Financial Plan
The Bellas Coffee Shop expects to raise $90,000 of its capital, and it plans to borrow additional $60,000 as a ten-year loan. This will provide the bulk of the current financing required.
Break-Even Analysis
The break-even analysis for The Bellas Coffee Shop is based on the average of the first year figures for total sales by units, as well as by operating expenses. The figures are ge presented as per unit revenue, per unit cost, and fixed costs. It is important to realize that such conservative assumptions are primarily used to make for a more accurate estimate of real risk (Drexler et al., 2014). The Bellas Coffee Shop is set to break even by the fourth month of its operation based on the steady increase in its sales.
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Table 1: Break-Even Analysis
| Monthly Units Break-even | 13,255 |
| Monthly Revenue Break-even | $38,225 |
| Assumptions: | |
| Average per Unit Revenue | $2.12 |
| Average per Unit Variable Cost | $0.27 |
| Estimated Monthly Fixed Cost | $29,343 |
Projected Profit and Loss
The business expects to continue its steady growth in profitability over the next three years of operations, as shown in the Profit and Loss table below.
Table 2: Profit and Loss
| Year 1 | Year 2 | Year 3 | |
| Sales | $491,000 | $567,105 | $655,006 |
| Direct Cost of Sales | $76,750 | $88,646 | $102,386 |
| Gross Margin | $414,250 | $478,459 | $552,620 |
| Gross Margin % | 84.37% | 84.37% | 84.37% |
| Expenses | |||
| Payroll | $260,800 | $273,840 | $287,532 |
| Marketing Expenses | $27,000 | $35,200 | $71,460 |
| Depreciation | $60,000 | $69,000 | $79,350 |
| Utilities | $1,200 | $1,260 | $1,323 |
| Payroll Taxes | $39,120 | $41,076 | $43,130 |
| Total Operating Expenses | $388,120 | $420,376 | $482,795 |
| PBIT | $26,130 | $58,083 | $69,825 |
| EBITDA | $86,130 | $127,083 | $149,175 |
| Interest Expense | $10,000 | $9,500 | $8,250 |
| Taxes Incurred | $3,111 | $12,146 | $15,650 |
| Net Profit | $13,019 | $36,437 | $45,925 |
| Net Sales % | 2.65% | 6.43% | 7.01% |
Table 3: Cash Flow Statement
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash Sales | $491,000 | $567,105 | $655,006 |
| Additional Cash Received | |||
| Sales Tax | $0 | $0 | $0 |
| Sales of other Current Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| Expenditures | |||
| Cash Spending | $260,800 | $273,840 | $287,532 |
| Bill Payments | $143,607 | $186,964 | $127,731 |
| Purchase of Long Term Assets | $0 | $20,000 | $20,000 |
| Net Cash Flow | $86,593 | $76,301 | $94,744 |
| Cash Balance | $156,593 | $232,894 | $327,637 |
Guerrilla Marketing Strategy
Guerrilla marketing refers to an advertisement strategy that is specially designed for businesses to promote their products and services in an unconventional way, with little money to spend. Generally, guerrilla marketing strategies are favorite among small business because they usually operate with low marketing budgets. Guerrilla marketing strategies involve high energy and imagination that focus on grasping public attention at a more personal and memorable level ( Hutter & Hoffmann, 2011) . As such, the primary objective of guerrilla marketing is to get maximum reach and brand engagement without necessarily causing considerable holes in the pocket. It is important to realize that the traditional promotional tactics are so saturated that they cannot easily stand out. Thus, marketers are compelled to teach guerrilla marketing in the promotional mix to attract the attention of the public.
Generally, guerrilla marketing involves campaigns that are more economical and effective. Small businesses are able to make an impact in the market using limited resources. It is always crucial for small businesses to develop innovative ways of getting maximum reach. Targeted reach is another defining feature of guerrilla marketing. This type of marketing focuses on creating campaigns which get more reach through word of mouth, as well as publicity. As such, fewer resources are generally used to create a big message. The most common communication channels used in guerrilla marketing include word of mouth, social media, and publicity. As such, the businesses do not do much to communicate the intended marketing message, as they implement the campaign and the rest of the communication is done by the people who ultimately become part of it.
Guerrilla marketing will help The Bellas Coffee Shop to promote its business cheaply and effectively. It is important to note that the daily struggle for survival has become common for businesses in the hospitality industry. The competition is, and the economic crisis is increasing, with survival for many businesses becoming more or less a lottery. As such, every owner of a café, restaurant or bar understands that effective marketing is essential for survival. A small business like The Bellas Coffee Shop cannot afford expensive marketing consultants who can help them in the planning of marketing operations. The Belllas Coffee Shop is faced with significant problems with marketing. Such issues arise primarily because of the low marketing budgets. Essentially, promotional activities require funds that are generally not planned at a time.
Guerrilla marketing will provide The Bellas Coffee Shop with an extraordinary advantage over the competition. The optional objective of the guerrilla marketing strategies is to attract visitors from the competition. The Bellas Coffee Shop will use a combination of guerrilla marketing strategies to attract customers. The business will use branded T-shirts, mascots, stickers, flyers, and graffiti.
Branded T-shirts
The Bellas Coffee Shop will use printed T-shirts with its striking business logo. The striking logo will significantly help in reminding the customers of the brand. The business will ensure that employees wear the T-shirts so that the customers can have a clear look at the unique business logo. The Bellas Coffee Shop will also provide its customers with the branded T-shirts as gifts. This will ensure that the brand of the business is given maximum visibility possible hence driving the much-needed sales. A picture could also accompany the logo. A picture speaks more than a thousand words about a given business. Although this is one of the oldest guerrilla marketing techniques, it is perhaps the most successful strategy. Printing T-shirts with business logo will improve the business, as more guests are more likely to be seen at the shop's tables. The marketers will, however, not forget to include small but the visible lettering on the T-shirts printed indicating the business’ contacts, location and website.
Mascots
Generally, people love mascots, including kids. Many people like taking photographs with them, talk to them and even touch them. It is important to realize that such moments serve to make the brand of the business memorable. This way, the public could be drawn to the restaurant, increasing the number of guests visiting the business. Mascots are generally very significant, as studies have shown that it is one of the most popular tactics of guerrilla marketing. The Bellas Coffee Shop will set a mascot on the road to promote their products. The business will also make videos with the mascot and share it on social media. This way, the industry will be able to reach many consumers. This is perhaps the most effective and exciting guerrilla marketing technique.
Stickers
Stickers are essential means for communicating with the public about a given business. If a business sticks them at strategic places, they can help in getting the desired attention. The stickers will come in the form of QR codes that will provide more information about the business. The QR codes embedded on the labels will serve to convince guests about the creativity and quality of the shop's offer.
Flyers
Flyers are not only cost-effective but also an effective way of communicating with current and prospective customers. The Bellas Coffee Shop will find a quality and affordable printing studio that will help in designing and printing flyers. The business will share or leave the flyers at strategic locations. For instance, bus and railway stations are some of the excellent places where marketers can merely share or leave the flyers. The Belllas Coffee Shop will also share the flyers in the local companies with large numbers of employers. The marketers will also identify the places where they believe that hungry and thirsty people that can visit the coffee shop can be found.
Graffiti
The use of graffiti is one of the cheapest alternatives for guerrilla marketing. Clean graffiti is a convenient form of guerrilla marketing. The use of graffiti is not only an innovative technique but also safe for the environment. Graffiti has become a popular form of marketing in recent years. The Bellas Coffee Shop will look for a dirty wall, clean it, and form graffiti art, advertising its business. For instance, there are many places where graffiti can be done, particularly in big cities where there are plenty of dirty unused places. Businesses that wish to advertise using graffiti in the city streets walls and tunnels may get more attention, as well as a broad audience compared to those announced during the evening news. Essentially, guerrilla marketing is legal when done in the right way. As such, the business will seek to comply with laid down rules and regulations regarding marketing and advertising.
Business Location
The second store will be located along Duke Street near the round-about. The location is appropriate because it is strategic. There is a large traffic around the place, particularly in the morning, lunchtime, and in the evening. Additionally, there are several offices around the site, and the business will benefit from the market provided by the employees in the offices. Most importantly, there is not coffee shop nearby. Therefore, thirsty and hungry customers will not have to walk long distances to get a coffee shop.
The new location is likely to perform very well because of the potentially large market it is expected to serve. The numerous pedestrians that cross the raid daily near the roundabout will undoubtedly provide the necessary traffic. The business will ensure that there is always a mascot across the road to entice consumers into the shop. The mascot will also ensure that The Bellas Coffee Brand is visible to the public. Thus, the new location is very appropriate for setting up the second store for the business.
Securing Loan
Setting up the second store will not be an easy task, mainly if there are not enough finances. The business will approach one of the local banks to secure a long-term loan that will be repaid for the next five years. Long-term financing is appropriate for this particular venture because the business may grow at a slower pace. As such, the more extended repayment period will ensure that the repayment installments do not overwhelm the business. The proceeds of the loan will be used to buy all the assets that will be required in setting up the new store. The money will also be used to purchase the initial raw materials for the business. However, the wages and rent will be catered for by the business.
References
Drexler, A., Fischer, G., & Schoar, A. (2014). Keeping it simple: Financial literacy and rules of thumb. American Economic Journal: Applied Economics , 6 (2), 1-31.
Hutter, K., & Hoffmann, S. (2011). Guerrilla marketing: The nature of the concept and propositions for further research. Asian Journal of Marketing , 5 (2), 39-54.
