Feasibility Analysis And Projected Financial Essay For Starting A Full-Service Restaurant Business In Malaysia.

Questions:

In your role as a first-time entrepreneur, you are required to prepare an individual written presentation to outline and explain the following:

1. The importance of creativity and innovation in entrepreneurship.

2. Your New Venture Concept based on a detailed feasibility analysis. 

3. Your proposed strategy and business model to explain how the new venture will work to achieve positive financial results. 

4. The conditions which must prevail to avoid failure.
 

A business plan is an important factor for any start-up business as it provides plan to the business and also indicates the future of the business depending upon the projected financial statement analysis. Here, in this report an entrepreneur intends to start-up a business in Malaysia in the service sector, such as a restaurant that will serve only Asian foods to the consumers. Thus, in this report a feasibility analysis and a projected financial analysis have been performed that indicates the feasibility of the proposed business. The positive economical and social condition will support the proposed business. In addition to this, the positive financial outcome of the projected financial statement analysis has also been performed. This indicates the feasibility of the business that is the particular entrepreneur will be able to start-up the proposed business as it will run successfully in future. 

An entrepreneur is defined as an individual who takes the risks of an enterprise with the aim to bring in change within the business and also aims to earn profit by inventing new ways to combine the resources (Bohlander and Snell 2013). The successful entrepreneurs add value to the economy for the broader group of stakeholders. Therefore, an entrepreneur can also be defined as an individual who develops the opportunities regarding economy by the procedure of innovation, business skills, funding and people. The stable economic condition of the country will help and motivate the entrepreneur to set up the new business (Byars and Rue 2011). Thus, it can also be said that the entrepreneurial procedure is the particular process that converts an invention into an innovation for earning economic profit. This report represents how a first-time entrepreneur analyzes the market, its competitiveness and its feasibility in order to start a business. Here, a first-time entrepreneur plans to start-up a business in Malaysia and focuses on the service sector. The entrepreneur intends to start-up a full-service restaurant in the country of Malaysia that will provide Asian foods. The reason behind this is that the Malaysia is a popular tourist spot. Moreover, Malaysia has a rich tourism industry, and this helps to bring in more tourists from various countries and continents every year. The growing tourism industry of Malaysia has put a positive impact on the economy of the country.  In addition to this, it can be said that the tourism industry has also indirectly put an impact on the food industry and has also affected the other business sectors of the country positively (Armstrong and Armstrong 2011). The increased numbers of tourists of various countries increase the demand for various types of foods in the country and thus it can be said that opening a full-service food restaurant in Malaysia is a good proposal for a start-up business. However, in order to ensure the success of the particular business, the following feasibility analysis and financial analysis have been performed in detail.

Feasibility Analysis

In present days, entrepreneurship is taken as the primary factor that helps in economic development. The entrepreneurs strive hard to develop more opportunities within the sector and provide enormous options of employment and finally provide a positive impact on the revenue generation, per capital income and lifestyle (DeCenzo, Robbins and Verhulst 2013). The other important factor of the entrepreneurship is creativity. It has been found that the main features or characteristics of the process of entrepreneurship are composed of innovation, economic importance, profit maximization, risk taking and job opportunities. Therefore, from these features only, it can be said that innovation is an important factor in case of the entrepreneurial process, as the mind of an entrepreneur revolves around various new ideas and various opportunities for innovation (Armstrong 2014). Entrepreneurship includes the spontaneous examination of present workflows of business and devises the ways to carry them in a more effective and efficient way, in terms of cost and time. Based on the characteristics of the entrepreneurs, a thorough surveillance of the entrepreneurial process indicates that the creative thinking is the most effective skill for every entrepreneur as this skill of creativity helps the entrepreneur to create or generate new ideas (DelCampo 2011). The skill of creativity allows an individual or an entrepreneur to devise interesting procedures that provides various benefits to the business persons. However, the close analysis indicates that the creativity is an essential factor for the entrepreneurs as this leads to innovation and also creates new ideas for gaining competitive advantage. The entire procedure of entrepreneurship is developed based on the creation skill and on the exploration of new ideas. Therefore, it is said that the ability of an entrepreneur is to generate new ideas and when these new ideas are efficient and feasible it provides the entrepreneur with an edge over the competition. Secondly, coming up with novel ways helps the entrepreneurs to develop or create his own product and thus the unique product or service provided by the entrepreneur helps to improve the particular business. Creativity skill helps the entrepreneur to create ways that will help or guide the entrepreneur to improve the existing service and/ or product. In addition to this, the skill of creativity helps an entrepreneur to start a new business and also to optimize it. Creativity and innovation makes the entrepreneur to think the unthinkable and this helps the entrepreneur to create and discover new products and services for his business. The versatile, unique, new and interesting products and services help the business to run successfully. The innovation and creativity are the skills that help the entrepreneurs to find the same pattern in various or differentiated ways. In addition to this, the development of the new inches takes place through entrepreneurship and creativity because the new aspects of the traditional business have already been explored. This change can be occurred by changing the form of the method of delivering the service and / or by changing the form of procedure of manufacturing the product. Thus, it can be said that all these factors can develop a niche market that might have a much potentiality in the business.

Projected Financial Analysis

The feasibility study is an evaluation and an analysis of a proposed project that helps in determining the technical feasibility and the feasibility regarding the estimated cost. This analysis also helps to identify if the project will be profit making or loss making (Dessler 2013). Therefore, before starting-up any business an entrepreneur should perform the feasibility analysis in order to ensure about the success of the business as this analysis indicates the technical feasibility, analyze the estimated cost of a start-up business and also analyze its profitability. Generally this study is taken into consideration when a large amount of sums are at stake (Harzing and Pinnington 2011). In this report, the feasibility analysis of a start up business that is a full-service food restaurant in Malaysia has been performed that will serve Asian foods to the people of the mentioned country that is the inhabitants of Malaysia and the tourists who visit the place. In this report, the feasibility analysis has been performed on the basis of the new venture concept. Thus the feasibility analysis has been performed in five steps, by focusing on each of the key elements of the proposed start-up business that is a full-service food restaurant in Malaysia.

• Product / Service
• Industry Attractiveness
• Market Attractiveness
• Organizational Feasibility
• Financial Feasibility

The particular entrepreneur intends to start up a business in the service sector. The first time entrepreneur intends to start up a full-service food restaurant in the country Malaysia. The reason behind this is that the population of the country Malaysia has a significant pool of consumers who are active and have evolving habits of eating. The increase in the consumption level of the beverages and the imported food also influence the food industry of the country in a positive direction. The population of the country Malaysia is around 35 million and it has been found that most of the population in the particular country is relatively young and only 32 % of the total population are under 15 years old (Hayton 2011). As per the statistical figure, more than 60 % of the total population of Malaysia is in the income group of middle to high (Ivancevich and Konopaske 2013). This represents the higher purchasing power of the inhabitants of the particular country and this also indicates the increased modern and sophisticated lifestyles of the people of Malaysia. The rate of unemployment in the country is also very low. Therefore, this leads to a greater consumption of various types of foods including the imported food and the beverages from various countries. As the economic condition of Malaysia is high and stable, the lifestyle of the people of the nation is also high and they can easily afford various types of foods from restaurants (Dessler 2013). It has been found that the consumers of the country are increasingly willing to dine out nowadays at the full range of developments that are available in Malaysia. These include - full-service food restaurants, fine dining eateries, casual dining eateries and fast food restaurants. Therefore, it can be said that as the income level of the people of Malaysia is high and the economic condition of the country is stable and growing, their lifestyle have also changed and this has changed their habits of consumption of foods. This changing nature of the people of the country has positive impact on the business plan of the particular entrepreneur that is of starting up a full-service restaurant in Malaysia. In addition to this, it can also be said that the country has a rich and developed tourism sector and is very popular for its tourists (Dowling, Festing and Engle 2013). The increased numbers of tourists also put positive impact on the food industry. Therefore, it can be said that the business plan regarding providing service in Malaysia i.e. a full-service restaurant is a perfect option. Thus a new business by an entrepreneur and the service of providing Asian foods will be appreciated by all its consumers. 

Starting a Full-Service Restaurant Business in Malaysia

The economic condition of Malaysia is well developed due to its enhancing tourism industry. Due to the influence of the tourism industry, the other industries have also been developed. One of these is the food industry. Therefore, it can be said that the food industry has also been developed well in the recent decades (Dessler 2014). The particular industry is much attractive for the particular entrepreneur as by analyzing the food sector of “Hotel Restaurant Institutional” in Malaysia, it can be said that at present there are about 2095 resorts and hotels that are registered with the Ministry of Tourism and there are about 170,000 rooms available across Malaysia. The occupancy rate in the country is about 75% or more (Prescott and Rothwell 2012). It has been found that in order to attract more international and local Muslims, some of the resorts and hotels have required certification of Halal, of which around 123 hotels have been approved by the National Islamic Authority as Halal (Mondy and Mondy 2014). Malaysia has a wider form of dining establishments that includes – full service food restaurants, cafes, fast food restaurants, food courts, food stalls, pubs, bars and eat-in bakeries. The particular industry is attractive for the particular entrepreneur as by market survey, it can be said that the demand of the Asian foods is high in the country. This implies that the start-up business of the particular entrepreneur will also run well in the country. Survey suggests that majority of the restaurants provide Asian cuisine along with the Chinese restaurants that dominates the high and mid end restaurants. The other dominating restaurants in Malaysia are – Malay, Japanese (various formats/ cuisines), Indian (various cuisines), Thai and Indonesian restaurants that generally dominate the local ones. As the particular sector is rising, the numbers of new entrants is also increasing. However, the existing companies in the particular sector are the main barriers to the new entrants, these include – Chilli’s Pub and Grill, Tony Roma’s, TGI Fridays, Outback, KFC, McDonald’s, Songket, Nai Kandar Pelita, Ah Koong Restaurant and many more (Price and Price 2011).   

The key buyers of the proposed business in the service sector are the people of Malaysia that is the inhabitants of the nation and the tourists who visit the place. The size of the potential customer base will be quite large. This is because the population of the country is composed of about 35 million and of this about 60 % of the total population has a high income level (Ivancevich and Konopaske 2013). In addition to this, the numbers of tourists in the country have started to increase with the passage of time. Therefore by combining both it can be said that the size of the potential customer base is much larger for the proposed business. The increased level of income and the well developed economy of the country indicate that the consumers of the country are increasingly willing to dine out (Noe 2014). This indicates the buying behavior of the consumers of the country that implies higher sales of the proposed business. The brand loyalty plays a vital role in every sector, but in Malaysia, the population is high as well as the numbers of restaurants are also more. Thus, as per the demand of various consumers, all the restaurants in the nation generally run well, especially due to the increased numbers of tourists. Therefore, it can be said that there is a huge probability that the proposed business will run well. The target market and the target customers of the proposed business are the tourists and the people of Malaysia who prefer to taste the Asian food or who have willingness to taste the Asian food. Various types of food items will be served by the proposed business. Thus, this will attract more customers and thus the revenue of the firm will increase. The innovation and the new ideas regarding the operation of the business will attract more customers and thus the revenue of the firm will increase in future (Mondy and Mondy 2012). The particular entrepreneur has to perform market survey and market research in order to access the information about the potential customers. The increased numbers of potential customers indicate the market attractiveness for the proposed business. 

Tourism Industry in Malaysia

The particular entrepreneur is a first time entrepreneur. Thus, he does not have any practical knowledge regarding business, but he has theoretical knowledge regarding the business and the management. The entrepreneur will take advice regarding the start-up of the business and the regulation and the operation of the particular proposed business from the people who are experienced in the same field. The entrepreneur might get support from the legal rules, regulations and policies of the government of the country. The unique, healthy, fresh, hot and delicious food will be served by the proposed restaurant and this will be considered as the organizational competency. The required skills that are required by the entrepreneur for running the proposed business successfully include the skill of creativity, innovation, managerial skill, ability to predict, understandability towards the field of business and the market (Mendling and Weidlich 2012). The business will be operated systematically and proper business model will be implemented in order to run the proposed business successfully. The essential resources that are required for launching the new proposed business are the man power, fund and intangible resources like patent, brand name and many more. However, there are various risks associated with the implementation of these resources, these are – if the company does not earn more revenue and profit then the company might suffer from making loss. The entrepreneur will invest his own fund as a capital of the proposed business and this will sufficient for running the business for first two years. The brand building, the increased numbers of customers, increased sales, complements to the service and the quality of food will provide energy and will also motivate the entrepreneurs to succeed in future (Rosa and Soffer 2013).

Start-up Capital:

For starting up business, financials are the main elements as the financials or the funds act as the fuel for the operation of the proposed business. The start-up capital costs are as follows:

Start-up Expenses	Amount (MYR)
Legal	7000
Logo	2000
Promotional Materials	5000
Insurance	8000
Computer	2500
Lease Expense	10000
Furniture	6000
Utensils	7500
Total Start Up Capital Required	48000

Therefore, after calculating the start-up expenses, it can be said that the start-up capital is MYR 48,000.

Working Capital:

The projection of the proposed business has been done for five years. Therefore, the working capital has been calculated for five years.                             

	Year 1	Year 2	Year 3	Year 4	Year 5
Current Assets (MYR)	24000	20000	35000	30000	40000
Current Liabilities (MYR)	10000	7000	12000	15000	18000
Working Capital (MYR)	14000	13000	23000	15000	22000

The projected working capital indicates that the requirement of the working capital for five years is volatile. Depending upon the increase in demand and increase in sales, the working capital of the company has also increased with the passage of time (Robinson 2012).      

	Year 1	Year 2	Year 3	Year 4	Year 5
Forecasted Sales Volume	10000	15000	20000	30000	40000

Suggested Prices:

Food Items	Amount (MYR)
Beverages	200
Snacks	1000
Starter	1000
Soups	550
Desserts	500
Main Meal Course:
Chinese	900
Indian	1000
Malaysian	500
Thai	700
Japanese	1000
Indonesian	950

Fixed and Variable costs:

Costs	Year 1	Year 2	Year 3	Year4	Year5
Fixed Costs (MYR):
Rent / Lease	10000	10000	10000	10000	10000
Vehicles	2000	2000	2000	2000	2000
Furniture	6000	6000	6000	6000	6000
Utensils	7500	7500	7500	7500	7500
Interior Decoration Expense	3000	3000	3000	3000	3000
Total	28500	28500	28500	28500	28500
Variable Costs (MYR):
Electricity	2000	3000	3500	3800	4000
Fuel for Cooking	1000	1500	1700	2000	2400
Salary	3000	3400	3800	4000	4200
Wages	500	600	800	1000	1200
Raw materials	2000	2500	3000	3500	4000
Others	500	600	700	800	900
Total	9000	11600	13500	15100	16700

Projected Margin:

	Year 1	Year 2	Year 3	Year 4	Year 5
Sales (MYR)	50000	60000	70000	80000	90000
Cost (MYR)	37500	40100	42000	43600	45200
Profit (MYR)	12500	19900	28000	36400	44800

For running the proposed business successfully, the particular entrepreneur should prepare a business plan. The business plan helps to run the business successfully as the business plan is composed of various business ideas, structure from various different angles that includes finance, marketing and operations. Therefore, for obtaining financing for the business, a written and formal business plan is prepared to represent it to the investor or lender (Mayes and Shank 2012). It has been noted that if the entrepreneur does not require the application of the financing, then at least for assembling, a proper business plan is required for the start-up business as it is considered as the start-up strategy. This helps in detailing the vision of the proposed business and this also helps the entrepreneur to guide the business. The second strategy is to know the customers of the company. This includes the entrepreneur should know about his business’ target market and target customers. This helps in understanding the market and present condition of the firm. Better understanding of the target customers and target market helps the entrepreneur to provide more innovative and creative products and services (Rothwell et al. 2012). The best strategy for knowing the customers of a particular business is the market survey and market research. Data and information can be gathered by performing survey or even by interview. These collected information and data also help in understanding the nature of the customers. Lastly, the particular entrepreneur should set some measurable objectives as these goals encourage the entrepreneur to run the business in a right direction and in a right way (Lindholm et al. 2012). The pre-determined measureable goals help the entrepreneur to adjust the objective of the firm if required. The measurable objectives also help to measure the progress of the business and without setting any goal, an organization or a start-up business can never meet its target. For accessing whether the target has been met by the business or not, the entrepreneur should check the measure of the business, the sales and profit report of the business on a daily basis or in a weekly or monthly basis, so that the business can reach its target (Stone 2011).    

Conclusion

The implementation of proper strategies within a start-up business is not sufficient to run the proposed business successfully in future. The business model that a start-up business should follow is composed of three factors and can be analyzed in details by implementing a set theory. These factors are – customer desires and external realities, what the entrepreneur sells and the internal activities and lastly, the objectives of the firm and the financial targets (Kaplan 2012). The sub-set of customer desires and external realties intersect with the subset of what the business sells and the internal activities (Torrington 2011). On the other hand, the subset of customer desires and external realities intersect with the goals of the business and the financial targets. Similarly, the objectives of the business and financial targets intersect with the subset of what the company sells and its internal activities. The intersection point created by all the three subsets help to determine the profit of the company or the business. When a business or a company follow this particular business model of set theory, the particular business will run successfully and it will also help to achieve the positive financial results regarding the new venture (Weaver 2012). As the three essential factors of the business model are interlinked to each other and intersect at a mid point, it can be said that the particular business model thus helps to provide positive financial result to the particular organization or business. 

In order to avoid any failure in the operation and regulation of the proposed business, the particular entrepreneur should follow the financial analysis model or the financial model development. The financial model development consists of seven steps. These include – the client objective, user needs, plan and structure, specifications, build and code, testing and auditing and lastly user review (Wilton 2013). From this it can be said that the particular proposed business should identify the client objective and as per the demand of the consumers the particular business should prepare healthy, tasty and fresh food for capturing more market. However, if the demands and needs of the consumers are fulfilled and satisfied by the consumers, then the customers would start preferring the food and service of the proposed restaurant and thus they would become loyal customers to the firm (Truss, Mankin and Kelliher 2012). The needs of the users are thus considered as an important factor as if the needs of the consumers are fulfilled then they would become satisfied and thus, sales and profit percentage of the firm would increase. Proper planning and structure is necessary to run the business effectively and efficiently. Accurate planning will help to regulate and operate business easily and this will help the owner of the firm to earn positive cash inflows. Some specifications or unique item of the service should attract more customers and this will lead the financial condition of the business to a positive direction. Examining and auditing of the financial statements of the business will help to identify any negativity within the firm and thus it will provide scope to the owner of the business to modify or to rectify them. This helps to strengthen the financial condition of the firm. The user review also helps the owner of the firm to understand the mentality of its customers to the service and the quality of food provided to them by the company. This review of the consumers also help to modify the regulations and operations of the firm and thus, it also indirectly helps the firm to run in the right direction in order to earn positive financial values and also to avoid failure in the business (Werner, Schuler and Jackson 2012).   

Conclusion

Therefore, it can be concluded that the particular proposed business plan of setting out a full-service restaurant in Malaysia is a feasible business as it will earn huge profits in future. The feasibility analysis of the business plan indicates that the large population, large percentage of people from higher income group, the lifestyle of the people of the country and the enriched tourism sector will help to run the proposed business successfully in future. In addition to this, the financial analysis of the proposed business have also been performed that includes the projected sales and profit percentage, suggested cost of the various food items, projected margin, fixed and variable costs and forecasted sales volume. All these financial analyses indicate that the total cost of the business at the initial stage and even in the projected five year financial statement is lower than the revenue or the sales of the company for all the projected years. This implies that the particular proposed business plan is feasible and will run effectively, efficiently, smoothly and successfully in future and will earn higher return in each of the five projected years starting from the initial year as the demand of the Asian food is much high in Malaysia. 

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