8. Strategy and Implementation Summary
8.4 Sales Forecast
Japanese characters are attractive to females, which are the majority population of NCCU.
Table 17: First Year’s Target
First year Target sale amount Target Sale value
Beverage and Food
Coffee 19,962 1,197,720
Sweet 4,476 335,700
Assuming the business will run as our expectation due to the suggestion of information from secretariat department and coffee owner which we target at worst case of business scenario.
The seasonal target sale quantity rely on occasion; in this case February, June, July and August has sale drop in percentage to 40%, 40%, 30% and 40% respectively. (Chart 9 and 10) (Table 18)
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Chart 9: First Years Sales Forecast by product
Chart 10: Five Years Sales Forecast by product
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First Year Sale Forecast by product (NTD)
Souvenir
Yearly sale forecast by product (NTD)
Souvenir Coffee
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Table 18: Five Years Sale forecast by three contributions
Year 1 Year 2 Year 3 Year 4 Year 5
Revenue 4,561,659 5,185,629 5,723,059 6,328,014 7,162,913 Cost* 4,241,667 4,703,207 4,957,701 5,243,728 5,493,102 Net profit 319,992 482,422 765,358 1,084,286 1,669,811
*Cost means including COGS and expense cost.
8.5 Milestones
Attaining first customer: 1 day
Reaching Payback period: 2 years
Reaching first 1 million net profit at year 4th
Owner’s withdrawal of 1,082,000 NTD to pay back part of bank loan: 2 years
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As the owner and both parties have agreement to operator of the business with store manager, therefore both parties shall intend to pay store manager as representative of U Shop manager which a salary is 35,000 NTD a month, when business starts to make a profit, excess will be plowback into the company. Moreover the increase rate of salary set as half a year with 5% of current total salary, and ERE (Employees rate expense) calculated at 2%.
Table 19: Personnel Plan
Year 2016 2017 2018 2019 2020
Total payroll* 1,287,342 1,287,342 1,617,822 1,661,886 1,705,950
* Total payrolls is store manager plus waiter and Barista plus ERE 2%
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Table 20: Role and respond Job position Job Content
Store manager Be responsible for annual, seasonal, monthly operation plan, and Leading the staff to achieve goals.
Analyze and report the operation situation monthly, seasonally and annually
Promote culture and idea of the store.
Monitoring the operation of the business
Dealing with customers’ complains properly.
Must be familiar with the mental and physical condition of the staff
Waiters &
Cleaners
Serve the product.
Be responsible for table cleaning and setting
Must be able to explain the knowledge of souvenir and coffee
Be responsible for the environment of the store and outside the store.
Barista &
Cashier
Produce Coffee sweet and light meal.
Provide detail information about the product to customer.
Must have knowledge of history of coffee.
Deal with the payment of customers.
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rather be reflected as an investment by the owner. Future owner’s withdrawals will be used to pay back the loan at the end of year one and two of operations.10.1. Important Assumptions
Initial bank loan of 60% to fund start-up proportion will bear 2% interest rate.
Bank loan to fund start-up will be paid between year 1 and 2
Expense tax of 5% is deducted from revenue at the beginning.
Income tax of 17 % is to be paid at the end of each year.
ERE (Employees rate expense) calculated at 2%.
Resupplied material is calculated 16% of COGS.
Long term rent means the leasing of Owen and coffee maker. With depreciation of 1%.
COGS for maintenance service is 2 % of maintenance revenue
Seasonal sale forecast has predict as low sale turn in February, June, July and August which are 40%,40%,30% and 40% respectively.
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This section is to point out the break-even point of each SKU (Stock keeping unit) in the store which there are 2 categories; Coffee and Souvenirs. Both are calculated based on compare variable cost of each unit with Total fix cost of that unit’s category. Convert calculated
Table 21: First year Break-even Analysis per SKU (Units) Total
10.3. Projected Profit and Loss
If our forecast is accuracy, the project shall have payback period at the beginning of 2nd year which means all of start-up expense shall make a payment at point together with back loan interest as well. (Chart 11)
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Chart 11: Payback period Analysis (Week)
Chart 12: First Year’s Monthly Gross Margins
100,000 200,000 300,000 400,000 500,000 600,000
First year Gross profit
Gross profit
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Chart 13: Five Year Gross Margins Forecast
Chart 14: Ratio of Revenue and Cost
1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000
1 2 3 4 5
5 Years Gross Profit
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Table 22: Pro-forma Income statement
Annually 2016 2017 2018 2019 2020
Sale 4,561,659 5,185,629 5,723,059 6,328,014 7,162,913 Sale after
Consumption Tax
4,333,576 4,926,347 5,436,906 6,011,613 6,804,768 Cost of sales Coffee 525,834 632,390 661,579 828,989 880,694
Gross profit Coffee 1,531,385 2,028,999 2,182,240 2,383,784 2,722,979 Cost of sales
Souvenir
1,111,734 1,115,694 1,137,944 1,219,144 1,376,944 Gross profit
Souvenir
1,392,706 1,408,546 1,741,296 1,896,096 2,182,296 Operating expense
Owner Salary 430,500 430,500 430,500 430,500 430,500 Salaries, wages 831,600 831,600 1,155,600 1,198,800 1,242,000
ERE 23,426 25,242 31,722 32,586 33,450
Advertising 16,000 16,000 16,000 16,000 16,000
Legal &
Accounting
12,500 12,500 12,500 12,500 12,500
Supplies 525,834 632,390 661,579 828,989 880,694
Owen + Coffee
Miscellaneous 60,000 60,000 60,000 60,000 60,000
Depreciation 5,280 2,640 6,000 6,000 6,000
Building rent - 180,000 180,000 180,000 180,000
Total operation expense
2,165,140 2,450,872 2,717,905 2,929,379 3,025,148 Operating profits 2,168,436 2,475,475 2,719,001 3,082,233 3,779,620
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10.4. Projected Cash Flow
Table 23: Pro-Forma Cash Flow
ANNUALLY 2016 2017 2018 2019 2020
total total total total total
Revenues 4,561,659 5,185,629 5,723,059 6,328,014 7,162,913 Revenues after
expense Tax 5% 4,333,576 4,926,347 5,436,906 6,011,613 6,804,768
COGS (Coffee) 525,834 632,390 661,579 661,579 661,579
COGS (Souvenir) 1,111,734 1,115,694 1,137,944 1,137,944 1,137,944 Gross Margin 2,696,008 3,178,263 3,637,383 4,212,090 5,005,245 Operating Expense 2,164,316 2,450,872 2,717,905 2,908,362 2,996,064 Cash flow (Net cash
from OP) 531,693 727,391 919,478 1,303,728 2,009,180
Cash interest payments
(Bank loan) 96,000 96,000 0 0 0
Cash after interest
payments 435,693 631,391 919,478 1,303,728 2,009,180
Depreciation (Kitchen
EQ renting) 2,640 2,640 2,640 2,640 2,640
Long-term Debt (bank
loan Interest) 52,800 52,800 0 0 0
All cost 4,241,667 4,703,207 4,957,701 5,243,728 5,493,102 Net change in Cash 385,533 581,231 922,118 1,306,368 2,011,820
Tax 17% 65,541 98,809 156,760 222,083 342,009
Net Change in Cash
after tax 319,992 482,422 765,358 1,084,286 1,669,811
Beginning Cash 31,000 416,533 898,955 166,4313 2,748,599 End year Cash 350,992 898,955 1,664,313 2,748,599 4,418,410
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10.5. IRR
(Internal Rate of Return)IRR as the rate of growth a project is expected to generate. IRRs can also be compared against prevailing rates of return in the securities market. In this case rate of return in securities market is 18% and Project internal rate of return is 60% which means it is worth to invest for this project for 5 years long it will generate each year of project rate of return higher than prevailing rate of return equal to 233%
Table 24: IRR calculation table
Year 0 1 2 3 4 5
NVP (1,082,000) 297,451 645,615 1,012,952 1,417,696 1,931,327 5 years
Net change in cash 4,223,042
Rate of return 18%
IRR 60%
Chart 15: Proportion of Revenue, cost and Net profit
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11. Conclusion
In conclusion, U Shop will have to undergo tough and patient time in the first two years of commencement. After the payback period is reached, U Shop can generate higher net profit approximately 1 million NTD per year with this new business model. Moreover in aspect of IRR higher than prevailing rate of return in securities market which results in high credibility to invest on this project. On the demand side, as per market survey, there are huge amount of customers willing to purchase innovative NCCU souvenirs and come for coffee shop new branded as known as U Shop. This trend will intend to boost demand for products and services related to our focus point. Lastly this paper dedicates to be pilot project for NCCU to begin to created channel that NCCU students can raise more awareness on university culture and true spirit of NCCU.
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1. 2015 Taiwan Tea, Coffee & Wine Expo. (n.d.). Retrieved May 26, 2015, from http://www.chanchao.com.tw/nov/market.asp
2. Chengchi University Secretariat. (2015). Retrieved May 25, 2015, from http://secrt.nccu.edu.tw/english/index.htm
3. Internal Rate of Return (IRR) Definition | Investopedia. (2003, November 23).
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4. Philip Kotler and Gary Armstrong, “Market targeting PP 225 – 233” Principles of marketing (thirteenth Edition), (2010) Retrieved May 29, 2015,
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Practical New Product Development and Marketing (2015 May 2-17) retrieved May 29, 2015.
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http://www.uonline.nccu.edu.tw/material/pdf_new/194_613_1FD90352436B4315B2E F9B53152F064A.pdf
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Appendix 1: Financial Fact Sheet
First Year Sales Forecast for coffee
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First Year Sales Forecast for souvenir
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Jan'16 Feb'16 Mar'16 Apr'16 May '16 Jun '16 July '16 Aug '16 Sep'16 Oct'16 Nov'16 Dec'16 2016 Total Proportion
Sale rate 480,900 314,400 390,900 366,150 351,150 297,500 222,765 240,407 422,195 403,431 513,431 558,431 4,561,659 100%
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First year Pro-Forma Balance Sheet
Appendix 2: Design
Projected statement of cash flow for year ending Decomber 31, 2016
Jan'16 Feb'16 Mar'16 Apr'16 May '16 Jun '16 July '16 Aug '16 Sep'16 Oct'16 Nov'16 Dec'16
Revenues 480,900 314,400 390,900 366,150 351,150 297,500 222,765 240,407 422,195 403,431 513,431 558,431
Long-term Debt (owen renting) 4400 4400 4400 4400 4400 4400 4400 4400 4400 4400 4400 4400
Net Change in Cash 88,457 19,126 49,141 35,393 27,893 10,127 - 51,079 - 42,531 37,745 27,192 81,692 104,192 Beginning Cash 31,000 119,457 138,582 187,723 223,116 251,009 261,136 210,057 167,526 205,271 232,464 314,156 Net Change in Cash 88,457 19,126 49,141 35,393 27,893 10,127 - 51,079 - 42,531 37,745 27,192 81,692 104,192 Ending Cash 119,457 138,582 187,723 223,116 251,009 261,136 210,057 167,526 205,271 232,464 314,156 418,349 deduce with begin Cash 387,348.78 tax 17% 65,849 321,499.48
Cash End year 352,499