The Sweetest Tooth Case Study

The Sweetest Tooth

To: Janelle Veenstra

From: Robin Black

Date: November 24, 2015

Re: Addressing Financial Situation at the Sweetest Tooth

I want to make several suggestions regarding the current financial situation at “The Sweetest Tooth”.

I am concerned about how your current finances are being handled. There are several ways to turn your business around to generate a greater profit to support yourself and the business. I do believe this requires immediate change.

Moving forward, I recommend that you change locations for your shop; I understand that it is in a prime location but unfortunately your revenues cannot support the rent. I would also like you to minimize your waste, this can be done by discounting soon to be expired products, it is better to sell products at cost rather than throwing them out. Additionally, I recommend that as you transition to a new, cheaper location that you capitalize on advertising. Since you are a new business it is important to generate traffic into your shop to gain a loyal and customer base. Unfortunately, the first year of business can be very stressful and rarely do new business owners turn a profit. I do believe that your business has great potential once you begin to manage your funds properly.

Sincerely,

Robin Black

Introduction

Janelle Veenstra, owner of The Sweetest Tooth, is an inexperienced entrepreneur who is having serious financial problems with her new gourmet cupcake shop. Having very little experience with running a business, Janelle has run into some problems since opening up her shop in March of 2013 and may be blind to the necessary tasks of starting a business. Firstly, she has not advertised or priced her products appropriately. Secondly, Janelle leased a prime location in February 2013 at a price her revenues cannot support. With all the expenses that come with opening a new business Janelle cannot afford to pay her personal expenses and has decided to take a loan from her parents to cover her personal costs. Without seeking a financial advisor Janelle could lose her business and other personal assets.

Analysis

Shown after an analysis of account information, The Sweetest tooth is not generating enough profit to sustain itself and Janelle’s personal expenses. She had a net loss of ($359.35) in April and even though she increased sales by $306.23 in May, she continues to show a net loss of ($53.12). In order to continue business and turn a sustainable profit Janelle can increase revenue by lowering her costs. She can decrease costs by moving her business to a cheaper location, preferably with a used kitchen. She could also reduce overhead cost by minimizing the amount of supplies she keeps in stock. Like most new businesses, it is unlikely to make a profit in the first year. Janelle must spend time and money marketing and promoting her new business in order to increase traffic and gain loyal customers. To reach a diverse range of customers, Janelle can look into preparing other baked goods or specialty drinks, much like Starbucks. Some costs that Janelle has incurring have affected her personal finances as she is using her apartment to bake cupcakes for the business. This is increasing her electricity, and other household expenses that should business expenses.

Conclusion

Janelle, a new entrepreneur with no experience, should look into hiring someone to help her get the business rolling. The sweetest tooth has potential to be a very profitable company. Janelle must learn how to manage waste and reduce her expenses. Until she reaches out for help or takes the time to manage her supplies and money, Janelle will continue to lose money. She should continue with business and make some personal sacrifices as it is hard to predict the profitability of a company