Coffee Shop Business Plan Essay Example

conducted an internal audit of the business and decided to push its venture even further. They reevaluated their initial business plan and realized the popularity of their roasted bean product.

Despite the beverage being responsible for only 20% of revenue, a popular bean generated 80% and garnered interest from a local market buyer. The buyer's request would require HannaH to rethink their business, leading to reevaluating the roasting process and partnering with a Costa Rican farmer. This allowed for closer quality monitoring and an increase in bean production for a planned supermarket chain supply. However, the expansion needed more funding. To solve this, HannaH moved from beverage production to wholesale coffee bean sales and invested in a larger facility focused on roasting beans. Finding the right investor could aid in the expansion which can also be costly.

(www.go4funding.om, 2010) Investing in a business that requires over a million dollars may lead to seeking a Venture Investor Capital, as done by Hannah who found Dixie Partners, a local venture capital firm. In agreement, the firm invested $3 million towards constructing a facility that is large enough for roasting coffee beans used in production and received a 50% share from the business in exchange.

Over the course of eight years, HannaH's successful operations led to the employment of approximately 200 more individuals. However, in order to expand further, Dixie invested $4 million for $1,200,000 shares in 2003 and $8 million for $1,500,000 shares in 2006. As a result, the five-year loan term was renewed twice - once in 2004 and again in 2007. Additionally, employees were issued with additional shares worth $400,000. The original small business vision has now transformed

into a large corporate entity complete with a board of directors that facilitates coffee distribution throughout the United States.

S. plans to obtain funding through an IPO, aiming to secure $20 million in new capital with an additional $20 million in SEO. However, IPOs bear a degree of risk and may result in private equity firms losing capital. (www.businessweek)

In 2010, according to com, Hannah improved in her decision to work with investors when the board of directors opted to utilize the proceeds from the IPO to expand the company. In August 2009, a year later, SEO received a cash offer whereby additional shares held by each owner, namely Hannah and Natasha, were sold, followed by the sale of Dixie's shares. The first two owners sold $4,000,000 worth of shares each while Dixie sold $2,000,000 worth. The resulting proceeds were then allocated with some being utilized to settle the term loan and the remainder directed towards expansion.

Dixie ceased to be a part of the company's ownership after its liquidation. Additionally, $50,000 in shares were given to employees as compensation which later proved to be a shrewd business decision. The CEO change in 2010 caused stock per share to plummet from $20 to $5 prompting Hannah and six other employees to undertake a leveraged buyout of HannaH with the aim of revitalizing it. They started buying shares and by the time they announced their LBO bid, Hannah had bought 5,000,000 shares while the remaining employees had purchased an extra 1,000,000.

The purchase of $7,400,000 shares at a cost of $7.50 per share was financed by the group through a mix of equity investment, bank debt, and a private placement

consisting of a semi-annual ten-year coupon bond worth $30 million. The intention is to publicly register the privately placed debt in the coming year.

The current debt is callable and convertible in five years, with a conversion ratio of 50 and a face value of $1000, along with a 5% coupon rate. This means that the holder of a convertible note can exchange it for shares of common stock at an agreed price, providing the company with comparable funds. (source: www.)

wikipedia.com, 2010) When looking for ways to revive a business, a callable bond can be a wise choice. This type of bond offers the advantage of its price going up and allows the issuer to redeem the bond before maturity. On the other hand, a convertible bond has its pros and cons. It offers delayed equity financing, delayed dilution of common stock and can be offered with a lower coupon rate. However, it comes with the risk of diluting common stock and loss of control for the issuer.

(www.investopedia.com, 2009) Hannah's financing decision was wise and has the potential to enable her to regain complete control of her company, which she founded initially.