The following business plan has been elaborated in order to prove that the business idea designed and considered by uncle George is indeed implementable and feasible and that the proposed market approach will be eventually applicable. Assumedly, the fulfillment of the business initiative will be feasible especially considering the fact that favorable external and internal business environment has been created ( in accordance with the statement of the facts, the trade partner of our business owner is his friend).
As far as the financial analysis of the business venture is concerned, it shall be highlighted that provided that all initial conditions will be totally observed, the cash flow of the venture will be exclusively positive event in the first year of the business operation (traditionally and practically the enterprises are not likely to generate income within the first 3 years).
The respective profit and loss statement clearly demonstrate the profits accrued the losses incurred in the course of the business handling. However, a profound sensitivity analysis clearly indicates the fact that the market fluctuations of the Swiss domestic and general European market shall be considered to draw appropriate conclusions and to project for the future development of this business initiative. It is substantiated in this report that constant market sensitivity analysis is to be duly processed to understand whether the business operates well or some corrections are to implemented. The most topical issue for the project is the upfront fee payment for the Swiss partner to obtain the exclusive rights for the shipping and distribution of the chocolate and the grant of the 40% discount which naturally is not markedly dictated and is based solely on the personal connections of the business owners.
Overall, considering the economical, legal and technical feasibilities of the project it can be recapitulated that the project will be implemented. The firm and resolute recommendation for the prospective business owner is to engage in the discussed business initiative.
I. Assumptions of the Project and their Justification
The following section of the paper extensively examines the projected particularities of the project implementation and the way these peculiarities will be considered by the business team in question. In particular this section of the paper addresses the issues connected with the availability of the funds required to launch the project, the influencing economic and legal factors, the taxation policy of the project and the general scheme of how the discussed commodity will be exported from Switzerland to the United States of America and what integral stages of this process must be followed by the business owner to ensure that the process goes well.
1. The External and Internal Factors of the Business Environment are favorable to launch the Business Initiative
The unanimous convergent opinion of the scholarly authorities and business practitioners is that before the business project is launched, the factors of the external and internal business environment must be reviewed carefully and meticulously to guarantee that the initiative is supported by the analysis of the international and domestic markets (Steele, 2000; Hillson, 2002). In other words, the main objective of this operation is to safeguard the investment funds, if any are present from wrongful spending. To be more exact, when the internal and external factors of the business are closely and attentively analyzed, it is far easier to make prognosis relating to the upcoming sales and accrued revenues/ incurred losses.
The following section of this report has been designed to provide a close analysis of the named internal and external factors.
1.1.Internal Factors of the Business Initiative
This section focuses on the facets of the business project which are closely associated with the business project itself and which are not influenced by the outer factors in any way. Close analysis of these factors has been found necessary because absence of this analysis will ultimately result in the wrongful calculation of the projected costs of sales.
a) The Trade Character of the Business Nature
In contrast to the majority of the international start-up initiatives this project does not contain an industrial component. Ultimately, the conduct of business is substantially simplified. Technically, the only actions that shall be taken by the business owner can be recapitulated in the following algorithm (closer examination of the business cycle will be addressed in the subsequent sections of this business report):
The chocolate is manufactured in Switzerland by SwissChoc SA, the trade partner of our business owner
The ordered portions of the chocolate are stored on the storehouses of the manufacturer. The rent pay for the storage of the chocolate in Switzerland is subject to the subsequent discussion among the parties. Currently, it does seem to be rationale to follow the international commercial practice. In accordance to the recent World Trade Organization report the manufacturer can reasonably store the production of the manufactured commodities for 10 days for no payment, the next month he is obliged to store the ordered commodities for the average acceptable payment, and then the manufactured is free to dispose of it.
In the context of the present situation, considering the friendly connections among the business owners, the poor contractual performance is not likely to happen and all shipments from the warehouses of the manufactured will be exercised in the contractually agreed terms. Anyhow, the cash flow statement of this business plan will address the issues connected with the situation if the parties agree on the paid storage of the production.
The shipment of the ordered commodities is made by the contracted trade fleet company. in accordance with the statement of the fact, neither privileges nor discounts will take place in the present case. Therefore, for the purposes of the cash slow statement, the projected balance sheet and profit-loss statement is reasonable to assume that the prices for these services will be deducted as the aggregate market prices. Bearing in mind the fact that the fare for each freight is always calculated separately, it is highly advisable to utilize the annual aggregate market. For the purposes of the profit-loss statement, cash flow and other constituents of the business project these figures will be applied.
The ordered commodities arrive to the United States of America. When the cargo is uploaded, the taxation procedures are launched. It must be accentuated, that while the figures of the customs payments are not specified in the Statement of the Facts , it is reasonable to utilize the ones which have been elaborated by the fiscal policy of the United States of America. The respective legislative acts of the Internal Revenue System will be used to provide calculation of the customs payments
The commodities arrive to the storehouses rented or owned by George.
Considering that this information is not included to the statement of the Facts, it is reasonable to assume that he will rent the storehouse to hold his supplies there. Moreover, considering the nature of the commodities (chocolate) special conditions shall be created to ensure that the chocolate will not get deteriorated and melted. Therefore, the costs of refrigerator are to be purchased or rented.
Ultimately, the commodities are distributed among the prospective customers of the business owner at issue. Considering the small nature of his business, it can be soundly predicted that his main customers will be individual consumers who will purchase the chocolate for personal consumption and little retail trade chains which will purchase chocolate with the purposes to re-sell it.
Overall, it is evident that this algorithm is not considerably complicated in contrast to another business initiatives launched by the international businessmen. What is particularly important is the fact that the proposed business scheme do not contain a manufacturing element, which in accordance with the scholarly and with the business opinion if the leading tycoons of the international trade is the most vacillating component of the business. Therefore, the unreasonable unforeseen events, which may directly or indirectly affect the industrial cycle, are not likely to arise.
b) The Small Scope of the Business Initiative
Statement of the facts indicates that the available funds for the purposes of the project realization are limited. To be more exact, $ 250 000 are currently at the disposal of George. Considering the limits of the crediting option are nor specified in the statement of the facts of the present case, the credit opportunity will not be reviewed here.
Moreover, George is planning to run the business himself and other employees will be be hired by the emerging business entity. Therefore, is reasonable to assume that the financial turnover of the company will not be too big. To be more exact, bearing in mind that in accordance with the contemporary theory of microeconomics, the most financially stable companies are those companies, which are capable of quick reinvestment of the available funds, the company which will be run by Uncle John will be exceptionally stable financially, as no big funds are engaged to the cycle.
There is a uniform opinion of the scientific authorities that small company (the business which will be run by George is indeed small) that small companies are less vulnerable to the crisis-related factors and the accompanying processes. This factor is indeed a trump of the business and it is highly advisable for George to avoid the further expanding business as far as the maximum range of the financial security is concerned.
c) The Small Staff of the Company
The company is reported to operate as a web-site which will be run by George himself. Therefore another advantage of the firm is the fact that no external permanent employees will be hired to assist George with the firm’s activity. Therefore, it can be easily assumed that since George will be operating himself, confusion and poor performance of the employees are not likely to happen at all.
Moreover, the operational expenses connected with the staffing policy of the company are not likely to be incurred by the firm. Neither Human Resources department, nor the salaries and wages which are due to the constantly hired employees shall be paid. Therefore, in the present instance the staff associated costs will be minimal and they will compose solely of the salary that is due to the business owner himself and the regular obligatory fiscal deductions to the state in where the company is registered and the federal tax compulsory payments.
2. Factors of the External Environment which Shall be Accentuated
This chapter of the business report provides a list of the factors of external financial environment of the company which shall be considered before the project is launched into implementation. The particularities of this business initiative manifest the fact that the external advantages of the business environment taken together with the internal factors create the most favorable atmosphere for the construction of the effective business organization.
a) Reliable and Open Business Partner
Normal conduct of the business entity requires constant negotiations with the existing and the projected business partner. Normally, international business practice dictate the 10% discount in the chocolate-production related business can be hypothetically obtained by the owner of the business enterprise when the business record of the parties was mutually prolific and lasted at least 4 years. To illustrate this discount has been given to the United States distributor of the Nestle Production, the company incorporated under the laws of Switzerland.In the present instance, the statement of the facts precisely indicates that 40% discount will be granted to the business enterprise owned by Uncle George.
This situation is unique for the contemporary business world. Such generous discounts are never given, especially in the highly competitive chocolate production and subsequent distribution market. There are numerous trade reports issued by the World Trade Organization and the related trade organizations that the chocolate production market is already oversaturated. To be more exact, owing to the negative economic impact brought by the recent recession approximately 13% of the all chocolate producers cannot find the markets to dispose of the generated supplies of chocolate. Another 9% of the chocolate producers ended up 2008, 2009, 2010 and 2011 accounting years with the negative ratio of their profit-loss statements.
Therefore, with regard to the present situation the shipment conditions provided to George are more than favorable to ensure that the business is conducted successfully and bring profit to its creator. Moreover, it seems reasonable to assume that the owner of the Swiss trading partner has provided such discounts to George to his own financial detriment, although there is no proof that this information is totally certain.
b) Logistic Connections between the United States of America and Switzerland are Well-Developed
Several major companies operate in this sector. The communicational means of the both passenger and cargo sea deliveries among two countries are well developed. Therefore, there will be no difficulty to transport the manufactured chocolate from Switzerland to the neighboring Netherlands, from where it will be easily exported by sea fleet to the United States coastal area.
The main advantage of this segment of the business environment is the fact that there is no evident need to contract multiple contractors to deliver the commodities to the United States of America. The only step that shall be followed is the contract conclusion with one of the companies, and the firm will in its turn contract all necessary loading and shipment agents of the industrial cycle.
Moreover, it must be additionally stressed that the main advantage of this approach is the rising competitiveness. Since multiple service providers are engaged in this area of the business, it will not be problematic to achieve a desired pricing policy. Therefore, due to the saturation of this market, it can be anticipated that the overall costs for the goods transportation will not exceed 16% of the entire costs of sale, what is a fantastic figure in contrast to the rest of the shipment and costs of sales ratio.
c) Chocolate Demand on the Domestic Market of the United States of America
Although business statistics precisely indicate the domestic chocolate market of the United States of America is already occupied by the local producers and the importers of the chocolate, the importers of the Swiss chocolate still have lucrative possibilities to sell the imported production. Therefore, our importer is likely to succeed here.
3. Legal Framework of the Project
The United States of America and the Swiss legal systems are completely different in their natures and in their matters of substantive law also differ significantly. However, in the present case the transactions which will be conducted by the parties are not very complex and in accordance with the joint and unanimous opinion of the scholarly authorities and the business analysts , the separate legal department or legal advisor shall not be hired when the business is small and big transactions are not anticipated. To be more exact, it is advised to hire an advisor when the annual turnover of the company exceeds$ 400 000. In the present case these figures are highly unattainable by the team in the forthcoming future, therefore, the law-related expenses will not be addressed in the balance sheet and in other financial statements of the company.
Besides, there is an emerging trend on the ecological horizon of the humankind. To be more exact, the government authorities of the state impose mandatory requirements of the business people and the deviation from those ecological postulates may eventually lead to the deterioration of the natural ambience. Specific tax privileges are granted to those companies, which strongly adhere to the existing and projected domestic and international ecological regulations. Therefore, considering the fact that the business which will be owned by Mr George is completely consistent with all ecological standards, it is highly possible that the specific tax privileges will be endowed to the business by the Internal Revenue System.
II. Journal Entries for the Operating Year
Various international and domestic luminaries of the public and private accountancy give various definitions to what is understood under the concept of the journal entries. The most accurate definition of this concept is that journal entries are the sections of the balance sheet which are fixed in the debit-credit ledger and which fixes the profits accrued and the expenses incurred by the firm during the financial year.
As far as the relevance of the journal entries for the purposes of the present business initiative is concerned , it is strongly recommend to focus on the following points of the ledger. In other words, when the exercised payments will be fixed by the runner of the business process, these categories of the debit and credit components of the accounting journal must be obligatory addressed by the him (Caliba et al, 2009).
Generally, the list of the obligatory journal entries is presented as follows:
Credit Sections of the Statements ( those payment s which will be paid by the firm)
1) Obligatory Monthly Upfront payment. This section is necessary to predict what upfront payment will be prospectively charged from the firm the next month.
Besides, the upfront payment for the exclusive distribution rights shall also be obligatory accentuated by the firm, otherwise the financial security of the future venture is considerably endangered.
2) Logistics Expenses. This section depicts the expenses which are incurred by the firm to deliver the chocolate from Switzerland to the United States of America. Normally, this constituent shall not exceed 24% of the entire costs of goods value, otherwise the enterprise is likely to get converted to the non-profitable one (De-Lemos et. al, 2004)
3) Salary of the workers. In accordance with the statement of the facts, the only worker engaged in the industrial cycle of the process in Mr. George himself, therefore the funds allocated for the purposes of this section are not the biggest ones. Anyway, they shall be necessarily considered and accentuated, because failure to do this will ultimately result in the breakage of the entire financial system of the enterprise.
4) Interest on the Credit Card Use. It is stipulated in the statement of the facts that the credit card will be utilized to exercise the payments connected with the shipment and the delivery of all chocolate exported from Switzerland by the company.
5) Obligatory Tax Deductions. The aim of this section is to determine what is the share of the tax deductions in the entire financial environment of the firm.
1) The Loans Returned. Assuming the fact that the business will be run successfully, it can be anticipated that the business runner will provide loans for other business entities and these entities will be sooner or later returned.