Business Plan
The hotel will be located in high-end traffic area in Bahamas, and will serve high profile customers that include government officials, business community, professionals as well as tourists. The luxury hotel will enter into contracts with several companies in the location such travel companies, suppliers and in some cases government institutions. Therefore, this points out the need to craft comprehensive legal action that will be executed by the lawyer hired by the hotel. The luxury hotel will have to consider legal matters that might arise after the start of the business. This will ensure that the number of litigation that will arise will be minimized through well-crafted legal strategies. This will ensure that the reputation and productivity are not affected by such litigation. Therefore, the owners of the luxury have designed legal action that will deal with suppliers and contracts (Pinson 23).
Contracts
Business contracts classically comprise a negotiation procedure in which different terms to which every party should abide as stipulated. The negotiation process might take days, weeks or months, reliant on the contract as well as the contractual accountability of each party. Contracts may also comprise a process for making changes or addendum to the agreement. The luxury hotels located in Bahamas will use contracts to make sure that a definite level of service is maintained or that competing hotels do not have access to explicit economic resources. In addition, the luxury hotel will use service contracts to chart the explicit duties the hotel will undertake in a contractual agreement. These contracts classically are used when the luxury hotel contract with other businesses to execute services, like maintenance, technical support or call-center operations (Pinson 23). Thus, service contracts typically comprise information relating to price for every service and the frequency at which the hotel will perform the services. The luxury hotel will use these contracts to make sure that they do not finish the work without being compensated; furthermore, the luxury hotel will use non-compete agreements to safeguard their unique products and services from being imitated by the rivals. This is businesses frequently use contracts to put in force non-compete agreements.
Therefore, non-compete agreements will allow the hotel to forbid other hotels from providing goods or services in the economic market. These contracts fashion tactical relationships between two hotels and permit them to offer distinctive goods or services to customers. The luxury hotel may also use non-compete agreements to limit the kind of services provided by former workers who have definite knowledge concerning the hotel’s particular business services. The luxury hotel will enter into several contracts, which will constitute to the need to develop a comprehensive plan to prevent any form of breaching such contract. Since the luxury hotel serves high profile customers that seek accommodation in the hotel, it will paramount that they enter into contracts before being allowed to seek accommodation. The luxury will hire an attorney to deal with contracts. This is because contracts frequently comprise tricky legal terms, which many business owners fail to appreciate. Attorneys may offer clear information on the benefits of business contracts and whether the luxury hotel must agree to explicit contractual terms (Pinson 23). The following are contracts and agreements of the luxury hotel:
Suppliers
Suppliers will play a leading role in ensuring the luxury hotel gets the needed supplies in terms of materials, food, and other resources needed to make the business going. The luxury hotel will outsource most of the functions and delivery of goods needed to be used to suppliers. This means that there is a need for the luxury hotel to have clear agreements with suppliers while outsourcing. The suppliers in some cases can breach the agreement concerning the delivery of some goods needed, which will attract legal action. On the other hand, suppliers may sue the luxury because may be they will fail to comply with some provisions of the outsourcing agreement. Therefore, the luxury hotel has the legal duty to comply with the agreement they entered with suppliers to avoid any form of litigation that will affect the reputation of the hotel. Suppliers, on the other hand, can breach the outsourcing agreement, which will demand that the hotel hire an attorney to deal with the matter (Covello & Hazelgren 18).
Financial Plan
Financial Budget
Base Model with 100% Equity Financing
- In this condition, the focus on equity financing offers a true IRR value
Debt versus Equity
- 75% Equity Financing: 25% Debt Financing
- This is the suggested situation as it will best support the company’s risk and profit levels.
- This focus on equity financing could be the best alternative as it lowers the risk of the business due to profit and loss sharing.
- The luxury hotel may use 25% of their equipment as well as land assets to use as security for a loan on some of the cost of financing.
- The debt will be financed utilizing a secured loan at 7 percent interest rate.
- Moreover, the equity will be financed by the owners of the luxury hotel who will presume all of the equity financing risk (Covello & Hazelgren 19).
- In this case, equity financing could be about $87,751 and debt financing could be $16,249 (Pinson 23).
- IRR = 24.0%
- NPV = $19,313
- Cash flow in year one and two correspondingly are $12, 281 and $(8,493).
- 4% Equity Financing: 96% Debt Financing
- In this situation, the owners of the luxury hotel could use largely debt financing that would increase the risk due to fixed obligations.
- In this case, equity financing could be $4,000 and debt financing would be $100,000.
- IRR = 77.8%
- NPV = $60,188
- Cash flows for year one and two respectively are $3,086 and $(17,689).
- In this case, the IRR is unnaturally high, and the cash flows situations are deteriorated, so this is not a perfect alternative of financing.
Pro Forma Income Statements
In the luxury hotel pro forma income statements, the average growth in sales for the projected two years will be calculated and used as the base prediction for the next financial year. From the information from the forecasts, the standard deviation will be calculated and used to determine the optimistic and pessimistic forecasts for the future. Growth rates will be held constant, indicating a consistent approach in future years. All the calculations will be based on the financial data for the sales forecasts and will be believed to predict luxury hotel’s future growth (Covello & Hazelgren 19). These figures provide valuation for the hotel, which is found below.
Annual Income Statement
The income statement of the hotel looks healthy, and this promises that the luxury hotel will meet its objectives, which is profitability.
Statement of Cash Flow
Works Cited
Covello, Joseph A, and Brian J. Hazelgren. The Complete Book of Business Plans: Simple Steps to Writing Powerful Business Plans. Naperville, Ill: Sourcebooks, 2006.
Pinson, Linda. Anatomy of a Business Plan: A Step-by-Step Guide to Building the Business and Securing Your Company's Future. Tustin, CA: Out of Your Mind & into the Marketplace, 2008. Print.
