Original post by CHRISDOR
Name – Number
AF1 – Information data selection and interpretation
background info ¾ sentences
justify why they need to consider different options
Open a driving school for new car drivers.
Open a driving school for lorry drivers
List data like trends relevant to option and say what it means and how they can make decisions based of it. Link it to the aims of the business
Af2 – Implications for resources based of decisions made
Human resources – People needed to run the business. Does the business already have staff, do they need more?
Financial resources – State what the start-up costs will be and how much money they need to run the business and how they will get the money they need to run the business and how they will het the money. E.g. loan venture capitalist.
Physical resources – Refer to tangible assets needed to run the business that could be the premises, stock, equipment
Time – How long is needed for each option to complete.
Example - A human/ physical resource the quired for option A/B is… a risk for this is …. and alternative to this is …. Link to aims
AF3 – Financial –
Calculate revenue, Calculate breakeven profit
Ratio analysis – Gross profit margin revenue – cost of goods sold and net profit margin, Acid test and ROCE one sentence for eatch
Do this for both options At the end of each, state which option is more viable. Link to aims
Gpm revenue – cost of goods sold / revenue x 100=
66000 X 100 = 80%
The gross profit margin is 80%
Npm revenue – costs x 100 =
24750 X 100 = 30%
The net profit margin is 30%. Which is higher then option 2 which makes this business more profitable.
416500 X 100 = 85%
The gross profit margin is 85%. Which is higher then option 1.
66640 X 100 = 13.6%
The net profit margin is 13.6%. Which is much lower then option 1.
The gross profit for Option 2 is 150500with a 70% gross profit margin. This means that for
every pound they make, they make 70p gross profit this is higher than option 1. However,
their cost of sales is more. Furthermore, their net profit is also higher than option 2.
However, the average spend per customer is less at £28. This tells us that option 2 is more
financially viable especially in the long run. However, they will have to sell their existing
business to cover the costs of starting the business. This will give them 45, 000 and help
them a lot. However, they will need to take out a 45, 000 loan to give them all the finances
they need. This is a good medium to long term source of finance that is efficient and
available to the company, A disadvantage to this will be the fact interest will be added onto
the payments and will amount up if not paid in time.
Roce net profit / capital employed
AF4 – Key factors
Risks and Alternatives
Legal- if the business doesn’t follow legislation, then they would face legal issues. Not only does this cost money to fight in court, but it would also damage its reputation. Option 1 would be easy for compliance, as it is a similar business model to other businesses. Option 2 would be harder due to the moving address and lack of clarity on employment terms for this. Legal advice should be sought to minimise risk.
Reputational- the business must ensure its quality is high to keep its customers. If they don’t handle reputational issues such as complaints well, then they would lose customers which will mean less profit, which they are aiming to increase. Option 1 would improve their reputation, however this would depend on them being able to gain back customers which could be difficult. Option 2 will see more customers, so the chance for reputation growth is better.
Financial- The business must ensure it keeps its expenses and liabilities as low as possible to have better liquidity and profitability. Option 2 is more of a financial risk as it includes a loan which is a liability. However, it has much better profit margins, which reduces the risk. Option 1 is also a financial risk as they would be paying for the £12,000 renovation upfront. This could cause cash flow issues.
• Take on a business partner with business experience so the owners can focus on food quality and experience. This would increase profit but decrease their share of the business. This would bring in expert knowledge
Conclusion – Make a decision/ Justify a decision
Thank me later