Reference no: EM132325939
Business Studies Case Analysis Assignment - Winter Sports Shop Case Study
Jeffrey and Terry are bus drivers who enjoy winter sports such as skiing, and they are considering opening a winter sports wear and equipment shop in Guildford. Neither Jeffrey nor Terry have owned their own business before, so for them this is an exciting idea that they believe they can make a success.
Jeffrey and Terry have not as yet considered all potential costs of their new business idea, but have managed to gather some data. Below is information that Jeffrey has collected as a part of the planning for the new Guildford shop.
- Shop rental costs £1,000 - £2,100 per month.
- Estimate of business start- up costs £35,000.
They feel the shop will be popular and have made the following forecast regarding sales, monthly costs and expected profits. They have not created a cash flow forecast.
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£
|
January
|
February
|
March
|
April
|
May
|
June
|
|
Sales Income
|
25,000
|
30,000
|
35,000
|
40,000
|
40,000
|
40,000
|
|
Costs
|
|
|
|
|
|
|
|
Insurance, Rent, Rates etc.
|
5,000
|
5,000
|
5,000
|
5,000
|
5,000
|
5,000
|
|
Staff wages
|
3,000
|
3,000
|
3,000
|
3,000
|
3,000
|
3,000
|
|
Other costs
|
6,000
|
6,000
|
6,000
|
6,000
|
6,000
|
6,000
|
|
Total Costs
|
14,000
|
14,000
|
14,000
|
14,000
|
14,000
|
14,000
|
|
Profit
|
11,000
|
16,000
|
21,000
|
23,000
|
23,000
|
23,000
|
Terry, who has a good head for figures and has calculated:
- Fixed Cost per year £175,000
- Variable Cost per customer £25
- Average Spend per customer £100
Jeffrey and Terry plan to apply for a bank loan of £60,000 to start the business.
You are required to:
Discuss how having accurate business information can help Jeffrey and Terry to decide whether their new business idea really can be a success.
Evaluate the benefits to Jeffrey and Terry of preparing a detailed cash-flow forecast and budget before beginning their new business.
Assess the problems with the financial information that Jeffrey and Terry have prepared so far, and give suggestions as to what further information may be needed in order for them to make the right decision about their new business.
Based on the information provided in case study and your own research, explain any other problems that you think Jeffrey and Terry may have and whether you believe that their business idea can be a success. Explain your opinion in full.