Business feasibility study for Pocket cake
Executive Summary
Pocket cake will be a bricks-and-mortar cupcake shop in Suzhou Culture and Arts Centre. The shop will mainly sell various cupcakes with healthy ingredients. Business skills, such as management skill, accounting skill and baking skill will all need to be considered before running the business. Young women will be our target customers who are pursuing a fashionable and elegant lifestyle. In view of being more considerate, four types of cakes will be provided: ordinary cupcakes, themed cupcakes, customized cupcakes, and cupcakes for those with diet restriction. Customers can exchange their feelings of new products casually on the blog of Pocket cake. The main rivals of the shop are 21cakes and pantry’s best, both of which have been recognized by residents in Beijing and Shanghai. This shop will make losses inevitably in the first two operating years and begin to make profit afterwards. According to the feasibility analysis of the business, it can be seen that the cupcake store is worth opening.
Section I: Personal skills, qualities and experience.
Necessary business skills are required before running the business officially. Specialized courses which I have learned from university will be the important bases of running the cupcake shop methodically. The application of accounting lessons will be helpful to know the financial position of the cupcake shop timely. Additionally, diversified marketing strategies learned from marketing lessons will be useful to attract more customers. Another course, organizational behavior, covers the knowledge of interpersonal communication, from which I knew how to cope with the complicated relationship between managers and subordinates.
In addition to business knowledge I already have, some technical skills will be taken into account as well. Because of the scarceness of cooking skills, I needed to seek a cooperator with baking skills to be in charge of launching new products. Two of us will be the entrepreneurs of the cupcake shop. People who with business knowledge will be assigned to manage the running of the business, and another one with technical skills will be responsible for the whole team of producing new products.

Section II: The business idea and market assessment
2.1 Product/Service. Cupcakes are known for their delicate and tasty in western countries. Only a few cupcake shops can be found in China and most of them sell their products online. In order to obtain the largest possible consumer base, our cupcake shop is located in Suzhou Culture and Arts Centre, which contains a variety of function facilities. High passenger flow volume will be helpful to drum up business. The name ‘Pocket cake’ apparently expresses the feature of mini cakes. Pocket cake will offer four types of cupcakes: ordinary cupcakes, theme cupcakes, customized cupcakes, and cupcakes for those with diet restrictions. Theme cupcakes will be produced to celebrate festivals. Customized cupcakes will be made to satisfy different demands of consumers. Moreover, our shop will also make sugar-free and gluten-free cupcakes. Compared with many dessert houses which use plant-based whipped "cream" and canned fruit as their raw materials, Pocket cake will use whipping cream and fresh fruit as main materials. Except the top quality ingredients and homemade recipes of our cupcakes, well-trained labors can also increase the reputation of the shop. People who have prior work experience will be probably accepted by the work team.
2.2 Target Customer. Females between 17 and 35 in high living standard will be considered as our target customer. Glamour of mini cakes lies in its one-bite size as well as the graceful lifestyle it reflects. Young females in modern urban are going after a fashionable and enjoyable lifestyle, which can be generally showed by their consumption behavior. Mini cupcakes exactly represent a new lifestyle to young females: healthy and elegant. Because of the restriction of our target customer, the expected population of customers is 100 per day. Nevertheless, the popularity of free bicycle and subway, the construction of ‘The Gate of the Orient’ will bring the cupcake shops more business opportunities.
2.3 Competition. Although there are just a few cupcake shops exists in Suzhou, ‘pocket cake’ will face stubborn rivals like Pantry’s best and 21cake, which are located in other provinces but have strong willing to expand to Suzhou. Pantry’s best imports its cooking materials instead of using cheap artificial flavoring. The shop now has branches in Beijing and Shanghai, only people who lived in these two places can be delivered. The restriction of delivery can be the biggest barrier for Pantry’s best (Pantry’s best, n.d.). 21cake is another competitor who insists doing network cake business since 2004. The standardized plant and strict control of storage temperature make 21cake bake more tasty cakes to satisfy different palate of people. However, heavier pressure of its delivery team is the current problem for this company (21cake, n.d.).
2.4 Sales and marketing strategy. In order to promote our brand widely, we plan to put up posters around some commercial districts, such as Moon Harbor and Time Square, where people have a higher level of consumption. Besides, starting a blog for the cupcake shop is necessary. The brand story, product list, new arrivals, and discount information will be posted via the online platform. The price of each cupcake varies from 15-35rmb. In terms of bulk orders of cupcakes, we will give 5% discount on the 1 dozen, 10% to the 2 dozens.
2.5 Star-up expenses
Items RMB Buildings (leased) | 200,000 | Furniture and Fixtures | 35,000 | Machinery & Equipment | 25,000 | Advertising/promotions for opening | 8,000 | Cash reserve | 30,000 | Training fees | 20,000 | Others | 10,000 |
Total expenses: 341,000rmb
2.6 Risk. The list above is the expected start-up expenses of ‘pocket cake’. 150,000rmb out of the total expenses will be borrowed from bank and my partner. If it is hard to apply for a loan from the bank, I will use my house as a mortgage. In case of huge losses brought by accidents, property insurance should be bought in advance.
Section III: Graph description – showing revenue and profit forecasts for 5 years
The list price of our cupcakes is basically determined by quality, service and environment. Accordingly, we will charge 15-35rmb for each cupcake. Assuming that the population of customers is 100 per day, and then we will potentially get 200 orders per day. The total sales revenue for the first year will be 1,825,000rmb.
Profit Forecast for year 1
Items RMB/year Buildings (leased) | 16,000 | Staff wages | 500,000 | Water and electricity | 70,000 | Raw materials | 1,460,000 | Others | 2,000 |
Total expenses: 2048, 000rmb
Year one PBIT=- 22,3000rmb

The line graph shows the revenue and profit forecast of Pocket cake from year 1 to year 5. It can be seen that revenue forecast and expense forecast will fluctuate in a symmetric form during the five years. The profit line will increased steadily until year 3. After that point, it will begin to decline rapidly until year 4 at which time the profit will make a slight recovery. The forecast revenue and profit will overall increase to a peak in year 3. The company will probably break even in year 2. The potential risks, such as more competitors and fewer customers will lead to a decrease in profit, which needs managers focus more on promotion and launch new products to attract customers.
Section IV: conclusion
On the whole, opening pocket cake will be a feasible business idea. The well-located cake store can provide various homemade cupcakes as well as considerate service to customer. Although the shop will face intense competitions from Pantry’s best and 21cakes, Pocket shop will form its own feature by product innovation. The shop may get into trouble when facing more rivals and low likeability. In that case, the shop needs to sell more related products, such as drinks and other desserts, to satisfied diversified demands of people. According to the profit and revenue forecasts of the cupcake shop, pocket cake will have vast potential for future development.
References
21cake, n.d..About 21cake. [Online]
Available at: http://www.21cake.com/about.php?act=product
[Accessed 28 November 2012].
Pantry's best, n.d.. Hello. [Online]
Available at: http://en.pantrysbest.com/beijing/products
[Accessed 28 November 2012].