Assignment 2: Expanding Your Business

Effective Small Business Management – BUS 402
Strayer University
February 26, 2012

Financial Plan
Based on an internet search of various start-up coffee shops, the anticipated start-up costs for the coffee shop I am opening in Atlanta will be approximately $175,000, of which $125,000 was provided by five investors who will each retain ownership shares proportionate with the amount of capital invested. The remaining $50,000 will be financed through a bank loan. Belissimo Coffee Info Group suggests that sit down shops cost approximately $200,000 to open (Belissimo Coffee Info Group) The shop will begin operation as a very small sit-down shop, with barebones décor, which I believe can be accomplished for $175,000 in the city of Atlanta, thanks to historically lower costs of real estate in the south, comparative with other parts of the country.
Growth of the business – including expansion of selection and continued purchase of high-quality products -- will be financed through re-invested profits in the business, to avoid the need for taking out more loans. I plan to repay $10,000 of the loan in the first year, $15,000 in the second year, and $25,000 in the third year, as the brand is established and clientele and profits increase. According to an article on smallbusiness.chron.com, businesses should strive for between 15 and 50 percent cash reserves (Dozier). In the fourth year, the business will begin operating with 20 percent cash reserves, to increase by two percent for each of the next six years, reaching a comfortable 32 percent of profits being attributed to cash reserves in by the tenth year in operation. This will ensure a comfortable margin of reserves, in the event of any unforeseen crises.
I am accounting for a slow, though not recessionary, economy, as the nation continues to recover from the