Cake Shop
Business Plan
2
Table of Contents
Executive summary……………………………………………………………….4
The Business………………………………………………………………………….4
The Market…………………………………………………………………………….4
The Future…………………………………………………………………………….5
Financial Consideration……………………………………………………………5
Introduction…………………………………………………………………………..6
Business Description…………………………………………………………………6
Legal Considerations…………………………………………………………………6
Management and Ownership……………………………………………………..7
Operations…………………………………………………………………………….8
Organization Structure……………………………………………………………….8
Key Personnel………………………………………………………………………….8
Service Process………………………………………………………………………..9
Licences and Permits……………………………………………………………….11
The Market……………………………………………………………………………..13
Products/Services……………………………………………………………………13
Break-Even Analysis………………………………………………………………..14
Market Research……………………………………………………………………..14
Environmental/Industry analysis………………………………………………..15
Customers……………………………………………………………………………..15
S.W.O.T………………………………………………………………………………….16
Advertising and Sales………………………………………………………………..17
Financial Projections……………………………………………………………….18
Assumption………………………………………………………………………………18
3
Start-up requirements……………………………………………………………..18
Sales Budget………………………………………………………………………….20
Purchase Budget……………………………………………………………………..21
Operating Budget Expenses………………………………………………………22
Budgeted Income Statement…………………………………………………..22
Budgeted Cash Flow Statement……………………………………………..24
The Future………………………………………………………………………….25
Conclusion………………………………………………………………………….26
List of References……………………………………………………………….27
4
Executive Summary
The Business
Yummy cake shop is cake shop established on 1st Dec 2014. It is located at
Lonsdale Street, Melbourne on a street front shop. Registered as a partnership
business the business ABN No is 52004005734. The cake shop expects to win regular
customers with its broad variety dry cakes and yummy bakers customer favourites. The
cake shop is owned by two high school friends John Sut and Saleem Hassan.
The market:
Target Market
Yummy Cake Shop targets on the middle and upper-income brackets
consumers. People within these market segments are the main consumers of the
majority of the cake industry.
The specific Target Market includes:
The parties Group: These are individuals who want to purchase a cake for
celebrations and other forms of parties. These types of consumers pre-order the cakes
and will be targeted through extensive advertising and word of mouth.
Individual buyers: To win individual buyers, the business will focus on using
window display marketing strategy to attract passersby.
Regular residents: These are individual customers who purchase cakes regularly
for consumption. Yummy Cake Shop would want to establish a large regular customer
base. This will ensure that the organization will have consistent profits hence business
sustainability.
Marketing Strategy
Yummy Cake shop targets the returning customers that reside in the
neighbourhood. The organization will focus on offering a personal customer service to
make customers satisfied and hence customer loyalty. Yummy Cake shop will also
focus on offering high-quality products in a competitive market.
5
The Future
Vision Statement:
Our vision is to be the best Cake shop offering high-quality cakes at an
affordable price. To achieve this vision we intend to bake quality cakes maintain a
friendly customer relationship
Objectives:
• To increase the second year sales by 40% and the subsequent year sales by
25%, and
• To expand to two storefronts by the fourth year of business.
Financial Considerations
The start-up capital was contributed by the two partners that amounted to
$110,000. The company has applied for a loan of $100,000 to boost their business
activities. The loan will be payable in a period of 10 years.
Sales projections
Year Sales Gross Margin Net Profit
2015 491,000 478,000 13,000
2016 567,000 531,000 36,000
2017 655,000 609,000 46,000
6
Introduction
Business Details
Products and Services: Yummy Cake Shop offers a wide variety of dry cakes and
flavored cupcakes such as Gingerbread Flavour, Rose petal, gingerbread flavour and
raspberry fudge. On the same note, the cake shop offers old time favourites such as
vanilla, strawberry and red Velvet.
Registration details
Business Name: Yummy Cake Shop
Trading Name: Yummy Cake Shop
Date Registered: 1st Dec 2014
Location Registered: Melbourne, Australia
ABN: 52004005734
GST: 10%, Registered 1st Dec 2014
Business Structure: Partnership this structure is selected because of less start-up
cost, few legal requirements and ability to utilize.
Business Premises
Business Location: Yummy Cake Shop is located at Lonsdale Street, Melbourne on a
street front shop. The shop is divided into two rooms. The front shop serves as an outlet
for the Yummy Cakes as well as the cashier’s office. The back room serves as the
bakery where the chefs prepare the cakes that will are sold at the shop. Lonsdale Street
is a busy street because of the surrounding shops and a supermarket. Therefore, these
visitors will be attracted to our shop for a quick bite.
The business premises are leased for one year. The contract is renewed each year
upon payment of rent.
Legal Considerations: Licences required include Trade licences and Health and safety
licences
7
Management and Ownership
Names of Owners: John Sut and Saleem Hassan. The owners are also the ones
running the business. John Sut is the manager and chief executive officer (CEO) of the
business because of his previous experience. On the other hand, Saleem Hassan is the
chief financial officer (CFO) as well as the cashier.
John Sut is quick in decision making and has a keen eye for quality of production.
Therefore, his profile and skills fit the position of a manager.
Skills, Experience, and Qualifications:
John: Management
Has a bachelor’s degree in human resource management and used to work at KFC as
human resource manager.
Saleem: He is a certified public accountant. He just completed his undergraduate
degree in Finance.
8
Business Operations
Organisation chart
Key personnel
Required Staff
Job Title Name Expected staff
turnover
Skills or strengths
Manager John Sut
Has a bachelor’s degree in
human resource management
and used to work at KFC as
human resource manager.
Cashier Saleem
Hassan
He is a certified public
accountant. He just completed
his undergraduate degree in
Finance.
Baker Evans
Brown
Worked as a baker in Kings
Bakery
Baker Fran
Reid
Worked at queens garden as a
baker and event organizer
Cleaner Jo
Stevens
Underwent basic cleaning and
laundry training
Current Staff
Job Title Quantity Expected
staff
Skills necessary Date
required
[Ms Fran Reid
Baker] [Mrs Winnie
Lawry
Quality control]
[Mr Jo Stevens
Cleaner]
[Mr Evans
Brown
Chief Baker
]
Figure 1: Organisation Chart
Mr John Sut
(CEO)
Mr Saleem Hassan
(CFO & Cashier
Ms Valarie
Amanda
(Marketing
Manager)
9
turnover
Quality
control
[1] [2-3 years] Must have two years
experience working in
catering related fields.
01/01/2016
Recruitment options
Because of the small size of the business, the management will recruit
employees through communication with friends and family to find the most appropriate
quality manager. This strategy will help the organization to reduce recruitment cost and
easily find a good employee.
Training Programs
The existing employees in the organization will be the ones responsible for
orientation and training of new employees. A new employee will be assigned a worker
to train and supervise him for two weeks before he/she begins working independently.
Skill Retention Strategies
Skill retention is an important part of human resource management. The
organization will retain the best workers through motivation and salary increase. By
rewarding exceptional performance employees will prefer to work with Yummy Cake
Shop rather than to work elsewhere.
Service Process
Yummy Cake Shop will process three types of orders. That is take away orders,
dined in orders and special orders.
Take away orders: refers customers request to purchase cakes and take them
home. The orders are processed by the sales person on the counter. The cakes will be
packed in a special takeaway packaged and given to the customer to take home.
Dined in orders will be offered for the clients to consume within the business
premises with a soft drink such soda.
Special orders: refer to those orders for cakes used for special occasions such
as weddings, birthdays among others. These orders will require the client to pre-order
for the chefs to prepare the orders before it is processed by the sales person.
Suppliers
10
Yummy Cake Shop will purchase its wheat flour required for baking directly from
the millers to reduce the cost of purchasing them. Other baking materials such as
cooking oil, salt, and baking powder will be bought from a wholesaler so as to utilize the
discount allowed by buying in bulk.
Assets Required
Equipment Purchase date Purchase
price
Running
cost
Ovens 1 st Dec 2014 $155 0
Proof Boxes 1 st Dec 2014 $102 0
Baking Sheets 4 th Dec 2014 $20 0
Work Tables 4 th Dec 2014 $92 0
Planetary dough mixer 16 th Jan 2015 $26 0
Inventory
Inventory item Unit price Quantity in stock Total cost
Flour 25 50 1,250
Sugar (Granulated, powdered and
brown sugar) 10 20 200
Baking Soda 2 20 40
Baking Powder 3 8 24
Butter milk 2 4 Litres 8
Food Colouring 1 20 20
Flavours 2 6 12
Eggs 2 250 500
Milk 2 50 100
Lemon juice 1 2 3
Salt 0.5 1 0.5
Vegetable oil 2 4 8
water 0.5 200 100
Technology Software:
Yummy Cake Shop uses accounting packages to keep daily records and
business transaction records. The business is also planning to open up a website that
will be used to advertise the company products and establish an online presence
(Razak et al., 2014).
11
Trading Hours: Our business shop will be open from 8 am to 5:30 pm on
weekdays. However on Saturday and Sunday, the shop will operate from 8 am to 11
am.
Communication Channels: the main communication channel will be through
telephone calls. The business organization encourages clients to communicate by
making a call or writing a message using our office mobile number. However, we also
process email orders. On the same note, once a website is a build, we will also process
orders via purchase portal in the website.
Payments Accepted: Yummy Cake Shop accepts payment in the form of cash,
we also accept credit and debit cards for payments above $25.
Credit Policy: We accept credit for regular customers but the credit must not
exceed $200. Invoices will be sent by mail every once a month to request for creditors
to pay their dues (Ossolinski et al., 2014).
Warranties & Refunds: we accept back broken cakes if they were transferred
using our means. We also offer refunds for merchandise that get spoiled during
transportation. However, the customer must produce a valid receipt that was originally
used to purchase the product.
Quality Control: The Company is planning to employ a quality control manager
that will ensure that the cakes offered for sale are of good quality. The new manager will
regularly do quality control checks to ensure that all the company’s products are of high
quality.
Licences and permits;
Insurance:
Public Liability: The business has no public liability insurance to cover for any
third party from death or injury. Similarly, employees are expected to make
arrangements with insurance companies to insure themselves
Business Assets: Business assets are insured against fire, burglary and theft.
Some of the assets insured include production facilities, business computers, and the
premise television set.
12
Action Plan
Sustainability milestone Target Target date
Reduce the use of burners that use unclean energy 40% Reduction Jan/2017
13
The Market
Products/services
Product/Service Description Price
Cup Cake 3.50
Rainbow Cake 2.95
Gingerbread
Flavour 3
Banana Rum 2.50
Rose Petal 3.45
Raspberry Fudge 3
Red Velvet 3.50
Vanilla 3.50
Straw berry 3.50
Market Positioning
The location is imperative when it comes to marketing and promotion. Yummy
Cake Shop is located in a high-traffic retail area in Lonsdale, Melbourne Australia. The
cake shop is located close to other shops such as electronic shops among others.
These shops attract high population, and Yummy will be able to pitch some of these
regulars. We will focus on providing unique types of cakes as well as superior pastry
shops (Harrington et al., 2013). Similarly, the company will advertise using fliers,
magazines and promotions to attract more customers.
Pricing Strategy
Price is an important factor when competing with other key players in the industry
and sellers of competing products such as Ice creams and coffee shops (Lappo et al.,
2013). Our cake shop will offer slightly lower prices as compared to other bakeries and
pastries. The company will also offer a 7% discount for a person who purchases more
than three cakes in a single day.
14
Break-even analysis
The breakeven analysis is calculated with assumptions on running costs such as
utilities, transport cost among others.
Target Market
Market Segmentation
Our market is divided into four segments. That is
The parties Group: These are individuals who want to purchase a cake for
celebrations and other forms of parties. These types of consumers pre-order the cakes
and will be targeted through extensive advertising and word of mouth.
The individual buyers: To win individual buyers, the business will focus on using
window display marketing strategy to attract passersby.
Regular residents: These are individual customers who purchase cakes regularly
for consumption. Yummy Cake Shop would want to establish a large regular customer
base. This will ensure that the organization will have consistent profits hence business
sustainability.
Market Research
Market Analysis
Potential Growth 2016 2017 2018
15
Customers
The parties
group
25% 10,000 10500 11,050
Individual
Buyers
15% 5000 5,750 6,613
Regular Local
Residents
15% 5000 5,750 6,613
Environmental and Industry Analysis
The banking business in Australia has been there for a very long time.
Therefore, there are other well-established business organizations in cake shop
niche. Some of the key competitors include;
• Donut and Coffee Shops,
• Restaurants,
• Ice cream shops,
• Free-standing traditional bakeries and,
• Supermarkets.
Customer Demographics
Cakes are universal and, therefore, every body’s favorite. Thus, Yummy
Cake Shop will have customers ranging from children, teenager, adults and the
elderly (Solomon et al, 2012). The cakes will also be demanded for celebration
purposes such as weddings, graduation parties, and birthdays among others.
Key Customers
From the customer demographics discussion, the key customers include
regular buyers from within the neighbourhood and buyers for celebration
purposes such as weddings, birthdays, graduation ceremonies among others.
Value to Customer:
Our customers will derive value from consumption of our variety of cakes
with different flavours. These cakes will satisfy basic human needs of hunger as
well as self-actualization needs such as the feeling of achievements during
graduation parties.
16
Customer Management:
The customer is a very valuable asset for any organization. Yummy Cake
shop will treat customers in a friendly manner following stringent business ethics.
17
S.W.O.T Analysis
Strengths Weaknesses
- Low cost of production due
to flat organization
structure. - Lower price than
competitors - Strong positioning of the
Shop - New to the market, not
established - Limited cash flow
- Low customer Base
- High advertisement cost
Opportunities Threats
- New Technology
- New creation of new
products
- New competitors enter the
market - High expenditure cost
- Stiff competition
Competitors
Competit
or
Establis
hed
date
Size Marke
t
share
(%)
Value to
customer
s
Strengths Weaknesses
Le Petit
Gateu 30
Unique
creations
and
irresistible
classics
such as
chocolate
gateu
-Located at
inner-city
-Good market
positioning
-Small physical
space for
eating out
Brunetti
cakes
20 Variety of
celebrator
y cakes
such as
vanilla
sponge,
chocolate
-Italian cakes
that are entirely
sweet
-strong market
presence
-Strong
customer loyalty
-management
problems.
18
chips and
Braziliana
Hausfrau
Good
desserts,
birthday
cakes
They do classic
European cakes
which are
unique in the
Australian
market
-Strong market
presence
Large
operations
hence
diseconomies
of scale
Advertising and Sales
Advertising and promotional Strategy
Planned promotion
/advertising type
Expected business improvement Cost
($)
Target
date
News paper and magazines Increased customers 20 February
/2016
Mouth to mouth Increased demand because of creation of
good image Free April/201
6
Social media campaigns Increased customer loyalty & better image
for the company Free July/201
6
Sales Distribution Channels
Due to the small nature of the business, the products will be distributed
through the storefront shop. Clients will be expected to make their orders
physically and collect their cakes. On the same note, clients can make orders
through email and will be delivered by sales agent if the customer is within
Melbourne (Arnold, 2014).
19
Financial Projections
Financial Management goals
- To cut down the cost of production.
- Reduce purchasing expenses through bulk buying
- Strategic partnership to obtain more funds for expansion
BREAK-EVEN ANALYSIS
Break-even Analysis
Monthly Units Break-even 17,300
Monthly Break-even $38,634
Assumptions:
Average per-unit revenue $2.22
Average Per-unit $0.35
Estimated Monthly fixed cost $32,343
Finance Required
YUMMY CAKE SHOP START UP REQUIREMENTS
START-UP REQUIREMENTS
Start-up Expenses: $3000
Legal $20000
Premise Renovation $4000
Expensed Equipment $4000
Other $1,000
TOTAL START-UP EXPENSES $32,000
Start-up Assets
Cash Required $70,000
Other Current Assets $12,000
Long-term Assets $65,000
TOTAL ASSETS $147,000
Total Requirements $211,000
20
STARTUP FUNDING 358,000
Start-up Expenses to Fund $64,000
Start-up assets to Fund $147,000
TOTAL FUNDING REQUIRED $211,000
Assets
Non-cash Assets from Start-up $77,000
Cash Requirements from Start-up $70,000
TOTAL ASSETS 147,000
Liabilities and Capital 147,000
Liabilities 46,000
Current Borrowing 0
Long-term liabilities $100,000
Accounts Payables $1,000
Other Current Liabilities
TOTAL LIABILITIES 46,000
TOTAL CAPITAL $147,000
TOTAL CAPITAL AND LIABILITIES $147,000
Total Funding $211,000
Sales Budget
Sales Forecast
Unit Sales Month
1
Mont
h
2
Mont
h
3
Mont
h
4
Month
5
Month
6
Month
7
Month
8
Cake Sales 4,950 7,500 9,500 13,50
0
13,500 13,500 13,500 13,500
Beverage Sales 2,050 2,500 3,000 4,500 4,500 4,500 4,500 4,500
Other 0 0 0 0 0 0 0 0
21
TOTAL
UNIT
SALES
7,000 10,00
0
15,50
0
18,00
0
18,000 18,000 18,000 18,000
Cakes $3.50 $3.50 $3.50 $3.50 $3.50 $3.50 $3.50 $3.50
Beverages $1 $1 $1 $1 $1 $1 $1 $1
Other 0 0 0 0 0 0 0 0
Sales
Cakes ($) 17,325 26,25
0
33,25
0
47,25
0
47,250 47,250 47,250 47,250
Beverages ($) 2,050 2,500 3,000 4,500 4,500 4,500 4,500 4,500
TOTAL SALES
($)
19,375 28,75
0
36,25
0
51,75
0
51,750 51,750 51,750 51,750
Purchases Budget
Unit Costs Month
1
Month
2
Month
3
Month
4
Month
5
Month
6
Month
7
Month
8
Direct Unit
Cost
Purchases
of Cake
Raw
Materials ($)
$0.50 $0.50 $0.50 $0.50 $0.50 $0.50 $0.50 $0.50
Beverage
Purchases
$0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25
Purchase
Expenses
Purchases
of cake Raw
Materials
$2,475 $3,750 $4,750 $6,750 $6,750 $6,750 $6,750 $6,750
Purchase of $512.5 $625 $750 $1,125 $1,125 $1,125 $1,125 $1,125
22
beverages
TOTAL
PURCHASE
S OF RAW
MATERIALS
$2,987.
5
$4,375 $5,500 $7,875 $7,875 $7,875 $7,875 $7,875
Operating Expenses Budget
OPERATIN
G
EXPENSES
Month
1
Month
2
Month
3
Month
4
Month
5
Month
6
Month
7
Month
8
Payroll $0.3 $0.46 $0.58 $0.83 $0.83 $0.83 $0.83 $0.83
Taxes $0.21 $0.14 $0.11 $0.08 $0.08 $0.08 $0.08 $0.08
Marketing $0.11 $0.07 &0.06 $0.04 $0.04 $0.04 $0.04 $0.04
Utilities $0.10 $0.06 $0.05 $0.03 $0.03 $0.03 $0.03 $0.03
TOTAL
OPERATIN
G
EXPENSES
$0.72 $0.73 $0.8 $0.23 $0.23 $0.23 $0.23 $0.23
Budgeted Income Statement for Year 1
Yummy Cake Shop
Revenue $ $
Cake Sales 395000
Beverage Sales 61000
23
Total Revenue 456,000
COST OF SALES
Cost of Cakes 96,177
Cost of Beverages 19,800
Total Cost of Sales 115,977
Gross Profit 340,023
OPERATING EXPENSE
Payroll 130,000
Taxes 8,500
Marketing 4,000
Utilities 5,400
Total Operating expense 147,900
Income before Fixed
Expense
192,123
FIXED EXPENSES
loan 1,000
Rent 30,640
Depreciation 900
Insurance 2,000
Total Fixed Expenses 34,540
NET INCOME 157,583
24
Budgeted Cash flow Statement
Projected Cash flow
Cash Received
Cash Sales 456,000 567,105 655,006
TOTAL CASH
FROM
OPERATIONS
Expenditures
Cash Spending 225,800 273830 287,522
Bill Payments 143,607 186,974 237,741
TOTAL SPENT ON
OPERATIONS
Additional cash
spent
Long-term liabilities
prepayments
1000 1000
Purchase of long-
term Assets
20,000 20,000
TOTAL
ADDITIONAL
CASH SPENT
404,407 490,804 560,263
Net Cash Flow 86,593 76,301 94,744
Cash Balance 156,593 232,894 327,637
25
The Future
Vision Statement
Our vision is to be the best Cake shop offering high-quality cakes at an
affordable price. To achieve this vision we intend to bake quality cakes
maintain a friendly customer relationship
Mission statement
The mission of Yummy Cake Shop is to offer high-quality cakes and
other pastry commodities at a competitive price to meet the demands of the
middle-income earners and high-income earners within Melbourne and its
neighborhood.
Goals and Objectives
• Yummy cake shop the highest quality cakes with personalized customer
service, and
• To offer competitive prices by cutting down on cost.
Action plan
Milestone Date of
expected
completion
Person responsible
Lower cost of production to achieve competitive pricing 1 st Feb 2015 Manager Mr. John sut
Improved production Volume 1 st April 2015 Chief Baker Mr.
Evans Brown
26
Conclusion
Yummy Cake Shop is a viable business operation with a bright outlook. The
break-even analysis indicates that the business will break even within a period of two
and half years. Therefore, the management should focus on ensuring quality
management of business operations and employees. The managers should also focus
on offering friendly customer service to win loyal customers and thus business
sustainability.
