Assess the various ways a small business owner can exit the business

Qualification - BTEC Higher National Diploma in Business (RQF)

Unit Name - Planning for Growth

Unit Number - Unit 42

Unit code - HB542

Unit Level - Level 5

Assignment Title - Investing in the future & Developing an exit plan

Learning Outcome 1: Analyse the key considerations SMEs should consider when evaluating growth opportunities.

Learning Outcome 2: Assess the various methods through which organisations access funding and when to use different types of funding.

Learning Outcome 3: Develop a business plan (including financials) and communicate how you intend scaling up a business.

Learning Outcome 4: Assess the various ways a small business owner can exit the business and the implications of each option.

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You are to work on a simulated business or social enterprise of your choice. This need not be complex and could be a small business, such as a local service (e.g. a new coffee shop or an online product sales business). You should choose something that interests you personally or where you may have some existing knowledge or access to resources and skills through personal networks.

Executive summary
A coffee shop namely "Nest Coffee Shop" is a small restaurant, for the growth of this organization they need to adopt some strategies and some techniques. So firstly they should figure out some competitive advantages such as cost leadership, good quality product and should provide comfort zone to the customer. With competitive advantages, they should also have to seek available opportunities along with they need to analyse some consideration for the growth of the business. The organization has used Ansoff Matrix for determining the risk and to overcome it. For creating a business plan the company need to focus on some market strategies and customer needs which will offer a newcomer to build a business plan according to the market.

Introduction
This paper will highlight the competitive benefits that "Nest Coffee Shop" will use for the betterment of the company. It will also demonstrate some of the opportunities that are available and can use by the organization for maintaining its position in the market. It will also determine the key consideration that the organization should adopt at the time of evaluating growth using opportunities. Here it will highlight Ansoff's growth matrix that the organization apply for the development and it will also display some option that will increase the revenue.

You will prepare a business plan for the growth of your simulated small business or social enterprise and submit a written report. This will include:

An explanation of the basis of competitive advantage for the business.

Solution:

Competitive advantage of the business

Having competitive advantage help the business to thrive in the market. The first competitive advantage of "Nest Coffee Shop" is the "Cost Leadership" strategy which means providing less cost on the coffee than another coffee shop due to which customers will get attracted to the Nest Coffee Shop.

Another one is offering good quality of services, as other businesses offer a good quality product with high cost. So it was a competitive advantage for "Nest Coffee Shop", for that they need to provide a good quality product at a low price. Quality differentiation is considered the basis of competitive advantage for the Nest Coffee Shop. In order to ensure high quality of the products or services, it is essential for the company to check quality at each step of the service procedure from the sources of coffee to equipment and staff (Kalogiannidis and Mavratzas, 2020).

Other businesses provide packing products so that customers can take them to their comfort zone so it is necessary for the "Nest Coffee Shop" should offer a home delivery option. So that customers need not need to go outside for having coffee.

Outstanding customer service is identified as the key source of competitive advantage for the business. The business offer positive customer experience by focusing on the delivery of services to customers.

An assessment of the opportunities available to the business.

Solution:
Assessment of the opportunities available to the business

There are many opportunities for "Nest Coffee Shop' available in the market:

As this generation wants Wi-Fi everywhere so the organization should provide Wi-Fi facilities within their Coffee shop and coffee shop area so that each and every customer could enjoy their friendly environment.

In today's world, the rate of every product has grown rapidly which are unaffordable for maximum people so if the organization takes the advantage of this problem and offer the best quality products at an affordable price (Chintalapati, 2020). Then it will be a relief situation for maximum people who were unable to afford such basic products in their daily life.

The organization should think of how to make their shop attractive by implementing innovative and attractive designs. If this organization focus on the shop inner transformation then it will provide them with a great opportunity to set a benchmark in the other coffee shops in the market.

Weekly offers should provide to the customer, as it was known by a maximum organization that offers attracts most of the customers (Nassè, Nanéma and Carbonell, 2021). So many companies provide different types of techniques so if the ‘Nest Coffee Shop' offers weekly gifts that will be useful for the customer then it will increase the number of customers.

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An assessment of the options for growth, applying Ansoff's growth vector matrix with an assessment of the risk of each option.

Solution

Key considerations for evaluating growth opportunities

"The Nest Coffee Shop" should consider these main keys while evaluating the development opportunities which are Energy, Weak points, opportunities and threats.

The essential power right is of manufacture who make products according to customer needs through diverse commission industry. So it is considered fairly incredible by the company as the organization need to consider the facts that this authorization provides to the manufacturer agency. So it is mandatory to make a good relationship with the agency who made sources and need to be in touch anyhow in any situation. The need of manufacturer by the company should be displayed by the organization that their companies run because of them to make a bests relation (Siering, Deokar and Janze, 2018).

The company should know their weak point so that they can work on them to make them better. The weak point should be only known within the company if the weak point of the organization spread outside the company then it will be a disadvantage for the Nest coffee Shop.

Seek for opportunities, the organization should always look for the opportunities and need to implement new technology. As opportunities give chances to the organization to outline the service of their company which will help in the growth of the company brand and implementation of new technology in coffee shop attract people (Berawi, 2018). Here technology means some new artificial intelligence such as the robot and many more increases the chance of growth of the organization.

Threats, it is necessary that company should aware their worker about the machine and artificial intelligence, the organization should also require to be aware of company functionality to achieve the business goals.

Assessment of the options for growth
Ansoff's Matrix is a tool of decision making that is used by the Nest Coffee Shop to determine potential growth. Generally, it is hard to figure out what is available for the organization so with the help of Ansoff's Matrix one can find out the availability and the option for the growth of the business (Loredana, 2017). Ansoff matrix has been divided into four strategies that are:
• Market Penetration is the point of beginning and has low chances of risk to sell the rest of the products to the present consumer (Brown et al., 2018).
• Spread newly invented products across the market which also give the chance to find out who crave your product and at what range your product has been needed by the customer.
• Need of product development so the nest coffee company should require to change the product and should invent new product as per customer requirement.
• Diversification is considered as high risk as new product invention into the new market may create a challenge but sometimes it works very smoothly (Zanjani et al., 2020).

Assessment of the risk of each option

Ansoff's Matrix depends on four strategies but includes risks associated with them.

Market Penetration - This focuses on how the sales of an existing product can be increased in an existing market. It can result in the lowering of the price of the products in the whole industry as the competitors try to match each other's prices and the firm might have to lower the price further.

Product Development - The firm tries to introduce a new product in the market to cater for the needs. The investment needed for the development of the new product involves risk. The firm needs to research and analyze the requirements of the customers first. In case a firm launches a new product without prior research, and if it is not appreciated by the customers, the firm will have to incur huge losses (Muchele and Kombo, 2019).

Market Development - When a firm enters a new market using its existing products to expand its sales. This is risky as the market and the types of risk involved in it are all unknown. Cultural factors too can have various impacts on the external market (Berns et al., 2020).

Diversification - When a firm enters a new market with new products, this strategy involves the highest risk for the business (Suciati, Kurniawan and Iswahyudin, 2020). The firm needs to focus on the reaction of the customers towards the product, change in the dynamics of the market, provide differentiation in the products, and need to convince the customers.

After assessing the risk of each option for growth, it can be said that Nest Coffee Shop should adopt product development option for growth. Through this option, the business could develop new product as per the needs and demands of the customers and fulfill their needs to achieve success in the business environment. Nest Coffee Shop will implement 4Ps of marketing mix by focusing on the product strategy for developing the product, selecting proper area for marketing the new product and adopt competitive pricing strategy to set price for the product. The implementation of marketing mix will help attract consumers and increase sales to achieve significant growth.

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An assessment of the options for financing growth.

Solution

Assessment of the options for financing growth

For its financial growth, The Nest Coffee Shop can recapture their old customers, they can come back if getting good service. The coffee shop can ask for referrals from its existing customers. They should extend their reach in the market by opening new shops in new locations and convincing new users to have coffee.

A few ways from which the Nest Coffee Shop can access its funds are:

Angle investment companies - Some companies of business development offer loans after evaluating the growth potential of a particular company. They also offer various payment options along with guiding professionally to help the receivers in achieving their goals. Angel investors are the persons with surplus cash to invest in future startups (Soloducho-Pelc and Sulich, 2020). It help the business in acquiring sufficient funds to start the business.

Loans against equity - The owner of the company can borrow loans from banks by mortgaging one's house or other assets that one owns. This is risky as the borrower can even lose the equity in failure to repay.

Landings from recurring revenues - The lenders give loans after evaluating the company's recurring revenue annually or monthly. This seems a safe option and the Nest Coffee shop can apply this.

Mezzanine Financing - In this type of financing, the company offers a particular amount of equity and the lender contributes according to the equity.

Partners - The Nest Coffee shop can look for partners who like their business proposal and are ready to invest in the business (MINDLIN et al., 2018). This will help them to reduce the burden of loans and works pressure also gets reduced.

Crowdfunding - It is one of the effective option for financial growth of the business. In this option, business can take a loan or seek investments from more than one individual at the same time (Mandych et al., 2018). It is considered the best option for generating interest and assists in marketing product alongside financing.

Venture capital - It is identified as the key option for financial growth of the business since venture capitals are professionally managed funds for investing in businesses having huge potential. It offer expertise and mentorship to evaluate the business from sustainability point of view (Jenik, Lyman and Nava, 2017).

Use of different types of funding
The correct use of the available funds is necessary for the proper growth and development of the company. The Nest Coffee shop should take a small business loan only when they have a complete plan of where to spend which amount of money otherwise it would be a complete loss. If the company should collect funds through funding rounds only when it is comfortable to exchange its ownership partially that is necessary for funding and a full-proof business plan. Investments from angel investors can effectively be used if the business is just starting or is a small one as they provide funds at an early stage (Samoedra, 2021). Thus the Nest Coffee shop might not use it. If Nest Coffee shop's startup is ideation in the past and has a product that is minimum viable, it can easily acquire and use funds from venture capitalists. If the product available at The Nest Coffee shop is consumer-oriented and crowdfunding is an easy option for the company. A plan or map of how the given funding will be used is necessary for achieving crowdfunds.

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Develop a business plan

Create a plan along with a summary as many investors and financiers are overwhelmed with opportunities so it is necessary to offer a summary with proper risk, solution, profit, gain and loss details that might form at the time of business creation (Erlina and Hermawan, 2021).The Nested Coffee Shop Company should implement innovative strategies in their business plan which will encourage the customer to visit their shop at least once(Dharmayanti and Darma, 2020). So it is necessary for the organization to offer such profitable services to the customer that the business plan will run according to the plan.
The marketing plan is as follows:

Product - Nest Coffee Shop will implement the new product in the new market to meet the demands of the potential customers. Product development growth strategy is selected for making the business grow in a sustainable manner and thus, development of new product such as espresso drinks. It will offer superior quality products to its customers.

Price - Considering the pricing strategy, the Nest Coffee Shop would use a penetration pricing strategy which would help in charging less price in comparison to the competitors and attract a large number of customers. This pricing strategy also assists the business to get the product quickly accepted by the customers and thereby, achieve significant growth.

Place - Place refers to the location where the products will be sold. However, the Nest Coffee Shop would open a store in the populated area to deliver the product easily and quickly to a large number of customers. The business would also offer products online and other market channels so that customers can order and purchase the product from anywhere. It would assist in developing the business in a sustainable manner across the market.

Promotion - The main goal of promoting the product is to illustrate to consumers the need for buying the product or the reason for paying the specific price for it. However, Nest Coffee Shop would use an effective promotion strategy such as advertising in newspapers and social media platforms which would assist in promoting the products effectively. Many people are active on social media and thus, it would be easy to attract customers and promote products easily via social media platforms.
Five-year financial projection based on the product development growth strategy
Income Statement

Five-year financial projection based on the product development growth strategy Income Statement

A recommendation for the business.

Solution

Recommendation for the business

Some of the recommendations for the growth of the Nest Coffee shop are:

• The right workers should be hired - The company should hire people who are hardworking and dedicated to the success of the company, smart and creative and has crowd managing skills.

• Try to adopt new traits - The coffee shop should get adaptable to the latest trends in the market as soon as possible (Dogru et al., 2020). This is very beneficial for its growth as people like to visit places that are trendy and going according to the market.

• Try to invent new products - The coffee shop should try to add new foods or some innovative types of coffee (Demirer, Madanoglu and Kizildag, 2018). This will separate them from others and people will get attracted to something new that is available only in their shop.

• Improvement in customer service - The service provided to the customers should be the best. The company should look after the comfort and cravings of its customers. The sitting arrangement, cleanliness of the place, the taste of the coffee, everything should be taken care of.

• Social media focusing - The public has a great influence on social media. A coffee shop profile should be created on various platforms of social media like Instagram, Facebook, and Twitter (Ioulianou, Trigeorgis and Driouchi, 2017). These accounts should be updated on a regular basis with innovative ideas to attract more customers.

• Offering a customer loyalty program - It is suggested to offer a consumer loyalty program to expand the business to attain success. It is crucial for the company to give incentive to customers to come to the shop every time and thereby, raise sales with the success of program (de Andrés, de la Fuente and Velasco, 2021).

Following on the above business plan, you are to write an appraisal of the exit or succession options for the business or social enterprise, explaining the benefits and drawbacks of each option and coming to a recommendation.

Appraisal of the exit or succession options for the business

The plan that made at the time of business exit strategy that what will be the consequences if a person wants to close his business for a life time.

• Continuing Heritage within the family - Sometimes many businessmen desire to keep their business going within the family that means creating a plan to hand over the business to their child or any relative of theirs. It is one of the business exit options as it can give success only if their family member can manage the instability and pressure regarding business ownership. Continuing heritage of family for various generations might look the best option to maintain their business name for the long term but it is essential to be practical (Jouk, 2017). It is mandatory to know if who is best for running this business well. The benefit of this is that one who is the owner of the business can select their choice person who can run this business in future and provide profit to them. The drawback of this process might create emotional, financial and normal stress to the business within the family which may consider as one of the biggest disadvantages.

• Staff Buyout - There is a probability that one who wants to exit their business than people around the business such as their employee may want to buy this business from the owner. As they know the owner and know how to run one business to get profit and this business exit option could show a smoother transition and rise the strong bond to the business heritage (Njoroge, Koori and Warui, 2021). Benefits would be that an owner could hand over their business to that person whom they know properly and know that they have a better experience regarding their business and easily trust them.

Conclusion
The paper concludes about the competitive advantages that "The Nest Coffee Shop" can use for growing their business across the country such as fewer price products and services. It was also demonstrated the purpose of new services which are available and will provide great opportunities to this business. It also highlighted the main consideration that this company should adopt for better growth in upcoming years. Weak point, threats, seeking opportunities and a good connection with the manufacturer was some of the key consideration that can be used by SMEs. Here it was also concluded some of the options that can be used by the organization for growth purposes. The five-year financial projection plan also provided based on the product development growth strategy of the Ansoff matrix to achieve growth. It also displayed the purpose of Ansoff's growth vector matrix for business growth with a risk factor, here it gave the purpose of option for financial development of the business along with some recommendations that the organization used for further growth in the future.