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Financial analysis is one of the most important part of the business as through this it is possible to manage finance which is one of the most crucial resource of the enterprise. Further, the present business plan is totally based on pet care service where different type of service will be delivered to target market. Therefore, it is necessarily required to undertake the part of financial analysis in appropriate manner so that overall operations of the business can be carried out in effective manner. Different revenue sources are present with organization as different type of services are rendered such as pet spa, massage, hydrotherapy, self serving bathing area, hair styling, doggy facial etc. By providing different type of facilities to the pets high amount of income can be earned easily and in turn it is beneficial for business in every possible manner.
On the other hand business has to incur different type of expenses and this directly leads to decline in profitability level of the enterprise. Further, the major expenses of the enterprise are salary, payroll, advertising, pick and drop facility, accounting and legal etc. All these are major expenses of the organization and without this it is not at all possible for company to operate efficiently in the market.
Repairs and maintenance of 200$ every month is one of the major expense which business enterprise has to incur for carrying out its operations in effective manner. Further, it is well known fact that dogs world has installed advanced machines for rendering different type of service to the pets and due to this reason proper repair facility is required to be given so that quality of service may not be influenced due to this. Moreover, proper maintenance of machines and other tools is required so that overall productivity may not be influenced due to this. In short it is one of the major expense of the firm and without proper repair and maintenance of tools and other type of crucial equipments need and requirement of target market cannot be met efficiently.
Advertising is also one of the major expense of enterprise as business is totally new in the market and it is required to promote products and services to the target market so that they can easily take purchase decision with the help of this. Amount for advertising is $1000 for every month. Further, effective promotional and marketing strategies have been developed by management of dogs world so that pet care owners can know the unique services granted by organization which is different from other pet care service providers in the market. Different sources of advertising has been undertaken by firm such as print, electronic media etc. All these sources directly enhances expenditure level of the organization but in turn good response can be received by firm when its product range is highlighted in front of target market. It is one of the most important start up expense of Dogs world and in turn can provide large number of benefits to the enterprise. On the other hand, it is the duty of management to control major expenses so that profit margin can be easily increased with the help of this.
Pick and drop facility of the pets is another expense of the dogs world and this facility is beneficial for the pet owners who do not have time to take their pets to places where treatment and other kind of facilities can be provided to them. Amount for pick and drop facility is 1% of sales Further, pick and drop facility also increases cost of the business as firm will pay salary to the drivers who are providing this facility to the pets. It is one of the main expense of the business enterprise and can assist in gaining competitive advantage to the entity in every possible manner. Apart from this, pick and drop facility will allow business to serve large number of customers in short period of time and is one of the best way to provide comfort along with convenience to the target market.
Accounting and legal is another expense for dogs world as it is necessary for enterprise to comply with the legal requirement and has to maintain proper accounting records so that it is possible to operate efficiently as per need and requirement of customers. Amount for accounting and legal is 500$ every month. Further, it is necessary for business to pay legal fees. It is a kind of start up expense for the business and complying with the requirement of government authorities is necessary for the business. Moreover, time to time it is necessarily required for enterprise to comply with the legal requirement of the government so that it may have positive impact on the brand image of entity in every possible manner. Proper maintenance of accounts and other type of books will help in determining whether financial resources of the business have been utilized in efficient manner or not. This can surely bring favourable results for the business and in turn can act as development tool for the management in every possible manner.
Dogs world has to pay rent for the building as to deliver pet care service large space is required and due to this basic reason firm has taken outdoor space on rent and it can be utilized in proper manner so that convenient environment can be provided to pets. Rent of the outdoor space is 750$ (Commercial, office space in Ontario., 2015). Apart from this main mission of dogs world is to deliver best possible service to the target market due to which large space has been taken on rent keeping in view overall comfort and convenience of customers. Rent will be paid by dogs world on continuous basis. Moreover, large space is required for rendering different service to the pets and in starting it is not at all possible for enterprise to purchase property with the motive to deliver effective services to the pets. Therefore, dogs world will pay rent for the free space taken.
Expenses linked with telephone and website development is 800$ every month and it is also major as telephones will be used by enterprise for contracting its target market and it is also one of the major expense for organization. Further, organization has developed its own website so that each and every crucial information can be easily shared with customers. Further, maintenance of website is also another cost to the company and time to time management has to allocate funds in maintenance of site so that best possible services can be provided to customers. Due to this reason telephone and website maintenance has also been undertaken as one of the major expense associated with the enterprise and can enhance overall performance in the market.
Utilities expenses of Dogs world are electricity, water, gas etc. All these things are necessarily required by firm to carry out day to day operations. Company will use large number of equipments for which electricity is must, water is required for rendering services such as pet spa etc. Therefore, firm has considered utility expenses as important without which it is not at all possible to carry out operations on continuous basis. Apart from this proper control of activities is required for business so that cost associated with business can be easily saved with the help of this. Utility amount is 500$ per month.
Insurance is considered as an expense for dogs world as dogs world will take insurance facility for equipments and other tools which are necessary for delivering services to the pets. Further, insurance of building and every employee is necessary which dogs world has taken for benefit of its staff members. Amount of insurance is 1500$ which dogs world has to pay on monthly basis.
Salary will be payable to the financing staff, administration staff, marketing staff and other workers. Salary will be payable on monthly basis (Harris and Mongiello, 2012). Increment will be done in the salary on the annual basis by considering their work efficiency, profitability status and industry standards. Salary will be considered as fixed expenditure because, it will not vary with the change in total spa services provided to the dog. Due to this aspect, salary will not be fluctuated in accordance with the sales of the company.
In accordance with the estimated values, average monthly salary of the company will be $2000 per month for every five employees. In next month $2000 will be provided to seven employees. In this amount there will be estimated increase of 10% (Decker, 2015). In situation of overtime work additional salary will be payable to the workers in accordance with the legislatory aspects.
Payroll expenses can be defined as amount of wages or salary payable to the employees in against of services provided by them. These expenses will be payable to the beauticians who will provide spa services to the dog (Kinney and Raiborn, 2010). This expenditure will be consists of payroll taxes such as matching payment for the social and medicare security.
This amount will vary in accordance with the services provided to the dogs in a month. These expenses will be associated with the sales revenue of the company. It is because organization is planning to provide remuneration to the beauticians in terms of the percentage of sales. Estimated monthly payroll expenses of the business will be 10% of the amount of sales. Increase in payroll expenses will be done in accordance with the change in the revenue of the Dog's World.
Entire activities will not be completed by management of Dog's world as they will be focused on their core activities. For this aspect additional services will be outsourced. These service will include pick and drop services, designing of campaign for promotional activities and customer inquiry services. With the help of these services, organization will be able to operate with more efficiency and effectiveness.
Cost of these services will vary in accordance with the contract made by organization. Approximate expenditure on these services will be 2%. With this approach ancillary services will be accomplished in an effective manner in minimum cost. Organization will take fewer assistance of outside services in order to enhance their profitability.
Supplies (office and operating)
Operating Supplies and Expenses are inclusive of non-salary related expenditures incurred for the accomplishment of daily operational activities of department. OSE charges include payments for items such as utilities, office supplies, repairs, and small equipment items. These expenses will be semi-variable in nature.
In order to operate in an effective manner, management of Dog's World is required to make use of efficient equipment. Further, they are required to make sure that this equipment is working in proper manner. For this they will be required to make regular repairing of the spa equipment. In addition to this, management is required to make use of appropriate products in order to enhance level of customer satisfaction. Supplies will be comprises of boutique section includes beds, pet food, treats shampoo, and toys. Total expenditure of supply in initial year will be $77994 and next year this amount will be increased up to $141941.
Organization will be required to pay legislatory charges in form of income tax to the government on the earned income. Initially, tax will be payable on the property acquired by them for operational activities. Rate for these taxes will be levied in accordance with the provisions of wealth tax of UK. Further, organization will be required to pay income tax on the net profit of the business at the rate of 25% (Perez, 2015). In situation of loss, organization will not be required to pay these charges. In addition to this, they will be able to take benefit of these losses in tax settlement of next year. Along with this, if organization had exceeded specified limit for salary and sales then they will be required to charge tax deduction at sources (TDS). This deducted amount will directly be payable to the government. These taxes are indirect in nature because it is paid and borne by different parties. Tax of initial year will be $26640 and next year it will be increased with the change in profits.
Dog' World be required to pay financial charges on the amount borrowed by them from financial institution. These expenses are fixed in nature and are part of financing activities. Amount of this expenditure will be aligned with the amount of loan taken by the organization. With the repayment of loan interest charges will also be reduced. These expenditures are charge against profit thus it will not be affected by sales and profitability of business. Due to this aspect company will be required to pay interest charges in regular time interval else they have to pay additional charges. Organization is required to pay interest of $18000 in first year. Due to repayment of loan interest charges of second year will be $12000 (Lending club., 2015).
Depreciation is non-cash expenses of business. Depreciation can be defined as reduction in value of the asset due to obsolesce, efflux of time, tear and wear and other incidents. Dog's World is required will depreciation at the rate of 15% by using straight line method (Finhealth., 2013). In this method, amount of depreciation is constant through the usage of asset thus it will not variate in accordance with the reducing value. Amortization will be used for written down the value of licensing agreement.
For effective management of operational activities, Dog's World is required to manage their office and administration activities in an appropriate manner (Theeke and Mitchell, 2008). Office and administration expenses are set of expenses need for administering of business which are not related to production activities. Approximate expenses of office and administration will be 3% of sales. These expenses will include accounting staff wages and benefits, depreciation of office equipment, utilities and insurance expenses.
In order to provide better facilities to the customer, Dog's World had established television for the dogs. Further, they had also provided playing area to the owner and pet so they spent good time. For this purpose, they had provided toys and other equipment to them. With the aim to provide more convenience to the target market, cameras have been installed in each operation room, and that makes it possible for pet owners to monitor and control all the activities. On the other hand, the interaction between staff members and their pets will provide them a piece of mind. Approximate charges of entertainment and travel in first and second year will be $24000 and $26400 respectively.
Some of the spa services will be provided by expertise persons such as hair styling, doggy specific fitness services and hydrotherapy. For this aspect, professional will be appointed by the Dog's World who had good experience in this work (Helfrit, 2001). These services are not used frequently by the customers. By considering this aspect payment will be made on the basis of each visit. In addition to this, consultancy seminars will be arranged for employees in order to enhance their skills and capabilities. Organization is required to charges for professional services in initial year of $7200. With the increase in sale of second year, this amount also be increased by $720.
For conducting financial analysis various assumptions have been taken which is fruitful for the entire study in every possible manner. Financial assumptions have been taken which has been shown below:
Therefore, these are some of the basic assumptions on which entire financial analysis has been undertaken and in turn it is possible to know the amount of profits which can be earned by delivering services to the pets.
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