Do the capital structure for this paper based on the other sections which are the start up items and the fixed monthly expenses

A. Capital Structure

State total money your business will need (start up items + 1 month expenses). Then, how do you plan to get it? What is your debt equity ratio? If you need a loan, give bank name, payments and interest charged. Each group member can contribute a maximum of $10,000 equity. Short and sweet paragraph or two, written after the rest of the draft is finished.

B. Start Up Items

The total start up cost for the first month of our business will be $19,944.81. This is the sum of all necessities such as furniture, equipment, payroll, promotion, inventory supplies, business license, and 1 month rent.

The start up cost for furniture is $970.00. We decided that we should have two trash cans; one in the bathroom and one near the door so that our customers can throw away their trash. We decided to have around 10 tables in our seating area but instead of buying the tables as a set it would be cheaper to buy table tops and  matching table bases separately. We had also decided that it would be cheaper to buy chairs that didn’t match the tables we buy. Originally our start up cost for furniture would be $1,700.00 but now since we’re buying our tables separately and cheaper chairs we were able to save $730.00. The start up cost for our equipment is $2,227.02. After looking at various prices we noticed that for some of our items, buying in bulk would be a lot cheaper and more efficient. As a coffee/kombucha shop we need various equipment in order to make and sell our products and since we are a food industry, we need to be very clean our we could be shut down.

The start up cost for our inventory will be $808.29 because those are our ingredients and we need them in order to make our products otherwise we won’t be considered a coffee/kombucha shop at all. Our office supplies will only amount to $62.00 because we don’t have an office since it would be more efficient to do paperwork on one of our tables whenever we have a slow day or after hours. The cost for miscellaneous items is only $60.00 because we need a Costco membership in order to buy some of our items.

The price for our business license category will be $220.00 because without any of our permits/licenses we would be shut down and even fined. The area that we will be renting will cost $2,500.00 for one month. For our payroll we will be paying $12,725.00 in total to our employees including us. The manager and lead barista will be paid more since they have more responsibilities and the sixth barista will be paid less because they’ll have less responsibilities. For our promotional costs we are willing to pay $142.50 a month to spread the word about our business.

C. Unit

    The average sales unit is a latte and a bagel. This costs the business $.60 for the latte and $.50 for the bagel which totals to $1.10 which then sell for a total of $5.20. These costs are coming from things like milk, espresso, syrup, cups, and lids to make the lattes as well as pre made pastries for the bagels.  How we decided on our unit was most of the people coming in are going to get something to drink and we figured kombucha isn’t going to be the most popular at first  and most people who are studying are going to want something with their drink. We decided on a latte but also decided to add a food item because most of our customers are going to be coming in to study so they are going to be there for a while and figured they would get hungry so we added a bagel as well.  After going into to a Starbucks and observing the majority of their orders to be a drink and some sort of pastry, we decided this was a good representation of the average customer in a coffee shop. We also had a minute to talk to some of the baristas and they all  agreed that was their average sales unit.

D. Fixed Monthly Expenses

The expenses are the costs that are expected to be incurred in the course of operation of the business. From the information presented on the Appendix III, there are various expenditures which include the cost of goods sold, depreciation, finance costs, utilities expenses, salaries and wages. The estimation has been done monthly with the various figures presented. A compilation of the total costs is as shown on the total row. The total expenditure in the first year of operation as shown on the Appendix III is $291,700. The total labor will cost $152,700 for the first year. The total cost for advertising and promotions will be $1690 in the first year. There is an expected rise in the expenses as the business increases its marketing strategy to make it to be well known by others. In order to control expenses, the company will have to adopt a saving detail plan which will involve trying to lower the costs.

The fixed monthly expenses are labeled clearly as shown in the appendix I. There, of course, are payments to utilities, such as gas, water, electricity, internet. Rent of the space that we are using. The wages and promotional expenses were mentioned previously in other charts. We will also need some basic office supplies as well as bathroom supplies. Those of which I got prices for from wholesale websites which are referenced in the references section. The total of all of the fixed expenses per month is 15,649.65.

E. Sales Projections

Our amount of units we expect to sell each month (on average) is 8250 (Coffee Statistics). After doing some research on the average amount of units a coffee drive through sells per day is 250 which is 7500 a month.  We expect that because we are a full coffee shop that offers an establishment where customers can stay and enjoy their purchased products, our average units sold per day will be a little bit higher. We averaged our units per day to 275. We anticipate to sell more during our busy seasons and probably a little less during the off season. Our start up for the first two months will be our busy season will be the fall, winter and spring (since that is when most students go to school) but we will still have customers during the summer because the coffee shop will still cater to people who work downtown and the few students who still take classes during the summer term. In addition to that, during the summer, many more people go downtown in their leisure time and stroll through the streets so these numbers are pretty representative of the actual sales we will have.

F. Break Even Analysis

In order to break even, we will need to sell 3,817 units to cover our fixed and variable costs. It is projected that we will sell 8,250 units per month, totaling in $42,900 of revenue. After factoring in our monthly fixed costs of $15,649 and variable costs of $1.10 per unit (in this case it is specifically $9,075), our profit per month will be $18,176. During our non-peak months (January, July, and August), we will only sell about 6,000 units, resulting in a revenue of $31,200 and a profit of $8,950. We will still be able to cover our fixed and variable costs, but we will not have as large of a profit. Our total sales for the year will be 91,000 units and $473,200 in revenue. After factoring in fixed and variable costs, we have a yearly total of $185,304.20.

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