Business Plan

On

The Coffee Bean

Submitted by Chirag Patel Roll No.CPF-01, Sem-4 MBA(G)

Business plan of The coffee Bean shop by Chirag Patel

1.

Executive summary

Coffee shop is the flourishing business in Pune. Coffee or Tea bar is a daily necessity for local coffee addicts, a place to dream many things, a place to escape the daily stresses of life and just a comfortable place to meet your friends or to read a book, all in one. With the growing demand for high-quality tea or coffee and great service, The Coffee Bean shop will capitalize inside School of Management Studies (SMS), Cochin University campus to build a core group of repeat customers. The culture will offer its customers the best prepared coffee/tea in the area that will be complimented with pastries, 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 in the upcoming years. The start-up funds available with owner is INR 50,000/-. It is expected that the remaining capital of Rs.50,000/- will be obtained through commercial loans from State bank of Travancore. The business is expected to earn sales revenue of INR 175,000/- in the first year. The Coffee Bean shop will strive to maintain a high gross profit margin and reasonable operating expenses. The projected sale and the profit are indicated in Figure 1.

160% 120% 80% 40% 0% Sale Margin Profit Year 1 Year 2 Year 3

Figure 1. Project growth of sale and profit of The Coffee Bean shop

Business plan of The coffee Bean shop by Chirag Patel

2.

Business Description

The coffee and tea consumption in the campus is very high. The Coffee Bean shop will serve students, teachers, ministerial staffs, laboratory staff and visitors are the customers of the campus. It is expected that the people from School of Management Studies and neighboring departments will be the loyal customers of the shop. An opinion survey conducted in SMS indicates that the proposed business plan is something people are 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 Stationery

38%

28%

Figure 2. Product share of The Coffee Bean shop

3.

Marketing

The projection of daily sales of The Coffee Bean shop for the given in Table 1. The total expected sale per day will be Rs. 15500/- . The expected daily profit is about 50 percent of the operating expenses.

Table 1. Projected Daily sale

Items Coffee Tea Snacks Stationery TOTAL Day-time INR 1,000 INR 1,500 INR 2,000 INR 1,000 INR 5,500 Evening INR 250 INR 500 INR 750 INR 250 INR 1,750 Total INR 1,250 INR 2,000 INR 2,750 INR 1,250 INR 7,250

The Coffee Bean shop will offer its customers the best tasting coffee or tea beverages in the area. This will be achieved by using high-quality ingredients and strictly following preparation guidelines. The store layout, menu listings and marketing activities will be focused on maximizing the sales of higher margin espresso drinks. Along with the espresso drinks, brewed coffee and teas, as well as some refreshment beverages, will be sold in the coffee bar. The Coffee Bean shop will also offer its clients pastries, small salads and sandwiches. For the gourmet clientele that prefers to prepare its coffee at home, The Coffee Bean shop will also be selling coffee beans. The menu offerings will

Business plan of The coffee Bean shop by Chirag Patel

be supplemented by free books and magazines that customers can read inside the coffee bar

Market share

10%

10%

Students Faculty 50% office workers Labstaffs visitors

20% 10%

Figure 2 Market analysis results of The Coffee Bean shop The Coffee Bean shop will focus its marketing activities on reaching the University students and faculty, people working in offices located close to the coffee bar and on sophisticated teenagers. The details of market survey are shown in Figure 2. The market research shows that these are the customer groups that are most likely to buy tea or coffee and snacks. The quality and cleanliness are other important factors to be used for marketing in well educated group of customers. The Coffee Bean shop will cater to people who want to get their daily cup of great-tasting coffee in a relaxing atmosphere. Such customers vary in age, although the location is inside University campus, most of our clientele will be college students and faculty. Our market research shows that these are discerning customers that gravitate towards better tasting coffee or tea. Furthermore, a lot of college students consider coffee bars to be a convenient studying or meeting location, where they can read or meet with peers without the necessity to pay cover charges. The Coffee Bean shop, this will provide a unique possibility for building loyal client base.

4.

Operation

The The coffee Bean shop will be open with one working staff and one cashier cum accountant. The The coffee Bean shop is planned to operate at 50 square feet space room available in the ground floor of School of management studies, CUSAT. The women labors are available in the locality to engage in the operation of the shop. The location of the shop is accessible to suppliers delivery van and waste removal. The start-up fund requirement is given in Figure 3.

Business plan of The coffee Bean shop by Chirag Patel

Start-up funding
INR 60,000 INR 40,000 INR 20,000 INR 0 Total fund Assets Liabalities Investment

Figure 3. Start-up fund plan of The Coffee Bean shop

5.

Management

The Coffee Bean shop is owned by Mr. Chirag Patel, who holds a Masters Degree in Business Administration from Cochin University. Mr. Thomas has good management experience in owning similar shop near University campus. He had conducted a study in various coffee shops, which is operating with significant margin. The customer feed back would be the prime consideration in the development of the business. The person who is working as cashier cum accountant will have to manage the labour, ordering inventory, dealing with suppliers, developing a marketing strategy and perform other daily managerial duties. A profit-sharing arrangement for accountant will be considered based on the first year operational results. The personnel plan of The coffee Bean shop is given in Table 2.

Table 2. Personnel Plan

Personnel Cashier Worker Number of employees TOTAL Year 1 INR 60,000 INR 48,000 2 108000 Year 2 INR 66,000 INR 52,800 2 118800 Year 3 INR 72,600 INR 58,080 2 130680

6.

Finance

The coffee Bean shop will capitalize on the strong demand for high-quality coffee. The owners have provided the shop with sufficient start-up capital. With successful management aimed at establishing and growing a loyal customer base, the business will see its net worth doubling in two years. The coffee Bean shop will maintain a healthy 50% gross margin, which combined with reasonable operating expenses, will provide enough cash 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 is profitable in the first year. The profit is increasing in the upcoming years.

Business plan of The coffee Bean shop by Chirag Patel

INR 3,000,000 INR 2,500,000 INR 2,000,000 INR 1,500,000 INR 1,000,000 INR 500,000 INR 0 Sale Margin Expenses Profit Year 1 Year 2 Year 3

Figure 4. Projected sale, margin, expenses and profit of The coffee Bean shop The 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 increasing significantly. The net worth of the business is increasing, which is the positive sign of growth of the business

INR 1,000,000 INR 800,000 INR 600,000 INR 400,000 INR 200,000 INR 0 Assests Liabilities Capital Year 1 Year 2 Year 3

Figure 5. Projected assets, liabilities and capital of The coffee Bean shop

7.

Critical-Risks

The neatness and the custom made coffee or tea would be core attraction of The coffee Bean shop. Milma booth stall will definitely be one of the major competitors because of its established marketing and operational practices. However, despite of Milma booth stall entrenched market position, many customers favor smaller, independent establishments that offer cozy atmosphere and good coffee at affordable prices.

8.

Harvest strategy

Strategy will be focused at getting new customers, retaining the existing customers, getting customers to spend more and come back more often. Establishing a loyal customer base is of a paramount importance since such customer core will not only

Business plan of The coffee Bean shop by Chirag Patel

generate most of the sales but also will provide favorable referrals. The coffee Bean shop will position itself as unique coffee bar where its patrons can not only enjoy a cup of perfectly brewed coffee but also spend their time in an ambient environment. Comfortable sofas and chairs, dimmed light and quiet relaxing music will help the customers to relax from the daily stresses and will differentiate The coffee Bean shop from incumbent competitors. To speed up the customer service, at least two employees will be servicing clients--while one employee will be preparing the customer's order, the other one will be taking care of the sales transaction. All sales data logged on the computerized point-of-sale terminal will be later analyzed for marketing purposes.

Business plan of The coffee Bean shop by Chirag Patel

9.

Appendix

A1. Start-up Requirements

Start-up Expenses Legal Stationery etc. Brochures Consultants Insurance Rent Remodeling Other Total Start-up Expenses Start-up Assets Cash Required Start-up Inventory Other Current Assets Long-term Assets Total Assets Total Requirements INR 5,000 INR 2,000 INR 2,000 INR 0 INR 5,000 INR 1,000 INR 5,000 INR 5,000 INR 25,000 INR 10,000 INR 10,000 INR 0 INR 15,000 INR 35,000 INR 60,000

Business plan of The coffee Bean shop by Chirag Patel

A2. Start-up Funding

Start-up Expenses to Fund Start-up Assets to Fund Total Funding Required Assets Non-cash Assets from Start-up Cash Requirements from Start-up Additional Cash Raised Total Assets Liabilities and Capital Liabilities Current Borrowing Long-term Liabilities Accounts Payable (Outstanding Bills) Other Current Liabilities (interest-free) Total Liabilities Capital Planned Investment Investor 1 investor 2 All other investors Additional Investment Requirement Total Planned Investment Loss at Start-up Expenses Total Capital Total Capital and Liabilities Total Funding INR 25,000 INR 35,000 INR 60,000 INR 25,000 INR 10,000 INR 0 INR 35,000

INR 20,000 INR 0 INR 0 INR 0 INR 20,000

INR 40,000 INR 0 INR 0 INR 0 INR 40,000 (INR 25,000) INR 15,000 INR 35,000 INR 60,000

Business plan of The coffee Bean shop by Chirag Patel

A2. Profit and Loss Account (projected)

Income Sales Direct Cost of Sales(0.65-.55) Other Total Cost of Sales Gross Margin Gross Margin % Expenses Payroll Sales and Marketing and Other Expenses Depreciation (0.3) Rent Maintenance Utilities/Phone Payroll Taxes Other Total Operating Expenses Profit Before Interest and Taxes EBITDA Interest Expense Taxes Incurred (0.3) Net Profit Net Profit/Sales Year 1 INR 1,740,000 INR 1,131,000 0 INR 1,131,000 INR 609,000 35% Year 1 INR 130,680 INR 20,000 INR 4,500 INR 1,000 INR 5,000 INR 1,000 INR 0 INR 0 INR 162,180 INR 446,820 INR 451,320 INR 4,000 INR 134,046 INR 313,274 18% Year 2 INR 2,175,000 INR 1,305,000 0 INR 1,305,000 INR 870,000 40% Year 2 INR 0 INR 20,000 INR 4,500 INR 1,000 INR 5,000 INR 1,000 INR 0 INR 0 INR 31,500 INR 838,500 INR 843,000 INR 4,000 INR 251,550 INR 587,450 27% Year 3 INR 2,610,000 INR 1,435,500 0 INR 1,435,500 INR 1,174,500 45% Year 3 INR 0 INR 20,000 INR 4,500 INR 1,000 INR 5,000 INR 1,000 INR 0 INR 0 INR 31,500 INR 1,143,000 INR 1,147,500 INR 4,000 INR 342,900 INR 800,600 31%

Business plan of The coffee Bean shop by Chirag Patel

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A4. Balance sheet (projected)

Assets Current Assets Cash Inventory Other Current Assets Total Current Assets Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets Liabilities and Capital Accounts Payable Current Borrowing Other Current Liabilities Subtotal Current Liabilities Long-term Liabilities Total Liabilities Paid-in Capital Retained Earnings Earnings Total Capital Total Liabilities and Capital Year 1 INR 328,938 INR 29,500 INR 10,000 INR 368,438 INR 15,000 (INR 4,500) INR 10,500 INR 378,938 Year 1 INR 15,664 INR 20,000 INR 0 INR 35,664 INR 0 INR 35,664 INR 40,000 (INR 10,000) INR 313,274 INR 343,274 INR 378,938 Year 2 INR 616,823 INR 24,000 INR 10,000 INR 650,823 INR 15,000 (INR 9,000) INR 6,000 INR 656,823 Year 2 INR 29,373 INR 20,000 INR 0 INR 49,373 INR 0 INR 49,373 INR 30,000 (INR 10,000) INR 587,450 INR 607,450 INR 656,823 Year 3 INR 840,630 INR 18,500 INR 10,000 INR 869,130 INR 15,000 (INR 13,500) INR 1,500 INR 870,630 Year 3 INR 40,030 INR 20,000 INR 0 INR 60,030 INR 0 INR 60,030 INR 20,000 (INR 10,000) INR 800,600 INR 810,600 INR 870,630

Business plan of The coffee Bean shop by Chirag Patel

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A5. Ratio Analysis

Financial ratios Current ratio Inventory turn-over Debt/Net worth Return on tangible net worth Return on Assets Year 1 10.33 38.34 0.10 0.91 0.83 Year 2 13.18 54.38 0.08 0.97 0.89 Year 3 14.48 77.59 0.07 0.99 0.92

Financial ratios

100
Ratio
Year 1

50 0 Current ratio Inventory turn-over

Year 2
Year 3

Financial ratios
1.00 0.80 0.60 0.40 0.20 0.00 Debt/Net w orth Return on tangible Return on Assets net w orth

Ratio

Year 1 Year 2 Year 3

Business plan of The coffee Bean shop by Chirag Patel

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