Management is the key cornerstone for any expansion, without sufficient expertise it would be impossible to sustain any type of growth. The current store although not controlled at a shop floor level on a daily basis by the management team does benefit from close supervision, this means that the underlying drive and enthusiasm they have for their business shows in the form of customer service and closely monitored stock and staff control.
If another shop was added to the business would the team have the same control as they currently enjoy. Jason currently spends most of his time on administration with the addition of another shop his work load would double and as such any contact with either shop would be very limited, Emma spends most of her time buying, with the addition of another shop her work load could increase twofold if different products were stocked in the other store, her time would also be spent out of both stores.
If the expansion went ahead then they would both need to re analyse their current management structure. As it stands now there is no mention of any type of management than themselves, as the current work climate stipulates a higher than
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One key benefit from employing a management team is the expertise that they bring with them, both Jason and Emma have completed studies that they need to run the business so far, but to sustain any type of growth a diversion of skills are required, by introducing managers with strengths in the fields that both Jason and Emma lack would strengthen the position of the company and help spread the workload that they both have helping them to concentrate on controlling the company from a level where they can control every element without their time being taken up on tasks others could do.
Jason and Emma would need to carefully analyse their own skills before employing managers, the basics in any company need expertise in Human resources, finance, logistics and of the products themselves.
They currently have six full time staff and nine part time staff, the most time intensive administration job within a business is human resources, legislation changes on a daily basis from both directives from our own country and through the European courts, with the addition of more staff then Jason would not be able to keep control of all the payroll and other employee needs (Pensions, health and safety, holiday pay etc ), there would probably be a need for an administration team to help with this side of the business, this would contribute to the expense of opening another store, although to control costs it would be possible to sub contract the work to an accountant, but it would still be down to Jason to oversee the operation, this in itself would increase his workload by two to three times its current level.
When employing a larger number of staff the possibility of sickness, theft and loss of staff through loss of enthusiasm or lack of job satisfaction is very common, although if staff were employed on the basis they could work at any branch, then the initial problem of staff shortage could be moved sop that an over staffed store could replace the staff shortage. Finances Forward planning in business requires a sound knowledge of cash flow analysis and profit and loss accounts. Looking at fine wear it is clear that when the last expansion took place it took two years before they made a profit, as this shows historically that the need additional income or capital to expand is there sufficient for their next two years needs available now.
They intend to buy or lease a shop, with the current economic climate of low interest rates and low inflation it would be tempting to buy the shop outright on a commercial mortgage, however there is uncertainty at the moment on how long interest rates will remain low and if the current government can keep inflation down, current economists insist that we are heading for recession, this would effect high street stores very badly and with the addition of cost from new stores is there enough net profit to pay out the additional costs whilst sales are down.
As the business is making a net profit of 600 per week a bank would advance them the money they need however they would require a bond or guarantee, as they both have equity in the house then that would be the bond the bank would probably ask for but this would mean as a partnership that they would lose their house if things went badly. An option would to become a limited company, there are currently tax concessions for doing this and this would also limit their liability to whatever they have invested within the company although full accounts would need to be audited every year and a copy sent to companies house.
The bank though would probably hesitate at lending money to their firm even though they are established without the security of their house. An alternative is a venture capitalist, they could forward the money needed for expansion and then get their share back plus their profit after say five years, this would see them through the historical loss stage into a more secure profit stage. Expansion would save them money through economies of scale, the more they buy the bigger discount they would get, this applies to simple things like carrier bags and refuse collection up to the payroll where an accountant would not charge that much more for 20 staff as they would for just 10 staff.