There has been an increasing trend of healthy consumption, resulting into the development of a new market segment comprising of individuals and communities that are health conscious. In particular, the concept of organic consumption has been increasingly getting popular, inspiring the rise of companies such as 9 Aqua, whose sole objective is to provide proven healthy and more natural foods. 9 Aqua promises the delivery of goods produced from natural bases, which are not only healthy but also provide opportunities for continuous health support. From the projected financial statements and the SWOT analysis of the business, it is clear that the company is set to grow and to be profitable in the coming years. 9 Aqua has significant competitive advantages over some of the early entrants into the market, which can help the company to grow beyond its current size. Furthermore, there is an opportunity for the investors to earn from their funds through taking advantage of the new consumer trends.
Significant competitive advantages for 9 Aqua
Compared to other companies manufacturing soft drinks and beverages, 9 Aqua comes with a unique value proposition which creates a strong competitive advantage over its competitors. For instance, the products are made from healthy materials. The incorporation of natural fruits into the soft drinks manufactured by the business is a unique value proposition that is also aligned to modern consumerism (Beverage market report 2018, 2018). This health benefit is often associated with higher premiums for goods, which is a competitive advantage in that the company can earn higher margins per unit product relative to substitutes. Secondly, the company serves a unique customer segment, which is committed to making an impact to the community both through environmental conservationism and through encouragement of healthy consumption (Al-Taie, Rahal, AL-Sudani, & AL-Farsi, 2015). With the changing trends towards organic consumption, 9 Aqua will benefit due to the advantages of early entry into the organic drinks and beverages market. Additionally, the company has a strong distribution chain and a fast delivery schedule. Timely delivery can affect customer perceptions and customer satisfaction significantly; hence having a robust distribution system is a competitive advantage. The company can be assured of access to its products through its active distributors, reducing the probability of substitution due to underserved markets. The high quality production processes and availability of technology to foster the delivery of consistently good quality product, which can also be considered a competitive advantage for the company. Taking advantage of the organizational strengths and opportunities that exist can be a good way to ensure sustainable competitive advantage. Moreover, the organic products market requires continuous innovation and intensive supplier scrutiny to maintain organic integrity. Through the commitment to healthy consumption, it will be possible for the company to achieve this.
Realistic financial projections
From the financial projections made for 9 Aqua, it is clear that the company has significant potential for profitability. The company sales projections, cash flow and the various ratios are all indicative of a good financial outcome in the future. Various financial indicators are available for evaluating the feasibility of a project. According to Bjornsdottir (2010), financial information including cash flow statements, and the balance sheet, are used to evaluate projects for profitability. The profitability of the project should determine whether investors opt for it or not. From the financial reports shared for the company, some of the features that stand out include the debt- to –equity ratio; current ratio; the return on investment and the cost of goods sold. The debt to equity ratio for the company is consistently less than 1 over the 3 year period for which the projection has been made. This indicates that the company will have a higher percentage of equity financing relating to debt funding over the three years of start-up. The current and the quick ratios are both indications of the potential profitability as a ratio of the expenses to the revenues. Similarly, the return on investment can help the organization to identify areas in which there is potential for revenue reception. A high return on investment is an indication of profitability as evidenced in the case under consideration. With a negative return on investment for the first two months only, the financial reports show that the company will probably break even within the third month. The cost of the goods sold is also set at 10% throughout the first few months of the operations, which would mean greater profit margins through those few months. From these reports therefore, it is deductible that it is financially feasible to grain from 9 Aqua.
Investors consider several factors prior to making the decision to start a business. 9 Aqua particularly offers an excellent opportunity for the investors to earn from their inputs. The first two months would be the only difficult time for the business, probably because of high expenses in the form of CapEx items, on which they have to invest only at the start of the business. After the second month however, the business promises profitability. The multiple opportunities available for expansion in the organic drinks market also offer a good opening for greater profitability of the company. While the rate of return promises to be high after the initial three months, the investors in the business have to be aware of the financial risks associated with the business.
Business exit plan
9 Aqua promises to be a sustainable business that will be profitable in the long run. However, there could still be need to exit the business, or for an investor to reduce his/ her stake in the business as a result of various reasons. One of the most probable reasons is the desire for business expansion. With the current debt to equity ratio, the company will be operating at high stakes to the investors. Consequently, an investor may decide to lower the stakes by trading his/ her shares to increase operating budgets while at the same time maintaining a low debt to equity ratio. The reasonable exit plan in such a case would be to work with a financial adviser or institution, who would provide guidance on the best way to offer unlisted company shares to a buyer. Furthermore, the same strategy can be used in case the business owners/ investors desire to quit altogether and to sell the business to a new owner. Alternatively, the investors may opt for a management buyout in order to reduce business stakes (Hayes, 2019). Each of these approaches help to sustain the buyers’ financial position through change of company ownership and/ or stakes. The choice of exit strategy will be influenced by several factors including the level of control or involvement that the investor intends to maintain in the business and the desired changes in the business.
Al-Taie, W. A. A., Rahal, M. K. M., AL-Sudani, A. S. A., & AL-Farsi, K. A. O. (2015). Exploring the consumption of organic foods in the United Arab Emirates. SAGE Open. Retrieved from journals.sagepub.com/doi/full/10.1177/2158244015592001#articleCitationDownloadContainer
Beverage market report 2018 (2018, Apr. 5).Research and Markets. retrieved from www.prnewswire.com/news-releases/global-health-beverage-market-report-2018-300624945.html
Bjornsdottir, A.R. (2010). Financial feasibility assessments: Building and using assessment models for financial feasibility analysis of investment projects. University of Iceland. Retrieved from skemman.is/bitstream/1946/4452/1/Assessments_fixed.pdf
Hayes, A. (2019, April 22). Business exit strategy. Investopedia LLC. Retrieved from www.investopedia.com/terms/b/business-exit-strategy.asp