Direct Cost Analysis

Freshman (College 1st year) ・Business ・APA ・3 Sources

Business growth is a major strategy requiring a critical and well-designed plan. It is important to have a look at the market structure before an investor decides to upgrade and open further channels for the company. Blindly entry into business has a negative impact on the business owner's profits. The complexity of the market must be understood and analyzed before any measures are taken. Different factors influence the ability of any company in a given location to expand market coverage. Both internally and externally, the progress of any organization is significantly influenced. Additionally, the marketing structure adopted has the influence in ensuring the business is able to tap the unexploited market in other areas. Marketing is a very strong tool in propagating knowledge of products offered by the business (Palmatier & Sridhar, 2017). Comprehensive means to familiarize customers with the products is a sure way to guarantee the business survival. The paper is going to evaluate various factors which are essential in expanding the business. The investor has the sole responsibility to come up with the right information in the market. This process of expansion is not considered a one-day process, but a continuity plan. It involves soliciting the available resources which are needed to open a new channel of distribution. The expansion creates a platform for the creation of more employment and definitely improves the economy (Sweeney et al., 2007). This is because the new business would require more employees to offer services. Therefore, coming up with a succinct procedure to arrive at the best plan to execute expansion is required in this case. Constituting all elements in facilitating the process could lead to a healthy expansion.

Financial Plan

It is a comprehensive analysis of the future finical position of the business based on the variables that are measured within the business (Liang & Nicholas, 2007). Such variables are cash flows and assets which are within the business. The purpose of having a sound evaluation of the financial position gives the management the direction to take. This is paramount in enhancing the organization is able to achieve its objectives and goals (Palmatier & Sridhar, 2017). One of the considerations is net income. Revenue collections are projected for the first five years to set the pace of the business. An increase of 4% per year is estimated to happen since the store will be new in the location. An exception of the first year is allowed. This is because the first year is assumed to be challenging to the new entrants in the market. It will be basically set as the baseline year, where customers will be familiarized with the products. At this time, the store is speculated to have a growth of 3%.
Moreover, the cost of sales for the first year is estimated to start at 56% with a continuous increase of 5% every year progressively. The overall net profit for the first year is projected to be around $32,150. The figure is quoted on the low side since the store will be new in the area. The assumption is that the business will require additional funds to hire new staff. Financing this growth would require a bank loan to facilitate training and onboarding of the new staff. The pinch would be felt in the first year. The second year would not witness a huge growth rate since more will be focused on marketing and payment of debts. Consequently, liquidity ratio is another important factor of consideration. It is defined as the ratio of current assets to debts (Sweeney et al., 2007). Since the business will involve opening a new store, much of the fund used will not involve borrowing. Some of the profits generated in the initial business would be used to open the new store. It is estimated that the liquidity ratio will be high. Current assets will be greatly reduced. A projected ratio of 2:1 would help the business stabilize. Profitability ratio is defined as the gross profit to total sales. Within the first year, there is the great hope of having a profitability ratio of 3:1. Solvency ratio is also speculated to be low since the store opening is entirely reliant on the initial capital generated by the mother business.

Guerrilla Marketing Strategy

This is a marketing strategy which aims to promote the products of a certain business using unconventional methods (Liang & Nicholas, 2007). They aim to use less budget to save on the costs involved with this process. High imaginations and creativity are employed to get the attention of the customers. This marketing strategy leaves the people with the memorable and personal liking of the marketed product (Palmatier & Sridhar, 2017). One of the characteristics associated with this method of marketing is that it is normally conducted over the streets and places which carry a high number of people. Guerrilla marketing is different from the traditional methods which have been used for a long time. It has shifted to online familiarization of the product rather than relying on radio and television. It has become one of the easiest ways to pass commercial messages that leave the customer with a good impression about the product.
One of the strategies that will be employed is buzz marketing. This is whereby the sales people will be used to explain to the customers about the brand (Sweeney et al., 2007). Areas to be targeted are mostly those populated places such as towns. One on one interaction serves a better chance to explain about the brand and convince the customer. They propagate the good news concerning the product which saves the company the cost of advertising using expensive platforms. This strategy is very effective, especially when there are large competitors. As alluded earlier, it enables the small business to thrive while using less in marketing. Secondly, the distribution of fliers, especially in festivities. They help people to remember about the brands in a different way they used to perceive them. This is through evoking varied emotional reactions in people so they get to understand the product more. Finally, there is a stealth form of marketing. This is whereby people are involved in a highly secretive consumption of the product without them noticing (Palmatier 7 Sridhar, 2017). They are actually used as marketing tools in a very imperceptible manner. They are allowed to use products either as free gifts or at subsidized prices.
The only challenge with this marketing strategy is the realization by the participants about the idea behind the process (Liang & Nicholas, 2007). They can seriously degrade the image of the brand which can result in lower sales or increased period of entry into the new market. It is speculated that the above methods can greatly help the small business venture into the new market at a very low cost. Guerrilla marketing has started infiltrating into the market slowly, due to the risks posed by large organizations which have the muzzle to buy expensive airtime in the media. In most instances, they are featured severally at the expense of small businesses which have no capability to beat their financial position. The current marketing is very impactful since it targets even the vulnerable who have no access to electronic gadgets to follow advertisements (Palmatier & Sridhar, 2017). Small businesses have been able to enter the complex market, by using this imaginative strategy.
Considering the new store to be established in another city, the only way to survive will involve the ground level of marketing. It creates more engagement which is paramount when the customers are not aware of the new product. Someone would opt to continue using what they used to until a sales person convinces them otherwise. Assurance is the only aspect which is required to change the minds and attitude engrossed in the minds of the people. Guerrilla marketing has the capability to capture this and turn it into a profitable venture.

The Most Appropriate Location

The location of the business is one of the factors which has a significant influence on its performance. The two have an exponential relationship which means poor site location results in little progress. Identifying a suitable place is among the factors needed for business (Liang & Nicholas, 2007). This can be achieved through conducting a guided research to identify a viable location. Most of the organizations in the world are failing to perform well due to the weak selection of premise site. Notably, it is essential to carry out a survey of possible new areas where a new setup can be established. Additionally, it is worth noting that location influence the revenues generated as well as operational costs (Palmatier & Sridhar, 2017).
The new store will be established on Delaware Street in Minneapolis, US. This is an avenue which is very famous and most of the people flock alongside this route. One of the strong elements to necessitate choosing this place is the high number of customers. Worthwhile of a business is determined by the customers served. Alongside this, the infrastructural development in the place is well connected. This has a significant importance to the customers as well as suppliers since the exchange of goods will be eased. The support services such as banks have mushroomed in the town and accessing them is easy. The above factors help the business to save on some costs and diversify its market.

Plan for Securing Sources of Debt Financing

Financing is needed to run and start a business which ramps up to profitability (Liang & Nicholas, 2007). The need of finances in the business varies; therefore, it is important to determine what is needed and at what time. Debt financing is defined as borrowing from institutions offering credits with the aim of repaying the amount with interest. The loan borrowed can be secured or even unsecured. The agreement between the two parties decides on the type of credit to engage in. One of the targets is banks. To be able to raise the money to set up a new store, the loan will be borrowed from a local bank. This would be achieved by submitting profit and loss account and other accounting entries to the bank to facilitate the same. Furthermore, a certain amount of profit from the mother business will constitute part of the developmental project. This is the best plan to lower the amount that will be borrowed from the bank.


Liang, F., & Nicholas, S. (2007). Knowledge Transfer through Appropriate Location Selection: An Empirical Investigation in China. Journal of Asia Business Studies, 1(2), 45-54.
Palmatier, R. W., & Sridhar, S. (2017). Marketing Strategy: Implementing Marketing Principles and Data Analytics. Marketing Strategy, 259-278.
Sweeney, S., MacLellan, A., & Dorey, E. (2007). 3G Marketing on the Internet: Third Generation Internet Marketing Strategies for Online Success. Gulf Breeze: Maximum Press.

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