Introduction
This paper seeks to write a business plan for a video game stores in St Charles or Jefferson country in a high traffic, multi-store mall. Case facts provide that discussion with accountant produced an estimate of the project of cost of putting up the store with as start up capital of $200,000. The amount will be used to purchase the cost of video machines, other store equipment and inventory of videos for sale. The same amount as well as the periodic earnings of the business will be used to pay insurance, loan amortizations and the salaries of two employees. Since it was also provided that the owner has $50,000 of savings that will be invested, the balance of $150,000 will be financed via bank loan. To pursue therefore the project a business plan that will convince the bank to extend a loan of $150,000 is needed. This paper will therefore prepare a business plan supported by projected financial statements for the next five years to convince the bank to approve and extend the loan to the owner.
Analysis and Discussion
Name and nature of Business
The name of business will Johnny’s Video Games and will cater to different customers who may want to spend an entertainment or their leisure inside the mall. The business entity will be ready to comply with regulations in the area by securing the necessary permits and paying all registration fees and taxes in order the make the business legal.
Capitalization
The start up capital will be $200,000, and $50,000 will be finance via investment by the owner with cash while the $150,000 will be borrowed from a local bank.
Projected Income Statement
The business will have projected revenues of per year and projected net income that will be favorable to the business. Sales revenues are estimated to be not less than $400,000 per annum for the next five year and with modest increase every year. The level of cost and expenses including taxed in relation to sales remain not more than 90% for the next five years hence the net profit margin at a tax rate of 30% is to be at least 13% every year for the next five years. The complete income statement could be found in Exhibit A in the Appendices.
Projected Balance Sheet
The projected income statement is believed to cause increase in profit and will maintain the good financial condition of the company in balance sheet. In the projected balance sheet, effect of the borrowing and the affected accounts would appear as shown in Exhibit B. The company’s liquidity for the five-year period would be evident for the company to be able to meet its maturing obligations. The projected cash flow of the cash in the balance sheet will appear positive for the next five years and will show that the company’s profitability in will be good enough pay for operating expenses and the amortization of the $150,000 bank loan that will have to be paid for five years. Liquidity is evident since on the average the current ratio would be about above 1.0 for the next five years. Debt equity ratio would also show the company would be stable for the next five years since on the average the ratio is less than 1.0. See Exhibit B for the ratios.
Management Plan
Since the company would be primarily managed by the owner, the latter would be in charge of all the functional areas of business as a finance office, as a marketing officer, and as a general manager who will supervise the two employees that will help in running the business. The manager and owner in one person would be motivated enough because profitability would be very attractive since the same business would be able to sustain the personal need for living expenses during the five year period. It is the company’s policy to take care of customers by providing them the best quality product as the most affordable price while providing the best support service that may be extended under given circumstance.
Marketing plan
The company will make the necessary promotion in the opening of the store to make the store known to customers. This include making introductory price for certain products while at the same time rendering personalized service to customers in dealing with their complaints about the company products. Since the video game stores is located in the mall where there are many people, there will be no much cost for advertising since the place would involve many customers to easily visit the store. The company would allow warranties to products sold and the owner will have to establish good relationship with suppliers of company goods so that long-term relation would also be established also with customers in delivering the quality product they deserve.
Conclusion and Recommendation
The projected financial statements all point the viability of the projects since the company is profitable as shown by the net profit margin of above 10%. It is also liquid because it will be able to meet its obligations for the next five years and will be able to pay off the loan of $150,000 while allowing the owner to withdraw a monthly income of $3,000 as his salary for operation the business and as an alternative for the salary that he would have earned had he continued employment. Every stakeholder including the owner, the creditors, the employees, the government and the customers would be benefited as a result of the putting up the business because needs and wants are identified to be satisfied while the interests of the others.
Works Cited
Massie, J. Essentials of Management, Prentice-Hall, Inc, 1987.
Meigs and Meigs, Financial Accounting, McGraw-Hill, New York, USA, 1995.