InstaCart Financial Feasibility
License: InstaCart will obtain a license to engage in food delivery business from Brent council at £52 per annum.
Furniture: InstaCart will spend £15,000 on office furniture and fittings. InstaCart being a service business does not have any other capital expenditure.
Marketing: InstaCart will spend £20,000 on pre-launch marketing promotion and 5% of total revenue on on-going marketing efforts.
Revenue: InstaCart will charge customers £1 per mile. Each rider is expected to cover 30 miles per hour. InstaCart will hire 20 riders working 40 hours a week. InstaCart projects revenue to increase by 10% every month for the first year of operations. In addition, InstaCart will earn 10% commission from hotels. Riders will earn a commission of 50% of total revenue they earn.
Utilities: InstaCart projects utilities to average £1,200 per month. The utilities include electricity bills and telephone bills.
Administrative Expenses: InstaCart will hire eight full time customer service employees at £15 per hour. Each employee will work 40 hours per week. The employees will be responsible for receiving calls and dispatching riders. Administrative expenses are calculated as follows:
Salary per employee = number of hours x rate per hour x number of weeks in a month = 40x £15 x 4 = £2,400
Total wages = Number of employees x wage per employee = £2,400 x 8 = £19,200
Return on investment: InstaCart has a 330% return on investment, and payback period of 4 months. The return on investment is calculated as follows:
ROI = Cumulative profit – initial investment/Initial investment x 100% = (576,356- 110,052)/110,052 x100% = 424%
Earnings: InstaCart is projected to earn £576,356 in the first year of operation.
References
Brent Council, (2017). Licence fees | Brent Council. [online] Brent.gov.uk. Available at:
https://www.brent.gov.uk/business/licences/licence-fees/ [Accessed 1 Feb. 2017].
Prime Location, (2017). Check out this property to rent on PrimeLocation!. [online]
PrimeLocation. Available at: http://www.primelocation.com/to-rent/commercial/details/42457057?search_identifier=f04e160c7987415d868756e23cfebb3d#3tvTikLMo3MmC9YH.97 [Accessed 1 Feb. 2017].
