Business Plan Analysis of a Coffee Shop

This report aims to determine the profitability of the coffee shop business, which is to be started by the owners. The report will discuss the cash flow system and the operating profit margin of the business, and eventually predict a long term forecast of the business. The report would also discuss the marketing plan of the business, the challenges that it would face in establishing a supply chain for the procurement. Lastly it tries to understand the long term profit of the business and it success rate based on the information available to the owners.

Running head: A REPORT ON THE OF BUISNESS PLAN OF A COFFEE SHOP.
Topic: A REPORT ON THE OF BUISNESS PLAN OF A COFFEE SHOP.
Students Name:
Student ID:
University Name:
Author Note:

1BUISNESS PLAN ANALYSIS OF A COFFEE SHOP
Executive summary:
This report aims to determine the profitability of the coffee shop business, which is to be
started by the owners. The report will discuss the cash flow system and the operating profit
margin of the business, and eventually predict a long term forecast of the business. The report
would also discuss the marketing plan of the business, the challenges that it would face in
establishing a supply chain for the procurement. Lastly it tries to understand the long term
profit of the business and it success rate based on the information available to the owners.

2BUISNESS PLAN ANALYSIS OF A COFFEE SHOP
Table of Contents:
INTRODUCTION:....................................................................................................................3
1. CASH FLOW STATEMENT FOR THE BUISNESS:......................................................4
a. Cash flow statement:..........................................................................................................4
b. Borrowing:.........................................................................................................................5
2. Marketing plan for the buisness:.........................................................................................6
Product:..................................................................................................................................6
Price:......................................................................................................................................6
Place:......................................................................................................................................6
Promotion:..............................................................................................................................7
3. Supply chain issues associated with the coffee business:......................................................7
4. Information needed to run the business:................................................................................7
5. Any other problems faced by Chan and Munira:..................................................................8
Conclusion:................................................................................................................................9
References:...............................................................................................................................10

3BUISNESS PLAN ANALYSIS OF A COFFEE SHOP
INTRODUCTION:
The report analyses the business plan and rollout of the coffee shop to be started by the Chan
and Munira. They have decided to start a coffee shop and have calculated the required
funding for the said project. The report analyses the financial vitality of the coffee chain and
requires the cash flow forecast and profitability of the company. The report analyses the
financial health of the concept and gives the forecast of future performance. It also highlights
the challenges that are necessary for the marketing plan and the rollout of the business
including management of the supply chain. It gives a better understanding to the owners as to
the feasibility and workability of their business model.

4BUISNESS PLAN ANALYSIS OF A COFFEE SHOP
1. CASH FLOW STATEMENT FOR THE BUISNESS:
Cash flow statement for the company for the year:
Overheads for 2019 June July August September October November
Net sales
income/revenue
receipts
15000 20000 25000 30000 30000 30000
Fixed costs/net outgo
Insurance, rents, rates
etc.
5000 5000 5000 5000 5000 5000
Wages of employees 3000 3000 3000 3000 3000 3000
Other overhead costs 6000 6000 6000 6000 6000 6000
Total costs 14000 14000 14000 14000 14000 14000
Total operating profit 1000 6000 11000 16000 16000 16000
a. Cash flow statement:
Based on the above cash flow projection, a forecast can be prepared on the operating profit
margin of the coffee shop for the financial year.

5BUISNESS PLAN ANALYSIS OF A COFFEE SHOP
0
5000
10000
15000
20000
25000
30000
35000
40000
1000
6000
11000
16000 16000 16000
22019.5685560564
24070.9424717883
25761.5254088631
27869.1092306632
30998.7341573639
33929.6909323707
forcast for cashflow
Considering the cash flow forcast for the current financial year, a steady upward trend is
noticed for the operating profit margin of the cofee shop. The profit margin is on a steady
increase indicating a healthy cash flow, into the buisness. This chart above indicates the
month on month increase in operating profit margins for the buisness from 1/06/2019 to
1/5/2020. This indicates that the buisness has good growth prospects.
Based on the forcast of the cash flow, It would adviced to the propreitoirs of the company to
increase their sales revenues.
 This can be increased by better service and product quality.
 Ensuring complete satisfaction to the customers so as to get repeat clients
Months
operating
profits existing
30-06-2019 1000
31-07-2019 6000
31-08-2019 11000
30-09-2019 16000
31-10-2019 16000
30-11-2019 16000
Months
forecasted
profits
31-12-2019 22020
31-01-2020 24071
29-02-2020 25762
31-03-2020 27869
30-04-2020 30999
31-05-2020 33930

6BUISNESS PLAN ANALYSIS OF A COFFEE SHOP
 The overheads that are variable such as food, coffee products, electricity, heating and
other overheads can be efficiently utilised and costs can be reduced without impacting
quality.
 The buisness can take up promotional activities, such as promotions, discounts and
packages to entice customers.
 Local community members should be engaged to spread publicity for the coffee shop.
 A balanced approach towards capacity utilisation, can help to reduce costs.
b. Borrowing:
It is evident from the forcasted cashflow model that there is a shortfall of 62650 in the
running of the buisness.It can be infered from the forcasted data on the buisness that the
buisness has a deficit for the year 2019-2020. Thus it nessiciates that Chan and Munira need
to borrow the sum to maintain a smooth day to day operations of the buisness. The cash flow
needs to be in place in the form of a bank loan against the fixed assests of the company, in the
form of a loan which will then be paid of as the buisness matures and the operating revenues
increase. The interest payments will be added to the total accounts payable to the company.
This cash flow, is however vital to the operations of the company to maintain current and
forcasted profitablity for the company. It will ensure that operations are not imapcted.
total
revenue total costs operating shortfall
230650 168000 62650
2. Marketing plan for the buisness:
Chan and Munira will need to develop a marketing plan for the coffee shop business. They
need to apply the 4Ps of marketing to their business model (Wirtz and Lovelock 2016).
Product:
The coffee shop needs to have a wide range of product portfolios to cater to all individual
tastes, here the main product is the primary focus of the company. However other products
like snacks and bakery items also need to be pushed to make the product portfolio complete.
The coffee shop also needs to have seasonal snacks and baked goods to attract maximum
number of customers and spread goodwill. (Londhe 2014).

7BUISNESS PLAN ANALYSIS OF A COFFEE SHOP
Price:
Price is a crucial element for any coffee shop. The customers are very price oriented and like
to pay a fair price that suits the target clientele. The age group needs to be focused, primarily
the age group associated with the coffee shops is the young and hip crowd, and hence a
budget friendly menu makes the difference (Resnick et al. 2016). Affordability is a crucial
factor, however the shop must never overlook quality.
Place:
Location is a key factor in the setting up of a coffee shop, location matters. A suitable
location near a college, a social gathering place like a park, a busy junction or a crowded city
centre. The place needs to be properly identified according to the budget, the target customer
base and the rental and overhead costs (Gürbüz, Albayrak and Alaybeyoğlu 2014). Thus the
coffee shop needs a suitable location to properly set up and operate.
Promotion:
Promotion is key to the success of any business venture. The coffee shop needs proper
advertising and promotion to get the business off the ground. Advertisements in the local
newspaper, local promotional activities like planning events to attract the target customers.
The shop needs to also have goodwill of locals who spread its popularity by word of mouth
(Baker 2014). The owners must also engage in social media to promote their products and
services and sell their USPs of the shop. Thus promotional activities will ensure a smooth
rollout of the coffee shop.
3. Supply chain issues associated with the coffee business:
The coffee chain business has a global presence, and as such there are various ethical
issues associated with the supply chain of the coffee shop. These issues come up in social
media and in the news and impact the buyer’s decisions (Christopher 2016). Today buyers
are very engaged and aware than before, they have access to information, ethical issues
highlighted by awareness groups led to change in emotions of the buyer, thus impacting
business. Hence the owners need to identify and properly mitigate these issues before
engaging any supplier for their shop. These are:
 Ethical sourcing of coffee, recently there are reports of slave labour in coffee
plantations, and poor working conditions of the workers, suppliers need to produce
proper documents regarding labour (Huang et al. 2014).

8BUISNESS PLAN ANALYSIS OF A COFFEE SHOP
 Not sourcing coffee, from suppliers who engage in destruction of forest cover,
suppliers must properly mitigate environmental problems in plantations.
 The supply chain must not use any unethical means to procure coffee, like buying
from unknown farmers (Van Rijsbergen et al. 2016).
 Suppliers must be chosen so as they grow premium product that is organically grown
without the use of harmful chemicals, so as not to degrade the environment.
 Suppliers must ensure that the coffee they provide meets the strict quality standards
and is of a reputable grower. The customers must never compromise on the quality of
the product.
4. Information needed to run the business:
To facilitate the smooth running of their coffee shop, Chan and Munira need to focus on
different aspects to ensure a smooth day to day operations of the shop, these are:
 Supply side issues need to be sorted out, proper suppliers need to be identified to see
to it that quality of products is ensured (Azadi et al. 2015).
 Marketing and market research data needs to be analysed to properly predict the target
customer base of the company.
 They need information on the financial health of the business, proper balance sheets
need to be inspected, and the accounts payable and receivable need to be studied.
 The sales data needs to be studied, sales forecast and cash flow statements need to be
used as a tool in business decisions (Monczka et al. 2015).
 Proper customer relations need to be maintained including studying behaviours of
clients. The owners need to engage the customers on a social platform like social
media sites, and customer review portals which rate restaurants. This data is very
essential in determining the popularity of the business and the acceptability in the
eyes of the end user (Sitek and Wikarek 2015).
5. Any other problems faced by Chan and Munira:
Chan and Munira may face some other problems in the running of their business, these may
include,
 Competition from other coffee shops in the vicinity of the business, this may lower
footfalls for the shop.

9BUISNESS PLAN ANALYSIS OF A COFFEE SHOP
 Negative reviews by customers who for any reason may opt for other coffee shops in
the area. They need to engage with any dissatisfied customers to properly help them
in their experience (Wu 2017).
 The coffee shop may face supply side problems with problem in procurement of good
quality of coffee from reliable suppliers.
 Price fluctuations in the market can hamper margins and lower cash flows for the
business. Thus profits may be negatively impacted as well.
According to my understanding, by studying the cash flows and forecasted models of the
operating profit margins of the business I have come to the conclusion, that Chan and
Munira’s coffee shop will be a success, according to the predicted profitability of the
company.
Conclusion:
By analysing the profitability of the coffee shop started by Chad and Munira, I have come to
the conclusion that their business model would be a success. The profit forecast for the
financial year look promising, and their profit margins look achievable, by looking at the
parameters of the business. The company has scored well on all the points, and the coffee
shop business chain has achieved global satisfaction and acceptability levels. The report has
concluded all the different factors, all the different challenges that the new business will face
in the short and long run. Ideas have been proposed to mitigate the negative aspects as well.
To draw a closure to this report, it can be concluded that the shop will meet profitability.

10BUISNESS PLAN ANALYSIS OF A COFFEE SHOP
References:
Azadi, M., Jafarian, M., Saen, R.F. and Mirhedayatian, S.M., 2015. A new fuzzy DEA model
for evaluation of efficiency and effectiveness of suppliers in sustainable supply chain
management context. Computers & Operations Research, 54, pp.274-285.
Baker, M.J., 2014. Marketing strategy and management. Macmillan International Higher
Education.
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Gürbüz, T., Albayrak, Y.E. and Alaybeyoğlu, E., 2014. Criteria weighting and 4p's planning
in marketing using a fuzzy metric distance and AHP hybrid method. International Journal of
Computational Intelligence Systems, 7(sup1), pp.94-104.
Huang, H.C., Chang, Y.T., Yeh, C.Y. and Liao, C.W., 2014. Promote the price promotion:
The effects of price promotions on customer evaluations in coffee chain stores. International
Journal of Contemporary Hospitality Management, 26(7), pp.1065-1082.
Londhe, B.R., 2014. Marketing mix for next generation marketing. Procedia Economics and
Finance, 11, pp.335-340.
Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015. Purchasing and
supply chain management. Cengage Learning.

11BUISNESS PLAN ANALYSIS OF A COFFEE SHOP
Resnick, S.M., Cheng, R., Simpson, M. and Lourenço, F., 2016. Marketing in SMEs: a “4Ps”
self-branding model. International Journal of Entrepreneurial Behavior & Research, 22(1),
pp.155-174.
Sitek, P. and Wikarek, J., 2015. A hybrid framework for the modelling and optimisation of
decision problems in sustainable supply chain management. International Journal of
Production Research, 53(21), pp.6611-6628.
Wirtz, J. and Lovelock, C., 2016. Services Marketing: People, Technology. World Scientific
Publishing Company.
Wu, H.C., 2017. What drives experiential loyalty? A case study of Starbucks coffee chain in
Taiwan. British Food Journal, 119(3), pp.468-496.
Van Rijsbergen, B., Elbers, W., Ruben, R. and Njuguna, S.N., 2016. The ambivalent impact
of coffee certification on farmers’ welfare: a matched panel approach for cooperatives in
Central Kenya. World Development, 77, pp.277-292.