Assessment of the Viability of Opening an Internet Caf
After analysing and evaluating all the possible aspects within my power I have reached a conclusion that opening an internet cafi?? is a worthwhile business. By the analysis of my questionnaire, which shows there is a market for this field. The potential customers of my business are mainly students and business men. There is an aspect to be considered here, as students do not have a steady income is it right to enter a field which is for them. However, the reason why this aspect does not worry me is as they only create 38.
3% of my target audience, and business men 61. 7% of my target audience. Business men have a stable income and their incomes can be 40 thousand year or more, meaning they have lot of disposable Income, so even if they see the usage as luxury item they will still use it. The location of the internet cafi?? is known to be one of the biggest factors affecting its success. The location is ideal; there are two high schools, three primary schools and a library near it. So there is a chance that the business will attract more customers than first expected.
It is also neighboured by shops such as Woolworth’s, KFC and many other brand shops. As it is situated with shops of such good reputation it would also get good reputation it, lots of people go to these shops, and they see an internet cafi?? near it they may decide to give it a try. As service will be of high quality they will frequently visit becoming loyal customers. It is not also far from residential areas, which means that potential customers around the area will not find it difficult to get to it.
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The results of my questionnaire also justify that this is a good location, as it shows most people that I questioned lived in Greenford or Northolt, this location being Greenford and Northolt being fairly close to it shows this location is good. Internet cafes are know to have elastic demand, however, my research states that people are willing to pay more if the business is nearer to there residence. This could lead to problems as some customers may not be wiling to pay extra, for this reason I have only raised price by a bit. Another factor, which would make sure the business, is not a disaster is repeated purchase.
My questionnaire allocates that most customers visit an internet cafi?? around three times or more, so even if the business is not attracting many new customers it can survive on its loyal customers for a while. Another reason why I believe that this business can be a success is due to the fact that my results show that the internet is mainly used for business and studies, meaning it is used in constructive way . Most people need to use it, they don’t use it because they want to, but because it has importance to them, meaning they will not sop using it if inflation rising, as not seen as luxury by most but necessity.
Another reason why this business can be successful is due to the limited competition it faces, there are only two competitors in the local area Cyberia (main competitor) and Somalia cafi??. They are situated some distance away from me, so gives me the chance to attract customers from Greenford and neighbouring areas. At the moment I am not in a state to compete with these two with full capacity, as they a have been around for years have loyal customers.
The main objective at the moment is to create customer awareness and create a good image by providing a good service. The nature of the business is also a factor which makes me feel this business can be successful as there is limited costs once the business is up and running meaning there is a less chance of experiencing liquidity problems. Another reason why I believe this business can be success is due to the outcome of the financial documents. The cash flow forecast shows very positive signs as there was not on month when the closing balance was negative.
The cash flow forecast illustrates how sales revenue increases month by month, showing there is a market for the service. As more and more people become aware of the service more revenue is generated. The cash flow shows that during the holiday period there is a lot of revenue produced meaning students use this service a lot and there is also a market for the future as students will play a large part in the future. As now they are students they have limited money when they grow up it is likely they will still use the internet cafes meaning they wil be spend lot then.
The cash flow is positive, so I should go ahead with the business, however as it is forecast can be slip ups and there could be external influences which affect its success, such as inflation – if inflation rises I will have to pay my workers more or even sack them. I will not be only sacking the so will be other business people with less money meaning less customers for my business leading to liquidity problems or even closure. Another financial document which was drawn up was a break- even chart. This document allows me to work out how long it would take the business to cover al its costs and make a profit.
The fixed costs are fairly high i?? 47852. It shows that I need 7362 customers to cover all my costs, on average I have around 2100 customers per month, meaning I should break-even in around 3 and half months, which is a fairly reasonable pay back period. However as my cash flow shows demand increases in June, July it could be less. Evaluation Even though I believe this business will be a success, there are lots things that would have helped me more with the business and decreased any negative aspects.
Firstly, I used cluster sampling to question people. This is when sampling within a specific area, where u believe will find your potential customers. I questioned people outside Cyberia my main competitor. This was due to the small sampling size. I interviewed only 50 people. Sample of 1,000 is considered large enough to represent the views of 44 million people. The reason why I could not do this is due to the reason it would cost a lot and is very time consuming, me being a student can not afford it or have the time for it.
The confidence level with 50 people is to low that’s why I chose a location where I would expect right results. However, by using this method I may have only discovered about half the target audience, or the only target audience Cyberia Attract. However this is not a problem due to the fact that it is a good enough foundation to start with changes can be made if any problems are faced. Another aspect which was lacked was the about of secondary data available. It would have helped me even more in choosing the location if I knew the unemployment rate of different areas.
For example Greenford can have high unemployment meaning people in that area do not have jobs meaning they have less money les people spending money at my internet cafi?? leading to liquidity problems of my business. However, this is not the case as there are many big name firms in Greenford such as ‘GlaxoWelcomeSmithKliene’ big pharmaceutical firm it also consist of big stores such as Woolworth’s. Other secondary data which could be useful is gender percentage in Greenford as males use the service more, so it would be useless to open the business if there are more females in the area.
However some of this data was obtained by my primary research. As a student I also found it hard to get information from firms which provide insurances, loans, etc. As I am student I did not have access to whole sale prices, had to put down prices that my customers would be paying to so I lost out on profit there. The financial aspects also have their draw backs. My cash in flow was based upon the results of my questionnaire. As my questionnaire has a low confidence level if the questionnaires results end up being wrong the business can go into liquidity problems or even collapse.
However, so far my results have been correct so very les likely to mislead now, however I am ready for any upsets as have personal savings of around i?? 30,000 which could help me out, if any problems are faced. There are few problems which the cash flow forecast does not account for such as what if sales are lower, the price of stock goes up, an unexpected incident such as September the 11th occurs leaving the world market in a mess, people losing there jobs, etc. What if the government increases interest rates leading to cheaper imports, meaning internal-natal firms from abroad may decide to open internet cafi??
in local area, cause more competition, leading to lower prices and even price wars and if the business has not made enough capital by then it can close down. Opening a business has May risks in it, you never know what’s going to happen next, the whole market may change tomorrow due to new technology, and the whole market may go into a recession, these are know as uncontrollable events. After analysis and evaluation of all the controllable aspects available to me, I have decided this business is worthwhile and has great potential of competing at national level in the next few years at the moment it will concentrate on local competition.