Financial Analysis and Cash Flow Management

The assignment content provides financial projections for a business over three years. The projected income includes cash from sales, debtors, and capital loans received, totaling £311,040 in Year 3. The expenditure includes various costs such as wages, premises, equipment leasing, and other payments, totaling £142,518 in Year 3. The net profit margin is calculated to be 0.34 in each year. The break-even point is calculated to be £285,496 in Year 3, and the projected closing bank balance is £437,985 by the end of Year 3.

ENTERPRISE AND
NEW BUSINESS
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Table of Contents
BUSINESS GROWTH PLAN OUTLINE...........................................................................................4
PROPOSED FUTURE BUSINESS ...............................................................................................4
CUSTOMERS ...................................................................................................................................5
COMPETITORS .................................................................................................................................5
SKILLS ANALYSIS............................................................................................................................6
RESOURCES REQUIRED ...............................................................................................................6
SOURCES OF FUNDING...................................................................................................................7
TYPE OF ORGANIZATION ..............................................................................................................9
VISION FOR BUSINESS IDEA .......................................................................................................10
REFERENCES...................................................................................................................................11
APPENDIX........................................................................................................................................12
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Illustration Index
Illustration 1: Gantt chart......................................................................................................................9
Illustration 2: Critical path....................................................................................................................9
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BUSINESS GROWTH PLAN OUTLINE
The present business named Bebeto is a construction services and development Ltd
organization where main motive is to deliver effective services to target market as per their taste and
overall requirement. Further, the entire construction sector of UK has witnessed high growth where
demand for development services is growing at faster pace (Oyedokun, Jones and Dunse, 2015).
Moreover, house building and its development were best performer part of the industry with
strongest growth in 12 months. Due to rise in rate of business investment and improving economic
condition of the country commercial development is taking place at faster pace. Apart from this
construction companies have created jobs for million of people and entire sector is receiving
support from government for overall development. Refurbishment and fit out market of UK was
assessed to have an value of around £6.6 billion in 2011 and around £ 7.1 billion in the year 2013
(Linwood, 2015). Every year growth is increasing at faster pace and this is providing ample of
opportunities to the businesses. Entire refurbishment market in public along with private sector has
noticed positive development. It has been found that in the year 2016 construction services market
will grow more and it is estimated that it will have price of around £7.7 billion.
PROPOSED FUTURE BUSINESS
The new business named Bebeto is based on the concept of construction services and
development. Further, the services will be delivered to both customers and other type of businesses
operating in the market of UK. Two type of services will be sold where one is for commercial and
another is for domestic one. The range of services which will be delivered to target market are as
follows:
 Refurbishment
 Painting and maintenance
 Office development for corporates
 Valuation of property
 Interior design
 Mechanical and electrical
 Bathroom remodelling
 Exterior Layout development
So these are the main services which will be offered to the target market of the enterprise.
Further, all these services have been added in the range after considering all the expectations of the
target market. At present demand for all these type of services is quite high in the market and due to
this reason firm can obtain good market by offering these services. Refurbishment as a service is
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effective as through this internal and external development of buildings is possible. Painting and
maintenance service will be rendered to both businesses and customers and this will bring a kind of
new touch to building. Apart from this for large organizations office development as a service is
appropriate and through this their internal premises will be developed. On the other hand, business
symbol of Bebeto will be protected through intellectual property right of trademark and will be
governed by provisions of trademark act 1994. So, with the help of this it is quite easy to protect
business symbol along with the name and it cannot be used b other businesses operating in the
market of UK. This is beneficial for new business in every possible manner and can assist in dealing
with market challenges.
CUSTOMERS
Main customers of Bebeto are companies and other type of people who are investing in
properties around UK- B2B and B2C. Firm will target large sized organizations who are planning to
refurbish their property in terms of interior modification. Further, on individual basis services will
be delivered to customers such as painting and maintenance, bathroom remodelling, exterior layout
development and valuation of property. By delivering all these services it is possible for new
business to satisfy need of target market in efficient manner. In short it can act as development tool
for enterprise and firm can easily deal with challenges present in the market. End users of services
are customers and large sized organizations and they will purchase the entire range of services.
Further, the unique selling point of services involve their quality where high quality material will be
used in development which is value for money. At present customers prefer to buy refurbishment
services on continuous basis along with development. Generally, market trend shows that high
amount is invested by customers in purchasing construction and development services as this
provides their property a new look (Reyers and Mansfield, 2001). Further, it is expected that
business will have unique position in the market as entire range of service can be highly
differentiated easily.
COMPETITORS
Bebeto will operate in market where competition level is quite high but on the basis of
service differentiation it is possible for company to compete with other companies in the market.
Name of competitor Range of service Website
BNP PARIBAS REAL
ESTATE
Consulting, valuation, property
management and investment
management
https://
www.realestate.bnpparibas.co.u
k/bnppre/en/property-
development/services-
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cfo4_15329.html
Seddon New build, refurbishment,
painting and maintenance,
energy solutions
http://www.seddon.co.uk/
May fair property services Refurbishment and Interior
design.
http://mayfair-property-
services.co.uk/
Savills services Property management,
valuation, consultancy and asset
management.
http://www.savills.co.uk/
services/
So these are key competitors of Bebeto but it is expected that customers will purchase
services of Bebeto only rather than its competitors as they are of unique quality and differentiated
also. Further, prices have been kept low as compared with key competitors which will encourage
target market as they can buy high quality service at an affordable price. Apart from this, customers
will be provided proper knowledge regarding services and through this they can be easily attracted.
Moreover, skilled workforce has been hired by firm for delivering services and they can easily
resolve main queries and other issues linked with customers timely. Therefore, these are some of the
main reasons due to which customers will purchase services of Bebeto rather than its competitors.
SKILLS ANALYSIS
In order to implement the business plan successfully it is necessary to apply effective skills
for overall development. Skills such as leadership, marketing, critical thinking and time
management are present in myself with the help of which I can easily take the business idea
forward. Further, through leadership skill I can easily handle large number of people who are
working together for delivering construction services. Moreover, by applying marketing skill I can
easily promote the range of services in front of target market. Further, it can support me to compete
with major competitors in the market and can enhance performance of my business. By applying
critical thinking skills I can easily take appropriate decisions for the welfare of business and through
time management skill each and every activity of business can be carried out in proper manner as
per preferences. On the other hand, various skills are required to be developed in myself such as
oral communication, stress management and decision making as in all these areas I am not able to
perform better. For addressing oral communication skill I will try to interact with my colleagues on
continuous basis and this will enhance my confidence level also. For development of stress
management skill I will try to indulge myself in situations which leads to stress and for improving
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decision making skill I will take advice from experts especially entrepreneurs.
RESOURCES REQUIRED
For successful implementation of business plan large number of resources are required
which is fruitful for business in every possible manner. Main resources required involves financial,
technological, human etc. Finance as a resource is required so that each and every operation can be
carried out successfully. Moreover, advanced technology has to be purchased so that construction
services can be easily delivered and for the same finance is must. Human resource is also required
as employees working in Bebeto will deliver entire range of services such as painting and
maintenance, exterior infrastructure development etc. Through effective management of all these
resources business performance can be easily improved in the market. Further, it is possible to deal
with the situation of inadequacy of resources which is unfavourable for firm.
Assumptions
 It is assumed that sales of the business will be increased by 20% annually
 Expenses of the construction and development business will also be increased as per
increase in sales of the organization. On the basis of this, expenses such as Premises,
telephone and broadband, printing and stationary etc. will be increased by 5% per annum.
 Loan will be borrowed from the Barclays Bank and on the borrowed amount rate of 10%
will be charged yearly.
 Rate of depreciation on equipment will be charged on straight line basis method and it will
be charged at 10% yearly depreciation.
 Yearly insurance will be paid by the business on the basis of sales unit and on each unit
£230 will be paid on annual basis.
(https://www.abi.org.uk/News/News-releases/2015/01/Cost-of-home-insurance-falls-
average-price-paid-for-buildings-cover-down-6-contents-insurance-down-5)
 As per the legal laws of government of UK, VAT on business of construction and
development is to be paid and it is to be charged on 20% of profits of the organization.
(http://www.startupdonut.co.uk/startup/tax-and-national-insurance)
SOURCES OF FUNDING
Bebeto will carry out operations in larger basis due to which financial requirement of
business is high and by adopting appropriate source it is possible to satisfy financial needs of new
company. Two main sources of finance are present which are appropriate for Bebeto and it involves
owner's capital and bank loan. Different financial institutions are operating in the market of UK
which can provide financial assistance to firm in every possible manner. Further, Bebeto will satisfy
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its financial requirement by obtaining loan for specific period of time and this can definitely support
business in obtaining long term benefits. Apart from this, using owner's capital is another source
through which financial requirement of business will be fulfilled as owner of business will invest
personal funds for smooth functioning of the business operations. Therefore, these are the two
major sources which will be adopted for carrying out overall operations. Apart from this the main
reason behind selecting these sources involves they are cheap and can easily satisfy financial
requirement of business. Organization can easily deliver refurbishment and construction services to
large organizations and other customers. Further, effective plans will be prepared for utilizing
financial resources in appropriate manner and this can act as development tool for the entire firm.
Task Task Name Duration Predecessors
1 Carrying out market research 11 wks
2 Development of business plan 7 wks 1
3 Selecting source of finance 3 wks 2
4 Registration and other formalities 3 wks 2
5 Purchase of fixed Assets 5 wks 3,4
6 Development of infrastructure 7 wks 5
7 Hiring workforce 3 wks 6
8 Purchasing advanced tools 2 wks 6
9 Designing website 2 wks 7,8
10 Marketing and Promotion 4 wks 9
11 Targeting Customers 5 wks 10
12 Testing & Modification 3 wks 11
13 Final implementation 2 wk 12
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Critical path: 1,3,5,7,9,11,13
= 11+3+7+3+2+5+2 = 33 weeks
The above chart represents each and every activity with the help of which entire project can
be completed easily. Further, 33 weeks is the critical path which is the shortest path of completing
project.
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Illustration 1: Gantt chart
Illustration 2: Critical path

TYPE OF ORGANIZATION
Bebeto is a private firm where owner of the business has right to take major decisions and in
turn effective plans are prepared for future development. Further, business will deliver entire range
of services by opening its physical stores and through this different businesses along with customers
can be better entertained. Moreover, firstly interaction will take place between staff members and
customers as through this company can easily understand the actual requirement of target market.
Apart from this, firm has employed management information system through which important
information linked with business can be easily managed and it is fruitful for business also. Further,
this system will assist company in dealing with market challenges and can boost productivity. With
adoption of computerized system crucial data can be saved easily and in turn proper refurbishment
services can be delivered to target market. Key performance indicators for Bebeto will be sales,
service quality and market share of company as through this overall performance of business can be
judged easily. Moreover, critical success factor is quality as on the basis of this target market of
company will buy services.
VISION FOR BUSINESS IDEA
The main vision of Bebeto is “To attract new customers even from foreign market also in the
next 5 years”. In order to accomplish this vision better plans and strategies have been developed by
management. Further, the vision statement of company shows that company can deliver
refurbishment and construction services as per requirement of its target market and this can improve
overall productivity of business. Apart from this to render different services raw materials will be
purchased from suppliers to meet with the requirement of target market.
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REFERENCES
Journals
Oyedokun, T. Jones, C. and Dunse, N., 2015. The growth of the green office market in the UK.
Journal of European Real Estate Research. 8(3) .pp.267 – 284.
Reyers, J. and Mansfield, J., 2001. The assessment of risk in conservation refurbishment projects.
Structural Survey. 19(5) .pp.238 – 244.
Online
Linwood, J., 2015. London refurbishment business improves but number of building projects
decline, according to report. [Online]. Accessed through <http://www.swlondoner.co.uk/london-
refurbishment-business-improves-but-number-of-building-projects-decline-according-to-report/>.
[Accessed on 10th Nov 2015].
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APPENDIX
Financial projections
Projected Profit &
Loss Account
Year 1 (£) Year 2 (£) Year 3 (£)
Total expected
sales 180,000 216,000 259,200
Less variable costs 72,000 86,400 103,680
Gross profit (sales
less variable costs)
= 108,000 129,600 155,520
Calculate your
gross profit
margin % (gross
profit divided by
total sales x 100)
(A) 0.6 0.6 0.6
Salaries/wages
(survival income +
any staff 4,500 4,725 4,961
Premises (including
rent, rates, utilities) 360 378 397
Telephone and
broadband 120 126 132
Printing, post and
stationery 60 63 66
Advertising and
promotion 240 252 265
Bank charges 200 210 221
Professional fees 60 63 66
Insurances 41 43 46
Bank/HP/Interest
(payable to your
bank) 200 160 120
Stock 18,000 21,600 25,920
Consumables 18,000 21,600 25,920
Equipment and
vehicle leasing 6,000 7,200 8,640
Depreciation 600 720 864
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0
Total fixed costs 48,381 57,140 67,617
Net profit (gross
profit less fixed
cost) 59,619 72,460 87,903
Calculate your net
profit margin (net
profit divided by
total sales x 100) 0.33 0.34 0.34
Calculate your
break even Year 1 (£) Year 2 (£) Year 3 (£)
Total variable
costs + total fixed
costs (B) 120,381 143,540 171,297
Breakeven point=
total cost / Gross
profit margin
percentage 200,636 239,234 285,496
Projected Cash flow
INCOME Year 1 (£) Year 2 (£) Year 3 (£)
Cash from sales (incl. VAT) 180,000 216,000 259,200
Cash received from debtors 36,000 43,200 51,840
Capital 5,000 0 0
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loans received 10,000 0 0
TOTAL £ 231,000 259,200 311,040
EXPENDITURE
Wages to staff (incl. PAYE &
NI) 4,500 4,725 4,961
Premises (rent, rates &
utilities) 360 378 397
Telephone & Broadband 120 126 132
Printing, post & stationery 60 63 66
Advertising & promotion 240 252 265
Bank charges 200 210 221
Professional fees 60 63 66
Insurances 41 43 46
Bank/HP 200 160 120
Equipment & vehicle leasing 6,000 7,200 8,640
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Payments relating to variable
costs 36,000 43,200 51,840
Capital Expenditure 2,000 2,400 2,880
Other Payments 600 720 864
VAT 11,924 14,492 17,581
Owner's wages/salary 600 600 600
Loan repayments 2,000 2,000 2,000
Stock 18,000 21,600 25,920
Consumables 18,000 21,600 25,920
TOTAL £ 100,905 119,832 142,518
0
Income less expenditure 130,095 139,368 168,522
Opening bank balance 0 130,095 269,463
Closing bank balance 130,095 269,463 437,985
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