Business Revenue Analysis: Car Wash, Kebab Van, and Coffee Shop

This assignment provides a comprehensive analysis of revenue calculations for three distinct business models: a car wash, a kebab van, and a coffee shop. The car wash analysis includes calculations for gross revenue under full capacity and reduced capacity with employee breaks, considering both car wash and vacuum cleaning services. The kebab van analysis calculates gross revenue based on a 98-hour operational period, factoring in production time, employee breaks, and varying operational efficiencies. The coffee shop analysis calculates gross revenue and net profit based on hourly customer service rates and production costs. Furthermore, the assignment delves into a discussion about the strategic decision of buying an existing coffee shop versus starting a new one, weighing the pros and cons of each approach, considering factors like location, existing customer base, and financial implications. The conclusion recommends purchasing the existing coffee shop due to its established presence and loyal clientele, emphasizing the advantages of continuity and reduced risk compared to launching a new business.

Strategic Management Calculations
INTRODUCTION
Two business models are presented below for the purpose of calculating their gross
revenues based on various situations. The first business in consideration is the car wash
which has 6 bays and operates for 48 hours. It offers two types of services car wash and
vacuum cleaning and it has 12 employees. For car wash charges are $40 per car while
$10 is charged for vacuum cleaning. Calculations have been done to show gross profit
when the business is running at full capacity continuously for 48 hours and when it is
operating at a capacity of 75% with employee breaks in between.
Task 2 is a kebab business where it is produced and delivered in a van. The period of
operation is 98 hours. There are four employees and it takes 5 minutes to produce one
kebab and 6 of them roll out at the same time. Gross revenue has been calculated when
production is at full capacity with employee breaks factored in also when the production
is at 75% of its capacity with employee breaks included.
Finally gross revenue and net profits have been calculated for a coffee shop which serves
16 people per hour and runs for 48 hours. It costs 30 cents to produce coffee which then
sells at$4.50
Calculations are explained and a table is attached to support them.
Task 1
1.Calculating the maximum gross revenue for the business of the car wash assuming all
the bays are operating continuously for a 48 hour period:
Total number of bays= 6
Length of the operations period: 48 hours or 4 working days of 8 hours each.
Washing: takes 20 minutes @ $40 per wash
Vacuum cleaning: takes 10 minutes @ $10 per cleaning.
Washing
Working hours per day= 8 which is equivalent to 8x60 =480 minutes

The maximum number of cars to be washed per day= 480 minutes divided by 20 minutes
(480/20) =24 cars washed per day. For the 48 hour period or four days, 24x4= 96 cars
washed
Gross revenue for the washings: 96x$40= $3840
Vacuum cleaning:
Working hours per day= 8 which is equivalent to 8x60 =480 minutes
The maximum number of cars to be washed per day= 480 minutes divided by 10 minutes
(480/10)=48 cars vacuum cleaned per day. For the 48 hour period or four days, 48x4=
192 cars cleaned.
Gross revenue for vacuum cleaning: 192x$10= $1,920
Total gross revenue for the Car Wash: $3,840
$1,920
Total gross revenue, 48 hours $5,760
2. Calculating the maximum gross revenue of the business operating with employee
breaks included and all bays active only 75% of the 48 hour period.
(It is assumed that employee breaks will not affect operations because they go in turns at
different periods)
Maximum gross revenue: 75% x 5,760= $4,320.
Task 2
Business period 98 hours
Minutes in 98 hours= 5880
Calculating the maximum gross revenue for the kebab van in every 98 hour period.
The number of kebabs produced in the 98 hour/5880 minute period: 5880 minutes
divided by 5 multiplied by 6 (5880/5x6) = 7056 kebabs. Assuming that all the kebabs are
sold, the gross revenue is 7056x $10= $70,560.
Calculating the maximum gross revenue for the kebab van in every 98 hour period
inclusive of employee breaks: During the 98 hour period, there are 11-hour breaks. If for

98 hours gross revenue is $ 70,560 what about in 87 hours (98 less 11)? It is
$70,560/98= 720x87= $62,640.
If the business operates at an efficiency of 75% including employee breaks, the gross
profit will be$62,640x75%= $46,980
Competitor’s Business
Calculating the gross revenue of the coffee shop in 48 hours, assuming that it serves 16
people per hour: 48x16=768 x $4.50= $ 3,456.
Cost of production: 768x$.30= 230.40
Net profit= Gross revenue less cost of production= $3,456 less 230.40= $3,225.60
Task 3
INTRODUCTION TO TASK 3
People in business often face the critical decision as to whether to start a business of scratch or
buy an existing one. The following is a discussion evaluating the merits and the demerits of
either purchasing a running business or establishing one. All the factors that are to be taken into
consideration a so as to reach the final decision are spelled out based on the gross revenue. It
takes into consideration all the factors that might influence decision making in this matter. The
recommendation that is given at the end of the discussion is presented in the conclusion.
Purchase or Open Your Own
A calculation of the gross revenues from the coffee shop makes the business to appear very
juicy. Since the production costs are very low the rate of return is very high. The production cost
of coffee is only 7% of the selling price. The profits accruing from this business look very
lucrative.
A careful analysis, however, must be done to determine which one is the best decision to make;
to buy the existing and running coffee shop or establish one from the scratch to compete with it.

Actual business results
Buying an already existing business has its pros and cons. The first and most immediate
disadvantage is money. If you decide to purchase the business you must be ready with cash
because you must pay upfront. As far as risks are concerned a running business is almost a sure
bet. You need not calculate your expected returns from that business using forecasted estimates.
At your fingertips, you have the actual figures because the business has been running and you
can evaluate performance at almost a glance. If the business you intend to buy had shown signs
of faltering and if you have the entrepreneur acumen you might be able to lift it out of stagnation
to greater heights with your expertise.
At times it is difficult to for one to convince one to sell you an existing and running business
especially if it has not been advertised for sale. If the business is booming and there is no
economic reason to sell it, the owner might hesitate to sell it. When a business is being sold
tongues wag and people give unsolicited explanations as to why an owner has decided to sell it.
Many people think that when a business is being sold there is something amiss with it, either it is
about to collapse or the owner is running bankrupt. This is a misconception because reasons why
people businesses vary and are not always negative.
Factors to Consider
Before you decide to buy a business a number of factors must be considered. First of all, is the
location. In the coffee Shop case, this factor is settled because it is strategically placed sitting
close to the car wash. The size is also not such a big factor because with its current capacity the
coffee shop is making good profits. Acquiring the coffee shop will not also change or interfere
with your lifestyle. You are already operating a business which runs at the same time as the
coffee shops.
Buyers of existing businesses do a lot of research prior to making their purchase because they
want to cut out the best deal. With the coffee shop deal, you have almost every detail about it and
you will not spend a minute or even a dollar to research about it. One other thing which a buyer
of a running business does is to carry out due diligence which enables the buyer to know the true
worth of the business and how much of the current owner’s link to the business adds value to it.
You will need the services of experts in valuation to do it for you.
After all of the above is accomplished the next big and very important issue is finance. To buy a
running and profitable business is not a cheap undertaking. You will either use your own money
to purchase it or get a financier.

Opening Your Own
Alternative to buying a running coffee shop business you can choose to establish your own next
to the existing one and compete with it. Starting a new business from scratch is a lengthy
process. There are start-up expenses you will have to meet.
One of the very first questions is about the premises on which you will run the business. Are you
putting up a new structure or are you going to lease an existing one? If you are building a
structure do you have land in the exact place where you want to establish your business?
There are also issues regarding a business name, registration, and licenses. If you will build the
shop will your finances allow you to complete the construction and leave you with an amount to
run your new business?
The coffee shop business looks lucrative but its fortunes might nose dive if you establish yours to
complete with your neighbor’s. When you establish your own coffee shop, the number of coffee
shops will increase by 100% from one to two. The number of customers will not increase
correspondingly. They will remain the same or reduce and you will be left to share the same with
your established competitor. There is also no guarantee that you will succeed to woo all or part
of all your employees who currently patronize the existing coffee shop to move to your new set
up.
CONCLUSION
After weighing and considering all the factors it is the conclusion of this discussion that to buy
an existing coffee shop business carries more merit than starting one of your own to face a
known and established competitor. There is more business sense in buying an existing enterprise
than starting your own. An existing business has established itself, and it has a name and a loyal
clientele. A new business started from the scratch will consume a lot of time to stand on its feet,
and while you will be in the process of establishing it you might spur your competitor to fortify
himself against your encroaching competition.
Buying the existing business will foster continuity. There will be no reason why you might lose
the existing clientele and the customer base when you take over the business. Starting a new
business will need time and resources to establish loyal patrons and maintain profitability at the
same level.