Management Team, Ownership And Support Services Of Big Red Bicycle Limited

Ownership Structure

Question:

Discuss about the Structure of The Business, Ownership.

This chapter describes the management team, the structure of the business, ownership, internal management team and their skills. Also covers the external management, feedback, control and support services. (Albrecht, 2007).

Ownership Structure

Big red bicycle limited is owned by the CEO Mitchell Yeo. Mitchell Yeo will be responsible for making all major decisions in the business, and assisted by the managing director and the CFO when necessary. All staff members will be answerable to her indirectly via the managing director.

The CEO intends to modify the organizational structure as the business grows in getting new employees. The company is considering manufacturing overseas in order to reduce cost and the cheap labor. The company is also considering diversifying its products in order to increase the sales of the product.

The Management Team ‘Internal’

Management style will reflect the participation of the Managing directors assisted by CFO and external expertise help.

Big red bicycle limited will utilize the services of Operation General Manager, human resources, marketing and operations departmental heads to run its operations and serve customers. (Gibson, 2009).

Managing Director

Tom Copeland is the managing director. He is in charge when the CEO is not present. He directs and controls the work and resources of the company.

CFO

John Black is the CFO. He oversees the daily operation of the company.He also provides strategic advice to the CEO and the managing director.

Operations General Manager

Stuart LaRoux is the head of operations management. Stuart is responsible for ensuring all the training operations and ensures smooth operation inside the company.

Senior Accountant.

Pat Roberts is the senior Accountant. He is creates budgets and implements the financial plans of the company.

Sales General Manager.

Sam Gellar is the sales General Manager. He is responsible for developing marketing strategies and getting Big red bicycle limited known in Australia. He will come up with various marketing strategies that will help the company get recognized in the country. He will contact the media, social crowds, and other marketing methods and will ensure he will come up with ways to get new customers for the services and products.

Production Manager

Charles Pierce is the Production Manager. He gives advice on technology and other IT solutions that business needs and how to meet those needs. He also ensure smooth operation in the manufacturing department and reports any problem.

Human resource Manager

Holly Burke is the Human resource Manager. He ensures that the company will have all the labor and human resources needed. He will also ensure the company recruits only the best for better services to the  customers and  will be preparing training sessions for the new recruits and in-job training for the continuing staff.

Organization Structure

The management team comprises of CEO, who is also the sole owner of Big red Big red bicycle limited and will be assisted by an manager Director. There are four paramount department’s i.e. human resource, sales and inventory, operations and marketing has heads, each qualified for the post. The heads reports to the Managing director via the CFO.

The Management Team ‘Internal’

Figure 1: Management structure

Support Services

Big red bicycle limited encourages feedback from its clients. This way, it will ensure it serves them better and take care of the complaints. The business provides its details; an email address, phone number, website where anyone can reach us for support. The business has integrated social sites like Face book, Twitter and Google Plus to reach more clients. These methods are vital in gathering data for forming a basis to serve the clients better. Professional services includes the media, which would involve advertising over the print and mass media to make the business known to the public. This would create awareness to the public as well as give the company a competitive advantage. Choice of media and outsourcing would be due to reduction of cost as well as expand to a wide region. IT outsourcing companies would be of important, to consider their services including web hosting, cloud computing and reference companies in case of a service that Big red bicycle limited does not have and would need in order to run the business to maximize sales and make profit. We will also need to contract Auditors to do audit work for the company.

Financial plan

This chapter describes the financial structure of Big red bicycle limited. It shows the financial status of Big red bicycle limited technologies and projections. It includes the projected income statement, pro-forma balance sheet and the cash flow financial strategy. Also included are financial ratios summary and the business financial long-term goals.

Financing Summary

The financial plan is an important tool for the success of Big red bicycle limited. The intention of the plan is to finance growth through cash flow and equity from the business. Big red bicycle limited plan to $1,000,000 in sales returns, Later Big red bicycle limited will focus on growth and profits. Some of the members who will be part of the staff of Big red bicycle limited technologies so far have done realistic forecasts, and cash flow projections for the financial reports.

Projected Profit and Loss

Big red bicycle limited has  projected profit and loss with sales from the business income to increasing from more than $ 200,000 the first year to more than 300,000 the second, and $500,000 the third year. Big red bicycle limited are expected to break even in the fourth year.

The net profit margin projected will be relatively good for a start-up business.

Big Red Bicycle Limited
Pro-Forma Income Statement
FOR THE PERIOD ENDING 2015, 2016 AND 2017 Table 1:Pro-Forma Income Statement
	Years
Income (Kshs.)	2013	2014	2015	2016
Sales income	300,000	400,000	600,000	750000
Total income	400,000	500,000	750,000	800,000
Less cost of sales	200,000	220,000	300,000	350,000
Gross profit	900,000	1,120,000	1,650,000	1585000
Operating expense (Kshs.):
Utilities	80,000	78,000	78,000	78,000
Advertising	100,000	97,000	100,000	120,000
Insurance	200,000	200,000	200,000	200,000
Salaries	100,500	140,000	160,500	160,700
Interest	73,000	80,000	90,000	92,000
Miscellaneous	17,000	15,000	15,000	18,000
Total operating expenses	170,500	320,000	450,500	500000
Net profit	200,500	300,500	459,500	550,500

Table 1: Profit and Loss Account

Balance Sheet

Big Red Bicycle Litided

Pro-Forma Balance Sheet

As At 31 December 2013, 2014 ,2015 AND 2016

Table 2

	Year(s)
Assets	2013	2014	2015	2016
Fixed assets	(Kshs.)	(Kshs.)	(Kshs.)
Vehicles	10,600,000	34,100,000	30,450,000	31,450,000
Printers  and copiers	3,000,000	4,000,000	3875,000	3875,000
Furniture	3200,000	3,200,000	3,100,000	3,000,000
Computers	40,800,000	45,900,000	45,000,000	45,000,000
Total Fixed Assets	57,600,000	87,200,000	82,425,000	81,425,000
Current Assets
Cash in bank	5,250,000	4,700,000	6,500,000	5,250,000
Cash at Hand	500,000	400,0000	300,0000	500,000
Total Current Assets	5,758,000	5,100,000	6,800,000	6,900,000
Total Assets	63,358,000	93,300,000	89,225,000	88,225,000
Less Current Liabilities
Suppliers	34,500	32,000	11,500	12,500
Net Assets	63,323,500	93,268,500	77,725,000	75,725,000
Financed by:
Long term loan	55,929,500	81,613,500	30,000,000	32,000,000
Surplus income	7,394,500	11,654,500	47,725,00	48,725,00
Total liabilities and equity	63,323,500	93,268,000	77,725,000	79,725,000

Table 2: Balance Sheet

profit margin (year1)

Gross profit margin = (Gross profit / Sales) * 100%

= (8,500,000/ 15,300,000) * 100%

Gross profit margin = 55.55%

Break-even level of sales:

= (Expenses / Gross profit margin) * 100%

= (1,370,500/ 50) * 100%

Break-even level of sales = Kshs. 2,741,000.

The business shall be able to generate normal profits above the break-even point in less time from the above ratio.

Support Services

Profitability of the Business

Profitability of the business will be estimated by calculating the return on capital.

Return on capital for year 1 = (Net profit / Capital) * 100%

= (7,129,500/ 63,323,500) * 100%

= 11.25%

The return on capital for the first year will be high but the business will not be experiencing normal profits yet until early the second year. This return on capital however is expected to increase with time to self-sustaining levels resulting to high profitability.

When Big red bicycle limited is fully established and expanded, more vehicles and computers will be purchased to cater for rising demand. More developers will also be hired to cater for new development of new bicycles. Our Service quality will see an increase in demand in the information technology market trends. Big red bicycle limited will also be expanded in the three more states to reach a wider market. This also means that the personnel will also be increased.

Return of Equity for the Business

Net profit after tax X 100

Owner’s equity.

Year 1.

7,129,500x 100 = 1425.9%

500000

Year 2.

12,960,000x 100 = 2592%

500000

Year 3.

17,659,500x 100 = 3531.9%

500000

Return on Investment of Business.

Net profit after tax + Interest x 100

Owners’ equity

Year 1

7,129,500 x 100  = 1425.9%

500,000

Year 2

12,960,000 x 100 = 2592%

500,000

Year 3

17,659,500 x 100 =    3531.9%

500,000

Return on Equity for the Business

Net profit after tax + Interest x 100

Total investment

Year 1

7,129,500 + 90,450 x 100

200,000

= 3609.975%

Year 2

12,960,000 + 87,000 x 100

200,000

= 3261.75%

Year 3

17,659,000 + 176,400 x 100

200,000

=9702.95%

Overheads

Total overheads for year 1 =    851,685 kshs.

Total overheads for year 2 =    946,150 kshs.

Total overheads for year 3 =    1,010,680 kshs.

Financial Requirement

Item	Amount (K.shs)
Pre-operation costs Working capital Fixed assets expenditure	112,080 604,680
Total	716,760

Table 4-Financial Requirement

The fixed assets expenditure has been added to pre-operational cost.

Proposed Capitalization.

Total investment           200,000

Owners’ equity              500,000

Total borrowers            150,000

Long-term goals

After the business is fully established, there are plans to purchase more machines and expand the business so as to be able to serve and contain the growing demand. Products and Service variety will also increase with market trends as we work hand in hand with technology consultant to

keep us up to date. This will result in an increase of revenue for the business.

Reference

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