Business Planning

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For this task I have been asked to create an imaginary business in which I simulate all aspects of running the business. This ranges from the initial start up of the business, generating ideas, gathering capital and sorting out where to locate the business. Afterwards I will continue by analyzing the business using methods such as breakeven analysis, cash flow forecasts and balance sheets. A business is either a single person or multiple people who share the same interest to sell a product or a service to customers.

There are four major types of business organizations; the first is a soletrader – the smallest of the four. A soletrader is a single person who runs the business and controls all aspect of the business. S/he will either gain all the profit and/or the losses. An important point is that soletraders have the risk of unlimited liability which has the possibility to lose all their personal assets if the company fails. The second type of business organization is partnership. This consists of 2 or more partners (the maximum of 20) who equally share the business.

This is good for a starting business because there will be more shared ideas, shared work load, a range of skills, more members to contribute to starting up the business. Although there are some disadvantages of being a partnership there is unlimited liability, shared profits, some partners might not be reliable, the decisions must be shared and disputes are likely to break out. Each partner must sign the deed of partnership which is a legal document that brings together each partner. This covers any issues dealing with allocation of profit, decisions, votes for each person and closure of the business.

Another important point is that a partnership still has unlimited liability unless there is a sleeping partner who has limited liability. A sleeping partner is one that invests into the business but does not join in the day-to-day running of the business. The third type of business organization is a private limited company (LTD). The first important point is that private limited company has limited liability which will protect the owner if the business fails. The next important point is that the business will have the power to sell shares to close friends and family.

Both private and public limited companies need to have a few legal documents to confirm they are limited companies. These documents are: the memorandum of association & articles of association and they must register with the Registrar of Companies, in which you will receive a Certificate of Incorporation. The main difference between private limited companies and public limited companies are that for public limited companies you can now enter the stock market; however you must illustrate your accounts to the public and this will cost more revenue.

Often a new business will need to plan ahead of schedule in order to survive, and then later be able to gain profit. A business plan is a report that shows what the business aims are and how the business goals can be achieved over certain time period. The business plan should illustrate various aspects of unexpected situations such as competitions, environmental issues, risk analysis and contingency plan.

A business plan may include a description to what the business provides, what the aims are, the products, targeted customers, a marketing plan, who is involved with the business, a profit and loss account, a balance sheet, a cash flow statement and capital required to run the business. My business will be a restaurant which specializes in fusion of foods; I have chosen to do a different styled restaurant because there aren’t many fusion restaurants in Hong Kong. My choice of ownership would be the partnership type, I would look for a business partner or two the most as to avoid conflicts on decision making by too many people.

My ideal partner should have passion on food, have ambitions on success, have experience in managing accounting side of the business, and yet have capital and is willing to invest. Partnership type of business would increase my chance of success and survival because I can make good use of my partnership’s strengths, I can focus on the area where I can do best, that is the operation side of the business, and my partners can take care of the menu creation and accounting side of the business.

Most important of all, the partnership can help gather the capital quicker and reduce my personal risk on investment should my business fails to generate profit. The typical legal issues for starting up a partnership business will be a deed of partnership: a contract that describes profit sharing, votes for each partner, rules for taking new partners and closure of the partnership. This will require funds for a lawyer who will help setup the document; also some small financial costs are required to register into the Registrar of Companies.

Other legal requirements include the Fire & Safety Health Certification; I will need to ensure fire exits are in place, smoke alarms that are directly connected to the nearest fire stations and staircases. If these safety precautions are not put into consideration this might mean the closure of restaurant. The restaurant I have planned will need to have two licenses that will require annual renewal: a liquor license for the bar so that I can serve both non-alcoholic drinks and alcoholic drinks to people over 18 years of age.

I will also need to have a restaurant license to serve food to the customers. The processing time takes approximately two months, but a restaurant license must be in place before a liquor license can be granted, the government will let you apply for both at the same time. The license can be applied from Food, Environmental and Hygiene Department through the government.

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