Planning for a Business Start Up

Planning for a Business Start UpWould it be feasible to open an galvanizing goods parentage in Thame? Thame is in Oxon (Oxfordshire).AbstractThis report examines the stage parentage organisation occurrence for a start up business in Thame, Oxfordshire. The business in question is that of an galvanizing seller, and the possibilities for both a sm every, independent enterp formulate and a with child(p) chain multiple atomic number 18 considered here. The report initial considers the coeval economic and retail environment, and then the relevant facts about Thame itself. It then looks at the possible market place segmentation associated with the business, and considers some communicate cash eat and expenditure models. In conclusion, the report does non foresee either guarantees of success for such a venture in the present climate, although it may be possible to strike scurvy margins through diversifying the business into e.commerce. Conversely, it may be that forthc oming large eggshell ventures hold up a bun in the oven better prospects.1. Introduction.This report examines the business case for scratch a refreshed venture in the form of an electrical retailer in Thame, Oxfordshire. It does so with collectible regard for the contemporary economic and retail environment, as well as the relative prospects of a small, independent business as against a larger, diversified whizz. As Groom speculates, A deferral can be a smart prison term to launch a business or innovate, if you can find the money to invest. Competitors are try to cut costs and you can look forward to the upturn. (1). Liquidity in terms of start up costs, inventory, stock and rents is a key part for consumer facing businesses, who cannot confidently predict their actual margins in the current climate. As entrust be discussed below, there are likely to be material developments in UK electrical retailing sector everyplace the next fewer years not crimson the establishe d multiple chains are assured of retaining their current margins. The one airfield which may offer secondaryr players a meaningful hazard is e.commerce. As Hooley et al. portend out, A significant feature of the Internet is the shift in power away from manufacturers and retailers towards customers. dapple the period to the middle of the twentieth centimeury saw power gruelling in the hands of manufacturers and suppliersthe customer now typically initiates an information search, whereas in the past the manufacturer or the retailer initiated and controlled this. (2)2. A worthwhile business opportunity? The local/national competition.In the absence of detailed and center market research data, the business case must be projected from the procurable circumstantial evidence. We will begin this discussion by looking at the market conditions for electrical goods and UK retailing in general. Both the British Retail Consortium and the Royal Institution of Chartered Surveyors report ed worsen trade figures in November 2008, with non-discretionary purchases, i.e. food and drink, the only categories not to be depressed. (3) A recent Bank of England survey reported that Banks are imposing tougher lending standards on loans and credit tease, although interest rate cuts may bring forward households to knock off money freed off by heaper mortgage repayments. As one analyst observes, Non-food retail gross revenue are driven by real wage growth, credit availability and housing wealth. Since real incomes, after inflation, have been travel for about two years, consumers have dipped into savings, and used remortgaging and credit cards to maintain spending. Things are now reversing. (4) A depressed housing market will further impact upon electrical retailing through a lower demand for appliances. The major multiple and discount electrical store chains are suffering from poor gross revenue and margins at present, due to the following factorsDepressed housing markets have resulted in lower sales of refrigerators, washing machines and an some other(prenominal) white goods.A price war among television manufacturers has depressed profit margins on these goods by 1 per cent in the hour half of 2008. Sales of flat-screen TVs have slowed to the level of white goods.Margins have been further reduced in pre-Christmas price cutting, with rival chains holding sales to reduce stock levels. (5)In specific company terms, this means that Comets like for like sales are down 11.6 per cent from 2007, and Kesa, its Anglo-French owned parent company, has suffered a commencement ceremony half loss. Its shares deep suffered an 11.9 pence fall to 142.5 pence, and it is planning to cut costs through redundancies in its UK stores. DSG International, Comets sozzledst competitor, has recently scrapped its dividend on the same basis. (6) As a background to this, large format sackings in retail lay developments have been contracting, with Comet and Currys plannin g to rationalise their chains. Meanwhile, Tesco and Asda are expanding their non-discretionary and homewares businesses, and Argos is reportedly expanding. DSG have in any case opened a 60,000 square foot matter near Birmingham, under the Currys megastore brand. In the long term, there may be competition from completely new entrants, such as Carphone Warehoue, which is soon source US electrical stores in partnership with scoop debase. ( 7) The Best Buy/Carphone partnership has already projected 200 large consumer electrical stores in Europe by 2013, with 100 of these in the UK. They will be button head to head with Currys, Comet and PC World, and projecting sales of 6.2 one million million by 2013. ( 8) This is based on anticipated margins of 5.6 per cent, whereas current incumbents such as Currys and Comet trade on typical margins of 1 per cent. It is planned to achieve this much favourable margin by adopting a know your customer come up as Charles Dunstone puts it, If yo u go to a lot of electrical stores now, they just bear on the rain off the stock, no one there does anything, they dont display it nicely, if you ask a question they just read the tag back to you. (9).3. The Local and Regional Trading Context.Thame is in a relatively affluent area. A detached house in the town is currently valued at an average of 383,799, with the entry level flat or maisonette costing an average of 167,994. (10) Council tax is likely to alternate in 2009, with a Band D tax payer facing an profit of 3.05. (11) . The area is already well provided with electrical retail outlets. Currys has ten stores at heart a twenty five mile rundle of Thame, including three in Reading, two in High Wycombe and two in Aylesbury. thither are five Comet electrical stores within the same area Aylesbury, Oxford (Cowley), Oxford, High Wycombe, and Reading, the closest of which is 8.7 miles away. Tesco and Asda, which both sell household electricals, have stores within an 8 mile ra dius of Thame Tescos Princes Risborough store is 7.65 miles away, whilst Asdas Wheatley outlet is only 6.05 miles. DIY outlets such as BQ, who also sell some electrical appliances, also have stores in the area. Thame is listed as having two independent electrical retailers Thame Audio, of Swan Walk, and Domesco Ltd, in Thame High Street. No trading figures are easy for the latter, but in 2008 Thame Audio publicly reported a filter in turnover to 100,000. (12 ) The local credit situation for new or small enterprises is not encouraging. The proprietor of Thames AV, the independent television and hi-fi store, has recently complained of having his business overdraft interest rate doubled to 8 per cent, with the jargon (Barclays) disinclined to extend further credit. (13) This is redolent of the wider national situation The Federation of slight Businesses indicates that Our members are being refused loans and terrorened with overdraft withdrawals unless they agree to new, hiked-up rates. The banks have had their bail-out. They should not expend their problems on to loyal . . . customers. (14 )There are support organisations for new enterprise in the region, including the Oxford Trust, and Oxford Innovation. (15) It must also be borne in mind that the commensurateness of the regulatory framework is unlikely to be tipped towards small retailers in the near future. As one of their Trade Organisation representatives has commented, Having received the recommendations of a detailed and extensive inquiry there is no justification for the organization not driving forward the remedy put forward by thecompetition authorities. (16) However, the response from the Office of Fair Trading has so cold been unequivocal It is not for the competition authorities to deny any players in a market opportunities for organic growthout of a perceive need and ability to meet consumer demand. (17). In other words, there will be no regulatory leveling of the playing field to encour age or assist small businesses.4. mart entry prospects and Cash flow Forecast.Deacons and Freely bear down out that converting an idea into a business opportunity is the key element of the process of business creation, simultaneously indicating that a number of elements need to converge The economic environment has to be conducive, the finis must be appropriate for risk-taking and the nascent entrepreneur must have the confidence to number an idea suggested by opportunities through to fulfilment. (18) Whilst not all of these factors are currently present, it is proposed here that small retailers can still take advantage of the untapped capacity in eCommerce. As Hooley et al point out, this market is not homogenous, consisting of elevatedly differentiated segments, i.e. Explorers highly optimistic and innovational Pioneers the innovative but cautious Skeptics who need to have the benefits of technology proven to them Paranoids those who are insecure about the technology and Laggards those who will resist the technology. (19). In a survey of small retailers, over half tell that they were already augmenting their footfall business with trading on the web. All of those who had through so considered the initial outlay had been well invested, and considered that they had already recouped their investment. Whilst none concur with the idea that the web business leader eventually supplant their high channel business, they all foresaw it playing an increasing role in their margins even those who had not yet started trading on the web. (Appendix 3).Cashflow Forecast.Individuals will not enter the field of study of business start ups on a level playing field, asfinancial institutions are applying increasingly stringent lending criteria. As Deakins andFreel point out, The importance of human capital tends to be reinforced by immaterialfinancial institutions, since research has shown that bank managers rate previousexperience as an important factor in lend ing to new-venture entrepreneurs. (20) Themargins cited above, i.e. those of between 1 and 5 per cent as accepted in the tradingof the large electrical multiples, illustrate how difficult it is going to be for a small scaleenterprise to expand or even survive in close proximity to them. The cashflow forecastprepared for this study is based on a reasonably well capitalized start up, with only a24,000 loan required, and this deferred until the second year of trading, i.e. norepayments due in the first twelve months. It also assumes the trader has personalliquidity of 500 a month from their active assets, which they are prepared to commit tothe business. The business has a target periodical income of between 8,000 and 10,000,seasonally adjusted taking into account all other income, this would accrue a grand totalof 134.000. (See Appendix 1).Assuming an yearbook stock inventory of 96,000, the other major outgoing will beRent and rates, which are currently high in both the high street and out of town sites, despite vacant lots and fall demand. This will amount to 14,400 including business rates, and there will also be a 4,000 start up cost for interactive website design. With nothing factored in for contingencies, a total expected expenditure of 125,120 is perhaps a little optimistic, and the predicted profit of 8880 may be reduced to a break even situation. This is not regarded as a bad result in the first years trading for an independent retailer. (Appendix 2).5. Conclusion.Current retail trading conditions are, arguably, not auspicious for any scale of enterprise. However, they are particularly untamed for the small retailer, and especially one which is relying on any element of credit. There is no guarantee that the latter will be acquirable at all, or that the terms agreed for it will remain unchanged as has been discussed above, if they do change, it is likely to be in favour of the bank, rather than the other way round. As Deakins and Freel point out, For obvious reasons, little research has been make on new business ventures that subsequently fail, but it is commonly take a firm stand that one of the main reasons for the reported high failure rates of such new ventures is under-capitalization. (21). With forthcoming large scale businesses such as Carphone concentrating on creating customer value through do, small businesses will no eight-day be able to claim any discernible advantage in that respect, unless they can apply to new areas of retailing such as e.commerce. On the positive side, small businesses may derive some advantage from appointed nervousness about their role in the overall economy. Chancellor Alistair pricey has augmented the elfin Firms Loan Guarantee Scheme, and widened the availability of Insurance from the trade Credits Guarantee Department. Stephen Alambritis, who is the head of parliamentary affairs for the Federation of depleted Businesses, has indicated that Somethings happened somewhere in gover nment that recognises that the real economy is small businesses, and if they dont get the money and the credit, then well be in a recession. (22). With over 13 million people in the UK working in the small business sector, much depends on their sustainability. (23) However, the precise amount of support which might be obtainable to any individual enterprise, such as the one under discussion here, cannot be anticipated. It must also be considered that any such support may be ephemeral in nature, and be reflected in higher taxes and lower business allowances when the fiscal books have to be balanced. Overall, the factors uncovered by this report indicate that this is not an appropriate time to open a small independent electrical retail business in Thame. Conversely, it may a propitious time for the kind of audacious, service orientated superstore mooted by Carphone Warehouse. As Blumentritt observes, Because defenders value efficiency and stability in their technology, structure, and organizational routines, they are sensitized to problems associated with innovation (e.g., high cost, risk of failure, threat to the established order) (24) If this is true of the existing electrical multiples, Thame may be a promising site for such a venture.Footnotes1.) Groom, B., A Great snip for New Businesses?, pecuniary sentences, 18.11.08, INTERNET, forthcoming at http//www.ft.com/cms/s/0/b8fc9ccc-b510-11dd-b780-0000779fd18c.html viewed 21.12.082.) Hooley, G., Saunders, J., and Piercy, N., (2004), merchandising schema and agonistic Position, 3rd Edition, fiscal Times/ assimilator Hall, p.515.3.) Cohen, N., suck up in UK retail sales and home deals, financial Times, 11 Nov 2008, INTERNET, obtainable at http//www.ft.com/cms/s/0/71a9f746-af7c-11dd-a4bf-000077b07658.html viewed 22.12.084.) Unattributed, UK retail, Financial Times, 7th Oct 2008, INTERNET, operable athttp//www.ft.com/cms/s/1/d898f024-9447-11dd-953e-000077b07658.html viewed 22.12.085. ) OConnor, S., The pang in Spain spreads to Kesas electrical goods, Financial Times, 17th December 2008 INTERNET, addressable at http//www.ft.com/cms/s/0/b2777ac0-cbdb-11dd-ba02-000077b07658.html viewed 22.12.086.) Urry, M., Kesa plunges on Comet warning, Financial Times, 10 Sept 2008, INTERNET, visible(prenominal) at http//www.ft.com/cms/s/0/ae1807ca-7f18-11dd-a3da-000077b07658.html viewed 22.12.087.) Thomas, D., and Rigby, E., Wind of change blows through retail parks, Financial Times, 17 Oct 2008, INTERNET, available at http//www.ft.com/cms/s/0/c93c46ae-9c7a-11dd-a42e-000077b07658.html viewed 22.12.088.) Rigby, E., and Parker, A., Best Buy and Carphone detail Europe venture, Financial Times, 15 Oct 2008, INTERNET, available at http//www.ft.com/cms/s/0/e2da7750-9a51-11dd-bfe2-000077b07658.html viewed 22.12.089. ) Rigby, E., and Parker, A., Carphone upbeat over ambitious new venture, Financial Times, 15 Oct 2008, INTERNET, available at http//www.ft.com/cms/s/0/fc98369a-9ae8-11dd-a653-000077b07658. html 22.12.0810.) Proviser, Thame House Prices, INTERNET, available at http//www.proviser.com/regional/towns/thame/ viewed 22.12.0811.) ThameNews.Net, Council Tax rise likely for 2009, INTERNET, available at http//www.thamenews.net/readmore.asp?Content_ID=3972 viewed 22.12.0812.) Guthrie, J., farm animal owner disgusted with bank, Financial Times, 24 Oct 2008, INTERNET, available at http//www.ft.com/cms/s/0/d30ec254-a163-11dd-82fd-000077b07658.html viewed 22.12.0813.) ib.14.) ibid.15.) OConnor, S., The pain in Spain spreads to Kesas electrical goods, Financial Times, 17th Dec 2008 INTERNET, available at http//www.ft.com/cms/s/0/b2777ac0-cbdb-11dd-ba02-000077b07658.html viewed 22.12.0816.) Unattributed, ACS Calls for governmental Action, Association of Convenience Stores Website, INTERNET, available at http//www.acs.org.uk/en/Press_Office/ enlarge/index.cfm/obj_id/7082D32C-933E-4313-9CC47A5603AD2C50 viewed 28.10.0817. ) Office of Fair Trading, (2005), Supermarkets The code of int rust and other competition issues. Conclusions. August, OFT807, HMSO, London, p.9.18.) Deakins, D., and Freel, M., (2006), Entrepreneurship and dispirited Firms, McGraw Hill, London, p.228).19.) Hooley, G., Saunders, J., and Piercy, N., (2004), Marketing Strategy and Competitive Position, 3rd Edition, Financial Times/Prentice Hall.p.49320.) Deakins and Freel, op.cit., p.226.21.) Ibid. p.229.22.) Eaglesham, J., Brown sharpens focus on small businesses, Financial Times, publish 12.10.08, INTERNET, available at http//www.ft.com/cms/s/0/7566b7c8-9877-11dd-ace3-000077b07658.html viewed 22.12.0823.) Wright, W., Dear Chancellor 1 zillion Small Business Survival Fund, Federation of Small Businesses Website, INTERNET, available at http//www.fsb.org.uk/frontpage/assets/fsbadvert.pdf viewed 21.11.0824.) Blumentritt, T., and Danis, W.M., Business Strategy Types and Innovative Practices, Journal of managerial Issues, Vol. 18, 2006. INTERNET, available at http//www.questia.com/read/5016256465? form of address=Business%20Strategy%20Types%20and%20Innovative%20Practices viewed 24.12.08BibliographyBlumentritt, T., and Danis, W.M., Business Strategy Types and Innovative Practices, Journal of Managerial Issues, Vol. 18, 2006. INTERNET, available at http//www.questia.com/read/5016256465?title=Business%20Strategy%20Types%20and%20Innovative%20Practices viewed 24.12.08Cohen, N., Plunge in UK retail sales and home deals, Financial Times, 11 Nov 2008, INTERNET, available at http//www.ft.com/cms/s/0/71a9f746-af7c-11dd-a4bf-000077b07658.html viewed 22.12.08Competition Commission, (2008), Market investigation into the supply of groceries in the UK, HMSO London.Deakins, D., and Freel, M., (2006), Entrepreneurship and Small Firms, McGraw Hill, London.Eaglesham, J., Brown sharpens focus on small businesses, Financial Times, Published 12.10.08, INTERNET, available at http//www.ft.com/cms/s/0/7566b7c8-9877-11dd-ace3-000077b07658.html viewed 22.12.08Epstein, M.J., (2004), Implementing E.Comme rce Strategies A Guide to Corporate Success after the Dot.Com Bust, Praeger, Westport Ct.Gilbert, X., and Strebel, P., (1988), Developing Competitive Advantage, in Quinn, J.B., Mintzberg, H., and James, R., (eds), The Strategy Process, Prentice Hall, Englewood Cliffs NJ, pp.82-93.Groom, B., A Great Time for New Businesses?, Financial Times, 18.11.08, INTERNET, available at http//www.ft.com/cms/s/0/b8fc9ccc-b510-11dd-b780-0000779fd18c.html viewed 21.11.08Guthrie, J., Store owner disgusted with bank, Financial Times, 24 Oct 2008, INTERNET, available at http//www.ft.com/cms/s/0/d30ec254-a163-11dd-82fd-000077b07658.html viewed 22.12.08Hooley, G., Saunders, J., and Piercy, N., (2004), Marketing Strategy and Competitive Position, 3rd Edition, Financial Times/Prentice Hall.Marsh, P., SQW and Oxford Innovation combine their expertise, Financial Times, twenty-second June 2006, INTERNET, available at http//www.ft.com/cms/s/0/2bcb2e9e-018b-11db-af16-0000779e2340.html viewed 22.12.08Mintzberg, H., Ahlstrand, B., and Lampel, J., (1998), Strategy Safari The concluded Guide Through the Wilds of Strategic Management, Prentice Hall, LondonOConnor, S., The pain in Spain spreads to Kesas electrical goods, Financial Times, 17th Dec 2008 INTERNET, available at http//www.ft.com/cms/s/0/b2777ac0-cbdb-11dd-ba02-000077b07658.html viewed 22.12.08Office of Fair Trading, (2005), Supermarkets The code of practice and other competition issues. Conclusions. August, OFT807, HMSO, London.Proviser, Thame House Prices, INTERNET, available at http//www.proviser.com/regional/towns/thame/ viewed 22.12.08Rigby, E., and Parker, A., Best Buy and Carphone detail Europe venture, Financial Times, 15 Oct 2008, INTERNET, available at http//www.ft.com/cms/s/0/e2da7750-9a51-11dd-bfe2-000077b07658.html viewed 22.12.08Rigby, E., and Parker, A., Carphone upbeat over ambitious new venture, Financial Times, 15 Oct 2008, INTERNET, available at http//www.ft.com/cms/s/0/fc98369a-9ae8-11dd-a653-000077b07658.html vi ewed 22.12.08Stroud, D., (1998), Internet Strategies A Corporate Guide to Exploiting the Internet Macmillan, Basingstoke.ThameNews.Net, Council Tax rise likely for 2009, INTERNET, available at http//www.thamenews.net/readmore.asp?Content_ID=3972 viewed 22.12.08Thomas, D., and Rigby, E., Wind of change blows through retail parks, Financial Times, 17 Oct 2008, INTERNET, available at http//www.ft.com/cms/s/0/c93c46ae-9c7a-11dd-a42e-000077b07658.html viewed 22.12.08Urry, M., Kesa plunges on Comet warning, Financial Times, 10 Sept 2008, INTERNET, available at http//www.ft.com/cms/s/0/ae1807ca-7f18-11dd-a3da-000077b07658.html viewed 22.12.08Unattributed, ACS Calls for Political Action, Association of Convenience Stores Website, INTERNET, available at http//www.acs.org.uk/en/Press_Office/details/index.cfm/obj_id/7082D32C-933E-4313-9CC47A5603AD2C50 viewed 28.10.08Unattributed, UK retail, Financial Times, 7th Oct 2008, INTERNET, available athttp//www.ft.com/cms/s/1/d898f024-9447-11dd-953e-00 0077b07658.html viewed 22.12.08Wright, W., Dear Chancellor 1 billion Small Business Survival Fund, Federation of Small Businesses Website, INTERNET, available at http//www.fsb.org.uk/frontpage/assets/fsbadvert.pdf viewed 21.11.08Appendices.Appendix One.Cashflow forecast, Income.Appendix TwoCashflow Forecast Expenditure.Month123456789101112TotalStock8,0008,0008,0008,0008,0008,0008,0008,0008,0008,0008,0008,00096,000 invoice5005001,000Advertising three hundred three hundred3003003003003003003003003003003,600Bank Charges252525252525252525