Ventures Financial Prospectus
Ventures Financial Prospectus
Description of Venture
One of the main trends of the modern society is a desire to live a healthy lifestyle. The current ecological and other conditions in the world are not supportive for humans. That is why they try to improve their health and continue their life in any available way. The main key to success in this goal is living a healthy lifestyle.
Healthy lifestyle includes many different elements such asdoing sports, receiveing adequate medical support and healthy nutrition. In addition, eating natural and organic food is an integral part of a healthy life. However, it is not an easy task, taking into account all the characteristics of the modern society. Such food is not readily available nowadays, and usually it is quite expensive. Thus, many businesses have decided to enter the market through the provision of such food to customers, since the demand for healthy products is rather high. Moreover, this demand is only going to grow in the future.
Thus, the venture, which is going to be considered below, will offer organic and natural products to the customers at the national level. The venture is going to be a healthy food store. A healthy food store is a great opportunity to get into a successful market segment and bring profit. The store will specialize on selling allergy-free foods, organic products and beverages, organic gifts, vitamins, snacks, and much more. All the products are free of chemical additives and artificial coloring, and are naturally healthy.
The venture is a small store that is going to sell hetlhy and organic products to the customers. At the beginning, the store will not be able to compete with such giants as Whole Foos Market Inc. Thus, there is a need to find its own niche in the market under consideration. It will be located in the areas where the similar retail stores are absent. The main target audience of the store are citizens of the local neighbourhood. The neighbourhood should be big enough to create required sufficient demand for the products and services. However, it should not be located in the downtown of the city or business areas since the real estate is expensive there. Also, similar stores are already located in such areas.
The first task will be to find an appropriate place to locate the store. It is planned to be a relatively small store, where local citizens will be able to buy organic food 24/7. The square of the store will be about 100 square meters. However, renting is not an appropriate option for the venture because of high rental rates, which may affect the prices of the products. The rental cost should be included in prices for the products, and the store will be forced to increase prices, which, in turn, wil decrease its competitive advantages. Therefore, the best option in this particular case is to buy the premise where the store will be opened. Such purchase is going to occupy the greatest share in the initial investments into the venture.
The store is going to be a retail business unit only and will not produce the goods itself. This fact requires signing the contracts with the most appropriate vendors. These vendors will be mainly from the farms, which are located close to store sincenatural and organic food cannot be stored for a long time. Moreover, the products can be spoiled during transportation. In turn, transportation to distant areas bares additional costs. Therefore, finding the suppliers from the neighbouring areas plays a crucial role in ssuring the ventures success. Finally, contracts with suppliers should be long-term in order to settle fixed conditions and establish stable operating of the business.
In conclusion, the store is going to have its own website. It will be an online platform, where customers will be able not only to get information about the store, but also order products. Such option will be available 24/7. Due to online shopping, customers get the ability to save their time and money, which raises the business value in their eyes. Online shopping has become one of the main trands in the business in the recent years, and an effective online platform will add a competitive advantage to the store.
The principle owner of the venture is going to be the author of this prospectus. However, the realization of the project requires funding. There is the need to find the whole amount of the required sum without the need to share ownership. The best option would be to get a banking credit. However, a venture, firm or investment fund may become co-owners of the business. However, their share should not be higher than 40% since the author of the project wants to keep control over the business. Generally, the the main source of financing of the business is going to be equity financing. Equity financing will be mainly personal savings of the business owner.
Talking about the owners biography, it is important to mention that he has an appropriate experience in management. His professional and educational background is enough to run the business effectively. However, his experience in retail of organic food is limited. Thus, it should be compensated by professional workers.
A person that has an experience in retail or even in retail of organic food should be hired. It is going to be an administrator of the store whowill be responsible for planning of sales, contacting suppliers and taking care of products. Also, the store will require professionals in marketing and accounting. However, such services are not required on a constant basis. That is why it will be possible to invite two consultants in each area on outsourcing basis. Generally, six people will be working for the store: the owner, an administrator, two sellers, consultant in marketing, tax and accounting advisor. Their salaries that will be fixed for the first 12 months of the stores performance are provided in the table below.
Competitive Product or Service Statement
The modern ecological and overall social environment are not ideal. First of all, severe climate changes and the activity of mankind have significantly affected the natural environment. Second of all, companies, seeking for profits, tend to propose cheap substitutes to natural products. Finally, overpopulation of the world leads to the lack of quality food and extensive use of artificial substitutes and genetically modified organisms. All these factors have led to the situation, when it is very difficult to get natural and healthy food. Expensiveness and difficult access to healthy products harms peoples health. Therefore, they are often ready to pay more for natural products. Such desire is the main driver of the success of the venture under consideration.
Moreover, this trend in human nutrition is an emerging one. Therefore, the industry has significant perspectives in the United States of America and abroad. According to the surveys, about 81% of US families have bought organic food sometimes. Also, it is claimed that 4% of all sales of food are related to healthy and organic food (Laux, 2013). Therefore, this sector plays an important role in the overall food industry, thus offering extensive perspectives for business development in this sphere.
The other essential characteristic of the industry is its local orientation. Taking into account the character of the production offered, the stores can buy food only from local farmers and agricultural firms. The reason for it is the fact that organic food cannot be transported for long distances since it would be spoiled. Retail companies usually sign agreements with various local contractors since it is difficult to build a centralized distribution network with one main contractor.
The main disadvantage of the industry is for the expensiveness of organic products. High prices for such products are caused by higher costs of production, short period of storage and high marginal value. Thus, it makes these products available mainly to the representatives of the so-called middle class. Taking into account the mentioned trends, including overpopulation, the price is not going to decline significantly. However, it can be lowered a bit to attract broader groups of customers.
Because of the low degree of saturation of the industry and significant prospects of the industry, it attracts many emerging companies. Thus, the degree of competition in the sphere is constantly growing. The main competitors for the store are going to be large and famous retailers. They are Whole Food Market Inc., Safeway Inc. and Kroger.
However, these retailers perform mainly in large and densely populated areas. Therefore, the store will be located where these retailers are absent. Also, the main target audience of the store will be local citizens. The store hopes to create a group of loyal customers that are going to become constant clients of the store, who will be generating the main share of income.
Constraction and Preopening Budget
Like any other businesses, the store under consideration is going to have a budget. There will be two types of budget preopening budget and operating budget. Preopening budget consists of financial resources that are required to open the store and prepare it for its first sale. Preopening budget of the store is going to consist of the following elements:
1. Purchase of the place for the store;
2. Repair costs;
3. Purchase of the first block of products;
4. Initial advertisement campaign;
5. Transactional costs (lending the contracts with suppliers, transportation, etc).
Also, the following important issue should be accounted in the process of planning preopening budget of the store, which is the need to have an appropriate level of working capital until the profits are received. The profits are planned to be raised in two months of operation. Therefore, working capital for two months should be guaranteed. This capital is needed to payfor daily operations of the store. The preopening budget of the store is provided in the following table.
|Element of the budget||Value|
|Purchase of the place for the store||$20 000.00|
|Repair costs||$3 000.00|
|Purchase of the first block of products||$15 000.00|
|Initial advertisement campign||$2 000.00|
|Transactional costs||$3 000.00|
|Working capital||$10 000.00|
Thus, the overall preopening budget is going to be $83 000.00. This sum can be financed from the owners savings.
Operating pro-forma is the mentioned operating budget for the store for the first 12 months of its performance. The budget is provided in the following table. All the values are provided in U.S. dollars. The budget is planned according to the forecast that the store will be able to attract more customers, and the sales will grow.
|Month||Purchase of products||Salaries||Utilities||Advertisement||Other||Total|
|Total||$219 000.00||$186 000.00||$12 000.00||$12 000.00||$18 000.00||$447 000.00|
Thus, the overall budget for the first year of the stores performance is $447 000.00. Of course, this budget should be financed from revenues from the business. Therefore, profitability is an integral and vital precondions of ths stores existence in the future.
Samples of Financial Statements to be Used
There are always some key performance indicators of any business performance. The most important is the stores ability to generate profits. Raising profits, the store will be able to pay off the debts, return interest to investors, etc. That is why income statement is going to be the main financial statement, according to which efficiency of the stores performance will be evaluated. The sample of the stores income statement that will be used for evaluation is provided below. All numbers are forecasted. The real numbers can be got only after at least one year of the stores performance.
|Cost of goods sold||$219 000.00|
|Operating profit||$131 000.00|
|Marketing expenses||$12 000.00|
|Profit before interest payments||$91 000.00|
|Profit before taxes||$91 000.00|
|Net income||$66 000.00|