Business Plan for Go Organic: Cost, Profit, and KPIs

The business plan for 'Go Organic' outlines the introduction of organic fruit juices in the UK market, targeting major cities and the young generation. It details the business idea, potential risks, and funding strategies, including a start-up loan. The plan includes a comprehensive cost analysis, differentiating between fixed and variable costs, such as setup, staff, raw materials, rent, and marketing expenses. A budgeted profit forecast is presented, showing a projected profit of £208,200 on sales of £340,000, with a net profit margin of 61% and a contribution sales ratio of 80.29%. A cash flow analysis is also provided. The cost-volume-profit analysis determines a break-even point of 4,037 units, or £80,740 in sales, with a margin of safety of 76%. Key performance indicators (KPIs) are established, focusing on sales growth, customer acquisition, and operational efficiency, like reducing costs and increasing customer satisfaction. The plan recommends a more focused approach on market trends, customer value, and sales prices to improve financial outcomes and margin of safety.

BUSINESS PLAN

Table of Contents
Go Organic Business plan...............................................................................................................3
Business idea...............................................................................................................................3
Costing.........................................................................................................................................3
Budgeted Profit forecast..............................................................................................................5
Cost volume profit analysis.........................................................................................................6
Key performance indicators.........................................................................................................7
RECOMMENDATION...................................................................................................................7
REFERENCES................................................................................................................................1

Go Organic Business plan
Business idea
It refers to the main idea concerning with the business that will lead the entire business
towards the direction of its objective (Kant and Gaba, 2020). It is the base of the business that
guide and lead the company. The main business idea behind the introduction of Go Organic is to
introduce a wide range of organic fruit juices for the people of UK so that apart from the fried
and unhealthy food they can attract and inculcate the fresh farm juices in their diet. The main
area of the UK including the London, Manchester, Edinburgh and various other big cities will be
targeted. The reason behind the launching of Go Organic is to ensure and deliver a healthy life
and healthy diet to the people of UK. However, majorly the young generation around the age of
18 to 30 would be targeted.
As along with raising the intensity of market competition it is quite common that Go
Organic may also have to fight this competition along with facing various risk. Risk in the form
of non-acceptance by customers, high intensity competition, raising expenses, changing trends
may affect the business of Go Organic. Being planning to serve at the larger scale so in order to
support the business it would require major source of funds in order to cover its cost and the
expenses of establishment. In order to source its initial funding, the company may move towards
the start-up loan facility of the UK’s government. This means that by taking a loan of
approximately £6000 it can initially begin its business. As along with facing the various risk and
financial issues Go Organic is ready to serve the population of UK with its organic juices.
Likewise, by converting the risk into opportunities Go Organic is ready to enter into the market
of UK.
Costing
Income:
Before costing it being assumed that the income percentage of the Go Organic would also
meet its planned objectives. As it is planned that an estimated of 17000 units at the rate of 20 per
unit in the initial year of its market exploration. Since the product would be applicable for the
whole year so an estimated sales of the year would be:
January 800 May 1,400 Sept 2500
February 1000 June 1,800 Oct 2000
March 1200 July 2000 Nov 500

April 1,250 Aug 2000 Dec 550
Cost:
It is an important element or the concept associated with the establishment and the
running of every business. Cost refers to the main element or the expenses that every company
including the Go Organic have to bear before serving its customers. The cost structure of Go
Organic is basically comprised of two types of cost. The may include fixed and variable. Fixed
cost refers to the fixed expenses and the cost that the company have to bear at every possible
aspect (Pagare, 2020). While variable cost may vary as per the situation and requirement of the
business (Geiszler, Baker and Lippitt, 2017). The main cost associated with Go Organic are:
Set up cost:
It refers to the cost of all the equipment that is being required in the setting up of the business. It
would be estimated around £75000. This cost will be depreciated over a period of three years as
£25000.
Staff cost:
It refers to the cost of the employees or the salary which is needed to be paid by the
company and cover under its fixed cost. The 4 manufacturing staff would be paid at a salary of
£30000 per year.
Raw material:
It includes the cost of raw material that will lead to the production of final products. An
estimated cost of raw material over every product would be around £ 5 per product.
Rent:
This is also a fixed expense or cost of the company. it would be estimated around £4000
per quarter.
Electricity:
Electricity cost is also a fixed expenses associated with the Go Organic. It would be
expected around £40000 for the year out of £6000 would be counted as fixed.
In addition of this company may also have to incur an administrative cost of around £7000
per year which will be spread throughout the year in terms of legal fees, audit fee and various
other. The company will also have to bear a 3% interest on bank loan. Likewise, a cost of
advertisement estimated around £0.5 per brochures which it will deliver to the people. An

estimated of 6000 brochures per year would be plan to deliver. An insurance cost of around
£4000 paid per year in February.
Cost analysis:
Cost type £ Fixed/Variable Notes
Set up cost 75000 Fixed Depreciation of £ 20000
Staff cost 30000 Fixed
Raw material 30000 Variable 60000 kg@ 5 per unit
Rent 16000 Fixed 4000 per month
Electricity 40000 Semi variable 6000 fixed and remaining variable
Administration 7000 Fixed
Advertisement 3000 Variable 6000 estimated brochures @0.5
Insurance cost 4000 Fixed
Bank interest 1800 Fixed 6000 @ 3%
Total 206800
Budgeted Profit forecast
Forecasting of profit refers to the percentage of profit that is being expected to be earned
and generated by the company in the future (Ahmed and et.al., 2019). It acts as an assistance that
guide the company to moult its business operation so that it can grab the targeted and forecasted
profit.
Particular £ £
Income from
sales 340000
Less: Variable
cost
Material 30000
Electricity 34000
Advertisement 3000
-67000
Contribution 273000
Less: Fixed cot
Staff cost 30000
Electricity 6000
Administration 7000
Rent 16000
Bank interest 1800
Insurance 4000

-64800
Profit 208200
Notes:
From the above calculation it is cleared that the company is making a profit of 208200 from the
sales of £340000. This means that the company is earning at net profit margin of 61%.
Contribution sales ratio is 80.29%.
Budgeted cash flow
jan feb march april may june july august sep oct nov dec
inflow
sales 10 27 32 28 30 35 45 50 35 25 55 50
outflow
staff cost 3 3 3 3 3 3 3 3 3 3 3 3
set up cost 75
material 2 3.5 2 1 1.5 2.5 3.5 4 2.5
rent 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6
electricity 2 5 4 3 2 1.5
administration 7 7 7 7 7 7 7 7 7 7 7 7
advertisement 1.2 3 2.5 1.5 2.3 3.7 4
insurance cost 4 4 4 4 4 4 4 4 4 4 4 4
bank interest 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8
total outflow 94.4 24.1 24.4 25.4 21.4 18.9 20.4 19.7 21.9 24.6 26.9 19.9
net cash flow -84.4 2.9 7.6 2.6 8.6 16.1 24.6 30.3 13.1 0.4 28.1 30.1
Cost volume profit analysis
Breakeven point:
It refers to that point where the production cost is equal to revenue of the product. This
means that it is a situation of no profit and no loss (Kostjukova, 2018). Here the cost will be
equal to revenue of the product so that company would not come into the position of loss.
Calculation of Breakeven point:

Particular Calculation
Total fixed cost £64800
Contribution £273000
Number of sold units 17000
Contribution per unit £273000/17000=16.05
Break even units £64800/16.05=4037.38
Break even point in sales value 4037*20= £80740
Margin of safety= Budgeted
output-BEP
=17000-4037
=12963
=12963/17000
= 76%
From the above calculation it is clear that the company will achieve its break even at a sale of
4037 units which is equal to the sales value of £80740.
The company’s margin of safety is 76%. This means that the sales will fall at a percent of 76
before making a loss. This is not quite healthy margin of safety.
Key performance indicators
These are the main indicators that helps the company to measure its success and the
performance. These are act as controlling and monitoring measures against which the company
can measure its actual performance with the standard one (Jetter, Eimecke and Rese, 2018). With
regard to the Go Organic also it set its KPI so that it can measure its actual performance against
the standard. Percentage of sales that includes a raise in the 10% per year sales revenue is being
identified as KPI for the company. Measurement of actual performance in terms of actual sales
with the KPI would enable the Go Organic that whether it has hit the target or not.
Likewise setting of KPI in the form of raising of customer’s share by a minimum adding of
30 customers every month would also be measuring estimate for the company by which it can
measure that whether its succeed or not.
Similarly, setting up of standard in the form of reducing operating cost by 7%, increase
customer satisfaction by 90%, raising the morale of the employees, reducing absenteeism,
reduction of process cycle and various other measures would also be counted and considered as
KPI for the Go Organic. By having a measurement of actual performance at the end of the year

against these KPI, Go Organic can determine its actual business performance and efficiency.
Through this it can also analyse that whether it is moving in a correct direction or not.
This KPI will also assist the company apart from evaluation that in case of occurrence of any
loopholes and deviations the company can take corrective actions so that it can mitigate the
deviation percentage and grab success and help it to accomplish its business goals.
RECOMMENDATION
 From the above analysis it can be recommended that although the planned activities and
business forecasting is well equipped that can assist the company towards the direction of
its goal achievement but a more careful analysis of the market trends and accordingly the
customer’s preference would enable the company to raise its sales percentage and
improve the margin of safety.
 Likewise, it is also recommended that along with making and focussing on financial
forecast a high focussed concentration of over the determination of sales price or the
customer’s value would also be needed. This means that the setting up of prices as per the
value of the product would not only assist the company in terms of raising or improving
the sales but it will also lead to improvising its financial position.
 Likewise, it is also recommended that as per the market condition an increment in the
sales price would enable the company to raise its marginal contribution. This would
further assist the company to improve its margin of safety. It is again to be noted that
along with raising of sales prices a reduction in the variable cost per unit would also lead
to an improvement of margin of safety (Stoenoiu, 2018).

REFERENCES
Books and journals
Ahmed, and et.al., 2019, October. Enhance Smart Sales Forecast and Budgeting Management.
In 2019 IEEE 9th International Conference on System Engineering and Technology
(ICSET) (pp. 162-165). IEEE.
Geiszler, M., Baker, K. and Lippitt, J., 2017. Variable Activity‐Based Costing and Decision
Making. Journal of Corporate Accounting & Finance. 28(5). pp.45-52.
Jetter, J., Eimecke, J. and Rese, A., 2018. Augmented reality tools for industrial applications:
What are potential key performance indicators and who benefits?. Computers in Human
Behavior. 87. pp.18-33.
Kant, U. and Gaba, A.K., 2020. Unit-9 Business idea generation. Indira Gandhi National Open
University, New Delhi.
Kostjukova, S., 2018. Profit management of building organizations based on the authorial break-
even concept. MEST Journal. 6. pp.34-40.
Pagare, S., 2020. Cost and Works Accounting Paper-I.
Stoenoiu, C.E., 2018. Sensitivity of indicators used in cost-volume-profit analysis. In MATEC
Web of Conferences (Vol. 184, p. 04003). EDP Sciences.
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