The business will consider the costs in order to stay in business (Marron, 2014); (Kidder, 2012 ). a) Upfront Costs
Since the business is new, there will be several starting costs before official opening. Upfront costs consist of the purchase of furniture and fittings (table, chairs, coffee machines, installation of EFTPOS (electronic funds transfer at point of sale) and computers, cutlery, and front decoration (Ilasco and Seto, 2012 ); (Spencer, 2010). Advertising expenses will consist of the advertising campaign in the initial year. The advertising drive will be geared towards increasing sales to cater for the other costs (Marquis, Demand Media, 2014). Materials for shop decoration will be used to attract new customers. The total cost will include the cost of employing an interior designer. In addition, the business will consider the bond for the rent. This is because the expense must be paid prior before the business is opened. There will be other upfront costs that will include the certificates and legislations required for the business opening (Department of Health, 2014). b) Fixed Costs
Owing to the scenic area of Melbourne, the high cost of rent must be taken into account. Utilities like lighting, heating, telephone lines, internet router and air conditioning have to be considered before the official opening. The business will choose a cheap electricity supplier. There are many to choose from (Smart Utilities, 2014). For an attractive design of the display in the shop, an interior designer with experience will be sought once per year. The cost associated with this will be recorded as expenses for design. Besides, the parking bays rental will be a yearly fixed cost paid to Melbourne City Council (Hamer, Currie and Young , 2011). The parking bays will be provided to increase revenue. The business will take legislations into consideration, because set annual fees will have to be paid to the relevant bodies to ensure business continuation. c) Variable Costs
These are the expenses that will change with the output of the business. The main variable cost in the cake and cupcake shop is raw materials used in the production of cupcakes, coffee and cakes such as lollies, vegetables, fruits, flour, milk, coffee beans and chocolate (Leach and Melicher, 2014). The cost of vegetables and fruits will change depending on seasonal and weather changes. There will be other variable costs like package expenses: boxes, bags, staff wages and utilities. The workers in the shop will include
Junior casual staff
Wages will be paid fortnightly. Additionally, the business will offer staff uniforms and training opportunities.
There will be allowance of discount expenses owing to the high-inventory turnover and the need to supply fresh products. On special occasions, the business may have deals or offers that will reduce the unit profit. There will be other expenses like machinery maintenance, new fittings and insurance. These will be required as the business grows. Resource Requirements/Mapping
It will be very easy to get the key employees as it will only involve placing adverts on the street notice boards. There will be an added cost of interviews, as well as paying the Melbourne City Council (City of Melbourne, 2014).
Property for lease is available in the area identified. Due to the scenery of the area, the cost of lease is high. However, the expected returns are high. The business premises will be gotten under a one-year lease. This will save the cost that may be incurred in paying monthly costs. Similarly, it will avoid the costs associated with monthly rent increases. Financial Resource
The total startup cost is $130000. The business will raise $30000 and $100000 will be obtained from the bank as loan. Costs for maintenance will be catered for by the revenue from the business. Investment Size
The business plans to raise $130000 to meet its startup cost. The funds will be used for: Developing the companys cupcake and cakes store location
Financing for the first year of operation
Capital to buy baking equipment and ovens
The company will contribute $30000 to the venture. The remaining $100000 will be financed by the bank as loan. Projected Startup Costs
Initial Lease Payments and Deposits
Company Vehicle and Lease Deposits
Miscellaneous and Unforeseen Costs
Total Startup Costs
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Available at: http://dmarron.com/2009/11/28/cupcake-economics/ [Accessed 11 05 2014].
Meg Mateo Ilasco, Catherine Seto, 2012 . Mom, Inc.: The Essential Guide to Running a Successful Business Close to Home. Illustrated ed. San Francisco: Chronicle Books. Melbourne, C. o., 2014. Rates and valuations. [Online]
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Paul Hamer, Graham Currie, William Young , 2011. Parking Price Policies A review of the Melbourne congestion levy. Australasian Transport Research Forum 2011 Proceedings , 1(1), pp. 1-16. Spencer, P., 2010 . Start a Cupcake Business Today. London: InformationTree Press. StartupBizHub, 2014. Starting a Cake Business. [Online]
Available at: http://www.startupbizhub.com/starting-a-cake-business.htm [Accessed 11 05 2014].
Utilities, S., 2014. Compare Electricity Rates in Victoria. [Online] Available at: http://www.smartutilities.com.au/electricity-comparison-victoria/ [Accessed 11 05 2014].
Wilson, D., 2011 . Bakers Field Guide to Cupcakes. Unabridged, reprint ed. New York City: Houghton Mifflin Harcourt.