The success of a business is determined to a great extent by the ability of the management to come up with and execute a proper financial plan. Little Angels academy’s financial plan is in place to ensure that the business starts and continues to operate in a manner that optimizes resources and aids the company to grow. When is previously mentioned in the business concept, the business will not incur any debt during the startup phase. I will raise most of the money needed while the rest will come from my partner for the joint venture.
The expected outlay for starting the business totals $80,000. I will be responsible for raising $48,000 while my partner, Kids ‘R’ Kids, will raise the remaining $32,000. The decision is based on the shareholding where I hold 60% of the shares while my partner holds the rest of the stakes. The agreement is that I will buy my partner out following the lapse of the three- year period and have full ownership of the company. The money raised at the start will be used to finance all the activities and facilities that the daycare will need to be functional. The first and the most important consideration is the premises. Since the decision was made to start the business from the start, it will be important to secure a lease for premises that can handle the kind of business I intend to start.
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Once the premises are in place, there will be a lot of necessary work to do to ready the place to start admitting children. Therefore, there will be significant spending on furniture such as tables and chairs, playing equipment, sleeping mats, toys, art supplies, computer, and much more. On top of that, some money will be spent in complying with the conditions set by the city and which must be met before the business is registered.
Breakeven Analysis
When starting a business, it is critical to have a projection of when the investor will recover the money put into the venture (Longenecker, 2016). Breakeven analysis enables one to develop an idea of the point at which the business will have made just enough money to cover the costs incurred in setting it up. Several assumptions underlie the breakeven analysis. First, it is expected that the fixed monthly expenses for the business amount to $3000. Apart from that, there is a variable cost of $100 per child per month. Therefore, the business should expect that it will recover the invested amount in about 15 months. That will only be possible if the center will be tending to at least 15 children during the day and 5 at night.
Key Projections
The ability of the business to continue operating as a going concern will depend on a host of factors. First, the center will be profitable from the first year. At the start, the projections have it that the center will achieve $11,986 in profit. The figure may not be much but it is reasonable considering that it will be the first year and the business may still be struggling to find some stability (Longenecker, 2016). However, the net profit is expected to jump to about $126,000 and $172,000 in the second and third years respectively. During this period, the business would have stabilized and gained traction, making it possible to grow profitability. As earlier stated, there will be no drawings out of the business from either Kids ‘R’ Kids or myself. The reinvestment of the earnings into the business will accelerate the rate of profit growth and get the business closer to meeting its estimates.
The projections for the business will only be possible if the center can sustain a particular growth level during the year. My estimates will have it that the center will add at least 5 new children every quarter and that any departures will be compensated. It will be important for the business to maintain high standards of care and service that will keep the customers coming back and satisfied. It will also be important to carry a comprehensive risk assessment and identify all the possible factors that could derail the success of the business or affect the achievement of the set projections. Risk planning and assessment are critical aspects of the business and make it possible to avoid the pitfalls that could derail the success of an enterprise (Longenecker, 2016).
The end of the third year will be a critical period for the business. It will mark the lapse of the agreement with Kids ‘R’ Kids. Therefore, I have to buy back the stake that my partner has. The agreement states that I will have to buy the ownership held at a premium compared to the amount that Kids ‘R’ Kids spent when the business started. Therefore, it will be important for the business to have sufficient funds to compensate the company to relinquish its shareholding in the daycare.
Guerilla Marketing for the Business
Marketing is a critical aspect in the success of any business (Frey, 2012). It is especially critical to a small business that is just starting out and wants to gain a foothold of the market. However, many small enterprises find them-selves unable to spend significant amounts on marketing and are handicapped when it comes to laying out substantial outlays for advertising and other activities meant to sell the business. Therefore, it becomes necessary for the owners of small businesses to find creative and unique ways to get the message out about their business while spending the least possible amount of resources (Frey, 2012). It is for this reason that I choose to follow the concepts of guerilla advertising to market the daycare center.
Just as the name suggests, Guerilla marketing is all about using irregular methods and having a variety of tactics aimed at achieving maximum advantage despite any apparent limitations (Frey, 2012). Therefore, one needs to come up with ways of promoting products in a rather unconventional way with little spending involved. It is a rather unconventional strategy that will involve high energy and imagination aimed at capturing the customer’s attention in ways that are unusual (Frey, 2012).
The aim of guerilla marketing is instant and sharp engagement. Therefore, the thinking is to target parents with small children who would form the center’s target market. Some of the places for possible engagement include children’s parks, schools, baby shops, and facilities that provide children’s services. The idea is to come up with unusual but captivating ideas that will quickly capture the attention of those targeted and leave an impression that will make them want to take action. Doing so will require nimbleness and aggressiveness that will make it possible to have an instantaneous and targeted delivery approach.
Appropriate Location for the Second Store
The importance of a proper location to the success of a business cannot be gainsaid (Scarborough, 2011). It is critical to locate the business in a place with enough visibility and adequate foot traffic that will then translate into sales. Therefore, I will conduct an extensive survey in North Carolina, scouting for the best possible location for the second outlet as part of the dream to expand the business to as many locations as possible. The survey entailed detailed fact finding and an analysis of several factors such as ease of access, the surrounding population, competition and the availability of facilities. Unlike the first business which is to start from scratch, there is a high likelihood that the second center will be acquired as an existing business. Therefore, the survey has to also include finding out about existing business that may be open to selling.
Having carried out the survey, I identified two possible locations for the second business. The first location is 114 E Cornwallis Rd in Durham. The location has an existing center with extensive grounds that would provide ample space for play and other activities. The area has a lot of underutilized potential and impressive prospects for growth, and that should serve as a strong basis for choosing to locate the business there. However, the place would require extensive upgrades and extensive marketing to get people to know about the business. Other than that, the fact that the business has existed for year would be an advantage, as it would mean that I would not be starting from scratch.
The second possible location is 105 Preston Ave in Fayetteville. This location is attractive, as it was previously used as a child care center. That implies that it has some of the necessary facilities in place and that it is probably well known to residents there. The location has many working families which comprise the largest portion of our target market. Apart from that, it is easily accessible to most of the people there, and that would make it quite easy to attract customers. The facility would not require too much work, making it all the more attractive to set up the second branch there.
Securing Debts for the Second Branch
Ultimately, the aim of the business is to expand beyond the first branch to open many more branches in different locations. The plan is to open the second branch before the end of the third year. The second center should be much bigger than the first, and that inevitably means that it will cost way more than the first one. Therefore, it will require a lot more funding than the first. The estimates at the moment show that the initial cost could go as high as $100,000. Consequently, I will need to take a bank loan to finance the setting up of the second branch. The plan is to raise 20% of the required financing and then approach the bank for the remainder. Undoubtedly, the performance of the first center will have a profound impact on the ability to secure the loan for the second. Therefore, it will be important to ensure that the business performs well and that it achieves its stated financial objectives.
References
Longenecker, J. (2016). Small Business Management . Boston: Cengage Learning.
Frey, R. (2012). Successful Proposal Strategies for Small Businesses . Norwood: Artech House.
Scarborough, N. M. (201 1 ). Effective small business management – An entrepreneurial approach , 10 th Edition . London: Pearson.
