Note: Sample below may appear distorted but all corresponding word document files contain proper formattingExcerpt from Essay:
viability analysis of the proposed Golden Bear Lodge business venture. Golden Bear Lodge will be an affordable resort hotel that will serve as a good lodge for customers from all works of life. Golden Bear Lodge will be located at four blocks from Crest Lake Village in California, which is an ideal location for holiday resort near the expanded Crest Canyon area. The Golden Bear Lodge will offer 15 two-bedroom units for customers combined with the underground unit. The lodge will also be equipped with the laundry facilities, fully equipped kitchens, and stone fireplaces. Golden Bear Lodge will also offer on-site and off-site front desk services as well as outdoor hot tub services. On the average, Bear Valley Resort Area receives over 150,000 natural lovers and skiers annually and visitors spend over $300 Million annually for food, lodging, and recreational activities Thus, Golden Bear Lodge will take advantages of available market within the Bear Valley to achieve market advantages. Golden Bear Lodge will operate as ski resort between November and April. Between May and August, Golden Bear Lodge will operate as a summer resort. However, between September and October, the lodge will focus on other different activities such as lodging, food services and other recreation activities.
Since this is a new business venture that will face competitions within the Bear village, there is a need to carry out viability analysis to determine about the profitability of the new venture.
The owner of the new venture is proposing to invest the sum of $1.5 million in the Golden Bear Lodge business. The total fund is a combination of personal fund and loan that will be raised from banks. However, the owner of the business needs to analyze the viability of the business before putting this entire sum in the business. The first step in the financial analysis is to evaluate the company proposed balance sheet, and income statement of the company. The analysis of data in the balance sheet and the income statement will assist in providing viability of the proposed business venture.
The profitability ratio is an important financial tool that could be used to analyze the viability of a business. The profitability ratio could be used to evaluate the company performances over time. Jewell, et al. (2011) argues financial ratios are the important tools to measure the standard of firm's ratio compared to the industry average. Profit margins, returns and leverage are the important tools to evaluate firm's financial viability. Thus, financial ratios could be used to predict firm's credit viability and risks. Thus, the paper uses gross profit margin and net profit margin as important financial tools to determine the viability of the new venture.
Gross profit margin is calculated by dividing sales by the costs of goods. A company with consistence high gross profit margins is predicted to have a sound business model. On the other hand, a company with low gross profit margin is a company that is struggling to survive. Thus, gross profit margin is a first strep to evaluate a company.
Golden Bear Lodge will be able to achieve competitive market advantages because the company will record the net profit of $614,500 at the end of the year with the net profit margin of 47, 71%. The company will be able to achieve market advantages from the various product and services that the lodge will provide: The products and services that the company will offer are as follows:
The company aims to achieve total sales of $1,288,000 from the products and services that the company will offer. The sales forecast for the year round will be as follows:
However, the gross profit profits at the end of the year will be $1.25 Million with the gross profit margin of 97.07%. However, the company will need to deduct the cost of sales from the gross profits to arrive at the gross profit margin. Since the lodge will need to prepare food for customer, the lodge will need to buy the food ingredients that would be used for the food preparation and this will represent the cost of sales that will be deducted from the gross profit to arrive at the gross profit margin.
Based on the data recorded, the venture will be highly profitable because the Golden Bear Lodge will record influx of customer for the year round. The market segmentation will be divided in two groups:
Skiers: The Bear Valley area is quickly becoming the most marketable ski resorts in the country. The Bear Valley is easily accessible because it is just 36 miles from Richmond International Airport. Thus, Golden Bear Lodge will enjoy market advantages from visitors across the country wishing to have a good time.
Summer Visitors: During the summer months, Golden Bear Lodge will receive customer wishing to visit Bear Valley Resort area to enjoy summer sun. Bear Valley Resort area is a beautiful retreat providing outdoor recreational activities. Overall, the business venture is highly profitable and ROI (return on investment) will be high. Thus, the company will generate sales from these categories of different customer. The monthly sales will assist the company to repay its loan at the end of the month.
Table 1: Golden Bear Lodge Balance Sheet Before Operations Starts
Golden Bear Lodge Beginning Balance Sheet (For the day of 1/1/2013)
Lodge supplies and equipment
Bar supplies / Lounge, equipment, and furniture
Land and Structure
The proposal analyzes the income statement for the 12 months period to enhance greater understanding of the viability of the new business venture.
Table 2: 12-Month Income Statement for Golden Golfer's Club ($U.S.)
Cost of Sales
Gross Margin %
Bank loan Repayment
Total Operating Expenses
Net Profit Margin
Table 3: Golden Bear Lodge Ending Balance Sheet (For the day of 31/12/2013)
Golden Bear Lodge Ending Balance Sheet (For the day of 31/12/2013)
Lodge supplies and equipment
Bar supplies / Lounge, equipment, and furniture
Land and Structure
Scalability of Operations
Golden Bear Lodge is tolerant to scalability. Resort hotel development in the United States is very profitable due to the country economic improvement. Typically, resort hotel development is currently going stronger after 2008 and the sales of hotel and resort activities increased by 35% within the Bear Valley Resort area. Yearly, room occupancy is up to 100% during the peak skiing season. Golden Bear Lodge will employ aggressive sale strategy to achieve market advantages. The resort booking system of the Golden Bear Lodge will be the critical success for the company. The room rates will be between $150 and $250 per night during the peak season, and the charge for a room per night will be between $100 and $175 during the off-season. With aggressive marketing campaign that the company will implement, Golden Bear Lodge will be able to receive between 1000 and 1500 customers every week. The company will use both offline and online method of advertisement. The company will also design an attractive and colourful website where customer could book and make reservations online. Additionally, Golden Bear Lodge will highlight a promotional piece in the Ski Magazine. As the market opportunities increase, the company will expand its space and include other services. The strategy will assist the company to increase the market advantages.
Degree of Certainty Regarding Financial Estimates
Financial data collected for the estimate of the proposed venture are based on the meticulous primary and secondary research. The owner of the lodge will be able to raise the total amount of $1.5 Million through loan from SBA 7a loan to purchase land, building structure, office equipment, furniture and other essential materials that will be needed to start the business. There is a high probability that the…[continue]
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