You are a consultant who has been approached by a company about to embark on a p
ID: 2812886 • Letter: Y
Question
You are a consultant who has been approached by a company about to embark on a project (identify any project of your choice). The client would like to prepare a document to be used for the purposes of ‘selling’ the project to potential financiers.
Prepare an information memorandum for the project to be presented to the potential financiers. Among others it should contain the following:
1. The full business description of the project.
2. An analysis of the key risks facing the project and the ways of mitigating the risks.
3. The proposed financing structure and justification for using that particular structure.
Explanation / Answer
First understand, an Information Memorandum is a written description of the business for which the client is seeking funding from equity investors or debt finance. The objective of an information memorandum is to raise funds for operation of the proposed project. In that respect it is a sales document.
Proposed Project – ABC Wedding Consultants for which client wants to raise funds.
Information Memorandum
Executive Summary
ABC Wedding Consultants is a complete service company that offers complete consulting services for weddings, holy unions and anniversaries. Our consultants are experienced and dedicated professionals with many years of experience in event planning. ABC is unique because we listen to the needs of our customers and work with them to create the event of their dreams. Our customers' wishes become our commands. So, if our client wants a Western, tropical, Las Vegas or more traditional wedding, we can assist them. Our services include weddings, honeymoons, receptions, anniversaries consultations, budget planning, answers to questions on the label, as well as full references to florists, stylists, entertainers, musicians, etc.
We offer a large number of packages and services specifically tailored to the needs of each couple. We are confident that this business venture will be a success and we estimate that our net income will increase modestly in the second year.
About ABC Wedding Consultants
ABC Wedding Consultants is a newly created company offering wedding services, holy union and anniversary for brides, spouses and other family members. We are a full-service wedding consultancy group and our goal is to give back "fun" by effectively planning a wedding, a holy union or an anniversary party.
The keys to our success are the following:
1. Service needs of our customers quickly and efficiently.
2. Maintaining excellent working relationships with vendors such as florists, hairdressers and bridal shops.
3. Always maintain a professional image.
Main risks that this project could face and risk mitigation strategies:
We are well prepared to take control of any wedding disasters. We have action courses to manage risks in all kinds of break scenarios that we could possibly think about.
Potential risks can be
1. Weather conditions
2. More number of guests than expected
3. Shortage of material, food, etc.
4. Technical problem
Project control process
To avoid or mitigate these uncertain risks:
1. Establish the basic plan – blueprint of wedding arrangements
2. Start ordering the materials and then start the arrangements
3. Review of activities every 3 days for some activities, review every 3 hours on the wedding day.
4. Backup of electricity, like the generator, check if all the lighting and audio systems work correctly or not.
5. If the materials ordered and used are within the budget.
6. Coordination with all the members who take care of each activity.
7. Establish an alternative plan in the event of unforeseeable conditions.
Competition and buying patterns
The area in which ABC Wedding Consultants is planning to run their business, there are more than 1000 marriages registered each year, which creates a great market potential for this line of business. The competitive analysis conducted by the owners of the company showed that there are currently 15 companies offering similar type of wedding planning service in this sector. However, most traditional competitors offer only a limited line of services such as catering, floral decorations or gifts. In fact, of these 15 competitors, only 3 offered a range of services comparable to those that ABC Wedding Consultants is planning to offer its customers.
Financing Structure:
This business project will begin as a simple proprietorship, owned by its founders XYZ and ABC. As the business grows, the owners will consider re-registration as a limited liability company or as a company, which is best suited to future business needs.
We estimate that our initial costs will be $ 40,000 (including legal costs, logo design, advertising, direct mail and related expenses). For the first two months of business activity, an additional $ 25,000 will be required on the bank account as working capital. Start-up costs must be financed in equal parts by the personal funds of the owners. Once the company starts to grow (after a few months), the company plans to raise funds balance of equity capital and debt funds as company don’t want to lose control of decision making in many hands. Furthermore, based on estimated and analyzed market needs and trends, the company will start generating sufficient operating income to pay interest to lenders. Thus, the company expects to have a debt-to-equity ratio of 1.
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