Nightclub business plan

NIGHTCLUB BUSINESS PLAN Autor: Helena Orero Burriel Tutor: José Fernando López Muñoz GRADO EN ADMINISTRACIÓN DE EMPRESAS AE1049 - TRABAJO FINAL DE GRADO CURSO 2018-19 ÍNDEX 1. INTRODUCTION ................................................................................................... 1 1.1 Objectives ...................................................................................................... 2 1.2 Description of the business .......................................................................... 3 1.3 Justification of the project ............................................................................ 3 2. ENVIRONMENTAL ANALYSIS ................................................................................ 4 2.1 Pest analysis .................................................................................................. 4 2.1.1. Political Factors ............................................................................. 4 2.1.2 Economic factors ............................................................................ 6 2.1.3 Social factors .................................................................................. 9 2.1.4 Technological factors. ................................................................... 10 2.2 Analysis of the 5 porter forces .................................................................... 11 2.2.1 Rivarly among existing competitors ............................................... 12 2.2.2 Power of buyers ............................................................................ 12 2.2.3 Bargaining power of suppliers ....................................................... 13 2.2.4 Threat of new entrants .................................................................. 14 2.2.5 Threat of substitutive products or services .................................... 15 2.3 Competitor analysis ..................................................................................... 15 2.3.1 Disco Ébano Peñíscola ................................................................. 16 2.3.2 Pub Oscars Vinaròs ...................................................................... 17 2.3.3 Nacar Vinaròs ............................................................................... 18 2.3.4 Benicarló Port ............................................................................... 18 2.3.5 Noves Algues - La Rápita ............................................................. 19 3. INTERNAL ANALYSIS ........................................................................................... 20 3.1 Company formation and legal form. ........................................................... 20 3.2 Identification of resources .......................................................................... 21 4. SWOT ANALYSIS .................................................................................................. 24 5. MARKETING PLAN ............................................................................................... 25 5.1 Mission, vision and values .......................................................................... 25 5.2 Objectives .................................................................................................... 26 5.3 Market segmentation ................................................................................... 26 5.3.1. Segmentation............................................................................... 27 5.3.1.1 Geographical criteria .................................................................. 27 5.3.1.2 Demographic criteria .............................................................. 28 5.3.1.3 Psychological criteria .............................................................. 28 5.3.1.4 Socio-economic criteria .......................................................... 29 5.4 4p's ............................................................................................................... 29 5.4.1 Definition of the product/service .................................................... 29 5.4.1.1 Service ................................................................................... 30 5.4.1.2 Product ................................................................................... 32 5.4.2 Pricing policy................................................................................. 34 5.4.3 Promotion strategies ..................................................................... 36 5.4.5 Distribution channels ..................................................................... 37 6. OPERATIONS PLAN ............................................................................................. 37 6.1 Value chain ................................................................................................... 38 6.1.1 Primary or Main Activities ............................................................. 39 6.1.2 Support or Auxiliary Activities ........................................................ 39 6.1.3 Creation of value ........................................................................... 40 6.2 Process map ................................................................................................ 40 6.3 Stock and Warehouse Management ........................................................... 44 7. ORGANISATIONAL AND HUMAN RESOURCES PLAN ....................................... 44 7.1 Prior analysis of staffing needs .................................................................. 44 7.2 Recruitment policy ....................................................................................... 45 7.3 Organisational structure ............................................................................. 46 7.3.1 Enlargement : Description of the service for employees. ............... 50 7.4 HUMAN RESOURCES POLICY .................................................................... 53 7.5 Work climate ................................................................................................ 54 7.6 Company code of ethics .............................................................................. 54 7.6.1 General principles of the company ................................................ 54 7.6.2 Scope of application...................................................................... 55 7.6.3 Application of code ....................................................................... 57 8. FINANCIAL PLAN .................................................................................................. 57 8.1 Initial investment plan ................................................................................. 58 8.2 Financing ..................................................................................................... 58 8.3 Forecast sales .............................................................................................. 60 8.4 Estimated operating expenses .................................................................. 63 8.5 Provisional Financial Statements ............................................................... 64 8.6 Financial criteria for the evaluation of investments .................................. 67 9. CONCLUSIONS ..................................................................................................... 69 10. REFERENCES ..................................................................................................... 71 A. TABLE INDEX Table 1 : Rivalry questionnaire amongst sector companies focused on the Baix Maestrat and Montsiá regions 12 Table 2 : Questionnaire on negotiation power of clients 13 Table 3: Questionnaire about negotiation power of providers 13 Table 4: Questionnaire on the threatening of the entrance of new customers 14 Table 5 :Threat of Substitute Products/Services Form 15 Table 6: Initial Project Investment 58 Table 7: Loan Amortization Chart 59 Table 8: Predicted average inflow 61 Table 9 : Income from receipts and consumptions (first year) 61 Table 10 :Prevision of income from receipts and consumptions 62 Table 11 : Personnel Expense 63 Table 12: Previsional Profit and Loss Account 65 Table 13: Provisional Balance 66 Table 14: Annual treasury forecast 67 Table 15: Cash flows 68 Table 16: Discounted cash flows 69 B. FIGURE INDEX Figure 1: Evolution of GDP per capita in Spain 7 Figure 2: Annual rate of evolution of the CPI in the Spanish economy between 2016-2019 8 Figure 3:Monthly evolution of the 12-month Euribor from 2000 to the present 9 Figure 4: Porters five forces 11 Figure 5: Ebano Peñíscola Disco Logo 16 Figure 6: Ebano nightclub 16 Figure 7 : Oscars Pub logo 17 Figure 8 : Oscars Pub Vinaròs Interior 17 Figure 9 : Nácar discotheque logo 18 Figure 10 : Benicarló Port 19 Figure 11 : Faràndula tardeo 19 Figure 12: Local: Noves Algues (outside) 20 Figure 13: Local Paladium Halls (exterior) 21 Figure 14 : Paladium lounges location of the premises 22 Figure 15 : floor plan of the first floor of the discotheque 22 Figure 16 : floor plan of the second floor of the discotheque 23 Figure 17. Locations close to the location of the company. 27 Figure 18: Saturyay Discotheque logo 29 Figure 19: Range of tobacco taboo flavours 34 Figure 20: Value Chain, Michael Porter 38 Figure 21: Process map 42 Figure 22: organization chart SATURYAY DISCOTEQUE 46 Figure 23: How to serve a glass 52 1 1. INTRODUCTION The main objective of this project is to analyze the feasibility of the implementation of a company of festive leisure and events being the area of action Vinaròs, Province of Castellón, within the Valencian Community. The commercial name of this company will be "Sayuryay Discoteque", and through this and depending on the demands that the client demands the following activities will be able to be developed: - Basic service, local nightclub leisure adapted for adults over 18 years in which there would be a DJ and different performances, in addition to offering a wide range of drinks from soft drinks to cocktails. - Contracting, of different services demanded for the client using the room in a private way, from a birthday, as own performances or catering service. - In addition to those events already carried out by competing companies such as nightclub, this company will act as a differentiating point to offer the service of performances that are a little out of the ordinary, offering its room for different gyms to perform dance performances, acrobatics, musicals, and singersongwriters. This company project is oriented towards financial stability. Thus, the implementation of the same one, will be financed entirely with financed funds, its fixed expenses are means, the partners will be fixed personnel, in addition we will have two in charge so much the person in charge of room and bar and a waiter a staff that will be fixed costs, plus the rest that depending on the demand they will be contacted will be counted as variable expenses. This situation allows to have a great flexibility depending on the demand. Due to the great variety of services that this company can perform, this gives a very wide margin to customers who may demand the services. 2 1.1 Objectives The main objective sought by this project is to analyse the feasibility of setting up a festive leisure company in the Baix Maestrat area of action. In order to reach this objective, a business plan will be drawn up in which a description of the business will be made first, as well as the promoters who will be part of it and the mission and vision of the project will be determined. Secondly, an analysis of the macroeconomic environment will be carried out, using PEST analysis, i.e. an analysis of the following factors: political, economic, social, and technological factors surrounding the business environment. Third, there will be an analysis of the microenvironment, including an analysis of the main market competitors, suppliers and potential customers. We will also have a SWOT analysis to determine those internal factors (strengths and weaknesses) and external factors (threats and opportunities) that affect our company. We will also have an analysis of the microenvironment, in which a marketing plan will be carried out, in which will appear those objectives to be met by the company and those strategies that will be carried out to achieve them and finally in this section will determine the marketing-mix of the service (4P's): characteristics of the service, price, distribution and promotion. Fourthly, a technical analysis will be carried out, in which the location of the business will be detailed, as well as the necessary works, equipment and a calendar with the time and money that each of the investments made will entail. In addition, a descriptive analysis of the implementation of human resources will also be carried out, and an organimagram will be made, shaping the different commands and positions of the company. In addition, this section will also detail the legal form of the company and the social responsibility that this project entails. Finally, an analysis of the viability of the project will be carried out, making an economic-financial analysis. In this section an investment-financing plan will be made, sales forecast, operating expenses, amortization, a forecast of the company's balance sheet results will also be made and the profitability of the project will be evaluated. 3 1.2 Description of the business To really understand our business we should first define the nightlife sector, as traditionally it is not a topic that is studied, so to do this we must clearly define which activities make up the nightlife and on which we should focus. To this end, the key definition of nightlife is: "The set of recreational activities performed by people at night, always within the legal limits and established by law, in order to entertain," mainly weekends and holidays. Nightlife is related to a series of activities that involve a large economic consumption, as it is linked to the consumerism of certain services and products that are offered during this time, and are linked to be carried out during this time as well. The main products or services included in this sector are bars and discotheques, but they are not the only ones that are part of this offer but we can find many establishments. The difference of these establishments is in the products offered and to what kind of public they are directed, that is to say that rank of age they have our clients, the social position of the individuals, the place of residence of the same ones or their customs at the time of enjoying with their idle festive time, these factors among others are those that determine at the time of choosing a product/service or another one. 1.3 Justification of the project The justification why I chose this project is because in addition to the realization of an enquesta via social networks of this project and another, the most voted with 86% was this one. I also know the sector internally, which makes it easier to obtain internal information from the various competing companies in the market and thus make a real comparison. The creation of a leisure-night project is an interesting and different proposal than usual. It has also been observed the lack of a local nightlife in the Baix Maestrat region that has as its main objective the integration of all existing groups, so far, there are only types of premises with the same music, the same parties and the same current theme. With the creation of this local will try in some way, even locally, to promote the integration of these groups. In order to achieve this, thematic parties will be held dedicated to each one of them in different weeks, of course, in this way the place welcomes all these people, regardless of race, sexual orientation, musical tastes or different beliefs. 4 2. ENVIRONMENTAL ANALYSIS 2.1 Pest analysis In order to perform the following macroenvironment analysis and thus evaluate the market in which the business project is located, we will perform the following analysis with the key factors to understand in this way the growth or decline of the market and what position our business is in. 2.1.1. Political Factors Here we will deal with the political factors of the current politics of our country as well as the legal order that governs our business. At present, as far as politics in Spain is concerned, we are starting from a highly worrying panorama due to the lack of consensus in the sides of the different parties on issues that are of great concern to the population, together with the great unemployment that continues to affect the population and the low pensions that punish families internally, thus ensuring that many young people currently have to take responsibility for maintaining their families or helping financially by contributing their salaries at home. The current government is the Socialist Party but it is a provisional government which is having serious problems when it comes to approving state budgets since it does not have the support of the other parties that demand elections to determine which direction the country should take. Next, we will determine the legislation that governs the business and that we must know and respect to work always within the limits of the law. Autonomic Regulations: The regulation to which nightlife activities are subject at regional level in the Valencia Region is Law 14/2010, of 3 December, of the Generalitat, on Public Shows, Recreational Activities and Public Establishments. In this regulation, the following chapters stand out in this respect: ● The competences of the Public Administrations ● Procedures for the opening of public establishments ● Extraordinary, singular or exceptional shows and activities 11 2.2 Analysis of the 5 porter forces Figure 4: Porters five forces Source: https://www.cgma.org/resources/tools/essential-tools/porters-five-forces.html Regarding the 5 forces of porter is a model that defines the profitability of the sector and distributes the economic value and analyzes these 5 forces that are constantly changing (1. Bargaining power of buyers, 2. Threat of new entrants 3. Threat of substututive products or services 4. Bargaining power of suppliers 5. Rivarly among existing competitors ). A good analysis of this model maximizes resources and surpasses the competition, adapting to any change. It is considered of vital importance for a good survival of the company. It should be borne in mind that the company is not included in a single sector as it offers intangible services and tangible products. Using some forms for the extraction of valid information the conclusions will be extracted that will be useful for the start up of the company. They will include this combination of recreational and entertainment activities along with the beverage establishment itself. 12 2.2.1 Rivarly among existing competitors Focusing on the region of Baix Maestrat and Monstsiá as a place of action, we do not find an excessive concentration of competition, being our main competitors: Nacar Vinaròs, Ébano Peñíscola, El Puerto Benicarlo, Pub Oscars and Noves Algues la Rápita. Looking at the different localities found, there is not much diversity between the different companies taking into account their commercial objectives, the different costs, benefits and strategies pursued. Table1 : Rivalry questionnaire amongst sector companies focused on the Baix Maestrat and Montsiá regions High Mid Snow White Concentration of the sector x Market dominance executed by competence x Innovation frequency apparition x Competitors diversity x Ease access to information x Sector's exit barriers x Source: self made After the evaluation of the rivalry in the nightlife sector within these two counties and the possible appearance of direct competitors, it can be said that the rivalry between companies is Middle-Low. 2.2.2 Power of buyers Focusing on the region of Baix Maestrat and Montsiá being the clients to whom we address, since it is known that the demand will concentrate on those people who live a prudent distance from the establishment due to the comfort and regularity of the assistance. There are no differences in the services offered in the establishments, so there is no competitive advantage over the rest of the existing premises. 13 Our main clients will be young individuals, with more free time, i.e. with fewer family burdens, so they have more money for free use and to enjoy their experiences. Table 2 : Questionnaire on negotiation power of clients High Mid Snow White Dispersion of clients x Market dominance executed by clients x Shopping capacities of clients x Differentiation of the existent products/services x Easy change of products/services for clients x Substitutive products/services existence x Source: self made After the analysis of the negotiating power of the clients, making an average of results, it can be concluded that the capacity of these to demand certain conditions is average. 2.2.3 Bargaining power of suppliers The great importance of supply by suppliers is clearly highlighted because for the proper functioning of the company, it must have a good supply of beverages, cups, ice, and other essential products, because without them could not meet customer demand. Table 3: Questionnaire about negotiation power of providers High Mid Sno w Whit e Spreading of providers / Providers spreading x Market dominance executed by providers x Lack of offer / Offer shortage x Quality-price relationship on provided products x Significance of the procurements offered by providers x Cost of changing providers (suppliers) x Source: self made 14 With regard to the bargaining power of suppliers, we can state that their capacity to influence our decisions is low due to the great variety of suppliers in the market. Taking into account the different offers of the same, we will choose who does not try to influence our business decisions, as there are many who work with specific brands and to improve the offer do not let have others to offer to our customers. Since our intention is to satisfy a maximum number of customers, no such negotiations will be allowed and the drinks that are deemed necessary will be obtained using various suppliers. 2.2.4 Threat of new entrants Due to the high standardization of products/services offered by companies that currently cover the market, this can greatly favor the emergence of new competitors in the market who want to differentiate themselves. In addition, together with this high standardization it is achieved that many of the clients do not have their necessities completely covered or the place is not to the height of their exigencies. The initial investment is considered high for the purchase/rent of a possible premises and together with it all those reforms that are considered pertinent for a good start up of the company. Economies of scale are not reflected because we are dealing with a service sector and not a production sector, so it is much more difficult to achieve them and would require a great investment. Table 4: Questionnaire on the threatening of the entrance of new customers High Mid Sno w Whit e Standardization level of products/services offered by clients x Presence of unsatisfied necessities x Scale economies x Little need of capital to enter the sector x Brand image shortage from competence x Raw material access/Access to raw material x Source: self made 15 As mentioned above, not all the companies that currently exist in our environment have a great brand image, only those mentioned. So the image defined by companies in the sector is average. 2.2.5 Threat of substitutive products or services As for the analysis of substitute products, seeing what is going to be offered by the company is difficult to find substitute products in the market. Although it could arise if the business idea is accepted by our customers, thus arising imitation by existing companies or future companies Table 5 :Threat of Substitute Products/Services Form High Mid Sno w Whi te Stock threatening/sustitutive services x Competence of the companies which offer sustitutive products x Own stock contrasted to sustitutive services x How easily the customers change their mind x Customer’s inclination to change their buys depending on the relative price x Increasing taxes of sustitutive products at the expenses of the sector products x Source: self made The rate of replacement products is currently very low, so maintaining a high degree of differentiation and innovation on the part of the directive is not a force we should be concerned about at present. 2.3 Competitor analysis In this analysis he proceeds to detail the positioning of our main competitors in order to make a niche in the market. 16 2.3.1 Disco Ébano Peñíscola Figure 5: Ebano Peñíscola Disco Logo Source: www.discotecaebano.com This is a unique opening nightclub in summer season taking advantage of the largeincrease in population that suffers Peñicola in summer as it goes from being a village of 6,000 inhabitants to be more than 100,000. Figure 6: Ebano nightclub Source: www.airbnb.es This discotheque has a capacity of almost 400 people taking advantage of the large increase in population and being the only one located in that locality, has higher prices than the rest of the competitors. It consists of a room of an only environment with commercial music always of the same style. A great weakness of this discotheque is that by opening every day during the week and not having a great variety and having internal information it is known that the same session is heard every day. This makes it a very monotonous discotheque that only becomes an occasional use by users. In addition, the staff is not too attentive due to the over booking of people to be 17 served, this causes great discontent for customers who are closer to the area and reside in it throughout the year. 2.3.2 Pub Oscars Vinaròs Figure 7 : Oscars Pub logo Source : www.facebook.com/oscarsvinaros/ A pub located in the town of Vinaròs, with relatively low prices, its price is the lowest compared to other major competitors. One weakness of this place is that it is very small, with a small capacity that does not reach 100 people. Figure 8 : Oscars Pub Vinaròs Interior Source: www.tripadvisor.es On the other hand, a great strength that presents this pub is that the staff is very attentive and takes care of their customers, that gets a lot of loyalty, so you have customers "for life". And in addition more and more they unite little by little makes that this clientele is always growing. 18 2.3.3 Nacar Vinaròs Figure 9 : Nácar discotheque logo Source: www.discocil.com It is a relatively new discotheque, it is the new face of the discotheque of all the life in the locality of Vinaròs "Red74". This new face really improved the image of this discotheque, which in recent years lost much of its regular clientele. This discotheque has a capacity of 600 people together with the two rooms andtwo different atmospheres that it presents, it is our maximum competitor since onhaving two rooms they can satisfy more audience and adapt more to the tastes of the clients. Prices are between medium-low. Because while it does its usual function ofdiscotheque it maintains an average price. On the weekends, on the other hand,you can use one of the halls as a pub until 3:30 with reduced prices. The clients ifthey consume in the pub then have access to the two rooms of the discotheque. Inthis way, they get customers to enter and consume the premises at an earlier time.In the last year, this discotheque has managed to increase its audience a lot, solittle by little it is growing and building loyalty with its new customers. 2.3.4 Benicarló Port A set of Pubs located in the area of the Port of Benicarló, in recent years had been virtually deserted but in the last year has increased its customer base by offering a different amount of premises to cover all about 500 customers. Their customers come from the town of Benicarló offering very low prices. 19 Figure 10 : Benicarló Port Source: www.elperiodicomediterraneo.com A great weakness is that except for one of the locals (which is not well known and is the least frequented), the rest close at 3:30 in the morning. 2.3.5 Noves Algues - La Rápita Figure 11 : Faràndula tardeo Source : Instagram Local found in Sant Carles de La Rápita, offers an average price as far as the entrance and services of the local. This place only opens for occasional parties called 'Farandula' and always manages to position itself with a full capacity at their parties. As for the type of music that is listened, it is commercial along with music of the zone, thing that manages to connect a lot with its clients of the zone. It has a capacity of 300 people. 20 Being a place that offers occasional parties is not a competitor that directly affects our target audience on all our opening days. Figure 12: Local: Noves Algues (outside) Source: www.tripadvisor.es 3. INTERNAL ANALYSIS 3.1 Company formation and legal form. The company will be registered under the legal form of Sociedad de Responsabilidad Limitad with the name of Saturyay Discotheque S.L. It is a type of commercial legal society of capitalist type and will be formed by two partners Mr. Iker Alfredo Aymerich Congil and Helena Orero Burriel, each one will correspond to 50% of the participations of the society. The capital of the company will be divided into equal, nominal and indivisible shares, therefore they cannot be freely transferred. The partners have the right to preferential subscription in the event of a capital increase. The capital for this company is €30,000 and will be paid in full at the time of incorporation of the company, each of the partners will contribute their corresponding capital (as has been said before in equal parts of 50%). These amounts will be presented and certified before a notary. 27 In addition, this division will determine which is our target audience and to which we will have to make greater marketing efforts. 5.3.1. Segmentation 5.3.1.1 Geographical criteria The location is in the town of Vinaròs, in the Baix Maestrat region and on the border with the Montsiá region. Figure 17. Locations close to the location of the company. Source : Google Maps This city is of high tourist interest for its famous carnival that takes place during February-March and for being coastal attracts a lot of tourists in the months of June, July and August. Furthermore, its proximity to other tourist towns such as Peñíscola means that there is a large number of visitors during the festive seasons such as summer and Easter. 28 5.3.1.2 Demographic criteria Age The services offered by this establishment are aimed at an audience that passes the age of majority in Spain, that is to say, 18 years and older. Anyone can come from that age without limit, although by the volume of the music and the influx of people, our customers will be understood mostly between 18 and 60 years. Sex It will be an irrelevant criterion, services and products can be used by both sexes. Nationality Bearing in mind that most of our clients will be of Spanish origin, letters, posters, directions and others will be in that language. In addition, they will also be available in English (since it is the international language) due to the possible visit of foreigners who do not know the national language. 5.3.1.3 Psychological criteria Lifestyle People who like to spend free time partying, having drinks, spending time with recreational games, want to enjoy a different act than usual with dance shows, singing, theater ... etc.. The vast majority of our night customers will be people with little family burden, or few worries as it is the easiest profile to adapt to the schedule. Values The values expected of customers are the same as those that the company wants to be appreciated, that is to say that they know how to value the quality of the product and service, the good treatment with the customer and the professionalism of the workers. Personality It is not a factor to define, because with this business model we try to satisfy the demands of different types of customers, with different tastes and preferences, from the most traditional to those who follow the most current trends. 29 5.3.1.4 Socio-economic criteria Socio-economic level From those who have a low level as a student to people who have a high income. Target audience Taking into account the profile you are looking for as a client you can make a segmentation by making distinctions between age and income ranges. As for young people between 18 and 30 years will be our main audience as they tend to go out more at night. The customer within this age range will be plentiful, but their default spending within the disco will be medium-low. on the other hand, between 31 and 60 is more difficult to reach this type of customers and will not be a majority segment, but are those who have more economic capacity, therefore there will be a great effort in loyalty to this type of customer, because the older more demands and a failure could be lost. In conclusion we find two main segments 1. Ages between 18 and 30: less expenditure, more clients 2. Ages between 31 and 60: more expenditure, fewer customers. 5.4 4p's 5.4.1 Definition of the product/service Name: SATURYAY DISCOTHEQUE Figure 18: Saturyay Discotheque logo Source Own elaboration 30 The SATURYAY DISCOTHEQUE discotheque logo will be formed by a discotheque ball together with a crown that represents the aspiration of the discotheque to be the best. The pink background represents the color that in the old society represented the royalty, in this way one tries to contribute a grain of sand to the change of thought that the pink color represents the woman. 5.4.1.1 Service Once inside the access of the establishment during weekends and holidays this will be with security staff who will ensure order and good manners within the premises, as it is necessary especially at night both within the pub and recreation hall and main room, where the capacity of people is higher and may arise conflicts due to the intake of alcohol and some other substance. During the week only the pub and recreation room will be available, and the main room will be for single use on weekends with access through the purchase of tickets to access it at the box office or with the consumption of certain products in the pub room, these prices and offers will be detailed later. To the left of the main door of the Main Room you will have access to the bathrooms, where they will be prepared for men and women and in the same area you will find the wardrobe where you can leave your jackets, bags and other personal objects. The pub and recreation room will be decorated by a team of experts, who will give a pleasant and welcoming touch to convey the image of the premises to customers and thus the image reflects the 'brand' of the company. In this area, it is expected to be an ideal place where you can meet family, friends, colleagues or come as a couple, to enjoy a good conversation while consuming the various products offered. In this room the music volume will be lower allowing conversations to flow smoothly. In addition, as mentioned above, it will consist of a target and a table football so that a group of friends can play and have a good time and distract themselves from their worries. The consumption of drinks will be accompanied by sweets or some varied tapa depending on the type of drink chosen, to satisfy the appetite of attendees and take advantage of the properties of these foods to produce greater desire to drink, with which we will improve income while the customer is satisfied with the invitation from the company. On certain dates there will be thematic days where certain drinks will be on offer and can be consumed for a lower price, in addition to having the possibility of obtaining 31 prizes to be drawn among all participants, also offer various and varied offers to reward the loyalty and consumption of customers. As for the main room, where depending on the party or theme of the week will change its decoration by creating different environments, this creates a different feeling in each party and is perceived as unique. In this room, the person in charge of animating the party will be the resident DJ, who will be in charge of putting music to the client's liking. In addition, occasionally in occasional parties there will be DJ and guest artists to promote innovation and who do not find that it is a monotonous place. The entertainment staff in this room will be responsible for motivating customers and creating spectacle, help the theme party come to have a full meaning, ie its main function is to make customers feel that they are within that theme party and forget their other problems during that night. For a good realization of this function, the employees of animation will go maquillados and dressed of opportune way for the occasion. As for the thematic room, one of the novelties in the area is the rental of one of the rooms for the use of a private party, in this room you can buy all the products that are in the rest of the premises. A waiter will be placed at your disposal in that bar if necessary, whose salary will be paid by the tenant in addition to the consumed cups. To do it in a more efficient way, the employee will write down the data of the client and at the end of the night when he leaves he will be given the pertinent invoice that will cover the rent of the room, the extra service contracted and the corresponding expense of light of the hours that the room has been used (own meter in that room). In addition, the thematic room will have decoration to the taste of the consumer (if warned 24 hours in advance) or if it will not have a predetermined thematic decoration depending on the week. In addition, this room will be open to the public at designated parties and it will not be possible to rent it, the price of this room will be included along with the entrance of the main room, so that people can enjoy more space on days when full capacity is expected. The local staff will be in charge of ensuring that the clients in the three rooms only have to worry about having a good time, while attending to their requests. There will also be a person on weekends in charge of taking photos to customers (outsourcing a professional) while they enjoy the facilities, these photos can then be viewed and downloaded on the website and facebook page of the company. These photos have a double function, on the one hand, to offer a souvenir of the stay in the place and the one to promote the different parties through the images, because if the photos to the clients like them, they will upload them to social networks and therefore they will make 32 us publicity of the place. In this way it is intended to increase the attraction of new potential customers. 5.4.1.2 Product In the bars of the three rooms, you can consume different types of alcohol for cup and shot, these different types of cups will be divided into normal cups, premium cups and extra premium cups. The difference between the 3 is the type of alcohol depending on the brand and quality of it. The alcohols to be considered at normal price are : - Geneva: Tankeray, Master's and Port of the Indies - Ron: Bacardi, Brugal, Cacique and Barceló - Vodka: Smirnoff, Sky and Absolut - Wisky: Cutty Sark, J&B, Johnny Walker Red Label, Ballantines and Jim Bean. Premium Cups : - Geneva : Bombay Saphire, Bulldog and Tankeray Rangpur - Ron: Capitain Morgan, Brugal Extraviejo, Cacique 500 and Havana 7 - Vodka: - - Wisky: Jack Daniel's, DYC and Johny Walker Platinum Label, Extrapremium cups: - Geneva : Botanic, Citadelle, Nordés, G-vine, Gin Mare, Hendrick's, Martin Miller's and Mombasa club. - Rum : Barceló Imperial, Matusalem 15 and Zacapa 23 - Vodka : Belvedere, Ciroc, Crystal Head, Grey Goose and Xellent. - Wisky : Cardhu, Chivas, Macallas 12, Johny Walker Gold Label, The Glenrothes. For the shots to part of the range offered in the bar, liquors will be offered that will be kept fresh in the fridge, these liquors can also be used in glass with a normal price. The types of liquors offered are the following: Jagger, Peche, Red Vodka, Violet Vodka, White Martini, Black Martini, Blue Vodka, Tequila, Strawberry Tequila, Rice Liqueur, Baileys and Gentleman's Punch. 33 As for the types of soft drinks offered: Coca-cola, Coca-cola zero, the entire Sweppes range (Orange, Lemon, Tonic, Gingerale, Ibiscus, etc.), 7up, water, Perrier (sparkling water) Redbull, Orange Juice, Pineapple and Peach. The beers that we will have in the rooms will be : Heineken, Amstel Gold, Star and Moritz. As for the letter of champagne and cava, will be very reduced only work with Moët : - Imperial Moët Brut - Moët Brut Rose As for the Cachimbas, the brand that the company will work with will be Taboo, which offers us the following menu of flavours: - Irish Dream : Nut and Coconut - Italian Passion: Orange - Casanova Dream : Ice Cream Cucumber - Bikini Sunset : Melon and Chewing Gum - Caribbean Cruise: Mojito - Over the Rainbow: Pear and Mint - Seduction : Melon and Peach - Sexy Green: Mint and Chlorophyll - Waterfall: Frozen Sweet Watermelon - Blue Bay: Blueberry & Mint - Alpirine Spirit: Licorice and Mint - Red Blast: Peppermint and Raspberry - Black Limousine : Cola y Lima - Tropical Storm: Mint, Melon, Guava, Pineapple and Lemon - Mambo : Strawberry, Kiwi, Peach and Coconut - Bahama mama: Pineapple, Banana, and Coconut - Pocamel: Caramel - Blizzardine: Mint and Grenadine - Cool Sunrise: Sweet Peach Ice Cream 34 Figure 19: Range of tobacco taboo flavours Source: www.tabooshisha.es 5.4.2 Pricing policy In order to better reach a different number of customers with different purchasing power we will offer a different range of prices so that there is variety and is more attractive to the public. For access to the main hall on weekends and public holidays, the following information should be known. ▪ 5€ ticket + stamp ▪ 8€ entrance fee + stamp + consumption ▪ 9€ entrance ticket + stamp + consumption + wardrobe (1 garment) ▪ 10€ entrance fee + stamp + consumption + wardrobe (1 garment) + shot. For special parties, the price will vary depending on the importance of the guest, DJ, or group hired for the occasion. As a general rule, it will be an increase proportional to 2€ with respect to the previous prices, that is to say : ▪ 7€ ticket + stamp 35 ▪ 10€ entrance fee + stamp + consumption ▪ 11€ entrance ticket + stamp + consumption + wardrobe (1 garment) ▪ 12€ entrance fee + stamp + consumption + wardrobe (1 garment) + shot. As far as the pub hall and the recreation room are concerned, they will have a completely free entrance with reduced consumer prices. Therefore there will be a promotion for them i.e. : ▪ Consuming 2 glasses or 3 beers in these rooms, you will have access to the main room. ▪ If in this case it was a special party, I would change to 2 drinks and a shot/refresh or 4 beers. With regard to the price of products offered in bar depending on the room : Pub and recreation room ▪ Glasses : 4,5€ (RedBull +0.50€) ▪ Premium Cups : 6€ (RedBull +0.50€) ▪ Extrapremium Cups : 8€ (RedBull +0.50€) ▪ Soft drinks : 2€ (RedBull +0.50€) ▪ Beers: €2.5 ▪ Shots: 2€. ▪ Cocktails: €5.5 ▪ Shishas: 12€ + 20€ deposit ▪ Mixing jars (2 liters) : 25€. Main room Within the main room at the bar the following prices will be used: ▪ Glasses : 6,5€ (RedBull +0.50€) ▪ Premium Cups : 8€ (RedBull +0.50€) ▪ Extrapremium Cups : 10€ (RedBull +0.50€) ▪ Soft drinks : 2,5€ (RedBull +0.50€) ▪ Beers: €3 ▪ Shot: €2.5 36 ▪ Cocktails: €7.5 ▪ Shishas: 18€ + 20€ deposit ▪ Mixing jars (2 liters) : 40€. As far as the reserved one is concerned, it has its own bathroom, its own bar (it keeps the same prices as the main bar of the room), an air-conditioned zone higher than the rest, surrounded by a glass window. The basic price (100€) includes 1 bottle of alcohol, together with 10 soft drinks, 2 ice bags, the necessary glasses and a bottle opener for the soft drinks. In addition, everyone will be provided with a welcome shot when entering with their own cocktails. ▪ VIP table : (100€ each 5 persons), in case of being 6 or 7 a supplement of 15€ per person would be added, from 8 it would be 200€(2 bottles). Thematic room The room on the second floor will be reserved for rent for theatre, dance, musicals, group performances, dinners, private parties, etc. The price of renting this room to different events will be 300 € 5 hours. The relevant electricity costs in those hours will be borne by the tenant, so that the room will have its own meter. In addition, in this same room you can hire your own DJ, a catering service, a waiter to attend you, ... ie, will be available all those amenities that you want to hire. 5.4.3 Promotion strategies The key objective of this section will be to reach the greatest number of potential clients and to achieve greater diffusion at the lowest cost in order to make the company known. As previously mentioned, the company will have its own website, facebook page and instagram account, these three online tools will be used to have a wider dissemination because thanks to the great influence of the Internet and the low cost involved, is the most effective method. In this way, all relevant information on the company, its functions, services, reservations and queries will be made available to everyone. Using these tools, the different offers and promotions to be carried out by the company will be made known. As much as gifts, lower prices, ticket contests ... An initiative to bear in mind in this section is that it will be held every week: all those who do not 43 Source: Self made 1 2 Staff prepares the corresponding VIP or drinks Waiters serves customer Customer drinks his drinks and ask for the bill Room Manager issues the internal document ‘command’ He issues an invoice or ticket Room manager picks up the bill 2 finish Customer pays the bill 44 6.3 Stock and Warehouse Management This section is highlighted by the problem that can have a company like this, as it will be affected by a lack of stock control of raw materials that are lost daily. This may be due to the fact that there is not really an administration to determine the items and resources that are used since the purchases that are made weekly do not have to correspond to the demand, but can correspond to small weekly losses that at the end of the month can be transformed into large losses. To do this, a forecast of possible losses will be made and it will be standardized in such a way that even if we do not know exactly what quantity of product we have lost, we will know an approximation of it, in order to be able to better carry out the management control of the company. 7. ORGANISATIONAL AND HUMAN RESOURCES PLAN The most important element to which a well-functioning company owes its existence is its employees. So a good definition of personal policy is key for a type of company like this because the service offered by the staff is related to the product being offered. A good human resources plan has to take into account that the following problems have to be solved: - Dimensions of the template - Functions to be developed - Coordination and organization systems - Recruitment and selection of personnel - Wage policy - Training policy - Working conditions 7.1 Prior analysis of staffing needs After this analysis, it will be possible to decide how many workers will be needed and what the internal organisation will be. The company will be open on weekends from 22:00h to 07:00h, this being its only opening hours, this schedule will vary during the months, in summer the opening will increase greatly by moving to open all week except Monday so that all employees can 45 enjoy a day off.Mondays will be devoted to replenish the stock provided by suppliers by management. This day will be changed if it coincides with a national or municipal holiday. Therefore, these schedules may vary depending on the month in which we are and the demand expected within them, will be detailed in the economic and financial part. Also depending on the demand it will be able to adjust the schedule of the same one, being this always the stipulated one but being given cases like midweek or in findesemana there are no clients, therefore the schedule will be able to give in some occasions of 22:00h to 3:00h/4:00h/5:00h/o/6:00h. 7.2 Recruitment policy Security - Sunday, Tuesday, Wednesday and Thursday: Security Boss - On Fridays and Saturdays: 5 securities, depending on the demand expected that night. Waiters - Sunday, Tuesday, Wednesday and Thursday: Chief of staff and a waiter - Friday and Saturday: In charge and 5 waiters, depending on the demand expected that night. DJ - Sunday, Tuesday, Wednesday and Thursday : 1 DJ - Friday and Saturday : On Friday 2 DJs and on Saturday 3 DJs Cleaning personnel - 2 every day of the week Staff - Sunday, Tuesday, Wednesday and Thursday: A staff of bar help. - Friday and Saturday: 4 staff of which 2 will be of help at the bar, 1 box office and 1 cloakroom. 46 In short, for a good functioning of the company, and a good forecast of the minimum demand that is expected, the necessary personnel would be, a chief of staff, five waiters, a head of security, five securities, two cleaning people, four staff and three DJ. 7.3 Organisational structure In this section we will detail the organizational structure of the company, that is to say its organization chart in which we will detail the work posts and the tasks of each one of them. A functional structure has been used for carrying out tasks. Figure 22: organization chart SATURYAY DISCOTEQUE Source : Own elaboration. Job descriptions : MANAGER ● Department All of them. Administrative, Financial, Human Resources and Marketing ● Dependency Dependent on shareholders. ● Roles and Responsibilities 47 Administration of the company and the functions of accounting, contact with suppliers, management of Human Resources and design of market strategies. In addition to the coordination of the chieff of staff, DJ, security boss and cleaning staff. ● Formation ● Business knowledge of direction, leadership and management. Profile of graduate in Business Administration. CHIEF OF STAFF ● Dependency Managers ● Functions and Responsibilities Coordinate waiters and supervising staff to perform their work efficiently and effectively. It is responsible for deciding the work positions of each of them and is responsible for collecting, presenting and serving customers who arrive at the reserved. It will also be responsible for reviewing if supplies are falling from stock and notifying managers to make the relevant orders. ● Formation Experience as a waiter, who knows in detail what are the functions of your employees, in order to manage them. Have a gift for people and leadership skills. WAITER ● Dependency Chief of staff ● Roles and Responsibilities To attend the clients, to offer a professional and quality service, in addition to the collection. For a good operation must keep the bar in perfect condition, ie always clean and without any object that hinders the ability to serve the customer. ● Formation It is not necessary although it will be taken into account and will be valued if it is contributed. A big plus for the position will be the willingness to work, motivation and commitment to the company. 48 STAFF ● Dependency Chief of staff ● Roles and Responsibilities They will be divided in two groups, one will be the pending staff of warehouse and bars and the other will be in charge of entrance and box office. The first ones, are in charge of facilitating the work to the waiters, make the cachimbas, wash the dirty glasses, are in charge of providing cold drinks in the moment that the refrigerators of the bar are not replaced and finally, they are in charge of keeping the track clean of broken glasses and others. The second one, as far as the ticket office staff is concerned, is in charge of the entrance, revision of the identity document so that minors do not enter the premises and to provide clients with the entry and exit stamp. The person in charge of the wardrobe will be responsible for the collection of the wardrobe and for storing the client's garments. ● Formation It is not necessary, the same as for the position of waitress will take into account the desire to work, motivation and commitment of the company. DJ ● Dependency Manager ● Roles and Responsibilities To entertain and make clients enjoy their artistic skills, in charge of carrying out the sessions and doing choreographies in some cases, in short their main function is to motivate the attending public. ● Formation The resident DJ should provide a short session showing their skills and abilities to determine what they can contribute. SECURITY BOSS ● Dependency Manager 49 ● Roles and Responsibilities It is responsible for the supervision and coordination of the security team, explaining well the guidelines and policies of the company that must follow when doing their job properly. ● Formation Have completed an approved course of preparation to be able to exercise this profession. In addition, they must have at least 5 years of experience in the security position and have the appropriate character to coordinate the rest of the team. SECURITY ● Dependency Security Boss ● Roles and Responsibilities Maintain order and control of what happened in the company's facilities, protection of workers and customers, avoid confrontations or conflicts, contact with the security forces in case of major problems. ● Formation To have carried out an approved course of preparation to be able to exercise this profession, as far as the experience is not necessary, mainly it will bet for people in form, good conditions and with a suitable character for this activity, fleeing from the prototype of people who traditionally form part of this collective. CLEANING STAFF ● Dependency Manager ● Roles and Responsibilities The state of the installations must be impeccable at all times, avoid any lack of cleanliness and offer a flawless image. ● Formation It is not necessary, but it is experience in establishments of high demand as far as cleanliness is concerned. 50 7.3.1 Enlargement : Description of the service for employees. Below will detail the tasks and steps to perform the service bar by Staff and Waiters, this document will be available to all workers if there is any doubt about the tasks: Task sheet: Opening: The objective is to prepare the bars and rooms for their opening. ● Turn on the dishwasher. ● Cutting fruit. ● Clean refrigerators, bars, glass and tables. ● Clean and place wipes. ● Clean bottles and always tidy. ● Turn on computers. ● General overhaul in case anything is missing. During the service: We put a lot of emphasis on order, cleanliness and companionship, this way we will be more effective and the work will be easier, achieving a balance between speed and quality. ● Throw away empty bottles (do not leave them in place again) and mark them on the computer. ● First take the emptyest bottle (many accumulate without just alcohol for laziness to mark them). ● Full trash is tied up and warned for staff to come. ● Empty bottles should be placed in their corresponding boxes (pepsi/7up, schweppes, heineken), once the box is full prepare for staff (we don't pile refreshments on top of a full box). ● Remove empty cups, glasses and soft drinks from the top of the bar once the cubatas have been served (the clearer and cleaner the better). 51 ● Always keep the bar clean, use cloths and glass paper. ● Any type of glass is collected and cleaned immediately (dangerous). ● Be careful when leaving the liquor bottles on top of the refrigerators: they break, we don't realize it, we put our hand in and cut ourselves (bottle that breaks is cleaned). ● Attention and order when it's time to collect! Any failure or error is reported and noted. ● Leave tweezers in the same ice cube tray that we have taken (finish one with 5 and another with 1). ● Use ice bucket, refrigerator, alcohol closer to the place you serve. ● No alcohol bottles, tweezers, openers, etc. on top of the bar. ● The boat is put in the piggy bank, it's not individual. ● Always attentive to the customer! We will try to give the best possible service! ● In the event of any doubt, problem or misunderstanding, the bar manager or manager is consulted. Closing ● Clean and tidy up all the dishes ● Fill refrigerators with soft drinks, red bull, premium, liquors and alcohol. ● Replenish crockery (if needed) ● Replace napkins and straws ● Remove vacuum ● Throwing or storing fruit ● Emptying ice cubes ● Clean refrigerators, spades and bars in general ● Cleaning cloths ● Cleaning cards ● Cleaning and setting tables ● Remove ALL garbage 52 Figure 23: How to serve a glass. Take out the corresponding soft drink or mixer Put 3 ice cubes in a tube glass and 4 ice cubes in a ball glass. Finally, fruit if it corresponds Uncover the soft drink or mixer Serve the alcohol, count 7 seconds of cocktails. Serve the soft drink or mixer two seconds before cutting the jet of alcohol, working with both hands simultaneously. Finish serving soft drink or mixer, it is not necessary to serve it at all. 59 foreseeable that sales will progressively increase, but initially they will not be sufficient to cover the payment obligations generated. Different options have been consulted and it is considered that the best option is to resort to a loan from the ING Direct entity. This entity offers a loan with a minimum repayment period of 12 months and a maximum of 7 years, with an APR of 6.11% and a maximum drawdown of €60,000. In this case, 60,000€ will be financed (as indicated above) and the repayment term will be five years (on the grounds that it coincides with the period for evaluating the viability of the project). In this way, the following table includes the estimate of the life of the loan although it must be indicated that the loan payments would be made on a monthly basis and in the following table it is summarised annually: Table 7: Loan Amortization Chart Yea r Initial Capital Quota Interest Amortized Capital Final Capital 0 - - - - 60.000 € 1 60.000 € 14.286 € 3.666 € 10.620 € 49.380 € 2 49.380 € 14.286 € 3.017 € 11.269 € 38.110 € 3 38.110 € 14.286 € 2.329 € 11.958 € 26.152 € 4 26.152 € 14.286 € 1.598 € 12.689 € 13.464 € 5 13.464 € 14.286 € 823 € 13.464 € 0 € Source Own Elaboration Subsequently, financial investment evaluation criteria will be applied to determine whether this project is financially viable and a discount rate will be required to do so. To find out this discount rate we must know the following data: - Proportion of own resources to total financing and also proportion of external resources. This ratio is 2/3 external financing and 1/3 own financing. - Cost of external financial resources, which as indicated in the table above is 6.11%. - Cost of own resources. The founding partners consider that the risk they assume is greater than that of outside financial resources and therefore require double the return, or in other words, a return of around 12.22%. 60 With these data, sufficient information is already available to obtain the weighted average cost of capital that will be used as a discount rate to evaluate the viability of the project. The following formula should be used for this: Weighted average cost of capital = % R. Own x Cte R. Own + % R. Others x Cte R. Others Applying this formula, the weighted average cost of capital would be approximately 8.15%. Other considerations for short-term funding will be as follows: - Sales will be charged in advance so the customer balance should generally be zero, and the average collection period equally zero. - The services provided by ordinary creditors usually involve cash payment, although to the extent possible, an attempt will be made to defer payment by creditors within the 60-day limit. - Employees' payroll will be paid on the last day of each month. The extraordinary payments will be prorated in each of the months so that each month they will receive the same amount of salary. 8.3 Forecast sales The first step in obtaining the planned profit and loss statement is to carry out the sales forecast. For this sales forecast we are going to consider the following premises depending on the summer season (with more affluence) and the winter season (with less public). - The first premise is to consider the capacity of the disco. As we saw in the description of the local, it has dimensions greater than 1,000 square meters. Considering an area per person of 1.2 meters, the capacity would be 833 people, which for safety we will reduce to 600 customers maximum capacity. - The following table shows the expected opening days depending on the month in question and the percentage of expected influx over the maximum capacity of 600 customers. 61 Table 8 : Predicted average inflow Month Opening days Predicted average inflow Month Opening days Predicted average inflow January 8 20% July 20 90% February 8 20% August 20 90% March 8 20% Septi 15 60% April 10 40% Oct 8 20% May 10 60% Nov 8 20% June 20 80% Dec 8 35% Source Own Elaboration - The next hypothesis is to assume an average revenue price per entry. An average price of 6€ will be assumed. In the Marketing Plan we saw that there were different prices being the lowest of them 5€ and in a few days. For the sake of prudence, this price will be assumed as the average selling price, although it will probably be higher. - In addition to the entrance price, it will be considered that the average consumption of each customer within the premises will be 20 €. Obviously there will be customers whose consumption is much higher, but given that there will be others with a lower consumption, and for prudence, this amount is considered as the average selling price. On the basis of these premises, the annual sales forecast can be made, which is shown in the following table: Table 9 : Income from receipts and consumptions (first year) Average ticket price Income Month Monthly customers Entrance Consumption Entrance Consumption January 960 6 € 20 € 5.760 € 19.200 € February 960 6 € 20 € 5.760 € 19.200 € March 960 6 € 20 € 5.760 € 19.200 € April 2.400 6 € 20 € 14.400 € 48.000 € May 3.600 6 € 20 € 21.600 € 72.000 € June 9.600 6 € 20 € 57.600 € 192.000 € July 10.800 6 € 20 € 64.800 € 216.000 € August 10.800 6 € 20 € 64.800 € 216.000 € Sept. 5.400 6 € 20 € 32.400 € 108.000 € Oct. 960 6 € 20 € 5.760 € 19.200 € Nov. 960 6 € 20 € 5.760 € 19.200 € Dec. 1.680 6 € 20 € 10.080 € 33.600 € Total 294.480 € 981.600 € 1.276.080 € Source Own Elaboration 62 In this way, the previous table shows a realistic, and even prudent, sales estimate, considering an adequate capacity of the premises (because it could be higher, but for safety it has been reduced) and different customer estimates according to the time of the year, which is consistent with the affluence of the public according to the market study. However, that would be the sales target, but we believe that it is prudent to set progressive achievement targets, which are reflected in the table below. These objectives increase as the years go by: Table 10 : Prevision of income from receipts and consumptions Income Year Sales target Entrance Consumption Total 1 60% 176.688 € 588.960 € 765.648 € 2 70% 206.136 € 687.120 € 893.256 € 3 80% 235.584 € 785.280 € 1.020.864 € 4 90% 265.032 € 883.440 € 1.148.472 € 5 100% 294.480 € 981.600 € 1.276.080 € Source Own Elaboration 63 8.4 Estimated operating expenses Based on the premises that appear in the human resources plan, the following table shows the expenditures on annual wages and salaries and social security: Table 11 : Personnel Expense Annual Costs gross salary Social Security Company total cost Chief of Security 24.500 € 8.167 € 32.667 € Security 1 18.000 € 6.000 € 24.000 € Security 2 18.000 € 6.000 € 24.000 € Security 3 18.000 € 6.000 € 24.000 € Security 4 18.000 € 6.000 € 24.000 € Security 5 18.000 € 6.000 € 24.000 € Foreman 24.500 € 8.167 € 32.667 € Waiter 1 12.500 € 4.167 € 16.667 € Waiter 2 12.500 € 4.167 € 16.667 € Waiter 3 12.500 € 4.167 € 16.667 € Waiter 4 12.500 € 4.167 € 16.667 € Waiter 5 12.500 € 4.167 € 16.667 € DJ1 36.000 € 12.000 € 48.000 € DJ2 18.000 € 6.000 € 24.000 € DJ3 18.000 € 6.000 € 24.000 € Staff 1 24.000 € 8.000 € 32.000 € Staff 2 12.500 € 4.167 € 16.667 € Staff 3 12.500 € 4.167 € 16.667 € Staff 4 12.500 € 4.167 € 16.667 € Cleaning Staff 1 12.500 € 4.167 € 16.667 € Cleaning Staff 2 12.500 € 4.167 € 16.667 € 480.000 € Source Own Elaboration In addition to personnel expenses, which represent the most important operating expense, we have to face another series of expenses, the forecast for which is as follows: - Purchasing expenses. It will be considered that on average, the cost of consumption will be 15% of the selling price. - The rental cost is estimated at €7,500 per month, which is equivalent to €90,000 per year. 64 - A communications budget of 500€ per month (internet, telephones, etc.) is established, which is equivalent to 6,000€ per year. - It would be necessary to contract the corresponding insurances specific to the activity. It is estimated that good coverage would cost €18,000 per year. - A budget of €1,000 per month (€12,000 per year) is established for social networks and internet advertising. This budget is expected to increase each year in order to achieve the sales growth targets indicated in the sales forecast. In this way, the annual expenses for the second year would be 24,000€, and the rest of the years would be 30,000€ per year. - It is estimated that advertising expenditure (flyers and related) of €3,000 per year. - The cost of electricity and water is estimated at €21,000 per year. - An annual budget line of €20,000 will be allocated for various repairs (decoration, furniture, etc.). - A budget of 6,000€ per year is established for the replacement of glasses and similar items. - Finally, the following budget is established for the celebration of nonsponsored parties, which will be increased to meet sales targets: First year, € 30,000, and the rest of the year will be increased by another € 30,000 each year. With regard to the depreciation of fixed assets, the useful life will be considered to be five years (out of prudence, since they are likely to have a longer useful life). Given that the investment in fixed assets is €90,000, the annual depreciation will be €18,000. 8.5 Provisional Financial Statements With all the information contained in this financial plan, the point has been reached at which the financial statements can be designed, specifically: the forecast profit and loss account, the forecast balance sheet (assets and liabilities) and the cash flow forecast. In order to understand the design of these financial statements, it is also necessary to consider these premises, in addition to the previous ones: - Consider the loan payment and the financial expenses involved. - Consider a corporate tax rate of 25% payable the following year. 65 - The effect of inflation has not been considered either on personnel costs or on other expenses because it is considered that if they existed, they would increase in the selling price and therefore would not have an effect on the profit and loss account. - In addition to the revenue collected in the sales forecast, it is expected that there will be additional revenue from sponsored parties, advertising, etc. However, for the sake of prudence, they have not been taken into account and income is limited to expected receipts and consumptions. Table 12 : Previsional Profit and Loss Account Year 1 2 3 4 5 Ticket sales revenue 176.688 € 206.136 € 235.584 € 265.032 € 294.480 € Consumption revenue 588.960 € 687.120 € 785.280 € 883.440 € 981.600 € Total revenue 765.648 € 893.256 € 1.020.864 € 1.148.472 € 1.276.080 € Merchandise used -88.344 € -103.068 € -117.792 € -132.516 € -147.240 € Supplies -6.000 € -6.000 € -6.000 € -6.000 € -6.000 € Rent -90.000 € -90.000 € -90.000 € -90.000 € -90.000 € Personal and Social Security -480.000 € -480.000 € -480.000 € -480.000 € -480.000 € Communications -6.000 € -6.000 € -6.000 € -6.000 € -6.000 € Insurances -18.000 € -18.000 € -18.000 € -18.000 € -18.000 € Internet advertising -12.000 € -24.000 € -30.000 € -30.000 € -30.000 € Other advertising -3.000 € -3.000 € -3.000 € -3.000 € -3.000 € Parties advertising -15.000 € -45.000 € -75.000 € -105.000 € -135.000 € Supplies -21.000 € -21.000 € -21.000 € -21.000 € -21.000 € Repairs -20.000 € -20.000 € -20.000 € -20.000 € -20.000 € EBITDA 6.304 € 77.188 € 154.072 € 236.956 € 319.840 € Amortization -18.000 € -18.000 € -18.000 € -18.000 € -18.000 € EBIT -11.696 € 59.188 € 136.072 € 218.956 € 301.840 € Finance expenses -3.666 € -3.017 € -2.329 € -1.598 € -823 € PROFIT/(LOSS) BEFORE INCOME TAX -15.362 € 56.171 € 133.743 € 217.358 € 301.017 € corporate tax 25% 3.841 € -14.043 € -33.436 € -54.340 € -75.254 € PROFIT/(LOSS) FOR THE PERIOD -11.522 € 42.128 € 100.307 € 163.019 € 225.763 € Source Own Elaboration As can be seen in the first year, losses are expected. However, given that the turnover forecast has been extremely prudent, and despite this, the EBITDA for the first year is positive. It should also be noted that these losses are more than recovered in the second year, with the result expected to be positive for the rest of the years. It is therefore considered a circumstantial circumstance and has no major relevance. 66 The following table shows the planned balance sheet for which the forecast has to be taken into account: - An average stock consumption period of 7 days is established. - All operating expenses are expected to have a 30-day deferred payment. With the exception of personnel expenses that are paid monthly, social security will also be considered to be paid in the same month, insurance payments that are considered to be cash payments, amortization expenses that do not involve the outflow of money, and financial expenses and the repayment of the loan that is paid monthly. In the same way, the payment for IS will be paid the following year of its generation. - Due to the characteristics of the activity, customer collections take place in cash. - The effect of VAT is not considered in the forecast balances and in the treasury, since the difference (in favour or against) will be settled with the tax authorities, with the neutral effect finally being applied. - No provision has been made for remuneration via dividends, although excess cash after the third year indicates that either new investments are taken on or that it would be advisable to make these dividend payments to investors. Table 13 : Provisional Balance 67 Source Own Elaboration The last forecast statement is made up of the cash flow forecast. Table 14 : Annual treasury forecast Source Own Elaboration 8.6 Financial criteria for the evaluation of investments Once the forecast financial statements are available and the investment needs are known and how they will be financed, it is time to apply financial criteria to assess the financial viability of the project. 68 These financial criteria are Payback, or investment payback period, Net Present Value (NPV), and Internal Rate of Return (IRR). There are two steps prior to the application of these financial criteria. The first of these is to calculate the weighted average cost of capital, which will be used in the NPV as the discount rate. This first step has already been calculated by obtaining a discount rate of 8.15%. The second step is the calculation of free cash flows. The following table lists these calculations Table 15 : Cash flows Source Own elaboration On the basis of the cash flow calculations and knowing the discount rate, the discounted cash flows have been calculated, which appear in the following table. Based on those calculations obtained in that table it can be concluded that: - The resulting payback (payback period) is 1 years and 10 months. This means that the necessary initial investment of €90,000 (€30,000 as an asset and €60,000 as cash requirements) would be recovered in that time frame. - The financial payback would be 1 year and 11 months. The interpretation is the same as in the previous case but this criterion uses the discount rate and is therefore more reliable. - The NPV (sum of discounted cash flows) is positive, and being positive means that with the financial requirement of the investment resources the activity would generate sufficient cash flows to compensate for the investment in the project. - As for the IRR, the resulting rate is 86%, being much higher than the 8.15% used as the discount rate, it means that the project is worth carrying out. 86% is the limit of profitability requirement for the project to be carried out.