The entry into the analysis of the business plan gives the relevant information of the business and how the business is carried out. As the investigation of the Business Plan of Aqua Auto-care of Edinburgh Limited, it is necessary to look into what a Business Plan really is, and more significantly, how it aids business, especially Small and Medium Enterprises (SME’s).
Aqua auto-care of Edinburgh Limited is a service industry providing car wash service. According to the plan, It is a service provider industry in terms of 3 services like external car washing, internal cleaning, and detailing. The owner of the business is Mr. Davy Baxter. The reputation of the company and the goodwill are its major promotion tools. According to the plan the quality of the service delivered is given utmost importance. The hiring of the best employees in the plan aims for cost-effective measures. As far as the business plan is concerned, its main aim is to generate revenue and customers to increase customer satisfaction. “Customer expectations are continuously increasing. Brand loyalty is a thing of the past. Customers seek out products and producers that are best able to satisfy their requirements” (Kotelnikov n.d.).According to the business plan the company targets mainly 3 groups of customers; they are individuals, leasers, and car dealers. According to the business plan, Different promotional programs can be implemented by advertisement, peer relations, and campaigning to attract more clients and to have a wider market presence. “Activities, materials, devices, and techniques used to supplement the advertising and marketing efforts and help coordinate the advertising with the personal selling effort. Sweepstakes are among the most well-known sales promotion tools, but other examples include special displays, coupons, promotional discounts, contests, and gift offers” (Sales promotion 2010).
Business plan analysis
Strengths & weaknesses of the business plan
The strength of the business plan is projected through its market existence for about 30 years in this field. In the plan, they adopted to charge less price to attract the target people. The plan shows an initial investment of £30,000. The plan shows that it is a premium car wash company and does a lot of good promotion in the market. It has good market segmentation and 40% of the business is generated from the household. The proposed business plan has made all the necessary financial records it needs while starting a business like Projected month-wise profit & loss, projected cash flow, projected balance sheet, and Break-even analysis. Inventory has been correctly recorded in performa balance sheet. Retained earnings have been correctly recorded in performa balance sheet of the business plan which is necessary for determining the net worth of the company. Break-even analysis has been done correctly based on the sales figure with the consideration of variable expenses depending upon sales in the business plan. Ratios have been done appropriately with including all the ratios like Current, Quick, Inventory & accounts payable turnover calculation in days in the business plan. The gross profit of the company in the business plan is very high in comparison to the net profit, there is no risk analysis conducted in the plan, proper analysis has to be made and they have to be abolished. Besides, it is observed that the gap between GP (Gross Profits) and NP (Net profits) is quite glaring. While the GP is believed to be 95%, it is seen that the net profit envisaged is only around 10-15%. The business case study pre-assumes that around 80-85% would be non-trading expenses, and a large chunk of the incomes would be needed to meet payroll expenses. It is necessary to reduce these lacunae to present a more plausible financial model
There is no exit strategy for the business and the least consideration to the competitors has been made in the business plan. The main competitors of the company as shown in the business plan are from both narrow services and authorized dealers providing the same service because they are mainly providing seasonal services. In the business plan, the strategy that is adopted is that of the word of mouth strategy which will not be much effective to attract the public. In the proforma profit & loss statement of the business plan, the interest expense should be calculated along with other expenses while determining the operational expense. Similarly, there is no provision for bad debts in the proforma profit & loss statement. Depreciation calculation changes every year with respect to change in the company’s depreciation policies so depreciation shown as a constant figure in the Projected P/L statement of the business plan is considered a weakness. The proforma balance sheet in the business plan makes no arrangements for investments in the assets side of the balance sheet. An arrangement for goodwill that is necessary for a business to establish has not been recorded in the business plan. Arrangements for recording the prepaid expenses have not been done in the financial plan of the business plan.
It is very vital to analyze the business plan and to identify the pros and cons for the business and have smooth functioning of the business in terms of revenue and profit. Besides, “by forecasting where your business will be in six months, one year, or five years, you are not only letting potential investors know your plans but also setting up realistic milestones for yourself and your employees”(Ten reasons why you need a strong business plan, 2010).
The service industry is the inherited family business which has a market presence of 30 Years.The Company has a good business execution; the analysis of the company gives an idea about the sales and the market presence. In order to quickly establish the company in the market entrepreneur plans to use the goodwill and repute that the business has got through the family name.
Initial investment of £30,000 but the rest he plans to finance through cash flow. Cash flow statement is created for recording the cash inflows and cash outflows of a firm. At the start of the business, the firm Aqua auto-care should procure more funds in the form of capital rather than trying to get funds in the form of cash inflows.
As far as the auto care industry is concerned, there is no separate law making body. The ownership is on a single person who is the owner and manager of the company and lack of professional approach prevails in the organization. Unofficial services are common in the management during the absence of the manager. The services should be done in such a manner that uniformity in services should be maintained in each operation and should be to be done in a professional manner.
“This definition of management refers to a “program”. This implies that, for management to be effective there needs to be some type of defined approach or system in place. This system becomes the plan and management is guiding others in following that plan” (Shead 2007).
The main objective of the company is to be a premium company in terms of revenue and profit; the objective can also be extended to the customers and attention is to be provided on the customer orientation and satisfaction. “A business objective is something the business is aiming toward or a strategic position it is working to attain. Usually it is a step in the strategy. Objectives are similar to goals, but often have success/failure rather than quantifiable metrics” (Reh 2010).
The % credit on sales of 15% remains the same in all the three years. The first year’s dependence on credit sales is quite high. The different methods of forecast can be carried out to know the expenses. An idea can be obtained when communicating with the persons who are already into the business and how much are to be reserved for contingencies. The contingencies are those that are to be equal up to 20% of the start up business. “Business continuity planning is a process that determines the key functions of an organization and devises strategies to moderate the effects of an outage or loss of service provided by these functions. Business continuity planning is, in fact, a form of contingency planning” (Sarkissian 2010).
Break even analysis has been done correctly on the basis of the sales figure with the consideration of variable expenses depending upon sales. Ratios have been done appropriately with including all the ratios like Current, Quick, Inventory & accounts payable turnover calculation in days. The approximation of 203 break even units month wise is a proper projection taking into consideration the variable costs.
Aqua auto-care of Edinburgh Limited does not have any Insurances policy.
To plan the business convention is a very complicated task. It is the choosing of the right location, right product, right price and the right marketing aspects in promotion and revenue. The main target of the convention is the customers, revenue, ROI and the increased profits.
The management of the company does not consist of authorities; the company is operated by a single operand, and the only strength of the firm is the goodwill attained from past experience. There is no specific advisory board or different departments of operation. “The group of individuals make decisions about how a business is run. It is the initiation and maintenance of an investment portfolio” (Management n.d.).The main objective of the management is to be a premium company in terms of revenue and profit; the objective can also be extended to the customers and a little attention to be provided on the customer orientation and satisfaction. “A business objective is something the business is aiming toward or a strategic position it is working to attain. Usually it is a step in the strategy. Objectives are similar to goals, but often have success/failure rather than quantifiable metrics” (Reh 2010).
The product of the industry is the car washing and it is one of the premium car washing firm in UK.It includes the other service like the detailing, external car washing and the internal car washing. The business is concerned much on the quality. As the quality is concerned the brand and quality conscious people are attracted towards the firm.
Market analysis is one of the important factors that we need to assess at the time of the starting a new business. Various methods are used to evaluate the market like forecasting the sale. “Market analysis is to determine the attractiveness of the market and to understand its evolving opportunities and threats as they relate to the strength and weakness of the firm” (Market analysis 2007).Market segmentation helps to understand market growth potential of the Aqua auto-care of Edinburgh limited. In this company, segmentation of the business is in following categories: new car owner, old luxury car owner, sports car owner, dealership, local business. This entire segment group have various needs according to their convenience. They are usually charged less price to attract the target people. “This is the first of three lessons based upon SEGMENT – TARGET – POSITION. To get a product or service to the right person or company, a marketer would firstly segment the market, then target a single segment or series of segments, and finally position within the segment(s)” (Segmentation 2010). Segmentation must be critically evaluated, because if same type of opportunities is given by two firms it will affect overall market condition. For that, we have to evaluate:
- Whether the above segmentations are applicable in the market?
- Whether the above segmentations can be monitored?
The company must evaluate the entire segment on the basis of success factors, growth, profit etc. The next task is to target the market on the basis of growth potential. In this plan, present growth of luxury car owner, and sports car owner was 15% and based on this future assessment should be made.
“Target marketing makes better use of distribution dollars as well, enabling marketers to concentrate on developing working relationships with department-store chains or on developing a business-to-business sales force, but not both” (Target Market 2010. In this, all the segment groups have different choice of service. Most important thing is that the target market should be based on the growth and profitability earning from the business.The Company’s main competitors are both narrow services and authorized dealers providing services.
The Company offers services on lower prices, but the fact is that its clients do not bother about the price; they need only better services. About competitors pricing “There are no comparable competition prices, as our services are different from any in the market, except, however for the coin-operated car wash which has an average price of $5. For full-service oil changes, the price ranges from $25 to $30” (N’ Fix 2010, p.7).
Strategy and implementation
Aqua car care adopted word of mouth advertising strategy. This strategy will never become attractive strategy to capture the market. The company is not making any plan to give promotional activities to capture the clients. They are not giving any guarantee to its customers. Sales strategy adopted is that individual to individual method. Davy is having well awareness about the switching cost that they are usually following low rate. So he knows that we should work hard to get the repeat clients. “In today’s very competitive marketplace a strategy that insures a consistent approach to offering your product or service in a way that will outsell the competition is critical” (Marketing plan 2010).
Here, the business of the company is seasonal; it mainly gives services in summer. Forecast should be based only on this. “A sales forecast is a prediction based on past sales performance and an analysis of expected market conditions. The true value in making a forecast is that it forces us to look at the future objectively” (Conduct a sales forecast 2009).
The technique through which greater detail about the competition of our.
Business could be gained only through the proper analysis of the business plan.
It is necessary that the financial projections of this business be reviewed in the light of very significant impact upon profits, of its trading and financial profits. The business plan is the blueprint of the effective sales and the marketing strategy of the company. The business plan is also an essence in covering the nook and corner of the aqua auto care Ltd, including the financial status and future forecast.
Recommendations for Davy Baxter
The creator of this business plan needs to address areas of improvement, including the need for a back up plan and an exit strategy in the event things do not work out as planned. Besides, it needs to have specific details about competitors, their market share and how they could act as a barrier to this Company‘s growth and sustenance in future years.
Besides, this Company’s claim that it is the most economical in terms of pricing may not be substantiated since it is quite possible that, upon its forays into the business, they may reduce their prices substantially enough to throw Aqua
Auto-care of Edinburgh Limited out of business, and later on, hike their prices again to maintain profits and cash flows once this company has made an exit.
The aqua auto care has to reduce the administration cost as they contribute much in comparison with the net profit, the financial projection on the quarterly basis should be incorporated in the plan.
The risk analysis should be included in the proposed business plan, it is vital for a company to have a reliable back up during the catastrophic ccurrences, emergencies or contingencies.
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