Target Audience and Marketing

New Business

MM's Sandwiches is a small upcoming sandwich shop that will offer delicious and uniquely prepared sandwiches. This paper provides a financial plan and a guerrilla marketing strategy for the business. The paper also discusses the most appropriate location for a second store and outlines a plan for securing sources of debt financing for the second store.

Financial Plan

Financial planning constitutes an important element of the business plan (Sahlman, 2008). It enables a business to understand its present and future financial position. This is important for establishing the viability of the business in the short and medium term. For example, a financial plan may show the extent to which the business may be profitable in the next or first one year, or three years. A solid financial plan is crucial for ensuring the stability of the business. Without meticulous identification of the costs involved in running the business and the expected revenues, the business may experience financial troubles earlier than expected.

The major costs involved in operating the sandwich shop include rent and labour. The shop rests on a 2,200 square feet space, with the leasing cost for a square foot per month being $1.35 and an extra $0.15 for real estate tax. Therefore, leasing costs will be $3,300 per month, or $39,600 annually. The shop will have a workforce of 11 people (the general manager, one operations manager, one accountant, two chefs, one marketing manager, and five waiting staff). Salaries will cost approximately $250,000 annually. As a sandwich shop, ingredients will also comprise a significant portion of the expenditure. Inventory will cost approximately $200,000 in the first year. This is projected to grow by 20% in both years 2 and 3. Other expenditure elements will include utilities, marketing, and insurance. Overall, operating expenses are expected to cost $316,000 in the first year.

The shop will be in operation 7 days a week from 6 am to 10 pm. The shop is projected to make sales of $2,000 per day on average. This will translate to sales of $60,000 monthly or $720,000 annually. Given the projected expenses and revenue, the shop will be profitable in the first year. It is estimated that a pre-tax profit of $54,000 will be made in the first year. Table 1 below summarises revenue and cost projections for the first year.

Table 1: Project income statement for Year 1

Sales $720,000

Cost of goods $350,000

Gross margin $370,000

Expenses

Utilities $2,000

Salaries $250,000

Marketing $15,000

Website $500

Rent $40,000

Insurance $3,500

Miscellaneous $5,000

Total expenses $316,000

Pretax profit (loss) $54,000

A breakeven analysis (table 2) shows that the shop will require sales of $51,232 to break even.

Table 2: Breakeven analysis

Breakeven analysis

Fixed costs (FC) $316,000

Contribution margin ratio (CMR) [gross margin/sales] 51.4%

Average annual breakeven sales (FC/CMR) $614,786

Average monthly breakeven sales $51,232

Revenues and inventory costs (cost of goods) are expected to grow by 20% in years two and three. Operating expenses are forecasted to grow to $350,000 in year 2 and $410,000 in year 3. Pre-tax profit will grow by 74% in year 2 and 34% in year 3. Overall, projections indicate that the shop will be profitable in the first three years. Table 3 below provides income statements for years 1, 2, and 3.

Table 3: Projected income statements for years 1, 2, and 3

Year 1 Year 2-Year 3

Revenue $720,000,864,000 1,036,000

Cost of goods sold $350,000,420,000 500,000

Gross margin $370,000,444,000 536,000

Operating expenses $316,000,350,000 410,000

Pretax profit (loss) $54,000 94,000 126,000

Guerrilla Marketing Strategy

The significance of marketing cannot be overemphasised. It is through marketing that a business reaches out to its target audience. Marketing is particularly important for a new business. Effective marketing can be important for accelerating customer acquisition and market share growth. Nonetheless, marketing can be a daunting task, especially for a small business. Small businesses like MM Sandwiches are often constrained by resources. Therefore, conventional marketing platforms like television and print advertising may often be out of reach of most small businesses.

Guerrilla marketing presents a significantly less costly route for the sandwich shop as far as marketing is concerned. Indeed, guerrilla marketing is often deployed when there is little or limited resources to spend. Guerrilla marketing essentially entails achieving marketing objectives through the use of low-cost unconventional strategies (Levinson, 2007). The marketer invests energy and creative imagination, as opposed to financial resources, to grasp the attention of the target audience. Guerrilla marketing works because it is simple, easy to execute, and substantially cheaper compared to conventional marketing techniques. In fact, as it targets consumers at a more individual and unforgettable level, guerrilla marketing arguably generates greater impression with consumers compared to conventional forms of marketing. For the new sandwich shop, guerrilla marketing will offer a valuable way to get discovered as well as stand out from the competition.

Prior to selecting the guerrilla marketing strategies to use, there are a number of factors that ought to be out into consideration. First, it is important to understand the target market, particularly in terms of thinking and behaviour (Levinson, 2007). This is important for settling for the most appropriate strategy. Second, creativity is a must. The whole idea of guerrilla marketing is to capture the attention of the target audience in an imaginative way. Without creativity, guerrilla marketing messages may be easily missed. It is also vital to understand how to measure success (Levinson, 2007). The success of marketing is usually measured via sales. Nonetheless, sales is not the only way that can be used -- marketing success can as well be measured using aspects such as number of customers acquired and number of customers that become loyal customers. Other important factors to consider include location, relevant laws, as well as unforeseen events such as weather (Levinson, 2007). Considering these aspects will be particularly important in this case.

Examples of guerrilla marketing techniques the new sandwich shop can rely on include outdoor advertising, free samples, sticker marketing, and posters (Levinson, 2007). The use of multiple techniques is informed by the need to reach as many customers as possible. Outdoor advertising basically entails the placement of advertising messages in outdoor spaces. These may include public bathrooms, buses, bus stations, trains, garbage bins, footpaths, as well as sides of buildings. With outdoor advertising, the shop can easily reach a large audience at a low cost. Free samples can as well be used to attract the target audience. Generally, consumers love free things. By giving free samples through events such as road shows and fairs, the shop would get a chance to educate consumers about its sandwiches, which may in turn result in the acquisition of new customers.

Sticker marketing can as well be a valuable way of reaching the target audience. Indeed, this can be an effective mechanism for raising brand awareness. Possessions such as laptops, tablets, and game consoles offer ideal conduits for placing stickers relating to the new sandwich shop. The stickers can also be given away during events such as road shows, or placed in random places such as the roof of a bus or train. Posters also provide a useful guerrilla marketing strategy for the new shop. Ordinarily, paying for space for a poster can be expensive. Nonetheless, the shop can place posters on its property or on borrowed space. Posters may also be placed on community message boards as well as walls.

The shop can take advantage of the internet to boost the impact of outdoor advertising, free samples, sticker marketing, and posters. Social media has particularly become an important online marketing tool in today's world. Facebook, Twitter, Youtube, Instagram, Snapchat, and other popular social networking sites offer an inexpensive platform through which small businesses can communicate with and engage their target audience. These platforms can be used to post messages, pictures, and videos of the shop's offerings. Customers can also share their experiences via these platforms, offering an ideal opportunity for word-of-mouth marketing. In fact, social media has become an important driver of word-of-mouth marketing today. This can be of immense advantage to the new sandwich shop. On the whole, guerrilla marketing offers an outrageously cheaper marketing option for the new sandwich shop given its financial constraints.

Appropriate Location for a Second Store

In the financial section above, it can be seen that the shop will be profitable in the first three years of operation. It would, therefore, not be unthinkable to consider expansion options at this stage. Any business desires to grow as much as possible. For MM Sandwiches, growth will be particularly important. It would result in greater market share and more financial strength. The shop can expand its operations by establishing a second store at an appropriate location. Appropriateness is a vital aspect as far as the location of a sandwich shop is concerned. Ideally, a sandwich shop requires a convenient, easily accessible, and readily visible location. It also requires a location with substantial traffic. This explains why most sandwich shops are located along highways, busy streets, as well as shopping centres, malls, and colleges.