To Build or Buy
To Build or buy
Strategy for a Business Concept
One of the places the student frequently visits is Hot Coffee Place, a local coffee shop located within the student’s neighbourhood that provides the best place to meet new people. The aim of this paper is to provide a craft of a strategy for a business concept that would offer direct competition with the Hot Coffee Place and hopefully acquire some of the rivals’ most frequent and loyal customers. The new business would be called The Coffee Place and it would endeavour to provide to its customers a welcoming and practical place that would make meeting new people and having coffee more convenient. The Coffee would be distinct from the Hot Coffee Place in the sense that it would provide the necessary services and an ideal environment to make meeting new people not only effective but also easy. The Coffee Place would be arranged in such a way as to offer an environment that eliminates most of the inhibitions that comes in the way of people meeting, and will additionally breed self-assurance of the parties involved thereby making it efficient to hold a meaningful and insightful conversation. The Coffee Place would be the preferred destination for individuals between the ages of twenty-five and forty-five to meet and have coffee.
To achieve more success, The Coffee House will have to understand the forces affecting the market by getting the most relevant information on the market and understand the preferences of the targeted market. This will make it easier to recognize those to be targeted, their preferred tastes, and the strategy to be used by The Coffee House so as to communicate effectively with the targeted group. To attract more people, the menu of The Coffee House will be flexible and will alternate between tapas, microbrews and a wide variety of coffee drinks. The menu will include a variety of foods and drinks. Also, the waiting time taken by customers in the rival Hot Coffee Place will be reduced significantly so as to minimise the waiting time to enable clients have a faster access to the premises.
To make the process of meeting other people of the opposite sex even more interesting, The Coffee House will invest in long rectangular table that will require those meeting for the first time to sit on the opposite ends of it and have their conversation. The individuals on the table will be allowed a maximum of ten minutes to get to know each other before being directed to another table, and the process continues. Considering the fact that the process can be nerve-wracking for some people, The Coffee Place will make alcohol, particularly beer, readily available as the drink assists in eliminating the inhibitions that prevent people from meeting each other.
There will be a big range of other products on offer on the menu, ranging from coffee, alcohol, espresso, cappuccino, as well as other products. Other than the fact that alcohol significantly eliminates or reduces the inhibition that make meeting new singles harder, it will be served because it is more profitable. Coffee and other drinks related to it are enormously common is considered a must have in a coffee shop, especially in coffee houses where individuals are determined to make good impressions.
Purchasing an Existing Business
Since the Hot Coffee Place is a business that is already in existence and one with several loyal customers, it would be most appropriate to purchase it rather than starting from scratch and working to get a new business established. The process of starting a new business is novel, but the process may take a lot of time and resources as well as effort. There are several reasons as to why purchasing the Hot Coffee Place would be advantageous. Firstly, acquiring an already existing business is advantageous in the sense that the buyer gets to acquire an already existing customer base. The other advantage is the fact that the business is recognized by the customers as well as the goodwill of the purchased business. As a result, purchasing ensures that the new owner acquires a good reputation that is important in reaching newer markets (Alberta, 2010).
Secondly, it would be beneficial to buy since purchasing ensures the owner acquires an already competent and experienced team of employees who understand the demands of the occupation and are familiar with the regulations and rules that govern the practice. The process additionally reduces or eliminates the added cost of securing the services of new employees in the case of starting out afresh. The new owner is therefore saved the cost of conducting interviews and training the new members of staff on the regulations and rules that need to be observed. It additionally reduces the time that can be spent in either advertising the services offered or building the reputation of the business. Thirdly, purchasing the business is advantageous in the sense that it gets favourable credit conditions and terms from the suppliers of the business who already have an enduring association with the business. Long serving suppliers also have a deeper understanding of the standards of the goods and services of the business as well as its other needs. This can be beneficial in the face of increased competition from rival firms located within the same locality.
Banks are mandated to ask frequently their clients to re-negotiate their credit situation, when there is an alteration of ownership including situations where the activity is a share purchase and not the purchase of an asset. The fact that the business is on the track to make future earnings will be advantageous in the re-negotiation of better financial arrangements that may not be available for a start-up.
Appropriate Form of Ownership
The most appropriate form of ownership for the new business would be a joint partnership in consideration of the cost involved in acquiring an already established and profitable business. The number of partners would be three as the third partner will be important in breaking a tie in cases where a decision requires the partners to vote. One of the advantages of joint partnership in this situation is the partners will be able to share equally the expense of acquiring the Hot Coffee Place and, therefore, shift the burden from a single person, in the case of single ownership. Additionally, those in a joint partnership are advantaged in the case of paying taxes. In consideration of the fact that it is not a business entity, the partners in a joint partnership does not be not mandated to file tax returns. They are however permitted to shift their percentage of the businesses incomes and expenses directly to their individual income tax rate. The implication is that the partners are mandated to pay taxes on the revenue generated by the business by their individual income tax rate (United States Department of Commerce, 2009).
The biggest advantage to a joint partnership, though, is the ability to make decisions together in the course transacting business. Partners get to share the critical responsibility of making the decision with the other partners so that the burden is not shouldered by an individual. Additionally, partners in a joint venture can consult with one another on the best techniques to use in making the business more profitable. Because they have more freedom in comparison to corporations, the partners are allowed to apply any system of management that they perceive to be the most appropriate (Bond, 2004).
The Coffee Place will be the ideal place for singles between the ages of twenty-five and forty-five to mingle and meet new people. The business will exploit its strategic location to create a strong customer base by offering the best products and an ample environment. The Coffee Place will span a total of 2,400 square feet, and the space will be secured through a four-year lease with the possibility for extension. The owner will come up with $60,000 of the required $100,000, the remainder of which will be borrowed from Southern Bank.
Revenues are expected to increase from $120,000 to triple that in three years while profits are anticipated to increase from $80,000 to $100,000 within a similar period.
The objectives of The Coffee Place are to grow to become the most preferred coffee joint in the locality, to start earning profits from the month on inception, and to continue a profit margin of 70 percent.
The Coffee Place will make it its goal to provide an ideal place for singles to meet and hang out while enjoying the products on offer.
Company Summary and Ownership
The Coffee Place is a business that sells, among other things, coffee and other beverages and covers 2,400 square feet and located in the United States. The leading investor is Kevin Adams, who controls more than 60 percent of the company and is also the sole owner.
The total expenses while starting include renovating of premises, stationary, insurance, advertising expenses and legal fees. The assets for starting out are estimated at $40,000. The company will be funded by the founder and loans obtained from banks. The owner, Kevin Adams, will contribute $60,000 while the remaining $100,000 will be obtained from banks.
The Coffee Place will provide its clients with the best coffee and other beverages as well as an ideal meeting place. Other products are espresso drinks, brewed coffee as well as teas.
There is a steady increase in consumption of coffee by 3.3% in the last ten years, a market that The Coffee Place will endeavour to explore. Its target consumers will be the local population as well as students from the nearest university who are singles. The technique will be to market itself as the ultimate to have coffee while meeting new people. The business will make use of banners and fliers to promote its presence. Personnel will consist of the founder, a manager, and the employees.
Alberta , C. (2010). Rural Commerce and Action Plan. Levels of Ownerships. London: Routledge.
Bond, S. (2004). Business Growth and Development. New Jersey: Churchill Livingstone.
United States Department of Commerce. (2009). Basic Business structure: Business Centre. New York: Peter & Sons.