This marketing plan is an outline of the second phase of business expansion. Different activities such as financial outline of the business, the proposed guerrilla marketing strategy, the appropriate location for the second store, and sources of financing for your second store have been evaluated. The second store will be a replica of the Café Inn coffee in terms of services and products offered. It should be noted that the model for the initial Café Inn coffee will be used as the basis for the second store located in Miami.
A financial plan for the small business
This section entails the financial requirements of the second business, the amount of capital that the owner has raised, additional capital required, and financial projections.
Capital needed to expand the business
An estimated $ 1.5 million will be required to expand the business. The amount will be secured from personal savings, profits from Café Inn, bank loans and borrowing from family, relatives and friends.
Capital can be raised by owners
Out of the $ 1.5 million required to expand the business, the business owner will generate a capital of $ 0.9 million. This amount will be secured from business expansion funds generated by Café Inn.
Additional capital needed
The rest of the capital ($ 0.6 million) will be secured through debt financing. The debt financing sources employed will be from personal savings, bank loans , and borrowings from family, relatives and friends.
The need for capital
The capital is required to expand the business to open a second store. Different tasks such as opening, marketing, securing the business, employees’ salaries, and wages, insurance payments, acquiring of inventories, and paying taxes will be financed through the use of the required capital.
Financial projections
The second business is projected to make a gross profit of 15% in a period of three years after attaining a market share of 5%. In addition, adequate financial flows are expected in order to service the expansion of business finances acquired through debt financing.
It is projected that an annual sales growth rate of 10% will be achieved assuming that the business achieves a 5 % market share in the first year of operation. It is also projected that the second business will be profitable and that the profits generated will be used to service the loan and fund expansion strategies. The sales are projected as follows: first year $700,000, second year $950 million and $ 1.5 million in the third financial year.
Important Assumptions
This financial plan relies on multiple assumptions. The underlying assumptions are listed below:
- We assume that the economy will continue to growth without major market hindrance such as recession.
- We assume that technology will not change, thereby rendering the acquired facilities and technological equipments obsolete.
- We assume that the proposed access to debt financing will be sufficient to finance and maintain the proposed expansion financial plan as indicated in table below.
Figure: General assumptions
A guerrilla marketing strategy for the small business.
A guerrilla marketing strategy entails the use of low-cost approaches which uses typical tactics geared towards the creation of a competitive advantage over existing competitors (Levinson, 1989). Jay Conrad Levinson observes that this unconventional form of marketing relies heavily on imagination, energy, and time invested.
The reason why it has been chosen is because it is an interactive strategy which creates a unique, thoughtful, and engaging concept applied to generate a buzz. With respect to the business, the second Café Inn is expected to create a coffee buzz along the Ocean drive.
The guerrilla marketing strategy will entail the use of marketing strategies such as PR stunts, the use of mobile digital technologies, viral marketing, and word of mouth (Levinson, 1989). The business will be marketed on a daily basis and updates done on social media walls by an employee from the marketing department. An estimate of $150,000 will be used annually to rollout the marketing strategy.
The second Café Inn will use mobile digital technologies to enhance viral marketing. Through the use of established website and social media tools such as Facebook and twitter, the company plans to advertise the second store based on the success of the first store. Since the major targets are tourists, the youth, travelers, and students, the mode of guerrilla marketing is expected to go viral because the targeted groups mostly use social media networks.
In addition, through the use of social media networks such as Facebook or Twitter, the business will is able to interact with different stakeholders and get instant feedback. Moreover, the business will share the products and services provided on the media platform thus attracting a large consumer base (Sheehen & Morrison, 2010). Lastly, the social media platform will not only not only strengthen Café Inn brand, but also encourage referrals to family members and workmates to services and products available.
Word of mouth creates a marketing buzz. Based on the assumption that the first store of Café Inn will gain a competitive advantage over its competitors through the services and products provided, word of mouth will play an important role in creating a market share for the second business.
In addition, word of mouth travels easily compared to other marketing strategies. Other than being an interactive and engaging mode of marketing, the use of world of mouth is based on the memorable experiences which customers share with friends, relatives, and family members.
Guerrilla marketing strategy aims to
- Determine the wants, needs, and expectations of the customers.
- Develop a marketing mix that meet addresses the needs of targeted consumers.
- Analyze competitive advantages of the company so as to develop cost effective and efficient marketing plan.
Appropriate location for a second store
After a carrying out an extensive research, the most appropriate location for a second store is the Ocean drive. Other than being near the beach, the Ocean drive is on the way to South Beach. This means that it serves most of the customers living in the area and heading to South Beach.
The street has a high tourist population which can be targeted by locating the business. Given that there are already existing cafes and restaurants such as News Café, Caffe Milano, and Wet Willies, among others (Tripadvisor, 2012), the new Café Inn will enjoy economies of scale in terms of facilities and infrastructure. For example, the second store will enjoy the security, banking institutions, and transport in the region.
Based on reviews given by residents and tourists to the area, restaurants and Cafes in Ocean drive are always filled with people (Tripadvisor, 2012). This means that by locating the second Café Inn along the street, the business will attract an array of customers.
Moreover, the area is tourist-oriented filled with people from all walks of life. In addition, being near the beach, the street is populated by the youth who have the culture of consuming coffee as they relax after a long day in the South Beach. Therefore a caffeine buzz along the Ocean drive would be vital in keeping the street moving during the day and night (Tripadvisor, 2012). The major characteristics of the street are that it is high accessible by large population, it is safe, and tourists oriented.
A plan for securing sources of debt financing for the second store.
One of the commonly employed means of financing start-ups and expanding business is the use of debt financing. Although the initial business will be started through the use of owner capital, the second store will use debt financing. Debt financing is capital acquisition strategy that involves borrowing of finances from a financial institutions based on the understanding that in the future, it shall be repaid with a given interest (Covas & den Haan, 2005).
The reason why debt financing has been chosen over equity financing is that ownership is retained although the owner is obligated to repay the loan plus interest within a stipulated and agreed upon timeframe. Moreover, it is less expensive; it enhances financial freedom, and allows the owner to make vital strategic decisions (Covas & den Haan, 2005).
There are different sources that can be used to secure debt financing for the second store. The major sources are asset-based lenders, government sponsorship, bank loans, and mezzanine financing (Bowen, 2011).
Before acquiring debt financing for the second store, it is vital to consider the most effective source, the level of interests involved, how the loan will be prepaid, the timeframe to repay the loan, and affordability of the loan. Specifically, the interest accrued from the loans should be low, the loan should be repayable in a period of five to ten years, and it should be affordable and sustain the business.
Asset based lending entails securing of assets by lending institutions. In other words, existing assets are used as collateral to secure a loan. This is not an appropriate method to secure finance for the business because in case of a default, the business (Café Inn) would be possessed.
Personal savings, and borrowing from family, friends, and relatives is the most appropriate method to secure financing debt (Bowen, 2011). Funds saved from the first business operation could be taken and repaid back. On the other hand, although borrowing from family, friends, and relatives requires written agreements it ensures that one gets funds without the need for security or collateral. A bank loan is a traditional way of securing funds through debt financing.
As an appropriate method, the business owner will assess different banks available and compare the conditions associated with the loan, the interests rate offered, and the timeframe for repaying the loan. Afterwards the friendliest bank will be chosen to financing the business. Therefore, the chosen methods to secure debt financing for the second store are use of banks loans, personal savings, and borrowing from family members and relatives.
Reference List
Bowen, R. (2011). Overview of debt financing. Retrieved from https://www.brighthub.com/office/finance/articles/70631.aspx
Covas, F., & den Haan, W. J. (2005). The role of debt and equity financing over the business cycle. London Business School and CEPR.
Levinson, J. C. (1989). Guerrilla marketing attack: New strategies, tactics, and weapons for winning big profits for your small business. Boston: Houghton Mifflin.
Sheehan, K. M., & Morrison, D. K. (2010). The creativity challenge: Media confluence and its effects on the evolving advertising industry’, Journal of Interactive Advertising, 9(2), 40‐43.
Tripadvisor. (2012). Ocean drive. Retrieved from https://www.tripadvisor.com/Attraction_Review-g34439-d108858-Reviews-Ocean_Drive-Miami_Beach_Florida.html