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Business Financial Plan

Running head: BUSINESS FINANCIAL PLAN 1
Business Financial Plan
Name
Institution
BUSINESS FINANACIAL PLAN 2
Ten Cake Limited Company
Brief description of the Company
Ten Cake Ltd is a small and medium-sized manufacturing company offering a variety of
biscuits, cakes, and cookies. The company is involved in producing flour-based products,
retailing the products and beverages for immediate consumption and operating a single on-site
seating cafe. Ten Cake Ltd is a privately owned firm that began as a family business. The
enterprise works in the food industry that is characterized by many players and stiff competition.
The company is situated in the heart of New York one of the busiest and densely populated cities
in the United States.
Purpose of the Company
Ten Cake Ltd is dedicated to its loyal consumers by meeting all their needs. The
customer-oriented company aims to provide top-quality products and first-class services. The
company not only provides its customer with snacks that are freshly baked but also with
nutritious and healthy products. The business offers the buyers value for their money by
providing high-quality goods at all times. Additionally, the team ensures that all the ordered
products are delivered promptly, and the quality of the food is preserved throughout the entire
process (Chladkova, 2006). The firm maintains a friendly and fair working environment often
promoting creativity, hard work within its diverse work environment. Moreover, the company
keeps an eye on current trends which it promptly reflects in its activities.
Goal of the Company
Ten Cake Ltd has the following objectives;
BUSINESS FINANACIAL PLAN 3
The enterprise’s primary goal is providing a variety of cookies, biscuits, and cakes. The
products are unique to the manufacturer, and there is a pool of snacks that the customers can
choose from. Secondly, Ten Cake Ltd aims at capturing the entire New York market and expand
its services to the nearest cities. The company’s other goal is to maintain a high-class website
where its consumers can learn of the existing products to grow and increase its revenue streams.
Mission Statement
Ten Cake Ltd is a hypothetical company whose mission is to make sure cakes, biscuits,
and cookies are accessible to every potential customer with the aim of capturing the largest
market share in New York over time. The company embraces diversity and has a pool of
qualified personnel that ensures the manufacturer only produces healthy products that meet the
needs of the consumers. Its snacks are also baked with only fresh ingredients that are bought
locally and are thus safe for human consumption.
Vision Statement
Ten Cake Ltd aims at positioning itself as the largest producer of healthy cookies, cakes,
and biscuits that meet the requirements of the community. The company aims to be the leading
manufacturer in the United States’ food industry by ensuring superior quality in service delivery.
The business has a hardworking team of personnel that ensures customers receive their orders in
time.
Business Research on the industry
The retail bakery business includes thousands of companies across the globe that produce
fresh and frozen bread in addition to cakes, pies, doughnuts, cookies, biscuits among others. The
BUSINESS FINANACIAL PLAN 4
most popular companies in the USA include Flower Foods and McKee Foods. In the USA, the
entire baking industry consists of almost 2800 commercial bakeries with a total annual revenue
of more than 36 billion dollars and more than 6,000 retail bakeries with a yearly income of
nearly 4 billion dollars (SBDC Net , 2014). Like any other fast food industry, demand
predominantly depends on consumer preference. The level of profitability depends on individual
company operational techniques which indicates the efficiency level. The bakery retail market is
highly fragmented with most companies operating one facility at a specific location. Statistics
show while in the commercial sector where the 50 largest corporations produce almost all of the
total revenue, in the retail industry, the 50 most significant businesses contribute to a mere 15
percent of the combined annual earnings.
Companies in this industry sell goods to convenience stores, supermarkets, food-service
providers and may sell directly to the public domain. Research indicates that the total annual rate
in the industry is expected to grow by more than 0.5 percent in the next half a decade due to
increase in disposable income that increases consumers’ purchasing power. Similarly, customers
are predicted to continue to gravitate towards health-minded baked products due to the
increasing healthy eating campaigns across the country (SBDC Net , 2014). Customer desire for
healthy eating is likely to increase demand for healthy products such as heartened bread, gluten-
free loaves and grown and organic sweets. Additionally, industry lucrativeness is projected to
grow in the subsequent three years since the price of core main ingredients such as flour
continues to stabilize.
Economists predict that in the next few years despite the constant fluctuations of flour
and vegetable oil, bakeries will be able to anticipate the price changes and adjust product prices
appropriately to avoid making losses which consequently downsizes the total revenue. The
BUSINESS FINANACIAL PLAN 5
international market plays a vital role in the bakery industry in the USA. In the past decade,
external competition has increased and is predicated on continuing to grow at a yearly rate of 7
percent. Similarly, the USA is actively involved in the exportation of baked products to countries
such as Canada. The growing demand for baked products outside the USA is likely to increase
exports by almost 10 percent per year for the next five years.
Marketing Plan
The United States’ food industry is growing at a rapid rate. According to the daily meal,
there are more than 6700 bakeries in the USA with a majority of them located in large urban
areas such as New York. New companies in the bakery industry are faced with the stiff
competition since many players characterize the sector. The market is, however, growing due to
the increasing demand for freshly baked products in bust cities like New York. The city is the
most populous town in the USA with a population of more than eight million people. Producing
diverse products and ensuring customer satisfaction is necessary for Ten Cake Limited to appeal
to a large market such as New York. The company has specialized in producing a variety of
biscuits, cakes, and cookies to accommodate all of its potential customers.
Ten Cake allocates 5 percent of its total earnings to marketing. Marketing entails a
variety of concepts from social media, sidewalk signage to coupons are some of the basic
advertising strategies utilized by Ten Cake Limited. Ten Cake Limited desires to increase their
popularity in New York to enable them to conquer this market and branch to other cities in the
country. The necessity of effective marketing strategies is core to the company. The company is
owned and managed by Mr. and Mrs. Alan and Anne Patterson where Alan brings extensive
marketing and sales expertise having worked for various fast food industries for the past two
BUSINESS FINANACIAL PLAN 6
decades. Anne, on the other hand, brings expertise on product creation in an area she has been
passionate in since she was a little girl. Ten Cake plans on maximizing local support which will
be fundamental in increasing their popularity
Operational plan
New York City is the most populated city in the USA, attracts much business whether
small or big. The acquisition of a trading spot is particularly expensive regarding rent. Currently,
the bakery is paying 110 dollars per square foot since it is located in one of the busiest streets in
the city. The size of the restaurant is approximately six by 6 feet which brings the monthly rent
to 3,960.Annually, Ten Cake Limited Company spends 47,520 dollars on rent. Moreover, utility
costs such as water, electricity, and gas in the city are relatively high. Ten Limited Company
spends about 8 percent of their total revenue on utilities and occupancy costs. Ten Cake company
is a 75 seat company, but it is also majorly involved in the delivery of products. It has employed
four full-time bakers, two full-time baristas and six part-time waiters who handle day to day
operations and customer service.
Other important facilities in Ten Cake Limited are the equipment necessary for the
production of cakes. Ovens, range refrigerator’s, fryers, freezers, and dishwashers are some of
the essential components in the bakery. The equipment cost about 100 thousand dollars.
However, since the company has been operational for the past three years, the cost of the
equipment has reduced tremendously based on wear and tear. Additionally, there are thousands
of other little items that account for the facilities necessary for production such as spatulas,
storage containers, cutlery, and glassware among others. Technology is another important aspect
of the fast food industry. Ten Cake Company utilizes TouchBistro an iPad POS systems which
BUSINESS FINANACIAL PLAN 7
cost hundreds of dollars in the initial purchase and an affordable monthly subscription that adds
to the company’s total monthly expenses.
In the fast food industry, appearances are important in attracting and retaining of
customers. Individuals prefer to eat at lean places without attractive décor. Ten Cake company
spent thousands of dollars on the first renovations and decorations to update the kitchen and the
dining area. Ten Company invested in quality décor including chairs, tables, linens, and art.
Similarly, leaks, electricity complications and other issues arise monthly which the company
must contend with to be able to operate.
SWOT Analysis
Strengths
Ten cake limited is located in the heart of New York one of the most populous cities in
the USA. The large population provides a ready market for cakes, biscuits, and cookies produced
by the company whether they are delivered or on-site. Cake consumers tend to gravitate towards
indulgent and healthy products a key component in Ten Cake. Regarding indulgence, Ten Cake
continues to launch and produce tolerant varieties that appeal to different categories of
consumers. Biscuits flavor varieties such as ice cream, chocolate, and bacon have increased
consumer interests in Cake Ten. Similarly, health-minded qualities in the baked products such as
high fiber resonate with millions of consumers who want to maintain a wholesome diet.
Although the current cash flows are low compared to the commercial bakery companies, Ten
Cake has invested in effective work practices with prompt delivery to customers and welcoming
waiting services in the cafeteria. The extent of product differentiation in Ten Cake illustrates
BUSINESS FINANACIAL PLAN 8
their ability to adapt and change. Moreover, Ten Cake has access to critical ingredients such as
flour and sugar.
Weakness
Cake Ten company is a relatively new entrant in the Bakery Industry in the USA. Many
consumers tend to pledge loyalty to long-standing brands such as Oreo and Ritz in biscuits
sector. It may take a while before Ten Cake Company can enjoy the market share and customer
largest that other favorite brands experience not only in New York but also across the USA.
Large and famous corporations enjoy a scale advantage in procurement, production, and
distribution which are not available to Ten Cake Limited.
Opportunities
The bakery café industry in the USA continues to expand owing to increased customer
demand for moderately priced and high-quality products. Research indicates the industry will
continue to recover from the plagued recession in the next decade owning to influential trends
such as consumer preferences. Moreover, economic factors such as consumer spending and
disposable income are currently performed well in New York and are anticipated to continue
projecting similar trends (Kolbina , 2015). Positive economic factors continue to play a valuable
part in the growth and expansion of Ten Cake Limited. Statistics indicate that sandwich products
account for almost fifty percent of the total bakery commodities. However, in recent years new
establishments are expanding their offerings beyond sandwiches like in the case of Cake Limited
which specializes in biscuits, cakes, and cookies. The increasing health awareness of US
consumers increases that validity of Ten Cake which has specialized in the production of healthy
products.
BUSINESS FINANACIAL PLAN 9
Threats
Research indicates that almost 60 percent of food companies fail within the first three
years of operations (Euromonitor International , 2016). The failure rate may be higher in
locations such New York due to intense competition. The bakery industry faces risks associated
with unpredictability of the ingredients regarding the prices of wheat and vegetable oil that can
vary as much as 40 percent in one year. Similarly, the industry faces competition for consumers
within the consolidated supermarket industry. Health consciousness issues are likely to increase
consumer gravitation towards health-minded products which are currently relatively few on the
market.
Financial analysis
Ten Cake limited raised 160,000 for its capital through the savings of the owners Mr. and
Mrs. Alan Petterson and borrowed another 140,000 dollars from the bank to cater for the rest of
the financing. The startup loan earns an interest of seven percent per year. The company made
sales worth 502,000 dollars in the first year and 582,000 in the second year and expected to
increase the amount by almost 100 thousand dollars in the current financial year.
Commodities Unit prices Unit Sales (year ended Dec 2016) Total
Biscuits $1 126,000 126,000
Cakes-Big $5 23,000 115,000
Medium $2.5 34,000 85,000
Small $1.5 45,000 67,500
Cookies $1 188,500 188,500
Total 582,000
BUSINESS FINANACIAL PLAN 10
Personnel plan
Managers 100,000
Bakers 80,800
Full-time waiters 40,000
Part-time waiters 80,000
Total payroll 300,800
Capital budgeting
Year 1 2
Beginning of cash flow
Equipment -120,000
Working capital-180,000
Total-300,000
Operating cash flow
Cash revenue 502,000 582,000
Direct cost of goods 105,000 112,000
Total expenses 460,320 480,320
Taxes 10,800 10,800
Cash flows after tax 25,880 73,080
Ending cash flows
Cash flow on equipment 8,000
Return on working capital
Income statement
Ten cake limited company
Income statement
For the year ended December 31
st
2016
Revenues
BUSINESS FINANACIAL PLAN 11
Baked items sale-582,000
Expenses
Direct cost of sales-112,000
Depreciation-8,000
Salaries-300,800
Interest -9800
Rent expense- 47,520
Utilities expenses-4500
Marketing and advertising-15,000
Other expanses-500
Total expenses-498,120
Income before taxes-83,880
Taxes- 10,800
Net income- 73,080
Balance sheet
Ten Cake Limited
Balance sheet
For year ended 31
st
December 2016
Assets Liabilities
Current Assets Current liabilities
Cash 63,000 Insurance payable 25,000
Prepaid salaries 113,000 Long-term liabilities
Other current assets 40,000 Loans 130,000
216,000 Shareholder’s equity
Long-term assets Capital 118,000
Equipment and décor 107,000 Retained earnings 50,000
323,000 323,000
BUSINESS FINANACIAL PLAN 12
Cash Budget
Cash budget
For July-2016 through Dec 2016
MONTH
July
August
Sept.
Oct.
Dec.
Beginning bal.
10,000
18,300
27,800
39,800
50,100
Cash from operations
47,000
47,500
50,000
44,000
50,120
Capital expenditure (-)
Direct production
9,200
8,500
9,000
8,700
8,000
Other expenses
29,500
29,500
29,000
30,500
29,120
Total disbursements
38,700
38,000
38,000
39,200
37,120
Ending bal.
18,300
27,800
39,800
44,600
63,000
Cash Flow statement
Ten Cake limited
Cash flow statement
For the year ended Dec 31
st
2016
Operation
Cash received from customers 582,000
Cash paid for:
Inventory purchase 112,000
Wages 300,800
Interests 9,800
Rent 47,520
Income taxes 10,800
Others 20,000
BUSINESS FINANACIAL PLAN 13
Net cash flow from operations 81,080
Investing activities
Cash paid for kitchen utensils (8,000)
Financing activities
Cash paid for repayment of loans (10,000)
Dividends (23,080)
Net increase in cash 40,000
Ratio Analysis
Current ratio = current assets /current liabilities
216,000/25,000= 8.6
Quick ratio =cash in hand + cash in bank/ current liabilities
=63,000+40,000= 103,000/25,000= 4.12
Gross margin ratio =Gross margin/net sales
=582,000-112,000/582,000=0.8075*100= 80%
Inventory turnover ratio=cost of goods sold/average inventory
Average inventory= (9,200+8,500+9,000+8,700+10,000+8,000)/6= 8,900
=582,000/8,900= 65.4
BUSINESS FINANACIAL PLAN 14
Fixed asset turnover ratio =Net sales/ fixed assets-accumulated depreciation
582,000/107,000-8,000= 5.878
Debt to equity ratio=Total liabilities/ Total equity
=155,000/168,000=0.92
Debt to asset ratio=total debt/ total assets
=155,000/323,000=0.48
Times interest earned ratio = income before interest and taxes/ interest expense
=83,880+9,800=93,680/9,800= 9.56
Operating margin ratio= operating income/ net sales
=81,080/582,000= 0.14*100=14%
Net Profit Margin Ratio= Net profit/ total revenue
73,080/582,000= 0.126
The current ratio of 8.6 indicates that Ten cake has eight times more current assets than
current liabilities hence meaning it can quickly pay off its debts illustrating it is in a favorable
financial position. Ten Cake records a relatively high quick ratio which showcases the company
is investing too many resources in working capital which may be much profitable in other
ventures such as opening another onsite facility at a different location in New York. Ten Cake
gross margin of 80 percent indicate the company is selling their inventories at a much higher
price. Ten cake sales their inventories at much higher rates since they acquire the core inputs
BUSINESS FINANACIAL PLAN 15
such as flour and vegetable oils from the manufacturers. The inventory turnover of 65 indicates
that Ten Cake has cleared its inventories roughly sixty-five times in the financial year beginning
January 2016 ending December. The high inventory turnover showcases that Ten Cake can
easily turn inventory into cash which is a common phenomenon in fast food industry and
bakeries. A sizeable fixed asset turnover such as the one reported by Ten Cake indicates that
assets efficiently in production. However, since it is in the Bakery industry, the turnover rate is
relatively low which suggests the need for Ten Cake to increase sales.
Future considerations
To be able to compete large and famous companies in the industry, it is necessary for Ten
Cake to continue to offer specialty goods and invest in superior local distribution services in
New York. Product differentiation is an essential competitive tool in the bakery industry hence
the necessity of Ten Cake to increase the variety of products they are currently offering.
Garnering local support will prompt the company to invest in marketing techniques such as
magazine advertising that will allow it to reach markets beyond New York. Majority of retail
industries own one single store, but Ten Cake aspires to expand beyond the individual on-site
business to a countrywide known bakery. To attract the significant market share that Ten Cake
desires, it is essential for the company to continue to attract and champion local support, invest in
product presentation and expand to critical locations in the city. Ten Cake does not desire to
venture into the commercial side since the owners are passionate of customization which is
useful in a retail business. Moreover, the commercial side of the industry is concentrated with
fifty large companies producing almost 75 percent of the total revenue indicating that Ten Cake
does not have the resources and potential to venture in the commercial sector.
BUSINESS FINANACIAL PLAN 16
References
Chladkova, H. (2006). Internal environment of a bakery and its analysis. Agriculture and
Economics, 83-88.
Euromonitor International . (2016). Bakery . Retrieved from Euromonitor international :
www.euromonitor.com/bakery
Kolbina , O. (2015). SWOT analysis as a strategic planning tool for companies in the Food
Industry . Problems of Economic Transition , 74-83.
SBDC Net . (2014). Bakery business 2014 : Retail bakery business overview and trends .
Retrieved from SBDCNet : www.sbdcnet.org/small-business-research-reports/bakery-
business-2014

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