fourth ed.). London: Kogan Page Limited.

Kotey, B. (1999). Debt financing and factors internal to the business. International Small Business Journal, 17(3), 11-29.

Scarborough, N. (2011). Essentials of entrepreneurship and small business management (6th ed., Global ed.). Boston, Mass.: Pearson Education.

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