Bust08026 Introduction To Business - Assessment Answers
Part 1 – your new business
For this group assignment you will be putting together an overall new business concept and discussing it from the creation to the expansion stage, including financing. To start, review your team member’s individual submissions for the entrepreneurial assignment and from that list choose one that you, as a group, will develop. Include the reasoning as to why you choose this product/service over the other submissions (not the mark received, but perhaps sound reasoning/research). You will need to restate your company’s name and a summary of your product/service including your answers to these original questions. You will also need to update i.e. FOCUS any areas that need to be fine-tuned (as per my feedback to your previous individual submission)• Who are your customers?
• Where are our customers located?
• Is our business idea easily copied?
• If there are substitutes for our product or service, how can we make it stand out from competitors’ offerings?
Part 2 – growth and financing
What jobs will you need and how many people will you need in each area? How will you design the jobs e.g. specialized areas such as departmentalization?
Every business requires some sort of customer service and so does yours. So put together a comprehensive list of (3) job tasks for your customer service representative.
Tell me how you will market your product or service to your targeted demographics i.e. how will you make them “need/want” it?
Provide an organization chart including the additional 25 employees, with reporting lines indicated. Your org. chart can be done in excel, word (using tables) or visio. Note – this organization chart needs to correspond to your answer to question 1.
Very important -you must discuss the WHY behind your decisions. Including this helps demonstrate your own analysis AKA critical thinking involved in your decisions.
Additionally, as the result of your planned growth you now need financing from external sources. To do that you are required to prepare a cash budget. For the sake of this assignment your budget will be very simplistic. That means, you need one revenue source and a minimum of five expenses. Use the sample budget form posted in the assignment folder to assist you. In each section include the per unit/monthly cost of each item. For instance, tell me why you chose these figures in your budget by providing some research information that demonstrates your chosen pricing i.e. per unit price and projected sales amounts/#s. NOTE - It is important that you keep this budget as realistic as possible as it relates to your product/service. If your figures are too over the top you will receive a very poor mark for this section.
You also need to consider whether you will raise these funds through external borrowing (debt) or through external ownership (equity). You will discuss external options as you would have already used your own personal financing as part of the start-up process. Outline which you will choose and explain why. Don’t forget to explain the pros and cons of each form. Do not include these sources of financing in your budget.
Finally, statistics show that 20% of businesses fail in the first year with an overall failure rate of 80% within 5 years. Describe how your new business will not become part of the closure statistic of 20% in the first year of operation. Explain this by using two of the 4 key reasons for success and 2 of the four reasons for failure. Make sure you apply this to your specific company and potential customers .
Answer
Part 1:
Identifying the customers:
The farmers of Canada are the main target for the Canadian based fertilising company name Go Green. The focus of Go Green is to develop a product line, which contains fertilizers and helps in improving quality of the crops of the farmers.
Indicating where is the location:
The Location is mainly within Canada, where the company is producing the project and distributing among the country’s farmers.
Indicating whether the business is easily copied:
The business of developing fertilizers is relevantly present within the country for years. In addition, the demand for quality fertilizers is relevantly present in both domestic and international market, which increases the chance of obtaining profitability and growth.
Indicating how does the business stand out:
The difference in organisational structure and development team makes the fertiliser producing company stand out from its peers and competitors. The difference in the product quality and the reliability of the fertilizer in supporting all the quality standards, which allows the organisation to provide quality fertilizers to farmers.
Part 2:
Indicating what jobs will be needed and how many people is required:
The organisational structure directly indicates the four definite jobs that needs to be conducted within the company for adequately achieving sustainable growth. Specific jobs such as Finance, Operation, Marketing and Development is mainly needed by the company to maintain the level of activity for supporting its revenue. The total of 36 employees needs to be maintained within the organisation leaving the CEO so that the organisational structure could be supported. Hence, with the implantation of 36 employees the organisation to maintain the level of profits and revenue from the operations.
Indicating the comprehensive list of job tasks for the customer service representative:
The customer service representation has a designated list of jobs and tasks, which could help the management to understand the impact of their products for the designated customers. In addition, the major job activity of customer service representative is to detect any kind of limitations, which is currently present within the products of the organisation (Hannam et al., 2016). This detection of the limitations and complaints from customer allows the customer representative to detect the problems that is currently present within the product. The second major job task of the customer service representative is the promotion of the product and reduction of complaints risen by the customers. The third job description of customer service representative is for resolving the problems of the customer and increasing customer loyalty. The customer service representative aims in resolving the problems of customers as soon as possible from their end, which helps in building trust of the customers and raising the level of customer base. Hence, with the presence of customer service representative the fertilizers company could minimise the complaints and detect problems in their current product, which could be a beneficial feedback for improving their current product quality.
Depicting the ways in which product will be marketed to the target demographics:
There are different ways in which the finished product can be marketed within the exact demographic, as the company targets farmers of Canada. The fertilizer market is relevantly for the farmers, which use the product to improve quality of their crops. The advertisements in local farmlands with hoardings could be beneficial for the marketing team. In addition, the advertisements in supermarket and farmers markets might allow the organisation to target the specific demographic and generate adequate demand for the products. The use of hoardings, newspaper advertisements, exhibitions in trade fairs and local channel advertisements could eventually help the fertiliser producing company to improve their overall revenue from investment.
Depicting an organisational chart including additional 25 employees with the reporting lines:
Figure 1: Depicting the Organisational Structure
(Source: As created by the author)
Preparing Cash Budget for 1st Year:-
| Particulars | 1st Month | 2nd Month | 3rd Month | 4th Month | 5th Month | 6th Month | 7th Month | 8th Month | 9th Month | 10th Month | 11th Month | 12th Month | TOTAL |
| Sales Revenue | $ 50,000 | $ 50,000 | $ 50,000 | $ 50,000 | $ 50,000 | $ 55,000 | $ 60,500 | $ 66,550 | $ 73,205 | $ 80,526 | $ 88,578 | $ 97,436 | $ 7,71,794 |
| Purchase of Supplies | $ 30,000 | $ 30,000 | $ 30,000 | $ 30,000 | $ 30,000 | $ 33,000 | $ 36,300 | $ 39,930 | $ 43,923 | $ 48,315 | $ 53,147 | $ 58,462 | $ 4,63,077 |
| Salary to Support Staffs | $ 5,000 | $ 5,000 | $ 5,000 | $ 5,000 | $ 5,000 | $ 5,000 | $ 5,000 | $ 5,000 | $ 5,000 | $ 5,000 | $ 5,000 | $ 55,000 | |
| Processing Expenses | $ 3,000 | $ 3,000 | $ 3,000 | $ 3,000 | $ 7,000 | $ 7,000 | $ 7,000 | $ 7,000 | $ 7,000 | $ 7,000 | $ 7,000 | $ 61,000 | |
| Interest expenses | $ 1,000 | $ 1,000 | $ 1,000 | $ 1,000 | $ 1,000 | $ 1,000 | $ 1,000 | $ 1,000 | $ 1,000 | $ 1,000 | $ 1,000 | $ 11,000 | |
| Rent | $ 2,000 | $ 2,000 | $ 2,000 | $ 2,000 | $ 3,000 | $ 3,000 | $ 3,000 | $ 3,000 | $ 3,000 | $ 3,000 | $ 3,000 | $ 29,000 | |
| Net Increase/Decrease | $ 20,000 | $ 9,000 | $ 9,000 | $ 9,000 | $ 9,000 | $ 6,000 | $ 8,200 | $ 10,620 | $ 13,282 | $ 16,210 | $ 19,431 | $ 22,974 | $ 1,52,718 |
| Opening Cash Balance | $ 15,000 | $ 35,000 | $ 44,000 | $ 53,000 | $ 62,000 | $ 71,000 | $ 77,000 | $ 85,200 | $ 95,820 | $ 1,09,102 | $ 1,25,312 | $ 1,44,743 | $ 1,67,718 |
| Closing Cash Balance | $ 35,000 | $ 44,000 | $ 53,000 | $ 62,000 | $ 71,000 | $ 77,000 | $ 85,200 | $ 95,820 | $ 1,09,102 | $ 1,25,312 | $ 1,44,743 | $ 1,67,718 | $ 3,20,436 |
Start Up Expenses for first month
| Start-up Expenses | ||
| Fixed Costs | Particulars | Amount |
| License cost | $ 5,000.00 | |
| Rent of premises | $ 15,000.00 | |
| Electricty | $ 3,000.00 | |
| Salaries of Staff | $ 5,000.00 | |
| Marketing and sales cost | $ 18,900.00 | |
| Office equipment | $ 3,500.00 | |
| Total Fixed Costs | $ 50,400.00 | |
| Average Monthly Costs | ||
| Rent | $ - | |
| Interest on loan | $ 3,000.00 | |
| Total Average Monthly Costs | $ 3,000.00 | |
| x Number of Months: | $ 1.00 | |
| Total Monthly Costs | $ 3,000.00 | |
| Total Startup Expenses | $ 53,400.00 | |
| Start-up Assets | ||
| Sources of funds | ||
| Loans | ||
| Bank Loan | $ 6,00,000.00 | |
| Other | ||
| Total Loans | $ 6,00,000.00 | |
| Total Start up Funds | $ 6,00,000.00 | |
| Assets | ||
| Premises | $ 5,00,000.00 | |
| Equipments | $ 10,00,000.00 | |
| Computer and appliances | $ 2,00,000.00 | |
| Total Fixed Assets | $ 17,00,000.00 | |
| Total Start-up Assets | $ 23,00,000.00 |
| (4) Profit and Loss Forecast | ||||||
| Preop | ||||||
| Year | 2018 | 2019 | 2020 | 2021 | 2022 | |
| Revenue | $ 5,00,000.00 | $ 5,50,000.00 | $ 6,05,000.00 | $ 6,65,500.00 | $ 7,32,050.00 | |
| Cost of sales | $ 4,50,000.00 | $ 4,95,000.00 | $ 5,44,500.00 | $ 5,98,950.00 | $ 6,58,845.00 | |
| Gross profit | $ 50,000.00 | $ 55,000.00 | $ 60,500.00 | $ 66,550.00 | $ 73,205.00 | |
| Gross Margin | 10% | 10% | 10% | 10% | 10% | |
| Expenses/overheads | ||||||
| Salaries of Workers | $ 5,000.00 | $ 5,000.00 | $ 5,000.00 | $ 7,000.00 | $ 7,000.00 | |
| Depreciation of Equipment | $ 10,000.00 | $ 10,000.00 | $ 10,000.00 | $ 10,000.00 | $ 10,000.00 | |
| Supervisor's Salary | $ 6,000.00 | $ 6,000.00 | $ 6,000.00 | $ 6,000.00 | $ 6,000.00 | |
| Rent of the Premises | $ 15,000.00 | $ 15,000.00 | $ 15,000.00 | $ 15,000.00 | $ 15,000.00 | |
| Packaging and Distribution | $ 4,500.00 | $ 4,500.00 | $ 4,500.00 | $ 4,500.00 | $ 4,500.00 | |
| Interest on loans | $ 2,000.00 | $ 2,000.00 | $ 2,000.00 | $ 2,000.00 | $ 2,000.00 | |
| Marketing and Sales cost | $ 4,000.00 | $ 2,000.00 | $ 2,000.00 | $ 6,000.00 | $ 6,000.00 | |
| Total expenses/overheads | $ 46,500.00 | $ 44,500.00 | $ 42,500.00 | $ 44,500.00 | $ 44,500.00 | |
| Profit before tax | $ 3,500.00 | $ 10,500.00 | $ 18,000.00 | $ 22,050.00 | $ 28,705.00 | |
| Tax @ 20% | $ 700.00 | $ 2,100.00 | $ 3,600.00 | $ 4,410.00 | $ 5,741.00 | |
| Profit after tax | $ 2,800.00 | $ 8,400.00 | $ 14,400.00 | $ 17,640.00 | $ 22,964.00 | |
| Transfer to reserves | $ 2,800.00 | $ 8,400.00 | $ 14,400.00 | $ 17,640.00 | $ 22,964.00 |
Indicating how funds will be raised, while explaining pros and cons of each:
After acquiring adequate funds from external sources adequate investments in the fertilising business was conducted. The use of Bank Loan mainly helps in getting the required finds, which is necessary for staring the fertiliser producing company. the use of debt mainly allows the organisation to acquire the funds quickly and commence with the business operations. However, there are cetin limitations of using debt as seed capital, which relevantly increases the interest payments and reduces profit of the business. On the other hand, companies also use equity to raise the required funds for the business, where investment is taken by conducting the share issue. Nevertheless, the main limitation of the share issue is demand for the shares among potential investors, as share price might fall due to the lack of adequate demand and reduce the capital, which could be acquired from the issue. Hence, the required capital for the business could not be generated and might halt the overall operations of the company. Moreover, with share issue the organisation does not need to pay constant interest, which will increase actual profits and reduce cash outflows of the company.
Indicating how the new business will not fall under the closure statistics in the first year of operations:
The new business is relevantly focused on producing fertilizers for the crops, where the intensive breakthrough in the process will eventually allow the organisation to sustain the competitiveness in the market. In addition, the continuous marketing and promotion for the product within the farmers community will also boost the sales and allows the organisation to maintain the level of competitiveness in the market. Hence, with the identified measures the Canadian based fertilising company could sustain the market and will not fall under the closure statistics in the first year of operations (Glover & Kusterer, 2016).
References:
Glover, D., & Kusterer, K. (2016). Small farmers, big business: contract farming and rural development. Springer.
Hannam, K., Deschamps, C., Kwiaton, M., Venier, L., & Hazlett, P. W. (2016). Regulations and guidelines for the use of wood ash as a soil amendment in Canadian forests. Natural Resources Canada, Canadian Forest Service, Great Lakes Forestry Centre.
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