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 Business Finance for Managers Assignment Sample

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Business overview

  1. Business's main objective:

The core objective is to utilize and en-cashing the opportunity for high quality Bakery products and cakes related products at the attractive cost and also to provide employment opportunity for the suitable candidates.

  1. Financial Goals:
  2. To have sales revenue amounting to £ 525,700 on 10,000 units.
  3. To obtain a profit margin on cost of 94%.
  4. Forecasted monthly sales volume for the year 2021

It is assumed that sales will increase 9% every month

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Total

500

545

594

648

706

769

839

914

996

1086

1184

1220

10000

1.1 Intended products or services to be sold by Delish Bakers

The products and services of businesses are an important factor of business success as the sales of business products or services create revenue and business growth in the market. Delish Bakers will deal in a wide range of bakery products which includes rusk toast, bread and buns, waffles, Bagels, waffle cones, pastry, bakery sweets, and raw material for ice cream. The different products are intended to be added to the product portfolio of the bakery for attracting customers with different product choices and creating a sense of repetitive sales (Di Nunzio et al, 2020). Along with intended products, Delish Bakers will also provide customise and personalize bakery services such as making cakes on order, customised pastries, nutrition, and diet plan-based pastry products, catering services for small events, etc.

1.2 Intended Market group of Delish Bakers

  • Delish Bakers will focus on a high population density geographic area within UK by focusing on people with the dominant language 'English' to communicate the good quality and nutrition facts from bakery products among people effectively.
  • Delish Bakers will focus on different age groups by developing different product range such as confectionery bakery products for children aging 5-15, nutrition-based bakery products for people aging 16-25, and customised products for all. The bakery will provide economic prices of products to allow customers of medium-income to access products of business (Kapyrin et al, 2021).
  • Delish Bakers will focus on the values and needs of customers by providing customable and high-quality products to cricket positive interest and attitudes of potential commerce on brand.
  • The organisation will focus on people who like bakery products and use them daily with economic spending habits. It will support organisation to create customer loyalty and developing brand interactions among better customer segments.

1.3 The annual market size of Delish Bakers

The organisation is intended to provide high-quality products and services among target customers to create an annual market size of 1 million with an estimated annual growth rate of business 2%. Delish Bakers will focus on continuous innovation within the business for increasing the market share of organisation. the continuous improvement in business procedures and services by innovation will strengthen the customer relationships with businesses and will also support Delish Bakers to acquire competitors positively. Delish Bakers will focus on defining the business horizon and assessing the bottom line of business continues to achieve the intended annual market size and growth rate in Industry.

1.4 Potential competitors of Delish Bakers

The bakery industry is one of the largest sectors and it includes several competitors and substitutions within the region. Delish Bakers will face competition from small business organisations in the UK which deal in bakery products and services and has good product quality by which they have a strong consumer base. Delish Bakers have to manage marketing strategies and promotional activities properly in order to acquire the competition from Little Bread Pedlar (shop of cake and bakery products), Simon's bakery (in customise cakes), Rinkoff Bakery (a recognise cake shop and bakery product shop) etc.

1.5 Business products' specialty of Delish Bakers

Delish Bakers will provide different product range for different age groups along with nutrition-based bakery items and custom label fillings and flavours of products. Delish Bakers will focus on following strategies to create the uniqueness of business products and services in the competitive environment of the industry-

  • It will continuously clear business financial sheets to manage investment and expenses. This will support the bakery to create an appropriate balance between business investment in different areas for creating a highly efficient operation in order to become uniquely capable in the industry.
  • It will focus on innovative practices and customisation to attract and retain customers. by using innovative techniques, the organisation will streamline ordering functionality and become efficient in promoting products on social media and other digital platforms for creating unique awareness of business special products among targeted market (Álvarez-González et al, 2017).
  • It will utilise online promotion and delivery platforms to reach customers at distance. It will support organisation to integrate with services of online delivery methods at less prices and support the organisation to perform unique operations from starting.
  • it will utilise technology for managing bakery operations and delivering products on time. the streamlining in ordering functionality will support the organisation to reduce waiting time of customers and create the sense of unique services for retaining them for the longer term.

1.6 Business location of Delish Bakers

The Delish Bakers intended to be established in London because it is a crowded area and people love bakery products in the region. The bakery industry of the UK has a large market share in the food industry i.e., £3.9 billion (Evans and Taylor, 2021). The bakeries in the UK have more varieties of products and services because people have a great interest in bakery products and the like different items. London will be appropriate for the establishment of the bakery business because it has a good annual growth rate for Bakers and it will support Delish Bakers to sustain the business for longer-term.

1.7 Potential sources of finance for Delish Bakers

The finances are most important for establishing a bakery business and the initial sources of finance for starting a bakery business 'DELISH BAKERS' are as follows-

  • Personal investment: Initially the personal savings will be e utilise as initial finance for the business. The personal investment will support starting a business at a small level and managing business operations.
  • Friends & family: The informal loan will be e supportable for business because it will be granted easily and make the business run quickly. the friends and family members will be encouraged to invest in the business by providing the possibilities of business success in the future at a good level (Jauhiainen and Eyvazlu, 2020).
  • Business loans: The owner of the business will try to get the business loan on Delish bakers as it will be easily available and has a low rate of interest which will support starting and earnings of Delish Bakers.
  • The business would be taking initial debts of £72,356.

1.8 The initial funds are used to purchase by Delish Bakers

Initial finance will be utilised in the bakery business by investing in-

  • Licence required: First investment will be made to buy a licence for bakery business in London, the UK it is most important for starting a business is legally (Kapyrin et al, 2021).
  • Raw material requirement: the investment will be made in Delish Bakers at initiation in the raw material such as baking powder, all-purpose flour, assorted fruits, yeast, and other required material. The bakery has to continuously invest in raw materials for developing products in order to sell them among targeted customers.
  • Equipment requirement: It is essential to have appropriate equipment for starting a bakery business such as ovens, weighing scales, deep freezers, gas cylinders, utensils, mixing bowls, microwave, baking trays, etc.
  • Manpower requirement: The organisation has to initially invest in hiring manpower for the business because there will be capable to develop and sale product among targeted customers (Castro and Posada, 2019). Organisation needs to hire employees and pay salaries for room operating business.
  • Details are given below:
  • Land And Building:

Total Leasing of land and building will cost to company of £25,000 annually.

  • Machinery and equipment:

SL No.

Description

Nos. required

Rate

Total Value(£)

1

Dough Kneeder

1

650

650

2

Planetary mixer

2

90

180

3

Electric oven

2

50

100

4

Other Manufacturing equipment

Each one

200

200

5

Diesel generator

1

400

400

6

Electric Fryer

2

15

30

7

Display counter

2

20

40

8

Utensils

Total

300

300

9

Coffee machine

1

200

200

10

Cake Mould

20

10

200

  • Other Fixed Assets:

SL No.

Particulars

Nos.Required

Rate

Total Value

1

Furniture

5

230

1150

2

Computer

1

30

30

3

Inverter

1

20

20

4

CCTV Camera

2

10

20

  • Preliminary and Pre – Operative Expenses:

SL No.

Particulars

Amount

Remark

1

Licenses and Approvals

250

250

2

Trail Run Expenses

220

220

3

Contingencies

50

50

  • Working Capital:

SL No.

Particulars

Amount

1

 Raw Materials stock

550

2

Establishment expenses

210

3

Start up expenses

50

4

Misc. expenses

360

1.9 The possible business risk could face by business

Starting a new business is a courageous and complex process several issues arise in the operations and progress of a new business in a new region. Delish Bakers main faces following business risk in operating bakery business in the UK-

  • The organisation may face property risk which may arise by the ownership or the renting process
  • The bakery may face the potential issue of liability risk by launching the business because overlooking liability insurance (Evans and Taylor, 2021).
  • The bakery may face the issue of health and security problems at the workplace due to a lack of expertise and management policies.
  • The bakery may face the issue of competition due to already established bakeries in the region that may impact operations and the performance of the business.

There are Organized Bakeries and unorganized bakeries around the location.

Strengths/weakness of the competition:

Strengths

Organized Bakeries-

They have already established themselves and quality

 

Unorganized Bakeries-

They can sell products at very cheaper rates

Weaknesses

Organized Bakeries-

They don’t have manufacturing units and hence lagging in order procurements.

 

Unorganized Bakeries-

They don't prepare products in quality and hygiene.

  • The bakery main faces compliance issues for meeting the customer's requirements and promised features while delivering products and services (Kapyrin et al, 2021).

Income & Costs

Income:

Provide a little discussion on how you arrived at your selling price i.e. “We will be selling two different sizes of celebration cakes. The small cakes will sell at £12.50 each and the large cakes sold for £20.00 each. These prices are calculated by adding a 50% margin to the total cost.

 
 
 
         

Costs:

Cost type

£

Fixed / variable

Notes

 

Initial set up

 

Fixed

 

 

Staff costs – manufacturing

 

Variable Costs & Fixed Costs

Managers (Fixed)

 

Hourly Pd staff (Variable)

 

Staff costs –

 

Variable

Per hr or per mile?

 

Raw materials

To manufacture/make your product?

Variable

Use the excel spreadsheet to help you.

 

Rent

 

Fixed

 

 

Electricity

 

Semi-variable

 

 

Administration

 

Fixed

 

 

Advertising

 

Variable

 

 

Business insurance

 

Fixed

 

 

Bank interest

 

Fixed 3%

 

 

Telephone / internet charges

 

Semi-variable

 

Cost Volume Profit Analysis

Calculation of Unit Costs

 

Product

Cost

             
 

Cake

               
 

Description

No. of Hours

Material kg/ltrs/m

£ Rate per hour/kg/ltr

Total Variable Cost

Fixed Cost

Total Cost per unit

Markup 94%

Selling Price

 

Labour

0.48

 

41.79

20.06

       

Flour

Material 1

 

0.70

1.60

1.12

       

Sugur

Material 2

 

0.27

1.40

0.38

       

Butter

Material 3

 

0.20

1.00

0.20

       

Fruits

Material 4

 

0.50

0.90

0.45

       

Flavour

Material 5

 

0.10

0.18

0.02

       

Egg

Material 6

 

1.00

1.05

1.05

       
                   
         

23.28

3.96

27.24

25.73

52.97

 Calculation of Break Even Point and Margin of Safety:

  • Total fixed costs £39,583.53
  • Contribution per unit (Selling price less variable costs) £52.97 -23.28 = 29.69
  • Break even units £39,583.53/ 29.69 = 1,334
  • Breakeven Point in Sales value 1,334 x £52.97 = £70,662
  • Margin of safety: Budgeted output less BEP 10,000 - 1,334 =8666
  • In % 8666 / 10,000 = 86.66%

Break even analysis tells that how many units of a product must be sold to cover the fixed and variable costs of production. Our company targeted fixed cost are approximately £ 39,583.53 and contribution per unit is £29.69. Therefore BEP unit will be 1,334 If we sold 1,334 units then there will be no profit and no loss. To get profit we need to sell more than BEP units.

The Margin of Safety (MOS) is the amount of sales over a company's BEP. Means the MOS is the amount of sales a company can lose before it actually starts to lose money or stops making a profit. Our company's MOS will be 86.66% as calculated above. The high MOS indicates the Soundness of Business that is the BEP is much below the actual sales so that even if there is a fall in sales, there will still be a profit.

Delish Bakers are intended to sell cakes and other bakery products. Our market place will be Briton with the annul targeted 10000 units. There are many local and popular brands who are our competitors. But our Products with services are unique in nature so those will attract the customers, one of our concept Dial – Your – Cake will attract the customers. The company’s source of funds will be debts and own fund. There are multiple possible risks like economic risk, financial risk, labour turnover, compliance risk if any but we have very much confident in our work. This will be one of the successful business in 2021.

Key Performance Indicators

KPIs could help the bakery owner to align, sustain, and monitor the overall performance by incorporating practices that would optimise the benefits. The key KPIs for the bakery are enlisted below:-

  • To increase the margin of business profit by 10% by the end of FY 2021
  • The target is to lower down the operating costs by 5% in the next quarter. The special focus would be given on increasing efficiencies, removing redundancies, and packaging cost
  • Reducing wastage by 90% and increase the use of recycled products for better sustainability
  • Reducing employee turnover by 50% and providing 30 days necessary training to employees
  • Reduce the response time to 30 minutes
  • Reduce the number of employee injury cases by 75% by regular checks and upgrades.
  • Obtaining real-time quality and regulatory feedbacks

References

Álvarez-González, L.I., García-Rodríguez, N., Rey-García, M. and Sanzo-Perez, M.J., 2017. Business-nonprofit partnerships as a driver of internal marketing in nonprofit organizations. Consequences for nonprofit performance and moderators. BRQ Business Research Quarterly20(2), pp.112-123.

Castro, M.D.R.Q. and Posada, J.G.A., 2019. Implementation of lean manufacturing techniques in the bakery industry in Medellin. Gestão & Produção26.

Di Nunzio, M., Picone, G., Pasini, F., Chiarello, E., Caboni, M.F., Capozzi, F., Gianotti, A. and Bordoni, A., 2020. Olive oil by-product as functional ingredient in bakery products. Influence of processing and evaluation of biological effects. Food Research International131, p.108940.

Evans, E.W. and Taylor, H.R., 2021. Understanding the barriers to food safety scheme certification in the food and drink manufacturing industry in Wales, UK. International Journal of Environmental Health Research31(2), pp.225-236.

Jauhiainen, J.S. and Eyvazlu, D., 2020. Entrepreneurialism through Self-Management in Afghan Guest Towns in Iran. Urban Science4(4), p.51.

Kapyrin, P.A., Kozhinov, D.V., Khoruzhy, V.I., Gerasimova, L.N., Grishin, E.V. and Goloshchapova, L.V., 2021. Analysis of The Prospects of a Small Enterprise for The Production of Bakery Products in Russia, Taking into Account Current Market Problems and Chemical Health Risk. Journal of Medicinal and Chemical Sciences4(2), pp.199-206.

 

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