Financial Plan for Rainbow Online Gift Shop

The assignment content presents a business idea for an online gift shop called Rainbow Online Gift Shop, which aims to sell specialty cards, gifts, and home accents. The financial plan indicates that the company will incur losses in its first years of operation but expects profits in the future. The report highlights expenses such as rent, insurance, salary, miscellaneous expenses, website development, delivery and packaging, and logistics charges. The business will utilize a management information system (MIS) to control operations and improve processes through information and communication technologies (ICT). The vision of the company is to be the best online sellers of gift cards and items while providing exceptional customer service.

ENTERPRISE AND NEW BUSINESS
Business Plan for Online gift
shop

Table of Contents
INTRODUCTION...........................................................................................................................1
Proposed Future Business................................................................................................................1
Target Market and Customers.........................................................................................................2
Competitors......................................................................................................................................3
Skills analysis..................................................................................................................................3
Resource requirement and financial analysis..................................................................................4
Sources of funds to grow the business opportunity.........................................................................4
Plans for obtaining resources...........................................................................................................7
Type of organisation and system used to control the business........................................................9
Vision for Business idea..................................................................................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Business expansion and development are key requirement to attain success and achieve
desired goals (Thomas and Derammelaere, 2013). Successful entrepreneurs always look for
opportunities to advance an idea so as to meet market gap or requirement and can grow business
(Drucker, 2014). This unit deals with a business growth plan of a gift shop, whereas, the business
is going to expand on an online platform. Here, the business is planning to sell gift card and
items over online platforms to grow business. It includes a unique business idea, target market,
products and services, competitor analysis, skill analysis and financial plan for corporate entity.
Proposed Future Business
The business idea is all about selling gift items and cards over online platform with the
aim of expanding business operations. The “Rainbow gift shop” is proposed name for online
business. Through, its online business the organization is going to establish a "Brand Identity" in
the gift retailing market of London, United Kingdom by selling high-quality customers services
and gift cards and products. The customer is going to offer a relaxing and engaging shopping
environment through which customers are provided with unique, high-quality merchandise at
affordable prices.
Feasibility of business idea
The business idea herewith is of selling gift items and cards through online platforms,
therefore, implement e-commerce capabilities for business so that more and more customers can
be attracted towards business. The proposed business idea is feasible as the statistics represent
that UK gift card market is growing. In 2015, the market was UK gift card market was estimated
to be worth over £5.4bn, and internet provides an enormous boom over previous years. The
figures extracted from Understood (2015) it has been noted that annual sales of gift items and
cards is increased by 8.07% over 2013 (Understood, 2015). Including this, percentage growth in
retailer sales of gift cards in the UK has been grown by 10.62% in 2014from previous years (The
Statistics Portal, 2015). The trend of online shopping in the UK is increased as in 2014, it was
£1071 which is increased to £1174 which is a clear indication that online spending on gift cards
and items will be an opportunity to increase business operations (Moth, 2015).
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Products and services
Rainbow Online Gift Shop is going to offer range of specialty cards, gifts, and home
accents. The company will offer product range including brochures, business cards, and
calendars occasion cards: Greeting cards, wedding invitations, etc. It is also going to offer
customized apparel such as T-shirts with customized printing, gift items and home accessories,
collection of modern accents, specialty Gifts etc. The Gift Wrapping Services will also be
provided to customers.
USP/ Innovations
The USP of proposed business is that it provides an option of customizing almost any
item of product line such as customized printing services. The innovation of business includes
engaging customers or clients for raising creative ideas. The company will provide discounts
which are here listed:
 Spring: 10-15% discounts
 Fall: 15-20% discounts
 Summer: 15-20% discounts
 Occasions: 25% discounts
Target Market and Customers
The business is going to offer online gift cards and items to customers therefore, main
target market are people live in the UK. The market of proposed business sis going to be
segmented on the basis of demographic profile such as income, age, occupation, etc (Cravens
and Piercy, 2010). The population aged (age 0-59) and lives within a 5 mile radius of Rainbow
Gift Shop is to be targeted. Mainly youngsters and women will be the targeted customers. Here,
is the list of customers for Rainbow Gift Shop:
 Mainly Female
 Online shoppers
 Educated, homeowner
 Middle-to-upper class
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 Aged between 15- 49 years of age
 The people who enjoy spending time with family and friends
 People who are attracted through Word-of-mouth and referrals from friends and colleagues
Competitors
The organization is going to face huge competition from the market as there are many
online and offline gift providers in the London, UK. The offline providers are the indirect
competitors of company, on the other hand, online service providers are direct competitors for
Rainbow Online Gift Shop.
Companies Address Services Prices
Dot com gift shop Unit 3-4 Allied Way , London
W3 0RL
Website: dotcomgiftshop.com
Extensive range of gifts and
home accessories, Fast
delivery, excellent customer
service!'
Moderate
prices
Find me a Gift Northfield Road, Kineton Road
Industrial Estate, Southam,
Warwickshire, CV47 0FG, UK
(http://www.findmeagift.co.uk/)
Product: Personalise cards,
wide range of designs.
Affordable
Prices
Temptation Gifts E-Commerce Dept
Unit 2E, Woodlands Farm
The Vale Chesham Bucks
HP5 3NS, UK
http://
www.temptationgifts.com/
contact-us
Offers range of gifts and cards
with different designs.
High Prices
Skills analysis
The proposed online gift business is going to require lot of skills for attaining success of
corporate entity. The business idea is to be facilitated with entrepreneurial skills such as
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managerial skills, technical, analytical, managerial (Operational) and Soft skills. This business
idea requires to have lot of analytical skills on which behalf forecasting can be done (Zikmund
and Barry, 2010). Including this, entrepreneur of online business must be a risk taker which must
be financial risk or overall business risk. Business owner also requires technical skills as
business is going to be operated on online sites
Resource requirement and financial analysis
The online business requires less number of resources to operate business success,
however, resources must be sufficient to offer convenience to customers and competitive
advantage to business (Kraten, 2010). The new venture is going to require few staff who will
handle functions of business. The technical resources include website, which must be attractive.
This will be needed high level of capital investment which will be denoted as financial resource
requirement. Further, finance will be required for developing an e-commerce website, paying
license fees and miscellaneous charges, and competing others etc. IT specialists and talented and
experienced professionals are required to manage human resources. In the form of physical
resources, company requires warehouse, telephone line etc.
Sources of funds to grow the business opportunity
To successfully operate business, owner requires to access finances from different
sources. The sources of acquiring funds can be internal or external. Internal sources of finance
for proposed business is personal capital. The owner will put £15000 as personal capital, on the
other hand £30000 will be acquired from bank loan. Here, this section presents initial expenses
and future incomes, along with future projection of sales and cash flows.
Assumptions for financial plan:
 The sales of online operations will increase by 10% every year.
 Warehouse rent and corporate office rent is going to increase by 5 %
 The bank loan interest rate will be 7.83%.
 Marketing and promotional expenses will be increased by 10% p.a.
 The staff will be paid salaries and wages which will further increase by 7%
 The loan will be repaid in coming three months.
 The website development and maintenance charges will be £1500 which will be
increased by 5% per annum
 Gift items Packaging and delivery charges will be 5% of sales
 Logistic charges will be of10% of sales
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 Tax rate 20%
 COGS is 30% of sales.
 Utilities expenses (electricity, telephone etc.) increased by 10% every year.
 Warehouse insurance will be of £200 per annum
 Miscellaneous expenses will be increased at the rate of 5% increase
START-UP EXPENSES
Table 1 Sales Projection
Year 1 (£) Year 2(£) Year 3(£)
Units of
products
sold
1500 1650 1815
Average
price
150 150 150
Revenues 225000 247500 272250
The sales of online gift store is going to be increased by 10% in a year.
Table 2 Projected cash flow
Cash flow statement
Pre-Operating
Year
Year 1
(￡)
Year 2
(￡)
Year 3
(￡)
CASH INFLOW
Opening Balance 0 38000 81503 137605
Sales 0 225000 247500 272250
Owner's fund 20000
Bank Loan 60000
Total Cash Inflow 80000 263000 329003 409855
CASH OUTFLOW
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Working Capital 15000 0 0 0
Legal and Registration Charges 2000 0 0 0
Market Research 5000 0 0 0
Marketing and promotional 10000 10000 11000 12100
Utilities (Electricity & Phone) 0 5000 5500 6050
Rent of warehouse 0 2000 2200 2420
Website development and maintenance
charges 0 1500 1575 1654
Delivery and packaging 0 11250 12375 13612.5
Logistic charges 0 22500 24750 27225
Interest on loan 0 7047 4698 2349
Salary 0 100000 107000 114490
Miscellaneous Expenses 10000 2000 2100 2205
Insurance 0 200 200 200
Tax 0 0 0 0
Loan Repayment 0 20000 20000 20000
Total Cash Outflow 42000 181497 191398
202305.
5
Closing Balance 38000 81503 137605
207549.
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Table 3 Projected income statement
Particulars Year 1 (￡) Year 2 (￡) Year 3 (￡)
Revenue 225000 247500 272250
Less: COGS (40%) 67500 74250 81675
Gross Profit 157500 173250 190575
Operating Expenses
Legal and Registration Charges 2000 0 0
Market Research 5000 0 0
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Marketing and promotional 10000 11000 12100
Utilities (Electricity & Phone) 5000 5500 6050
Rent of warehouse 2000 2200 2420
Insurance 200 200 200
Salary 100000 107000 114490
Miscellaneous Expenses 2000 2100 2205
Website development and maintenance charges 1500 1575 1654
Delivery and packaging 11250 12375 13612.5
Logistic charges 22500 24750 27225
Total Operating Expenses 161450 166700 179956.5
Operating Profit -3950 6550 10618.5
Less: Interest -309.285 512.865 831.42855
PBT -3640.715 6037.135 9787.07145
Less: Tax -728.143 1207.427 1957.41429
Net Profit -2912.572 4829.708 7829.65716
Plans for obtaining resources
The organization is going to require resources such as tangible and intangible however, it
has to plan for acquiring such resources for opening and functionally of online gift store
(Blackwell, 2011). The financial resources will come from both owner's personal finances and
Bank loan. The business has to purchase tangible resources such as additional computer, POS
system, additional high-quality printing equipment etc.
Activities Week 1 Week 2 Week 3 Week 4 Week 5
Assessing the requirements
of resources
Finding out financial need
Sourcing finance from
different sources
Human resource planning
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Acquiring workforce
Review resource
requirement and make
changes
Personnel Plan Budget for salaries Roles
Owner £20000 Supervision, accounts handling
5 key staff members £60000 Technician, sales executive, Marketing and
promotional head, customer service
executive, inventory handler
Other Staff (6 delivery
boys)
£20000 Delivery boys
Table 3: Start-up expenses
Market Research £5000
Marketing and promotional £10000
Utilities (Electricity & Phone) £5000
Rent of warehouse £2000
Insurance £200
Salary £100000
Miscellaneous Expenses £2000
Website development and
maintenance charges
£1500
Delivery and packaging 11250 (5% of sales)
Logistic charges £22500 (10% of
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sales)
Type of organisation and system used to control the business
The proposed business will be a type of private organization which will be aiming at
maximizing business profits and capturing huge market share. To attain the objectives of
business owner will focus on strategies such as Prices, Promotions, Distribution channels,
Customer relations and Product development. There will be total 12 members in the organization
among which one will be owner who will supervise activities and will handle accounts.
Including this, 5 key staff member will technician, sales executive, marketing and promotional
head, customer service executive, inventory handler, and rest staff will be delivery boys. For
controlling the business operations management information system (MIS) will be used which is
a computerized database of financial information which will be helpful in producing reports on
operations for business. Including this, information and communication technologies (ICT) will
be used to improve business processes and enhancing organizational value chain (Bauknecht,
Madria and Pernul, 2012).
Vision for Business idea
The vision of Rainbow Online Gift shop is to be the best online sellers of gift cards and
items while showing e-commerce capabilities. The vision of company is to be achieved through
selling specialty cards, gifts and home accessories over convenient platform. The proposed
business is dedicated to provide exceptional customer service within a visibly relaxing
and engaging shopping environment. The success of business entity is to be attained by offering
them a unique, high-quality merchandise at affordable prices.
CONCLUSION
The above report explained a business idea of an online gift shop selling gift items and
cards namely “Rainbow gift shop”. The products of business includes specialty cards, gifts, and
home accents. The company will offer product range including brochures, business cards, and
calendars occasion cards which will be targeted to educated, homeowner, shopper 15- 49 years
of age. The financial plan represented that company is going to earn losses in the first years of
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business commencement. However, in upcoming years a sound profits from business are
expected.
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REFERENCES
Books and Journals
Bauknecht, K., Madria, S. and Pernul, G., 2012. Electronic commerce and web technologies.
Springer.
Blackwell, E., 2011. How to Prepare a Business Plan: Create Your Strategy; Forecast Your
Finances; Produce That Persuasive Plan. Kogan Page Publishers
Cravens, D. and Piercy, N. F., 2010.Strategic marketing.McGraw-Hill Irwin.
Drucker, P., 2014. Innovation and entrepreneurship.Routledge.
Kraten, M., 2010. Business Planning and Entrepreneurship: An Accounting Approach. Business
Expert.
Thomas, D., and Derammelaere, A., 2013. Writing a Convincing Business Plan. Barron's
Educational Series.pp.145-180.
Zikmund, W. and Barry, B., 2010. Exploring Marketing Research. Cengage Learning.
Online
Moth, D., 2015. UK online retail sales to reach £52.25bn in 2015. [Online]. Available
through :< https://econsultancy.com/blog/66007-uk-online-retail-sales-to-reach-52-25bn-
in-2015-report/>. [Accessed on 25th August 2016].
The Statistics Portal. 2015. [Online]. Available through :<
http://www.statista.com/statistics/376356/sales-growth-quarterly-retailers-sales-gift-
cards-vouchers-united-kingdom-uk/>. [Accessed on 25th August 2016].
Understood, 2015. Gift Card Sales 2014/2015. [Online]. Available through :<
http://www.underhood.cab/2015/06/30/gift-card-sales-201415/>. [Accessed on 25th
August 2016].
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