EXECUTIVE SUMMARY:

Though not very prominent, there is a problem recognized among those book lovers
especially in Kathmandu. They either do not have an access to a variety of books or do
not get a private space to enjoy their book properly. Hence this business plan will address
such problems to readers. This business is that of a book café i.e. a coffee shop with
additional feature of variety of books to choose from and read. Demand for coffee shops
are on the rise and because of the westernized culture it is gaining even more popularity.
The combination of two will definitely help in attracting more customers.
All the aspects of this business plan is carefully analysed and the facts used have
authentic validity. All the minute details have been taken care of, so that there is not
much deviation between the plan and the actual scenario. From location to pricing and
variety, everything is based on real data and figures.
The feasibility of this business lies in a lot of factors which are discussed below in a very
convincing manner. But one of the prominent reasons is that it is a service based industry
and thus does not require a very high cost of capital. Thus I think it is a viable project and
chances of its success are very high.

1
BUSINESS CONCEPT:
The Business should involved in the engagement and productivity by benefitting the contributors
and producers that they can live from it and helping the clients to reduce their costs. The business
that I am going to venture is the concept of book café called “Sip n Read”. It is a
combination of a book store and coffee shop, where the customers can come, read a book
and enjoy coffee based drink and bites. It is a service based business.

Objectives of the business:

Business objectives are the ends that an organisation sets out to achieve. A business
creates business plans to enable it to achieve these ends - thus plans are the means to the
ends. Theobjectives and plans that an organisation creates are determined by balancing
the requirements of the various stakeholders in the organisation. The stakeholders are
those individuals and groups that are affected by and have an interest in how the business
is run and what it achieves. Every business has a range of stakeholders, including:

o To grow and expand annually as per the market pattern (with the market).
o Gradually grab the market share and be a market leader in years to come.
o To be innovative and always maintain a point of differentiation among customers
to create loyalty among them.
o Realistic aspirations.
o Alignment with organizational values and culture.

FINANCIAL OBJECTIVES
1. Achieve an ROI and ROE of over 30% by the end of fifth year.
2. Produce net profits of over Rs. 5 lakhs from year 4
3. Gradually decrease the BEP over a period of years.

2
 Environment scanning:

The external environment is scanned using the Porter’s five force analysis which is done
as follows:

Threats of New Market Entrants: HIGH

This kind of business, unlike manufacturing does not
require a high capital investment, threats from new
entrants is pretty high.

Bargaining Power of
Supplier: LOW Bargaining Power of
There are a lot of suppliers Competitive Rivalry: INTENSE customers- MODERATE
of basic raw materials. There are rivals in the market Though buyers have a lot of
However contractual occupying a high market share choices among coffee stores,
relationship will be and with increasing no. of such not many have the same
maintained with suppliers cafes, the competition is likely to facilities and features as this
to ensure regular supply. get intense by the day. café.

Threats of Substitute products:

MODERATE
There are lot of substitute of coffee like tea
and other drinks. Even libraries could be a
substitute for such book cafés

We can see that the market is very competitive and the only strategy to sustain and grow
is through innovativeness. Though café is different from any other café, it is not difficult
to imitate such differentiation. Hence continuous innovation should be encouraged to
maintain the USP.

3
MARKETING PLAN:

The 4 P’s:

Product:
More than a product based, this business is process based in nature where people will be
served variety of coffees along with bakery items. The variety of coffee includes
cappuccino, mocha, frappachino, cold coffees, espresso. All these coffees will be
available in 3 different flavors –vanilla, strawberry and chocolate. Besides coffee, bakery
items such as doughnuts (chocolate and plain), muffins, pastries and cakes will also be
available. A lot of importance and emphasis will be given to ambience including
decoration of the place, the surroundings, the wall hangings, lighting etc.
This café is opened, not only to serve coffee but to develop and encourage reading habits
among people. The café will offer wide variety of books- from fiction to non fiction and
all of them belonging to different genres. The readers will thus have a wide array of
choice. To facilitate privacy while reading, each seating will have a separation.

Promotion:
In the first year, a lot of budget will be allocated for promotional activities. This is
especially done to create awareness about the café. As mentioned by Amar Bhide in his
article “How entrepreneurs craft strategies that work”, word-of-mouth (WOM) and
Guerilla marketing should be used for promoting niche products. Hence majority of the
promotion will be done even through WOM. However, other major promotional measure
taken will be through advertisement in FM. Radio has a lot of advertisement of cafes and
hence this media could be used to tap the potential customers.
From second year onwards, the budget spent of advertisement and marketing of products
will be slightly reduced. The advertisements will remain but the frequency of such ads
will reduce. As Amar Bhide has emphasized on “Customer Relation Management
(CRM)”, this will be introduced in “Sip n Read” through membership programs. Regular

4
customers will be provided membership cards and they can thus avail for many facilities
in such membership such as discounts, special schemes and offers etc. Simultaneously,
WOM will also be continued.

Place:
This café will be located initially at Lazimpat. This area is residential and at the same
time it is also gaining popularity as a hangout area. There has been a rise of different posh
stores and cafes. Usually most of the cafes were located in Thamel but because of
overcrowding of the area, people are now starting to look for a new place to hangout.
Thus Lazimpat would be a perfect area for location of this café. In the first 5 years,
expansion is not considered. But as the business does well and captures a large share of
the market, other such locations will be considered to open a new branch.

Price:
Since this is a premium café, the prices of coffee is high. However compared to other
competitors, initially around 10% lower price will be offered for all the products. The
pricing of the items are as follows:

Coffees Price Bakery Items Price

Cappuccino 65 Doughnuts (plain), 25
Mocha 65 Doughnuts (chocolate) 35
Frappachino 70 Muffins 40
Cold coffees 70 Pastries 55
Espresso 85 Cakes 50

Market:
This café is targeted to a niche segment of people who are fond of reading and look for a
relaxing, quiet place to read. Not everybody can afford to pay such high price for coffee
and other items. Hence it is only targeted to those people who can afford.

5
Market share: Sip n read does not have a defined set of competitors. The book stores as
well as the coffee shops can be its competitors. However cafes like Pilgrims, Java,
Galleria café etc have services to offer to customers. Hence they can be its direct
competitors. The market share of these cafes is as follows:

Existing market shares of major

players

45
40
35
30
25
20
15
10
5
0
Java Galleria Pilgrims Others

Café Sip n Read intends to take 5% market share of Java and another 5% market share of
other cafes. Initially the total market share that it intends to capture is only 10%.
However according to a survey done, it was found out that the CAGR of this industry is
around 7.5% This café also intends to grow at similar rate and hence the increase in
revenue will also take place at the same rate.

6
ORGANISATION AND MANAGEMENT PLAN:

An good and suitable team is very important for effective and smooth operation of any
business. If there is something that is not easily imitable by the competitors is the
“people” factor in the business. Even Timmons has emphasized on good entrepreneurial
team, in his article, ‘identifying various entrepreneurial opportunities’. He has also
mentioned that strong entrepreneurial leader is very important to lead any business. Thus
while selecting the manager, careful analysis and assessment will be done. The
organizational structure will be as follows:

CEO/ Owner

General Manager

Accountant

Assistant
Assistant

Labours-cook Labours-waiters Labours-

waiters

7
Qualifications

CEO:
The CEO of this venture is Mr. Arunav Chettri. He is an MBA from Bangalore and has
had prior experience as a senior manager in a food outlet in India for 13 years. He has the
zeal and enthusiasm in whatever he does. He is an innovative person and is always full of
new ideas. Hence considering all this, he is capable of carrying out the business.

Manager:

The manager of this business will have to be hired to manage the overall business. He
will have to have a Master’s degree in Business field and experience in managing
business independently for at least 3-4 years. Various other criterions will be looked into,
besides qualification and experience. His attitude, aptitude and approach will also be
tested. The manager considered here is Ms. Ashmita Shakya who has worked as an
assistant manager of a famous restaurant located in Pokhara for 5 years. She is an MBA
from KUSOM, Nepal.

Others:
For the employees one important quality that will be considered will be their positive
attitude. An innovative work environment will be promoted so that innovations can take
place at any level. Their interest and enthusiasm level will be seriously considered as it is
important to match profile with the business requirements.

8
Matching business with profile

Position Requirement Profile of the employee

CEO/ Owner Master’s degree in business Mr. Arunav Chettri,
discipline with at least 10 MBA from Bangalore with
years of experience in related experience of 13 years.
business. Self motivated and motivates
Leadership qualities everyone around him.

General Manager MBA, experience in similar Ms. Ashmita Shakya,

field for at least 3 years MBA KUSOM, Nepal.
Experience of 5 years in
similar business
Accountant Bachelors with major in Not yet hired
accounts.
Experience in small firms
Others Experience in service oriented Not yet hired
sector, with basic knowledge
of handling people

Trainings:
Before the operation of the business, necessary training will be imparted to the employees
by professional and qualified trainers. This will help enhance the existing skills of the
employee and also help them use it as per specific business requirement. The people who
deal with the customers carry the reputation of the café. They are the frontline officers
and they are the ones who can make or break the customer relationships. Thus training on
handling people in different circumstances is also important

9
OPERATION PLAN

OPERATION PROCESS
The operation process for the café is shown below:

Procurement Marketing Service

Start Up

Through
Farmers advertiseme
Rented Face to Face
Wholesaler nts
Building s Through
Confection WOM
eries Membership
to regular
customers

Initially the operations will take place in a rented building not will not acquire any
building or land. It will start at Lazimpat as it is becoming a hub for hangout. This area is
considered very posh and classy. The café will offer coffees of different variety such as
cappuccinos, mocha, frappuchinos, espressos and cold coffees and also some eateries like
pastries cakes, muffins and doughnuts. The eateries will not be prepared by this café and
thus will be supplied by Hot Bakers and confectioneries, a whole baker. These bakery
products will be supplied everyday to ensure quality and freshness. Coffee and milk will
be supplied directly by the farmers (different) on a contractual basis. Other materials such
as sugar, napkins etc will be supplied through a wholesaler of such items. In the first
year, the daily revenue is expected to be around Rs. 10750, considering different
combinations of coffees and eateries. As the market grows the daily sale would also
change.

As mentioned in the marketing plan, 3 main promotional measures will be adopted that is
advertisement in FMs, WOM and membership. The budget spent on marketing in the first
year is relatively higher basically to create an awareness among people. Since this is a

10
service industry, customer service will be given utmost importance and the café will be
flexible to the need of the customers.

Capital requirements: The total capital required to carry out the operations of the business
is Rs. 612710. This includes the cost of fixed capital, pre operating expenses and working
capital requirement. The expenses are further broken down as follows:

PRE-OPERATING ACTIVITIES
The following activities will be undertaken before the business is operated. Before
starting operation, these activities will take place in the given time specified:
1. Registration of business 15 days
2. Preparing business plan 30 days
3. Contacting suppliers 15 days
4. Furnishing the store 30 days
5. Purchasing Equipments (Computers, etc.) 02 days
6. Hiring labor 14 days
7. Purchasing goods 10 days
8. Arranging display of goods 05 days

Pre-operating expenses:
The expenses that will incur before the start of the business are as follows:
Pre-operating Expenses
Description Amount
Registration cost 2500
Survey costs 10000
Training costs 25000
Entertainment cost 10000
Transportation cost 10000
Total pre-operating expenses 57500

Working capital requirement: Here, all the revenue will be collected only on cash basis.
Hence based on this, the working capital estimate is as follows:

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Working capital estimation
One month raw materials 58710
Cash for one month expenses (exclude
depreciation) 112500
Total working capital 171210

FINANCIAL PLAN

It is very important to develop proper interrelationship between the business strategies

and the financial plan (entrepreneurial finance). Hence the broad objectives of the
business have financial elements as well and to achieve them, a proper financial plan is
conducted.

Assumptions:

o Since the CAGR of the industry is around 7.5%, it is assumed that revenue will
also increase at a similar rate.
o The expense on raw material will also increase as sales increases at similar
proportion
o As the business is that of a book café, it is assumed that all the revenue will take
place on cash basis.
o The bank charges interest @ 13% on term hypothecation loan.

CAPITAL REQUIREMENTS

WORKING CAPITAL REQUIREMENT

Working capital estimation

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One month raw materials 58710
Cash for one month expenses (exclude
depreciation) 112500
Total working capital 171210

TOTAL CAPITAL REQUIREMENT

The total capital required at the beginning of year 1 to start with the business is as
follows:

Particular
Amount
Fixed capital 384000
Pre operating expenses 57500
Working capital 171210
Total capital 612710

FINANCIAL INVESTMENT PLAN AND SOURCE OF FINANCING

The amount of fund that will be financed through own source and the amount financed
through borrowing from bank is shown as follows. Basically for working capital needs,
the entire amount will be borrowed from the bank. The fixed capital investments are
divided into 2 categories i.e. production equipments and office equipments. 30% of
production equipments fund is financed through loan whereas 20% of office equipment is
financed through loan. The debt to equity ratio is around 40:60 which is considered an
optimal capital structure. Even according to Entrepreneurial finance by Fred Adler, an
optimal debt equity mix should be considered in order to achieve a trade-off. This mix
controls the cost of capital and also prevents the business from risk due to high exposure.

Particular Owners'
equity Loan Total
A. Fixed capital
Production equipments 55300 23700 79000
Office equipments 244000 61000 305000
B. Pre operating
expenses 57500 0 57500
C. Working capital 0 17121 171210

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 0
25591
Total 356800 0 612710
Percentage 58% 42% 100%

LOAN AND ITS AMORTIZATION:

The loan that the bank will provide will be a term hypothecation loan, that is the
ownership of the raw materials are transferred to the bank but the possession with remain
with the café owner. Hence to avail of this kind of loan, collateral will not be required.
The tenure of this loan is 5 years @ 13% interest annually. At the end of 5 years, the loan
as well as the interest is fully paid. The repayment schedule is as follows:

Loan Repayment Schedule

Loan Interest Total
Year amount 10% Principle payment
1 255910 25591 47168 72759
2 208742 20874 51885 72759
3 156857 15686 57073 72759
4 99784 9978 62781 72759
5 37004 3700 69059 72759
Total 75830 287965 363795

FINANCIAL STATEMENTS:
The following is the profitability of the business that shows earnings before and after
interest. We can see that there is an increase in amount of EBIT and as there is a fall in
the interest amount to be paid, the earnings after interest is increasing even more rapidly.

YEAR I II III IV V
19428
EBIT 0 326534 455748 625097 873335
Interest 25591 20874 15686 9978 3700
16868
EBT 9 305660 440062 615119 869635

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BREAK-EVEN POINT, RETURN ON INVESTMENT, AND RETURN ON
EQUITY

Year I II III IV V Avg

BEP (FC/S-VC) 91% 85% 80% 74% 67% 79%
Return on Investment (ROI) 23% 31% 32% 32% 32% 30%
Return on Equity (ROE) 32% 37% 35% 33% 32% 34%
Payback period

BEP:
The In 1st year the BEP is 91%, which means that when 91% of total sales are made the
revenue generated becomes equal to the cost incurred. Hence the sales made after BEP
point (i.e. after 91% in 1st year) leads to profit and we can see that the BEP has been
declining gradually till the 5th year, which is a very good sign for the business. The BEP
is slowly decreasing as the fixed cost slowly decreased because it gets distributed over a
larger volume as a result of increasing sales.

ROI and ROE:

The Company will be able to increase the return on equity as well as the return on
investment over time. The ROI of the company is good and it has been able to achieve an
average of 30% in five years. This is mainly because it has not been paying its earnings to
investors and retaining more for future growth and expansion of the company. This rate
of return (ROE) shows the return received by the owner on their capital. They have been
receiving 34% return on an average. With the bank interest rate at the low of just around
13% this return can be considered to be very good.

FEASIBILITY:

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Hence as a conclusion it can be said that this business is considered feasible. In summary,
the following are the reason why this business is considered feasible.

o Innovative idea: The idea of book café is very innovative as it also looks at
encouraging the reading habits among people. There many cafes and books shops
and there aren’t many that offer both these services under one roof. The location
of this place is also decided very strategically as it does have a huge impact on
service oriented industries.

o Financial feasibility: As we have seen, the capital requirement in this business is

not very high. Unlike the manufacturing industry where the gestation period is
really long, here the earnings are positive from the first year itself. The main
reason behind this is that it is not highly dependent on huge machineries and
equipments.

o The team: The profile is matched with the business to get the most out of the
employees. If their interest suits the job that they are doing then they will be
satisfied resulting into mutual benefits of individual as well as the organisation.

Though the business is competitive, the business risks are not very high. Thus this
business is considered feasible.

ACTION PLAN- ENTREPRENEURIAL STRATEGY

The entrepreneurial strategy that will be used is “maximizing customer’s value” so as to
create a satisfaction among them. Only if the customers get the maximum value out of
their experience in “sip n read”, they will repeat their visits which will in turn benefit the
company. Thus marketing plan has been designed accordingly to create value to the
customers. The company will invest on CRM through membership among customers
after the first year itself so that they feel a sense of belongingness.

16