Business Modelling

Business decisions Modelling- Ancient Grains Artisan Bakery

Introduction

Australian bakery industry has been divided into three sectors that are cakes, bread and biscuit and pastries. The players in the industry have been largely classified as a wholesale manufacturing or the combination of retailing and manufacturing. However, the larger scale in involved in the preparation of dough and loaves of bread as it is a manure market. Highly fragmented, fiercely competitive and rapidly maturing, the Global Bakery Product Manufacturing industry has faced some challenges over the past five years

This focuses on the financial modelling of Alice bakery shop which will advice her to undertake this project or not.

Discussion

In order to advice Alice the following scenarios has been made from the information available.

Problem Statement

Business model has been developed which is covering the issue that whether it is advisable and profitable for Alice to open a bakery shop

Assumptions

The Bakery operates 52 weeks per year every year without annual leave

No projected growth rate for Loaves

Financial year ends in Dec

End user has basic accounting understanding

Scenario

Draft your advice to Alice

Alice wanted to bake three different types of loaves which are Rye, Kamut and Sourdough and Alice has estimated the following sale price, variable cost and quantity which she thinks that she will be able to sale the following quantity. After the estimated sales price and cost of sales, it can be seen that these estimated sales would be same, and then the profit would above the inflation rate.

The following graph shows the clear picture of the estimated sales and cost. Sales comparison is very important in order to see the cost that can be cover by the revenue generated. Hence, if Alice includes the advertising budgets which will allow her to aggressively promote their products through a range of media outlets that are inaccessible to new entrants. The cost will increase for each of the different loaves.

Nevertheless, new entrants have established themselves within the industry, with the majority in the low-priced, non-branded segment. Other smaller players have managed to carve out regional market niches, reducing direct competition from the industry's major players.

 

Per day

Per month

Yearly

Licence Bake

380 loaves per day

9120

109440

Shopfront Display

15 loaf shelves

 

 

 

15 loaf shelves in the Kitchen

 

 

No of working days in a month 6 days in 4 weeks

 

 

 

Fixed costs

$100 per day

2400

28800

Personal income tax rate

28%

 

 

 

Sourdough

Kamut

Rye

Estimated sale price

$4.50

$4.00

$4.50

 

 

 

 

Variable costs

 

 

 

Flour

$0.95

$0.85

$0.95 Other costs

$0.30

$0.30

$0.65 Labour

$1.00

$0.25

$0.50

 

$2.25

$1.40

$2.10

Minimum quantity

100

100

50

Maximum quantity

300

300

150

Yearly Sales Estimation

Sourdough

Kamut

Rye

Minimum quantity 28800

28800

14400

Maximum quantity 86400

86400

43200

The below graph indicate the cost that was incurred for the profit generation. It can be seen that when price of the flour increased the cost increase in the maximum quantity part while the sales was somehow equivalent to the cost incurred

If we compare the minimum and maximum of normal sales it is expected that Alice would earn profit between 100,000 to 300,000, while if fluctuation in flour price occur than Alice would be expecting profit between 69,000 to 200,000.

Threats that can be face by ...