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Starting a Small Business, Business Plan Example

Pages: 1

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Business Plan

Introduction

In am a student in the Valencia community college in my country and I am thinking of starting a small business dealing with the supply of clothes for children. I have the intention and desire to expand my knowledge of business practices and have decided to engage my activities in the Valencia since there are a lot of businesses dealing with the clothing of the children and all of them seem to be doing well. Is it because of the population is large enough to support all these businesses dealing with children ware or it is because the children of this town are less careful with clothing and therefore  make them wear out quickly necessitating the need for the fast replacement compared to the other cities?

I have done some research on the Valencia city and it has come to my notice that parents in this city like having their children smartly dressed as compared to the other cities. The parents and caretakers of children in the city buy children clothing almost on a monthly basis, explaining the reason for high demand for children clothes as opposed to its neighboring towns. People here are obsessed with smart children and take pride in the looks of their children more than any other city in the nearby. As a result, it has become a centre for small businesses dealing with clothes of children. People from the nearby cities also come to shop for their children here since the city has established itself as a city dealing with exclusive designs of children clothes. There are a lot of varieties of clothes for children and all the designs the children like are available here.

I thought of which business to start and arrived at this type of business, one dealing with clothes for children. I did some research from various websites and they were bearing almost the same information with what I knew. But in addition to this, the research also enabled me to understand the clothing business better on how to manage it financially. I got to understand how I could evaluate the business on the basis of its financial status and to make decisions based on the financial status of the business. From the research, I understood the best methods of running a business to get the best returns and therefore profit. This will help me on a great deal in knowing how I can modify the business operations to have the best outcome.

The business will be owned totally be me and therefore will be a sole proprietorship type of business. I will be the only decision maker. All the total capital will be raised by me through personal savings, borrowing from friend, family support or even a loan from a bank or a financial institution. I will start the business with a small shop and a van. I considered this type of business because being the founder of the business project I would be responsible for all liabilities and debts and exchanges made in the business. As such, I will have all powers pertaining to decision making in the firm. I will also be responsible for ensuring that the products reach customers. In addition, since it will be a new job in the market, being the proprietor will enable me to make the necessary adjustments without having to consult any other individual.

The business will start with the name “Valencia Kids Clothes Suppliers”. This name was considered in order to make the people of the targeted region to feel recognized. The business will be located in one of the main streets of Valencia in a region that is close to several family estates. This location was considered in order to make the business premise assessable to potential customers. Other than the shop, the business will also use the business van in marketing the clothes to other regions especially in areas from opposite direction, which have high number of children.

In order to reduce fraud, the following internal control will be implemented; there will be a well structured accounting procedure which should be followed when purchasing or supplying the products. This control will help to reduce fraud, since all products entering into the supply systems and moving out will have to be accounted for. In addition, the internal control will give the targeted clients assurance of the quality of products. In addition, as the sole proprietor, it will be my responsibility to ensure all periodic reconciliation tallies with the records in other accounting books (Business Glossary, 1). This internal control will help reduce internal fraud.

The business will be medium sized and will require one time start up expense of $33,590.00.  To obtain license for the business $150 will be used while $ 300 will be used for legal and professional fees. In addition, $1000 will be used in advertising and promotion while the remaining amount will be used on equipments, decoration of the business premise and installation of various equipments among other activities. This money will be used in modifying the business premise in order to be customer friendly, purchase various children clothes products with different designs and in the outreach programs where the van will be used to transport some of the goods to other designated areas in order to increase market area.

The service revenue for the business will be $89,600.00 while the operating expense for the business will be estimated to be $51,840.00. The estimated annual net income will thus be $37,760.

Income Statement

For the year that ended December 2010

Revenue

Products revenue $89,600.00

Operation Expense

Advertising Expense $2,880.00

Salaries Expense $ 42,000

Transport expense $2160.00

Supplies expense 3,000.00

Telephone and other utilities expense 1,800.00

Total operating expense ($51,840.00)

Net Income $37,760.00

The businesses assets will include a business van, stock and cash which will total to $113, 560.00. The liabilities will be $ 25,800.00 hence making Valencia Kids Clothes Suppliers equity to be $87,760.00. Hence, based on return on assets analysis, the business will be expected to have positive revenue which will be expected to continue increasing the subsequent years.

Assets

Business Van $24,000.00

Stock $4,000.00

Cash $85,560.00

Total Assets $ 113,560.00

Liabilities $25,800.00

Equity $87,760.00

Equity and Liabilities $113,560.00

Developing this business will have financial and non financial benefits, not only to me but also to other members of the community. Some of the financial rewards will include increased revenues which will in turn translate to economic stability.   In addition, the business will enable me to develop business personalities who will be liable for different business obligations. These benefits of running a business as sole proprietor will enable me to learn how to manage and predict business risks, i.e. a non financial merit of the business. This business will require few legal costs and hence make the company to be profit oriented. Based on return on assets analysis, the company will be able to recover a return that is above the amount I invested as capital by 33% and hence the business will provide business security to the owner (me). Based on debts assets ratio only 23 % of the business capital was sourced from the creditors.

Conclusion

Doing this research has been of great help since it has enabled me develop a strong perspective on how proper planning is important before establishing any form of business. Ina addition, this form of research has showed me the importance of research before developing any business. Through research I was able to identify the needs of people in particular regions and capitalized on the fact that customer needs to develop the business due to what is at demand. The research that was done for various business analysis strategies such as return on assets analysis, have been very important in helping me identify and determine the right business to consider.

Works Cited

Business Glossaries, “Business Defination for Internal control”. Barron Education Inc. 2007. page 1 Retrieved 13th March 2010 from http://www.allbusiness.com/glossaries/internal-control/4943791-1.html

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