Scaling Sipping Coffee: Business Plan, Funding & Growth Strategies

This report provides a comprehensive analysis of growth strategies for a small coffee business, "Sipping Coffee." It utilizes strategic frameworks such as Porter's Five Forces and SWOT analysis to assess internal and external factors influencing the business's competitive advantage. The report evaluates growth opportunities using the ANSOFF matrix, exploring market penetration, product development, market development, and diversification strategies. Additionally, it identifies potential funding sources for business operations, including loans from banks and financial institutions, crowdfunding, venture capital, and peer-to-peer lending, while outlining the advantages and disadvantages of each. The report also touches upon the importance of a business plan for growth, including financial information and strategic objectives for scaling the business, and briefly explains exit or succession options for small businesses.

Business Consultant

Table of Contents:
Introduction:..............................................................................................................3
P1...............................................................................................................................3
Analyzing various internal and external factors to get competitive advantage
over others:............................................................................................................3
P2...............................................................................................................................5
Evaluating growth opportunities after applying ANSOFFF matrix:.....................5
P3...............................................................................................................................7
Potential sources of funding available to business operations:.............................7
P4...............................................................................................................................9
Business plan for growth includes financial information and strategic objectives
for scaling the business:.........................................................................................9
P5.............................................................................................................................11
This explains exit or succession options for small businesses:...........................11
Conclusion:..............................................................................................................13
References:..............................................................................................................14

Introduction:
This report takes into consideration a small coffee business named as
Sipping Coffee and how it will expand its operations. Moreover, this report
explains various strategic frameworks to analyze the risk and challenges which
businesses has to encounter in order to grow and make profits. This framework
includes Porters five forces model which businesses should take into consideration
to take advantages of the opportunities available and minimize its threats. This
report also explains SWOT matrix which evaluates internal and external factors
with an objective to make profits by reducing costs. Other than this, ANSOFF
matrix is used to see how businesses should expand as per the resources available
and prevailing situations of the concern. This report also highlights various sources
to raise funds and what their pros as well as cons. Raising of funds will provide
additional benefits to improve their quality and expand their businesses.
P1
Analyzing various internal and external factors to get competitive
advantage over others:
Each and every business whether small or big conduct in depth analysis of
internal and external factors in order to grow. In relation to starting coffee business
an entrepreneur has to address all factors to avoid any kind of threats. In this
porters five forces tool is used to indentify main sources of competition in industry.
When businesses understand these factors they make relevant changes in strategies
to boost up the profitability and survive in the competition. This helps them to take
advantage of strength or improving inefficient areas with an objective to take
businesses for long term. (Aćimović, Mijušković and Rajić, 2020) This model was
introduced by Professor Michael porter to evaluate industry attractiveness and
figure out its profit potential. This strategic tool has become one of the most
popular and highly regarded business tools to improve the performance of concern.
According to porter, there are five forces which represents pressure on any industry
namely,
1. Completive rivalry: This is the first and foremost factor which businesses
consider to look at the number of existing competitors in the market place.

This means thoroughly examining all aspects of competitors with regards to
quality of goods and services they offer, how much prices do they charge
and how much profits they make, all these factors will give an idea to
establish an operations. In case of aggressive markets, companies make
profits by cutting down the prices of the products and spending high amount
on advertising and promotional campaigns to create brand awareness.
However, this helps customers to evaluate from where they should purchase
products. (Candelo, 2019) Alternatively, if companies have less competition
in the market, this gives an advantage of charging prices as per their own
convenience and make healthy profits. So, according to this companies make
business decisions after examining keen areas with regard to their
competitors.
2. Bargaining power of supplier: It means determining how many suppliers
do company have, how much they charge, how unique their products and
services from other competitors are and so on. This will give an idea to
business to make decisions whether to take resources form the same vendor
or switch to another one. In case, if coffee business has many vendors, then
it will be easier to switch to cheaper ones whereas, if they have only few
suppliers to rely on, they would give additional powers to suppliers to
charge more from company. So, this impacts the profitability position of the
enterprises positively or negatively. (Ahan, Rahim and Nilashi, 2017)
3. Bargaining power of customers: It is another important factor to look
upon. It means figuring out how many buyers do companies have, what kind
of products and services they demand, prices at which they want products
and services and so on. If they are large number of customers in the market
place this gives an advantage to businesses to make high profits due to high
sales. Whereas, if buyer number is small, this gives them power to switch
cheaper competitors which ultimately forces other companies to lower down
their prices in order to survive in competitive market place. All these
external factors are examined by businesses to make fruitful decisions for
present and future purposes. Moreover, it will help them to choose pricing
strategies according to prevailing market conditions and make high profits.

4. Threat from substitute products: this is an external force which
companies should analyze in order to grow in the market place. If there are
many substitutes available in the markets this gives an opportunity to buyers
to move to cheaper ones. Ultimately, this negatively impacts business
capability of making profits and makes its challenging to survive in high
competition. It weakens business positions and forces it to cut down its
prices in order to survive.
5. Threat from new entrants: If coffee business is offering products and
services that has high quality and at reasonable prices from competitors, then
it has more chances of making exceptional profits. As per this external force,
if it is easy for other businesses to enter into market and offer similar or
better services then it will negatively impact the profits of company.
Alternatively, if there are strong barriers to enter in markets then it will give
businesses an advantage to make high profits due to few dealers of products
in market place. (Bitat, 2018)
P2
Evaluating growth opportunities after applying ANSOFFF matrix:
To set up small business operations it becomes relevant to analyze each and
every aspect of market keenly. To figure out more opportunities company is
making use of ANSOFF matrix to maximize its business profits by minimizing its
risks. It is introduced by mathematician and business manager, H. Igor ANSOFF
As it is market expansion grid which is used by the companies to evaluate and plan
their future strategies for future growth. Here, by using this tool businesses expect
to see long term future growth by expanding its operations. This tool will helps
coffee business owner to choose right strategy for future and analyze risk
associated with each of the strategies. (Donald, 2020) Below are mentioned
strategies:
1. Market penetration: It this company focuses on selling existing products
and services to existing markets. Here, businesses focusing on increasing

their profits by increasing their market share. It can be executed by
companies in variety of ways such as decreasing prices of products and
services to increase more number of customers, increasing the portion of
spending on advertisement and promotional campaigns to entice customers,
creating brand awareness by offering the high quality products at reasonable
prices, acquiring a competitor in the market place and so on. as these are all
the strategies which businesses can use to expand and grow their businesses
and make healthy profits. To accomplish these revenue targets, companies
can put to use AIDA model (attention, interest, desire and action) to catch
customers for using company’s products and services.
2. Product development: This strategy focuses on introducing new product in
the existing markets. For this, companies conduct in depth analysis of
product and services customers are asking for, on which products they spend
more and many more. After analyzing all these aspects of current markets
companies come up with innovative solution to meet the needs of existing
market. Moreover, this strategy can be executed in number of ways such as
by conducting research and development, in this business obtains knowledge
about tastes and preferences of target market in order to serve them better.
They come up with improvised products or newer products which satisfy the
need of customers better. Besides this, Acquiring competitors business or by
forming strategic partnerships with other firms, companies can expand their
operations and better meets the need of existing market. (Farhikhteh and
et.al., 2020)
3. Market development: In this strategy company focuses on introducing
existing products in the market place. Expanding in new markets means
entering into new geographic regions. This comes up with various
challenges in front of businesses as they have to encounter with different
tastes and preferences of customers. These businesses can have profits in
case if new customer needs doesn’t deviate with existing customers or they
are the potential buyers of the company. Expansion can be domestically or
internationally so, companies have to conduct research of prevailing market

before setting up operations. Therefore, expanding operations after proper
research will help to boost profits of the organization.
4. Diversification: This strategy focuses on introducing the new product into
new market place. Although it is very risky, as both product and market are
new but also has the greatest potential of generating revenue. As it opens up
entirely new stream for company to generate revenue and make high profits
out of that. There are two types of diversification: related diversification and
unrelated diversification. Related diversification means there is a linkage of
new product with earlier product line or there are potential synergies
between existing and new product markets and vice versa. (Goovaerts and
Verbeek, 2018)
P3
Potential sources of funding available to business operations:
Finances are the life line of all kinds of business without which it cannot
run. So, all of the companies they plan, organize and control their funds well in
order to run their businesses smoothly. In this financial manager manages the funds
of organization and takes crucial decisions with regards to its investment and
distribution. Businesses need funds to set up the business, purchasing machinery
and other equipments to run business, make payment to workers and so on. So,
these funds can be required for long term period, short term period, medium term
period depending on the activities. Various sources of finances are loans from
banks and other financial institutions, crow funding, venture capital, peer to peer
lending and various others. (Hadinugroho and et.al.,2018)
Loans from banks and other financial institutions:
It means receiving funds from banks or some financial entity with the
assurance of returning it in future along with interest. Principal amount is the
borrowed fund and interest is the charges on these principal amounts. Banks and
other institutions charges interest because they are taking risk in the form that
business owner might go bankrupt or may not be able to return due to any other
circumstances. There are two types of loan issued by banks secured or unsecured.

Advantages:
1. Bank loans allow businesses with flexibility of returning it as per their
convenience. This goes smoothly as long as business owners are making
regular and timely payments.
2. It is comparatively cheaper option as compared to overdraft, credit card and
various other sources.
Disadvantages:
1. As many of banks issues secured loan which asks for collateral security. So,
it becomes challenging for new businesses to raise funds from this source.
2. It may take long for businesses to return back the entire amount and during
these span interest rates also changes. Which means installments will be of
different amount based on the influence of markets on interest applicable.
Crow funding:
It is a practice of arranging funds for the businesses by raising small
amounts of money from large number of people by using online platforms. In
addition to this, on the type of crow funding investors either donate money or get
returns in the form of equity. It is most often used by the startup companies or a
business who wants to expand by using alternative funds.
Advantages:
1. It is a fastest way to raise funds with no straight fees. As well as starting an
operations through online platform will catch media attention and would
lead to more profits to the business firm.
2. It is a good way to get feedback of public responds to your new business
idea. If people are taking interest it indicates that business could operate well
in the market as people are impressed with the concept.
Disadvantages:
1. Businesses have take lot of effort in the form of time and money before
launching their new operations.
2. There are times when people disliked the new concept and may not be
interested to invest which would led to failure of projects prior to its

execution. And due to not meeting funding target, businesses have to return
back money to the investors.
Peer to Peer lending:
This means businesses can raise funds directly from other individual by
removing the role of middleman in between. In this, coffee business owner wants
to set up a business and want funds for that. As per this, sole trader can directly
raise funds from other individual without involving banks in between. (Hafezi,
Akhavan and Pakseresht, 2017)
Advantages:
1. It is a user friendly application and gets fast approval.
2. There is no requirement of financial records in this and no requirement of
showing credit history. Besides this, there is no requirement of security
deposit as user gets loan straightaway without facing any difficulty.
Disadvantages:
1. Only limited loan amount is available through this method.
2. There are chances businesses have to pay additional fees on top of interest
rate charged for the loan amount. Besides this, due to poor financial profile
businesses might not get any loan.
P4
Business plan for growth includes financial information and strategic
objectives for scaling the business:
A business has to plan its activities in advance to conduct its operations
successfully. It helps to monitor current business performance and make future
strategies accordingly. It is a summary of what your business does how it has
developed and where it will go. Moreover, it helps to make or break a business. A
strong business plan provides a roadmap for the future and develops better
understanding of business finances and competition. This focuses on how a coffee
owner will start its operations in a systematic way. It showcases business three to

five year plans, with all goals and objectives mentioned and how business will take
action to achieve those objectives. As starting with company, Sipping Coffee
owner has to create summary of what all company has to offer to its customers and
how it will operate its business. (Helmold, 2019) These are as follows:
1. As it is a first step, deciding about how to start a business. How café will
look like, how it will be decorated, location of business, what all items will
be offered at café? How customers will navigate the location of café and so
on. Well this process begins with getting an inspiration of other cafes, ideas
of images, films and favorite books. So, this will give summary idea of the
business regarding what all company is about and what it has to offer.
2. Name and location of business: Sipping coffee is in the centre of the city
which catches the attention of most of the people and solute their problems
of travelling here and there. It has variety of coffees to offer and various
other items with delicious taste which will definitely attract large number of
customers. (Zhong and et.al., 2019)
3. Studying the existing competition in the market place: It is important to
figure out what all unique businesses offer which competitors doesn’t. It
explains how sipping coffee business competes with other food and
beverage businesses including big coffee chains such as star bucks, Mac
Donald’s and various others. All of this will help in deciding the prices of
the items such as coffee, pastries, sandwiches and others to remain
competitive in the market place.
4. Market analysis: In order to upscale business operations it needs to match its
offerings with tastes and preferences of customers. For this business do
customer segmentation on the basis of their behavior variables. For instance,
how frequently they reach out to café, or are they brand loyal and many
more factors. By dividing the market into segments will help to attract more
numbers of customers.
5. Later, business will decide their own pricing strategy on the basis of analysis
done. In this menu card prices will be determined and by keeping the prices
minimum will help to attract more number of customers.
6. At the last marketing plan will be created to attract more number of
customers in order to make high profits. How businesses will promote their
products on social media, or doing partnerships with other businesses to

retain the customers. Various social media platforms are used by the
businesses to create brand awareness among public. (Kowalik, 2019)
7. After promoting the business they will raise funds from various sources to
start their operations. Financial managers of the business plan and allocate
the funds in various areas in order to make high profits.
P5
This explains exit or succession options for small businesses:
This is a plan of what will happen in case if business owner leave the
business. This showcases how businesses will come to an end just like business
plan which guides how business will go further. There are many business strategies
one can adopt in order to exit their operations such as continuing the legacy in the
family, explore a merger or get acquired by someone, selling the stake to investor,
planning an initial public offer, liquidate the business and so on. In relation to
sipping coffee business, any of the following strategies can be chosen as per the
prevailing situations of business at the time of its closure. (Lin, Hsiao and Yeh,
2017)
Management or employee buyout: This is a method which can go for if in case
people who work for organization wants to buy it. As these are well aware of how
to manage and control the operations. This will be a smooth transitions and
increase loyalty of business.
Pros:
 This allows to handover the business to someone who has experience in the
organization and the ones whom trader knows and trust.
 Business entity will remain somewhat intact.
Cons:
 There might not be anyone who wants to purchase the business concern or it
be challenging to implement all such changes.
Selling the business publicly (IPO) : Many of the entrepreneurs dreams of selling
their business to public at high profits. But liquidating business in this case,

entirely depends on business conditions. This method of exit is not applicable for
all types of businesses but only to some. (Porter, 2020)
Pros:
 Among all the strategies, this is one which would help to generate
substantial amount of profits.
Cons:
 This is the most challenging exit strategy which requires fulfilling certain
conditions along with time, efforts and money.
Liquidating business operations: It means final closure of the business by selling
out the assets and paying of f the liabilities. It just means ending the chapter and
not failure. (Tepler, 2019)
Pros:
 This is the simplest and quickest method of closing the operations.
Cons:
 There are less chances of getting high returns with this option.
Conclusion:
With regards to above report various strategic framework are studied in
order to evaluate current business performance and make strategies for future.
These tools help to do in depth analysis of internal and external factors in order to
take advantages of opportunities and minimize risk associated with business.
Along with this, report also showcases various sources of methods through which
businesses can raise funds. As well as, it highlights various exit strategies which
companies can adopt to close their operations.

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