Unit 2: Finance in the Hospitality Industry

Topics: Balance sheet, Variable cost, Revenue Pages: 12 (3291 words) Published: April 24, 2013
Unit 2: Finance in the Hospitality Industry
Task 1
As an employee of Alpha Beta services my aim is to help small business owners or people think of starting a business within the hospitality industry by informing them of the funding available for these businesses and income generation for businesses and service industries. With small businesses or people thinking of starting a business is probably always the biggest problem. Below is a list of some of the most popular funding and start-ups available: * Loans: Loans are one of the most popular sources of funding. There are two types of loans secured and unsecured. The difference between the two is that with a secured loan the borrower initiates some assets and an unsecured loan is a loan that is not initiated by any assets. Assets also known as goods can be anything from business equipment, inventory or a receivable. The first is the time over which it takes to pay the loan off (the term) and the interest rate. According to Pakroo (2010) a majority of business loans are short term from between one to three years. In addition, Pakroo (2010) also stated Banks are the most popular place where business and service industries get their loans from. * Investors: There are people who contribute in financing your business, they are called investors. Investors usually take a significant amount of equity or ownership (a certain percentage) in the business, but the investment that they make in financing your business does not have to be paid back to them. There are two main types of investors; private and angel investors. According to Cobb (2012), an angel investor’s capital in a new business is considered to be a high risk investment since the new company has not yet recognised a solid track record of success. * Sponsorship: A sponsor can be an individual or a group that provides financial support. For example, O2 spends £6m a year sponsoring the former millennium dome which is now as the O2 arena. * Small Business Schemes: Small business schemes are intended to encourage new and small growing businesses, to bring wealth and ultimately create jobs * Grants: There are two types of grants, direct grant and repayable grants. A direct grant is a cash award, which is often given out for activities such as training, export development or staffing. A repayable grant is a scheme where cash funding is offered for a project with the intention that the sums are paid out of future revenues. However, if the project fails, the grant is written off. * Franchise: Buying a franchise or an existing business if often the right way for certain individuals. In addition, according to Keup (2012) individual buy franchise because there is a “lower risk of failure and/or loss of investment than if you were to start your own business from scratch”. According to Mendelsohn (2004), franchising is a method of marketing goods and services which knows no boundaries in terms of business categories. * Lease Schemes and Hire Purchase: Leasing schemes and hire purchasing are financial facilities which permit a business to use an asset over a fixed period. With leasing schemes ownership is never passed to the business customer as with the hire purchase the business customer will normally be responsible for maintenance of the equipment. They are both similar in a sense but both have different characteristics.

In every business or service operation the main goal is growth. Therefore, having a method or strategy of generate income is vital. There are a number of methods and strategies to generate income, a few are listed below: 1. Expansion of Service: Providing catering services at a different price for special events. For example, if you own a business that supplies buffet menus to parties (£12.00 per guest) and are called to buffet a special event you can slightly increase your prices (£22.00). The fact that you have expanded you services to also catering...
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