Baking has always been a major part of my family life, and for generations there has been infamous cookie recipes past down from one cook to the next. Every holiday season, my cookies are notorious for being the best any gift receivers have ever had. Finally, I believe it is time to make my baking hobby and actual money making enterprise. I know I have the recipe, the potential customers, and options for both retail space and an online presence. The only thing missing is the initial push to make this hobby an actual business -- Sweet Tooth Treats.
Business Start Up Plan
The essentially product here is the various cookies, of different flavors and ingredients. I have several recipes for cookies, both permanent and seasonal variations. These products will be sold in both individual sales at a retail location, and in bulk for gifts online through our website. Cookies will be priced at $1.50 a cookie, with some variations in regards to size and flavors. Bulk and gift orders will receive a slight discount, making the average sale per cookie about $1.25, rather than the individual sales of $1.50.
2. Staffing Plan
To meet operational goals, several staff members will need to be available. There will need to be at least three people present in the retail location at all hours of operation. One will work the counter, with the other two supporting the orders by baking enough different flavors to cover both the retail and online orders. Finally, an office manager will need to oversee sales, deal with the accounting, and work on implementing marketing measures.
3. Business Form
The business will take on two major markets. A local retail shop will be set up that will be the basis of the operation. This will then be augmented with the operation of a full scale website that is capable of taking orders and shipping product all over the country. Websites are important not only for sales themselves, but also for an online marketing presence (Hub Pages, 2012). Together, these two elements will help generate business locally, which will focus on individual sales of cookies at about an average of $4.50 in average customer orders. The website will be more tailored to bulk and gift orders at an average of around $35 a customer.
Accounts will be generated through several different strategies. Promotions are a huge part of the start up marketing campaigns. For in store locations, there will be promotions of buy 3 get 1 free, which will help promote the various flavors of the cookies, while still securing sales in house (). Online sales will focus on search engine marketing campaigns. However, there will also be online coupons. When a customer purchases on their first order, they will get an offer of $5 off their next order of $40 or more. This will help secure the goal of an average of $35 per customer for average online sales.
III. Accounting Practices
1. Generally Accepted Accounting Principles (GAAP)
The accounting practices to be used throughout the launch and growth of the company will focus on the regulations stipulated by the Generally Accepted Accounting Principles (GAAP). The research illustrates that these "are uniform minimum standards of and guidelines to financial accounting and reporting. GAAP establishes appropriate measurement and classification criteria for financial reporting" (Office of Financial Management, 2012). This is a standard for many service and manufacturing businesses here in the United States and can be understood easily based on several core principles that record balances, assets, and ongoing liabilities.
2. Incorporation of Changes to the Books
There are a number of incorporations that will be needed when changes to the books are made. For example, there needs to be changes to show the depreciation of assets as they age, which will prove important as the retail location begins to grow, and possibly expand into more locations (Office of Financial Management, 2012). Moreover, there must be notations to show the changes of fund balances and net assets under proprietary fund management styles of the GAAP. Essentially, "revenues are recognized in the period in which they are earned and become measurable, expenses are recognized in the period incurred" and "assets and liabilities reported represent all of the assets available and all of the liabilities outstanding" (Office of Financial Management, 2012).
IV. Pro Forma Balance Sheet and Income Statement
The pro forma balance sheet and income statement is essentially a future forecast of balance and income sheets. According to the research, "in the investing world, it describes a method of calculating financial results in order to emphasize either current or projected figures" (Richardson, 2011). Thus, the current example of pro forma balance and income reporting will focus on the next year of operation as broken down into months.
Damrauer (2010) provides a good model for the current pro forma business analysis. It looks at the forecasting the cash balance, cookies sold, cookies made, and overall gross profit. This will undoubtedly help investors see the potential of the business and how it will grow beginning from the very first month.
( Damrauer, 2010)
1. Assumptions Made
Based on the pro forma balance sheet analysis, the break even point should be on point to be met at the end of the first month of operation. Beyond the initial start up costs, Sweet Tooth Treats will not need a working capitol after its initial launch because of the profits earned through gross profit margins.
2. Support for Valuations Assigned
This is based on several standard variables that are seen as an average throughout the baking industry. Damrauer (2010) states that expense ratios in the baking industry are at an average of 44% for start ups and smaller businesses. Thus, this will still provide a clear profit, even earlier on.
Start up capitol is essential for any small business, no matter what the industry it is working in (Colorado Small Business Association, 2012). Start up budget of $23,000, as based on the cost of operation and production of cookie products. Moreover, future assets will include the equipment used in the baking process, which would be commercial grade ovens and cooling racks built in proportion to the retail location secured for business operations.
1. Balance Sheet
The balance sheet is an important part of any start up, as it helps outline what start up assets are still available and tracks the operational income and debt as the business begins to grow. Thus, "the balance sheet is called a balance sheet because it has two parts, and they must be equal, and therefore in balance" (Colorado Small Business Association, 2012). It is typical that pro forma statements will project earnings and operation budgets for a number of months to years. As a start up, the pro forma for Sweet Tooth Treats will focus primarily on the first year of business operation. Based on the calculations of the pro forma sheet, it is forecasted that Sweet Tooth Treats will have a positive cash flow of around 30% upon the first few months of operation.
2. Specific Internal Controls
To achieve the overall goals., there will need to be a system of specific internal controls. First, to protect the machinery, there will need to be routine maintenance and daily cleaning, the future machinery will undoubtedly be expensive and one of the largest assets the company will have during its start up period. As such, it is imperative that the equipment remains kept in excellent shape to secure the future of the asset for a longer duration of time. Thus, routine maintenance checks, daily cleaning, and insurance on the equipment will need to be implemented consistently throughout the first year and beyond. Moreover, it…