C4E Week 3 In Class

Week 3:

At the beginning of the week I mainly focused on the Foam Home and reworking the finances and P+L statement.  The cost of goods seemed exorbitantly high, especially for coffee, so I did some research myself yo figure out where the $9,000 a month cost in Part 5 was coming from.  The first results that came up were articles about the recent surge in coffee prices from $1.20 to $1.75 a pound.  While this might have been bad news for the rest of the coffee business, it was a huge relief for us at the Foam Home.  To solve for our COG per month for coffee I researched the weight of coffee beans per cup.  Then I multiplied that by our estimated cups sold per day, and from there per month.  It came out to under $400.  I did the same thing with coffee, tea, flour, and sugar to complete the rest of our COGS.  Are abysmal margins and low profits became slightly less abysmal and low, but we were not going to be millionaires any time soon.  It got me thinking about Starbucks and how the behemoth could possibly make so much money when the expenses of operating a coffee shop were so high.  I think the answer is not in the individual shop.  While I don't have the finance data from any one Starbucks franchise, I would hazard that their revenue wouldn't pop off the page and wow investors.  I think the secret to the success of the company is the sheer volume of operating venues.  Even though each one doesn't generate millions, they each retain decent income and when you add all of these returns together, that's when the magic happens.  I could be 100% wrong, but we calculated our returns based on 120 customers per day.  While some Starbucks serve 500 customers per day, they also have more people working at a time, so their costs are not too dissimilar to ours.  Another reason may be that the larger a company becomes, the more efficiently it will run because it has all the data points needed to calculated how to generate maximum returns.

Towards the end of the week, I focused on the $300 project.  We had a monumental marketing snafu by a couple of group-mates feeling adventurous (which I did not condone) that required cleaning up, but I think we were able to remove the posters before too many people were aware of their presence.  The biggest issue with our project right now is the price point for each calendar.  There were a few students who are very involved with BHS Athletics and were willing to shell out $15, but for those not featured in it, or not overly supportive of the athletic office, most were not going to buy one and often expressed surprise at the price tag.  We started to offer a premium 2 for $20 deal to soften the financial blow, but most people are still uninterested.  They only cost us $5.28 to make, so we can continue to lower the price and still make money.  We also broke even today, so every dollar we make from here on out is profit.  We tried to sell calendars before the Boys Basketball game on Friday, but only one person bought one. We are planning on selling on Tuesday before the girls BBall game and use a more aggressive sales strategy.