Structure of The Business - Ownership

Question: Discuss about the Structure of The Business, Ownership. Answer: Management Plan This chapter describes the management team, the structure of the business, ownership, internal management team and their skills. Also covers the external management, feedback, control and support services. (Albrecht, 2007). Ownership Structure Big red bicycle limited is owned by the CEO Mitchell Yeo. Mitchell Yeo will be responsible for making all major decisions in the business, and assisted by the managing director and the CFO when necessary. All staff members will be answerable to her indirectly via the managing director. The CEO intends to modify the organizational structure as the business grows in getting new employees. The company is considering manufacturing overseas in order to reduce cost and the cheap labor. The company is also considering diversifying its products in order to increase the sales of the product. The Management Team Internal Management style will reflect the participation of the Managing directors assisted by CFO and external expertise help. Big red bicycle limited will utilize the services of Operation General Manager, human resources, marketing and operations departmental heads to run its operations and serve customers. (Gibson, 2009). Managing Director Tom Copeland is the managing director. He is in charge when the CEO is not present. He directs and controls the work and resources of the company. CFO John Black is the CFO. He oversees the daily operation of the company.He also provides strategic advice to the CEO and the managing director. Operations General Manager Stuart LaRoux is the head of operations management. Stuart is responsible for ensuring all the training operations and ensures smooth operation inside the company. Senior Accountant. Pat Roberts is the senior Accountant. He is creates budgets and implements the financial plans of the company. Sales General Manager. Sam Gellar is the sales General Manager. He is responsible for developing marketing strategies and getting Big red bicycle limited known in Australia. He will come up with various marketing strategies that will help the company get recognized in the country. He will contact the media, social crowds, and other marketing methods and will ensure he will come up with ways to get new customers for the services and products. Production Manager Charles Pierce is the Production Manager. He gives advice on technology and other IT solutions that business needs and how to meet those needs. He also ensure smooth operation in the manufacturing department and reports any problem. Human resource Manager Holly Burke is the Human resource Manager. He ensures that the company will have all the labor and human resources needed. He will also ensure the company recruits only the best for better services to the customers and will be preparing training sessions for the new recruits and in-job training for the continuing staff. Organization Structure The management team comprises of CEO, who is also the sole owner of Big red Big red bicycle limited and will be assisted by an manager Director. There are four paramount departments i.e. human resource, sales and inventory, operations and marketing has heads, each qualified for the post. The heads reports to the Managing director via the CFO. Figure 1: Management structure Support Services Big red bicycle limited encourages feedback from its clients. This way, it will ensure it serves them better and take care of the complaints. The business provides its details; an email address, phone number, website where anyone can reach us for support. The business has integrated social sites like Face book, Twitter and Google Plus to reach more clients. These methods are vital in gathering data for forming a basis to serve the clients better. Professional services includes the media, which would involve advertising over the print and mass media to make the business known to the public. This would create awareness to the public as well as give the company a competitive advantage. Choice of media and outsourcing would be due to reduction of cost as well as expand to a wide region. IT outsourcing companies would be of important, to consider their services including web hosting, cloud computing and reference companies in case of a service that Big red bicycle limited does not have an d would need in order to run the business to maximize sales and make profit. We will also need to contract Auditors to do audit work for the company. Financial plan Introduction This chapter describes the financial structure of Big red bicycle limited. It shows the financial status of Big red bicycle limited technologies and projections. It includes the projected income statement, pro-forma balance sheet and the cash flow financial strategy. Also included are financial ratios summary and the business financial long-term goals. Financing Summary The financial plan is an important tool for the success of Big red bicycle limited. The intention of the plan is to finance growth through cash flow and equity from the business. Big red bicycle limited plan to $1,000,000 in sales returns, Later Big red bicycle limited will focus on growth and profits. Some of the members who will be part of the staff of Big red bicycle limited technologies so far have done realistic forecasts, and cash flow projections for the financial reports. Projected Profit and Loss Big red bicycle limited has projected profit and loss with sales from the business income to increasing from more than $ 200,000 the first year to more than 300,000 the second, and $500,000 the third year. Big red bicycle limited are expected to break even in the fourth year. The net profit margin projected will be relatively good for a start-up business. Big Red Bicycle Limited Pro-Forma Income Statement FOR THE PERIOD ENDING 2015, 2016 AND 2017 Table 1:Pro-Forma Income Statement Years Income (Kshs.) 2013 2014 2015 2016 Sales income 300,000 400,000 600,000 750000 Total income 400,000 500,000 750,000 800,000 Less cost of sales 200,000 220,000 300,000 350,000 Gross profit 900,000 1,120,000 1,650,000 1585000 Operating expense (Kshs.): Utilities 80,000 78,000 78,000 78,000 Advertising 100,000 97,000 100,000 120,000 Insurance 200,000 200,000 200,000 200,000 Salaries 100,500 140,000 160,500 160,700 Interest 73,000 80,000 90,000 92,000 Miscellaneous 17,000 15,000 15,000 18,000 Total operating expenses 170,500 320,000 450,500 500000 Net profit 200,500 300,500 459,500 550,500 Table 1: Profit and Loss Account Balance Sheet Big Red Bicycle Litided Pro-Forma Balance Sheet As At 31 December 2013, 2014 ,2015 AND 2016 Table 2 Year(s) Assets 2013 2014 2015 2016 Fixed assets (Kshs.) (Kshs.) (Kshs.) Vehicles 10,600,000 34,100,000 30,450,000 31,450,000 Printers and copiers 3,000,000 4,000,000 3875,000 3875,000 Furniture 3200,000 3,200,000 3,100,000 3,000,000 Computers 40,800,000 45,900,000 45,000,000 45,000,000 Total Fixed Assets 57,600,000 87,200,000 82,425,000 81,425,000 Current Assets Cash in bank 5,250,000 4,700,000 6,500,000 5,250,000 Cash at Hand 500,000 400,0000 300,0000 500,000 Total Current Assets 5,758,000 5,100,000 6,800,000 6,900,000 Total Assets 63,358,000 93,300,000 89,225,000 88,225,000 Less Current Liabilities Suppliers 34,500 32,000 11,500 12,500 Net Assets 63,323,500 93,268,500 77,725,000 75,725,000 Financed by: Long term loan 55,929,500 81,613,500 30,000,000 32,000,000 Surplus income 7,394,500 11,654,500 47,725,00 48,725,00 Total liabilities and equity 63,323,500 93,268,000 77,725,000 79,725,000 Table 2: Balance Sheet profit margin (year1) Gross profit margin = (Gross profit / Sales) * 100% = (8,500,000/ 15,300,000) * 100% Gross profit margin = 55.55% Break-even level of sales: = (Expenses / Gross profit margin) * 100% = (1,370,500/ 50) * 100% Break-even level of sales = Kshs. 2,741,000. The business shall be able to generate normal profits above the break-even point in less time from the above ratio. Profitability of the Business Profitability of the business will be estimated by calculating the return on capital. Return on capital for year 1 = (Net profit / Capital) * 100% = (7,129,500/ 63,323,500) * 100% = 11.25% The return on capital for the first year will be high but the business will not be experiencing normal profits yet until early the second year. This return on capital however is expected to increase with time to self-sustaining levels resulting to high profitability. When Big red bicycle limited is fully established and expanded, more vehicles and computers will be purchased to cater for rising demand. More developers will also be hired to cater for new development of new bicycles. Our Service quality will see an increase in demand in the information technology market trends. Big red bicycle limited will also be expanded in the three more states to reach a wider market. This also means that the personnel will also be increased. Return of Equity for the Business Net profit after tax X 100 Owners equity. Year 1. 7,129,500x 100 = 1425.9% 500000 Year 2. 12,960,000x 100 = 2592% 500000 Year 3. 17,659,500x 100 = 3531.9% 500000 Return on Investment of Business. Net profit after tax + Interest x 100 Owners equity Year 1 7,129,500 x 100 = 1425.9% 500,000 Year 2 12,960,000 x 100 = 2592% 500,000 Year 3 17,659,500 x 100 = 3531.9% 500,000 Return on Equity for the Business Net profit after tax + Interest x 100 Total investment Year 1 7,129,500 + 90,450 x 100 200,000 = 3609.975% Year 2 12,960,000 + 87,000 x 100 200,000 = 3261.75% Year 3 17,659,000 + 176,400 x 100 200,000 =9702.95% Overheads Total overheads for year 1 = 851,685 kshs. Total overheads for year 2 = 946,150 kshs. Total overheads for year 3 = 1,010,680 kshs. Financial Requirement Item Amount (K.shs) Pre-operation costs Working capital Fixed assets expenditure 112,080 604,680 Total 716,760 Table 4-Financial Requirement The fixed assets expenditure has been added to pre-operational cost. Proposed Capitalization. Total investment 200,000 Owners equity 500,000 Total borrowers 150,000 Long-term goals After the business is fully established, there are plans to purchase more machines and expand the business so as to be able to serve and contain the growing demand. Products and Service variety will also increase with market trends as we work hand in hand with technology consultant to keep us up to date. This will result in an increase of revenue for the business. Reference Troy, L. (2008). Almanac of business and industrial financial ratios. Chicago, IL: CCH Leach, R. (2010). Ratios made simple: A beginner's guide to the key financial ratios. Petersfield, Hampshire: Harriman House. Gibson, C. H. (2009). 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