Discussion
The aim of this report is to analyze a new business venture of a small coffee shop startup in Sydney Australia. The shop will mainly serve different types of coffee and some savories such as pastries, cookies, brownies and donuts. The shop will have a maximum seating arrangement for customers between 15 and 20, and will employ 2 workers, one for making the coffee and one for housekeeping activities. The shop will not have any waiters or table attendants, and the customers have to buy the beverage or savories from the counter. The shop would provide a relaxing ambiance for the customers, where they can chill with a cup of their favorite coffee and savories. In order to engage the time of the customers in a more effective way, the shop would also have a small library of books and magazines which the customers can read while enjoying their coffee or savories (Saffar, 2016). This will ensure the customers stay in the store for a longer time and thus spend more on the food and beverage. If the business shows growth in the first two years, additional books would also be added to the library to increase the collection, and provision would be made for regular customers to rent some books. On the longer run, plans would be made for expanding the shop to increase the capacity of the customers, hire more people (Jang et al., 2015).
The sources of capital needed for the coffee shop would include long term sources (longer than 7 years), medium term sources (2 to 7 years) and short term sources (less than 2 years). Each of these sources would be utilized to support the initial 6 months of running the shop where the flow of customers and profit flow can be expected to be low, and to cut the losses, plan for future expansions of the business (Scarborough, 2016; Li & Hall, 2016).
Short term sources of money can be procured through various means such as Bank Overdrafts, Trade Credit, Deferred Expense and Factoring (Harrison, 2017).
Bank Overdraft can allow the shops accounts to be maintained below zero, and the bank can support the deficit amount. This can help the shop owner to exceed the withdraw limit if needed be to cover the expenses of the shop such as electricity, maintenance and salaries (Storey, 2016; Chen et al., 2017).
Trade Credit would be utilized through agreements with the suppliers of coffee, and from bakeries supplying the savories. This can ensure that the shop does not have to make regular payments, and the resources can be procured without payment on the spot. This can also help to meet any additional demand of the supply in the store without prior arrangement of any payment, and payment can be made later (Wong et al., 2018).
Capital Sources and how are they obtained
Deferrals can also help to match the costs with the generated revenues as the costs can be accounted for later for the future profits that are anticipated (Rostamkalaei & Freel, 2017).
Factoring can be used for financing the library, by sharing a portion of the shop’s receivables to a third party who would supply books and magazines to the store. In this way, the shop does not have to pay to buy the books, and the third party can get a part of the shop’s profit to cover the expense of the books. This can also helps to keep the collection of books dynamically changing based on the preferences of the customers (Goh, 2017).
For medium term financial resources, Term Loans, Leasing and Hire Purchases can be used (Abor, 2017)
Term Loan for 7 years can be used to procure a source of capital through fixed interest rate. This will imply that a fixed amount of interest has to be paid to the bank every year for the loan. The payment would start after 2 years of taking the loan, by which time it is expected that the shop will start making profits (Jansen, 2016).
Leasing: Additional medium term loan can be procured by leasing one of the properties of the shop owner. However, such is only an optional choice, based upon the decision of the owner (Rostamkalaei & Freel, 2016).
Hire Purchase: This can be utilized for the procurement of equipments for the shop, such as new vending machines and coffee grinder, storage unit, disposable and also for the procurement of new books for the library which can me expanded on the medium term (Storey, 2016).
For long term capital sources, Venture Capital, Project Financing and Mortgage Loan can be used (Storey et al., 2016).
Venture Capital can be obtained from capital firms to invest in the shop for its long term growth in exchange of equity and profit shares. The investment plan would be for the first 10 years of the operation of the shop (Rostamkalaei & Freel, 2016).
Project Financing from key financers can help to increase the store sixe and customer capacity on the long term plan (Storey, 2016).
Mortgage Loan can also be optionally sought for in exchange for a property of the business owner (Campbell, 2016).
License and Permits: Necessary Licenses and permits needs to be obtained from the civil and governmental bodies (federal and state) to conduct the business in the region. Licensing and permits from the local municipalities should also be taken before staring the operations of the shop (Hatten, 2015; Steingold, 2017).
Short Term Sources
Safety and Hygiene: Maintaining safety and hygiene of the food is another very important legal requirement that mandates the business owners to ensure that the food and beverage served is free from any contamination is hygienic and would not cause any adverse heath effect on the consumers (Cunningham et al., 2014).
Environment, Health and Safety: This is also an important legal requirement that ensures the working environment of the store is safe for both the customers and the workers. Additionally, the owners have to ensure that adequate measures are in place to address emergencies and accidents such as fire. The operations of the business should also be environmentally friendly (Legg et al., 2015).
Fire Safety: This is a specific legal need, that ensures that fire prevention strategies are present in the shop and the employees are aware of the fire drill in case of a fire (Buchanan & Abu, 2017).
Various technological challenges might also occur in the regular operations of the coffee shop. These challenges include problems with the equipments such as vending machines, grinders, ovens and electrical appliances. Technical problems can also occur with the point of sales systems, computers and card swiping terminals that are used for billing. Another possibility of technical challenge can be with the electrical wiring system inside the shop (Burns, 2016; Ferreira & Ferreira, 2018).
Political challenges for the shop can be getting the approval from the local councils. It is important the local counselors are in favor of the shop, and show endorsement to the shop so that it does not face any difficulties with the political members (Storey, 2016; Poltke, 2018).
There can be different types of economic challenges faced by the business, which includes financial difficulties, payment of bills and loans as well as getting enough cash flow. It is vital that the quality of the products is maintained at optimal conditions, which can create an economic challenge for the procurement of quality materials for the most effective prices. Another economic challenge can be the payment of wages, and investing in sustainable practices (such as recyclable products) which can increase the costs of the business (Storey, 2016).
This challenge can be related to the disposal of wastes, non optimized use of resources, wastage of water, pollution and emissions (Goffee & Scase, 2015).
Social challenge that can be faced by the shop includes adversity from the local communities. This is however a rare scenario, which can occur if there is a conflict of interest between the operations of the shop and of the local community. Additionally, the socioeconomic condition of the neighborhood is an important consideration since a poor socioeconomic status of the local community can hinder and affect the cash flow of the shop (Storey, 2016).
Medium Term Sources
The setup of the shop should be culturally sensitive and respectful. Not adhering to such standards can lead to the displeasure of the customers from culturally diverse backgrounds. Overall, all the customers should be made to feel welcome in the shop, and no discriminatory practices should be shown be the staff (Storey, 2016).
The business can be exposed to different types of risks in its daily operations, which should be identified and strategies to address those risks should be outlined along with their methods of implementation (Burns, 2016). The key risks that can be associated with this business include:
This can occur at any time and can be caused due to various reasons, such as spillage of hot liquid, slip and fall and ergonomic injury of workers while moving heavy items. Risks of injury can also be caused due to an improper design of the shop and not maintaining safe working environment, which can cause falling of objects thereby injuring the customers and workers. Accidents related to improper wiring should also be considered as a significant risk since it can lead to serious adverse events in the shop (Hudáková et al., 2015).
This is a very significant risk in a store, since the store has objects that are easily inflammable, such as books, furniture and paper cups. This hazard can also increase the risks of accidental burns and damage of the property (Watts, 2016).
This is a serious risk that any business can face, and it can happen if the inflow of cash is unable to meet the costs of the operation and the repayment of loans. The misbalance between costs and expenditure can in turn affect the business performance and the long term viability of the shop (Burns, 2016).
This risk can occur if the quality and hygiene of the products are not maintained at the required levels, and poor quality of the foods can lead to adverse health conditions (such as food poisoning) of the customers. This can additionally lead to legal risks due to lawsuits filed by the customers (Vallianatos, 2017).
Damage to the equipments can occur due to wear and tear caused by the regular usage. Also damage can occur accidentally, when the equipment is not properly installed or used (Burns, 2016).
Furniture damage can also occur with the regular use, as they can break or can get defaced (Vallianatos, 2017).
Damage or loss of books:
Long Term Sources
Since the customers would be drinking coffee while reading the books, there is the risk of the books being stolen or damaged due to accidental spillages, which can affect the quality of the book, and other customers might not want to read those (Burns, 2016).
If the selection of the location of the shop is not viable, it can affect the inflow of customers and cash in the shop. This can increase the financial risks of the business and affect the long term viability (Watts, 2016).
This risk is associated with the loss or theft of financial and customer data of the business, which can adversely affect the business process. The stores registers would contain information regarding the regular cash flow and expense of the store, the financial accounts, paycheck details and employee details which can be prone to data theft (Hair et al., 2015).
Conclusion:
The aim of this report was to prepare an outline for a small coffee shop in Sydney, Australia as a start up business. The small shop would initially have a capacity of 15 to 20 customers, with self service system, where they would purchase the coffee and savories from the counter. In order to retain the customer and engage them in the shop for a longer time, the shop will have a small book store that the customers can read while in the shop. This can increase the sales of the beverages or food from the stall. The store would have the plans to undergo short term, medium term and long term development and growth as the store would increase its maximum customer capacity and increase the size of the library. However several important considerations has to be taken into account, such as the sources of capital for short term, medium term and long term investments, different challenges that can be met (such as legal, technological, political, economic, environmental, social and even cultural). Additionally different risks (such as accidental injuries, fire hazards, financial risks, adverse health effect due to bad products, property and equipment damage, data theft and poor selection of the shop location) that can occur should also be clearly understood. Identifying such information can help to understand the best methods to prevent or overcome them and develop an effective business plan or business model.
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Challenges and difficulties that might be expected
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