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Company reports have all estimates involving all business transactions from the capital, business, and benefit calculations. This includes the method of weighing, sorting, and interacting with economic actors. Accounting may also be described as the planning and maintenance of financial units (Lorek 2014).
In my work, I will set up a barber shop by the name of Razors and discuss its intended operating size and objectives, the source of capital funds, my business vision, the cost of production of services, my pricing strategies and contribution margins, profit projections, potential finances and strategies for obtaining finance. My work will also point to the question of whether the financial plan is important for a business.
Razors Barber Shop
Razors barber shop will have its main activity being providing hair services to potential customers, services will include hair shaving, hair trimming, and hair styling. Razors vision will be to be the leading hair services provider in the regional market and its goals will include being the best hair shop. Its initial operations will begin from one stall capable of hosting two barbers, the business will then be gradually expanded as per customer demands (Storey, 2016).
Business Financial Requirements
Just like any other small business, Razor barber shop will obtain the necessary initiatives for the start and running of the business before it starts generating profit to be used in running and expanding the business (storey, 2016).
Cost of Expenditure
The initial cost of starting Razors barber shop is approximated to 1000$, this will include purchasing of barber seat, customer towels, sterilizer machines, a television set to keep customers waiting in queue busy, shaving machines, barber mirrors and required hair combs. The employed barber’s salary is also included in the specified sum (Gitman, Juchau and Flanagan 2015).
Cost of Service Production
Razors barber shop will offer shaving services from 30$ to 100$ per head. The pricing strategies incorporated here include the idea that normal cuts will be cheaper than hair styling cuts with will require much time from the barber. The 30$ price for the normal hair cut was determined and contributed by margins such as prevailing market prices for normal haircuts (Gitman, Juchau and Flanagan 2015).
The accumulated profits per month are approximated to reach a value of 160$ a figure received after paying off two barbers employed and settling power and water bills. The price was approximated by interviewing fellow entrepreneurs who had barber shops in the market. With time profits are expected to rise due to the quality services expected from the skilled professional barbers who will attract and keep customers (Gitman, Juchau and Flanagan 2015).
Profit Targets and Desired Returns
After marketing the barber shop through local media and familiarizing our business with local customers, we expect a net profit of over 200$ per month for the reason that we will provide our customers with quality services to win them and keep them coming back. If this becomes a success then in 5months the initial capital will have been repaid (Gitman, Juchau and Flanagan 2015).
Asset Requirements and Asset Management
The assets in the barber shop will be required to be in good working condition and meet the required sanitation standards so as to avoid negative publicity. The asset management which incorporates a technical plan used to manage infrastructure to deliver a quality service will also be met by good hygiene, good barber-customer relations and keeping work gadgets such as the shaving machines in good condition to avoid injuries or substandard services (Barber, John and Porteous 2016).
Razors barber shop asset management strategies will include implementing marginal income accounting as 100% of the fixed overhead is borne by the business and discourage the common growth for growth sake as growth is hardly synonymous with capitalistic success (Barber, John and Porteous 2016).
Cash Flow Projections
Since a cash flow projection is an important tool in monitoring business growth and development in terms of profits realized and to also forecast possible expansions as per our business plan which endorsed expansions. Razors barber shop will ensure that cash flows projections are implemented for forecasting. Razors will also make sure its cash flow projections operate under legal terms i.e.it will have all required sections as per financial laws (Lorek 2014).
Capital Investment Requirements for Operational Periods
Capital investments for Razor Barber will be strategized to allow for smooth operations of the business. The initial capital will include a percentage of an extra cost which will be used to bail out the business in financial crisis whatsoever. The fixed assets such as shaving machines will also be the most quality make in the markets to avoid unnecessary repairs which disrupt business operations.
Budget Targets for Business Financial Monitoring
Budget targets will be emphasized in Razors barber shop in order to monitor the growth and position of the business, this will be achieved by monitoring monthly profit reports and comparing my reports with those of my competitors. In achieving the financial monitoring I will use sales, cash flows and profit margins reports (Lorek 2014).
Break Even Analysis
Break even analysis is a financial tool used to determine when the business will have covered all initial expenses i.e. starting capital and start making profits. A described earlier, Razors barber shop will return initial starting capital in 5 months as per current market research. After that, the business will run itself through accumulated profits (Grant 2016).
Projected Balance Sheet
The balance sheet to be used for financial purposes will be the standard balance sheet with the three main partitions Assets i.e. furniture and shaving machines, Liabilities i.e. debts and Capital will be calculated by subtracting the liabilities from the assets. The balance sheet also helps in forecasting the business financial position (Lorek 2014).
Working Capital Analysis and Start up Financial Requirements
The working capital analysis is used to measure a company’s operational efficiency. Its analysis is majorly achieved by calculating the asset liability ratio, in doing this razors will perform asset value and subtract them from liabilities. Negative capital will mean that the business has trouble n meeting liabilities with current assets. Razors initial capital will come from my funds as the specified required amount for the small business can be met (Downes and Goodman 2014).
Finance Acquisition Strategies
Identification of potential Finance Sources
When need calls for financial bailing, potential financial assistance for Razors will include internal sources such as the business savings and asset selling or external sources such as loans from bank i.e. mortgages for building extra stalls when the need for expansion arises and loans from friends and family members (Downes and Goodman 2014).
Cost of Securing Finance
The cost of securing finance for Razor barber shop will depend on where the financial aid is pursued. If from bank loans then interest rates have to be and from friends, there will be some interests too although lower than those from the bank (Downes and Goodman 2014).
Strategies to Obtain Finance
In obtaining financial aid, Razors barber shop will go for less interest and less cumbersome procedures to ascertain that loans do not result to additional financial baggage for the company but rather help in solving financial strains. (Downes and Goodman 2014).
In conclusion, it is evident from the above discussion and business knowledge that financial plans are important for the business as they help in monitoring business progresses and help in business decision i.e. choices for expansion.
Barber, J., Metcalfe, S. and Porteous, M. eds., 2016. Barriers to growth in small firms. Routledge.
Downes, J. and Goodman, J., 2014. Dictionary of finance and investment terms. Barron's educational series.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson Higher Education AU.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Lorek, K.S., 2014, June. Trends in statistically based quarterly cash-flow prediction models. In Accounting Forum (Vol. 38, No. 2, pp. 145-151). Elsevier.
Storey, D.J., 2016. Understanding the small business sector. Routledge.
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