1.1 Business name
I would like to start a coffee beverage shop called Java Coffee Shop. The name Java is the name of the building where the business premises will be located, "coffee" is the product I will sell and "shop" is the type of activity I will be involved in. Hence the name Java Coffee Shop.
1.2 Product to be offered
My shop will offer coffee beverage alone but some other customer services like free magazines for the customers to read as they enjoy the beverage will be available.
The following are my target markets for my coffee drink and the purposes the premises will serve; university students, working people, dating couples, meeting place for people local and foreign tourists.
1.3 Business location
The coffee shop will be located in the city of San Francisco in California USA along Fulton Street next to the Golden Gate Park.
San Francisco is a fast growing town in the USA with a large number of coffee lovers. People are found in long queues waiting to be served by a cup of coffee. This coffee culture favors small and new startups due to the large market of coffee. The availability of a Golden Gate Park also offers a more primary market for the product as tourists are likely to stop and have a cup of tea after a long day.
1.4 Form of ownership
The coffee shop will just be owned by me because I would like to have a total control of my business and have a single decision-making role
I will take a loan to substitute to my personal savings to start the shop. The loan will be repayable in three months.
1.5 Type of business/ status
The shop has not been started yet since I have to acquire all the required assets to launch the store.
SECTION TWO- INPUTS
According to research from other existing coffee shops in San Francisco, I will have to incur the following inputs into the business before it picks up. The total fixed and variable inputs are estimated to cost $10,000.
2.1 Fixed inputs
Fixed inputs are the inputs required to start the business that cannot be changed quickly but evolve over an extended duration of time.
Such inputs for my business are; buildings, shelves, seats, tables, coffee stock, legal fees, insurance and utensils.
2.2 Variable inputs
Variable inputs are inputs that can change over time. Such inputs in my business will be employees, bills like water and electricity bills and cleaning services since I can terminate the services at any time of my convenience.
SECTION THREE- COSTS
3.1 Explicit costs
These are costs incurred in the process of running a business. Such include purchases, wages, and rent
There will be some explicit costs that will be incurred monthly as analyzed below.
No. ITEM QUANTITY PRICE OF EACH TOTAL PRICE
1. Employees 5 $100 $500
2. Electricity bills 20 units $0.5 $5
3. Water bills 80 units $1 $80
4. Coffee 30 cartons $10 $300
5. Sugar 30kgs $1 $30
6. Rent 1 $2000 $2000
The total explicit costs will amount to $7415
3.2 Implicit costs
This is the cost of the forgone opportunity before starting a business. Since I was not in any income generating business before, my implicit costs will amount to $0.
I have targeted to sell at least 1000 cups of coffee per month with each cup going at $1. Therefore the total revenue generated from the sale will be $1000
Therefore the total accounting profits will be;
Total accounting profits = Total costs- Explicit costs
Total accounting profits per month= $11000- $ 7415
Total accounting profits =$3585 per month
From the table above I will employ five employees to help in preparation and serving of the beverage for the customers. I will also help them as the manager and coordinator.
The coffee business is projected to last for a long time because I also aspire to open other branches in other towns so as to fetch many profits.
SECTION FOUR- MARKET STRUCTURE
4.1 Market share
With the number of people who like coffee in San Francisco and the few coffee shops in the city, I am likely to enjoy massive sales to the big population.
In overall San Francisco has a population of 850,000 people and the lovers of coffee who take at least a cup of tea every week are estimated to be 700,000 people. Therefore, the market share that I may enjoy is;
Market share = (700,000/850,000) 100%
Market share = 82.35%
With the few coffee shops in the city and the high number of coffee lovers, I am likely to influence the cost of coffee due to the high demand and small supply of coffee.
When the price of coffee goes up many customers will take less coffee, but when the price goes down, there will be higher consumption of the same. This is the elasticity of demand for the beverage. In case I increase the price I will be discouraging customers.
Coffee shop business in San Francisco would be a good and profitable idea bearing in mind a large number of people who like the beverage and the few shops available. I hope that the business will pick as fast as possible and be able to meet the operations costs and reap more profits.
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