evaluate the following business plan, identify as many errors as possible (except for a grammatical or structural sentence errors) and explain why they are significant need 5 errors

luxury cars which require special lubricants and filters. Initial cost analysis indicates that the average cost of oil, lubricants, and a filter for each lubrication service will be $8.00. Deducting this cost leaves $16.95 to cover fixed expenses and provide profits. Proforwa Cash Flow Statements, Income Statements, and an Opening Day Balance Sheet are in the appendix of the case. A break-even analysis is shown below based upon conservative estimates for price, variable expenses, and fixed expenses. Total Fixed Expenses Calculations: =B/E point in oil change transactions Unit Contribution Margin $4,031 Calculations: =237.82 oil change transactions $16.95/ per unit While the business will be open approximately 24 working days per month, the breakeven point will be conservatively estimated using only 20 working days per month. This calculation leads to a break-even point for the store of approximately 12 lubrications per day, five days a week. The break-even point would be only 10 lubrications per day if the store can effectively operate six days per week. Southeast Oil Inc, believes that the store is capable of averaging 20 lubrications per day. Thus, break-even analysis suggests a high potential for generating above average profits. (Please Note that break-even analysis included covering both principal and interest on the proposed loan as fixed cash flow items rather than accounting expenses). Pro forma projections Table 3 highlights the most recent financial performance of MeElroy's Oil Change service. It shows historical Sales, Cost of Goods Sold, and Profits. Table 4 shows projected Sales, Cost of Goods Sold, and Profits for 2021, 2022, and 2023. Table 3. Sales, Cost of Goods Sold, and Profits for (all values in dollars) 1 This business plan was edited for this assignment. It is based upon a teal business plan submitted to a bunk with a loan application for a client when I worked at an SBDC over 25 years ago. The names and locations were disgroised due to confidentiality. The actual business plat was edited to use the section headings from the textheok. Then, it was edited to be sure it had enough flaws and errors for each student to find at least five. No actual financial statements are available. Don's consider that a flaw. They exist, but they were saved on a throe and Hs inch disk which I can't aceess. The acraal plan and loan application were approved. The entreprescur got a loan to atart the oil chango buainess, his fint of four locations Appendix Loan Proposal Chuck Sanders Main Street Lake View, USA (999) 555-1234 October 6, 2020 Mr. John Davis, Loan Officer First National Bank Main Street Lake View, USA 55559 Dear Mr. Davis: Please find enclosed a loan application I am submitting in order to buy an oil change service in Lakd. View, USA. The documents I am submitting are based upon the earlier meeting we had. The following items are included in this application: SUMMARY OF LOANAPPLICATION STATEMENT OF SOURCES USES OF FUNDS STATEMENT OF COLLATERAL BUSINESS PLAN PROJECTED CASH FLOW STATEMENT (assume they are available and confim historical data) PROJECTED NCOME STATEMENT (assume they are available and confirm historical data) OPENING DAY BALANCE SHEET (assume they are available and confirm historical data) RESUME (not included for assignment) Please let me know if there is anything else you require. I may be contacted at home at (999) 555-1234 if you have any questions. I look forward to discussing this business opportunity with you. Sincerely, Taylor counties. 5 This part of the state is among a handful of areas that is growing at a faster rate than several other regions of the country. Traffic counts along the Elm Street have been as high as 28,000 vehicles per day, according to the state Department of Transportation. State Hyy 16 connects neighboring towns like Millford and Henderson to Lake View and the junction with Hwy 222 five miles from Lake View goes to nearby Piedmont City, which is adjacent to the Interstate Highway. In addition to Millford, Henderson, and Piedmont City, Hwy 63 starts just outside of town near the lake connecting Lake View and Copper Mountain. Copper Mountain has a few oil change businesses, but quite a number of people commute between Copper Mountain and Lake View to work at the local university. Table 1 shows Lake View and Jackson County. Table 1 is in the Appendix. Lake View is almost a "hub" of sorts for people traxelling anywhere east or south of the local area. In addition, several demographic factors support the opportunities for a "quick" lube service. One, as a college town, Lake View has many residents who do not have either the time or the resources (oil wrench, drainage container, ramp, etc.) to change the oil or check other vital vehicle fluids. Second, over 42,000 people live within seven square miles of Lake View. Among these people is a sizeable retirement community with a golf course attracted by the moderate winter weather and the quality of life of the area. The only real negative aspect of the lubrication business is seasonal fluctuation. Lake View is influenced by the university schedule. Therefore, sales are somewhat higher between Fall and Summer when college students are in school. However, much can be done to offset this trend. These options are discussed in the Promotion Strategy section. Advertising and other forms of promotion can "educate' the public about the need for year-round car care. In addition, other services such as light maintenance can be offered to provide alternative sources of revenue. Specific customers for the business are all car owners residing in the Lake View area. Customers will be encouraged to come to us because of consistent, quick service in a friendly atmosphere, with a special emphasis on customer satisfaction. Table 2 shows Lake View and the location of Lake View Oil Change Service relative to the university and Hyy 16 . Table 2 is in the Appendix. Segments The overall market for oil changes is actually a segment of the much larger automotive services industry. These services include auto repair, after market sales, and oil change services. We will compete in the retail oil change segment. This segment was made popular by Jiffy Lube and other major oil change companies as service stations began to decline and when consumers became more pressed for time to do other things. The retail segment includes those individuals that simply don't want to change their own oil and females which is distinguished from the people that don't want to change their own oil which usually, but not always, is restricted to male customers. These two segments will be our market niche or target market. The area is well represented by our two primary target customers: females and people too pressed for time to change their own oil. About 54% of students at the local university are women. In addition, the community has retirees and many professionals including staff and faculty at the university as well as individuals at three major employers in the community. Both seniors and professionals are either too busy or simply not inclined to perform Do-It-Yourself oil change at home. Target Customer We will emphasize two primary groups of customers. The first customer will be females. Studies by IBISWorld show that females are a large segment of the oil change market (IBIS World, 2018). According to this research, a typical female does not care to go to a dirty service and wait while their car is serviced. The previous owner did not try to accommodate the preferences of females. The local university has over 8,000 students and 54% of them are female. Lake View Oil Change Service will provide a clean waiting room where customers may sit and watch their vehicle being serviced or relax and read the paper or a magazine. In addition, our parking lot is large enough to allow customers to drop off their vehicle should they want to do so while they take care of other things during the day. The second group of customers was discussed in the industry analysis section. Both seniors and professionals will seek the services of a quick lube oil change service. The overall market is driven by the continued past pace of life. Research by IBISWorid confirms this segment as well (IBISWorld, 2018). Whether someone is a single adult, a senior citizen, or part of a family, they are seemingly on the go. In addition, Generation Y and Millennials value their leisure time more so than Gen X or Baby Boomers. They seek a work-life balance (Jenkins, This means they place even more emphasis on paying for convenient services to allow time for other activities. Marketing Plan This section addresses our basic market strategy, methods of attracting customers to include sales promotions and advertising. This section does not include a separate subsection for selling approach, sales force, or distribution channel as they are not pertinent to this business plan. We will be a retail service business focused on oil change and light maintenance services. We will not employ a sales force and we will only have retail distribution. Marketing Strategy Lake View Oil Service will have four advantages. First, we know from observing other oil change businesses in the tri-csunty area that our service will be exceptional. We have paid for secret shoppers using university students and found major concerns with other oil change businesses. Second, our signs will be new and inviting. Third, we will use social media. The previous owner did not adopt social media as it became increasingly popular. Fourth, we are simply going to have a friendlier atmosphere. The decor and atmosphere of the business will be much cleaner and comfortable for all types of customers, Often, oil change services that will lubricate your car and force you to sit in a small, cluttered waiting area. Employees will have an additional responsibility to maintain the appearance of both the service area and the customer waiting area. We will pay our employees to come into the store, with pay, for training to ensure they fully understand our emphasize on safety and customer service. Chuck Sanders is planning to buy from Patrick McElroy. We propose to buy out a current oil change business that is being sold by its owner. History The business has been owned by Mr. Patrick McElroy for twenty four years. He started the business after retiring from the US Air Force. The business has been profitable although he admits the last two years it was a little bit less profitable due to health concerns. His health issues and a desire to spend time with his wife led to the decision to sell the business. The following table highlights sales and net profit the past four years. Mr. McElroy manages the entire business. He is described as an owner/manager for the business. He has an office staff member that handles transactions when he is not in the office. He does not have an assistant manager. Historically, sales revenue grew to a peak of $278,000 in 2018 , but declined, as noted, when Mr. McElroy began experiencing health problems. The company has averaged 30% net profit margin for the past five years, including this year. Legal Form of Ownership The business is established as a corporation in the state and has requested a Sub Chapter S tax designation from the US Internal Revenue Service. Papers were filed and go into affect on the day of the acquisition of McElroy's Oil Change Service. Industry, Target, Customer, and Competitor Analysis This section highlights Key characteristics of the industry, market segmentation and our competitive niche. The analysis is based upon observations from the community and a report obtained from IBIS World, a market analysis research firm. Industry Analysis (Key Characteristics) The oil change industry is designated as NAICS Code 811191 - Automotive Oil Change and Lubrication Shops. 4 It is part of Sector 81 of the NAICS (Other Services except Public Administration). We will use the shorter term "oil change" industry hereafter. The oil change industry is expected to increase in the Southeastern and southwest due to increases in population in those areas. Well-managed oil change businesses should prove to be successful over the next 58 years as consumers are taxed for time. Services that provide an affordable alternative to Do-It-Yourself tasks have a good potential for success. Examples of these types of businesses include day care, landscaping (gardeners), and automotive repair (mechanic). The local area is part of a larger region which ineludes Jackson, Montgomery, and 4 NAICS is an abbreviation for North American Induatry Clasification 5ystem which replaced the old Standard Industrial Classification (SIC) in 1997. It was created so allow a 3 - country standard for Canadh, Mexico and the USA when the NAFFA treaty was signod. Statement of Sources and Uses of Funds Statement of Collateral The loan will be secured with the following items: Dr. Heriot's Note: The names, dates, and places in this assignment were changed at the request of Chuck Sanders. The assignment is based upon the actual experiences of the person described in the business plan with one major exception. Mr. Sanders started a new quick oil change business. He did not buy an existing business. Financial Statements? Pro Forma Income Statements - Not Provided to Students Pro Forma Cash Flow Statement - Not Provided to Students Pro Forma Balance Sheet - Not Provided to Students Historical Financial Statements from McEltroy Oil Change Service - Not Provided to Students Promotion Strategy (Promotional and Advertising) Several means will be available to promote the business. The mere fact that Lake View Oil Change Service will advertise their service will be an immediate advantage over the competition which do not presently promote their services. We will have an online presence and a new Sign facing the By Pass. Our signs will emphasize Southeastern Oil Inc. and the 16-point oil service. Additional methods will be considered after the first few months of business. All advertising will emphasize the convenient location and ease of access from the By. Pass. In addition, the Southeastern Oil Inc. name and specific items will be stated during any advertisements. Southeastern Oil Company will bring its NASCAR race car to town within 2 weeks of the grand re-opening in January 2020. This promotional event has led to as many as 120 lubrication services over a two-day Friday-Saturday period. This type of promotion will be done as frequently as Southeastern's schedule permits. Other promotional opportunities such as sponsoring local sporting events or teams may also be done. Mr. Sanders hopes to promote Lake View through the local high school. Credit and Pricing Lake View Oil Change is a retail service business. It provides oil change services and light mechanical services. Most transactions will be paid by credit card or debit card. We will accept most major cards. We will minimize the amount of cash we carry on location based upon our records of cash transactions. All cash receipts will be deposited at our local bank. We anticipate increasing pricing in the business. The primary change will be in becoming more efficient. The previous owner acknowledged that less effort was made to control operating costs. Thus, cost control rather than increased pricing will be emphasized. Cost control will be accomplished by hands-on management of the business. The previous owner was often not on-site during business hours. In addition, specific policies and procedures will be emphasized in employee training. Operations and Development Plan This section highlights important information about our service methods, facilities, inventory control and purchasing procedures. We do not have a development plan at the moment as the focus will be on a smooth transition from the past owner. We do hope to grow the business by adding two or three new locations, but that is not formally in a development phase. Operating Methods Lake View OCS will offer quick oil and lubrication changes, basic automotive maintenance, state inspections, transmission flushes, radiator flushes, and light mechanical work. The primary service will be to change oil and filters and lubricate the vehicle chassis as part of a 16-point service check. Employees will follow a standard checklist each time they service a customer's car or truck. This checklist will be documented and closely monitored for consistency lubricants for the chassis, windshield wipers fluid, power steering fluid, fan belts, bulbs, and windshield wipers will be maintained in inventory based upon projections and experience of the store owner. Initial stock amounts will be based upon the advice of Southeastern Oil Inc. Filters will be purchased from Auto Lubricants Co. They can supply 95% of our needs within 2 days. Auto Lubricants Co. is located 84 miles away. Purchasing Our inventory control system will be automated. All supplies are scanned before use. This information is maintained in our computer system and checked against established usage levels to trigger a reorder of items. Management Team The manager/owner of the business will be Chuck Sanders. Mr. Sanders has lived in Lake View since 2002. He was a manager/owner of a pub located at Silver Forest Apartments. This service-oriented business has provided invaluable experience in customer relations, government regulations, bookkeeping, inventory control, employee supervision, and other critical retail management needs. Mr. McElroy will stay with the business for two weeks after the acquisition to Mr. Sanders to ensure a transition to the new owner. Mr. Sanders will not hire an assistant manager or an office manager in the first three years. He will be an owner/manager of the business. He will have three employees, initially. He will have a clerical office associate and two service technicians. When he is not on-site the clerical office associate will be responsible for processing transactions and taking messages. The clerical associate will be paid an additional $3 per hour to do so. As sales grow, the Mr. Sanders will promote one of the two service technicians to operations manager responsible for supervising all vehicle services. He hopes to also hire additional service technicians. The clerical worker will continue to be paid to take care of transactions when Mr. Sanders is not onsite. Mr. Sanders will be sole owner of the business. There will not be any investors. He is not seeking investors. He is applying for a loan to buy an existing business. Financial Plan The financial plan includes a break-even analysis, pro forma finanoial statements (not actually included, but not an error or flaw to be included in your analysis). The break even analysis was provided because it was included in the original loan application. A break-even analysis is not included in the outline for a business plan used in the textbook, but was used in the real business plan presented to the bank. Break-even analysis The complete lubrication service will be offered at $24.95, based upon the recommendation by the oil supplier, Southeast Oil, Inc., for most cars with the exception of high performance or Summary of Loan Application NAME OF BUSINESS: LAKE VIEW OIL CHANGE SERVICE TYPE OF BUSINESS: OIL CHANGE AND LUBRICATION SERVICE NAICS Code 811191 ANNUAL SALES: projected 2021Sales (12 mos) $278,000 projected 2022 Sales ( 12 mos) $327,000 projected 2003 Sales (12 mos) \$359,000 FORM OF OWNERSHIP: Sub-Chapter S Corporation ADDRESS OF BUSINESS: Elm Street Lake View LOAN REQUEST AMOUNT TERMS INTEREST COLLATERAL $139,000 15 YEARS 7.5 PERCENT ITEM Building and Land $185,000 PURPOSE OF LOAN: To purchase McElroy's Oil Change in Lake View, USA. and to ensure customer satisfaction. The typical transaction will start with the customer being greeted in the waiting room or in their vehicle in front of the facility should they choose to remain in the vehicle. The service associate will ask the customer what they want after carefully explaining Lake View OCS's standard 14-point service. After determining the customer's needs, we will ask them to be seated while we service their car. They will have the option to stay in the car. The time to service the car will be approximately 18 minutes. However, the typical customer will be at the store about twenty-five minutes. We will also leave customers with the option to drop off their vehicle. Our parking lot is large enough to accommodate anyone that chooses this option. Facilities Lake View Oil Change will be located at 7172Elm Street. Elm Street is the local name for Hyy 16 which connects Lake View and the neighboring towns of Millford and Henderson. It will be located across the street from the university. The building is located on 0.80 acres of land. The building is 1,200 square feet. It consists of a guest waiting room, small office, storage area, and three-car service bay. There is a basement below the service bay. The building is 24 years old. Inventory The business will require only limited inventory. Oil will be stored in bulk in an underground storage tank installed and provided by Southeastern Oil Inc. Bulk storage will also The Offering Mr. Sanders will be sole owner of the business. There will not be any investors. He is not seeking investors. He is applying for a loan to buy an existing business. Details about the offering are explained in the Appendix. Mr. Sanders will invest equity in the amount of $66,000 and is requesting a loan of $139,000. The bailding and land will be pledged as collateral. As stated previously, Mr. Sanders is the sole investor in this business. He will be an owner/manager of the business. A sources and uses of funds statement is provided in the loan request. Laan Mr. Chuck Sanders is requesting a \$139,000 loan from First National Banik. Mr. Sanders is investing $66,000 of his own money. The Appendix has detailed information in support of the loan application to include a pro forma financial statements and historical financial records from 2018-2020. Assume other Financial documents (e.g, Cash Flow) were available (they are on 3 and 1/2 inch disks that I can no longer read)