Assignment # 02

SME Management (MGT-601)

Submitted To: Dr. Ch. Shahzad Ansar

Submitted By: Mahnoor

Date: 02/08/2021

VU ID: mc210200465

Session: Spring 2021

VIRTUAL UNIVERSITY OF PAKISTAN, LAHORE

Question:

Requirement:

Amjad has working experience of an ice cream parlor selling variety of ice-creams, juices and
coffee etc. After being laid off, he has decided to start his own business. Selling “ice cream and
shakes on wheels” is an idea he is fantasizing on. He wants to work hard to put his dream to
reality. These days he is working on business idea. You are required to help him develop his
idea in the following areas:

1. Should he borrow from bank or rely on his personal savings and borrowings from friends and
family? Justify your opinion as well? 4 marks

2. What should be the product mix of his business? 2 marks

3. What will be the human resource requirement for his business? 2 marks

4. What is the utilities cost estimation? 2 marks

Answers:

1. Starting a new business at first seems to be difficult. As we know that if we borrow a loan
from bank it will also cause interest money when returning it. A business at first, is not a
thing to rely upon because you are not sure whether it will run or not. So, starting a new
business a Amjad should rely upon personals savings and if he is needed more money he
can ask his friends and family for that. So, my opinion is that he should start his business
relying on his personal savings rather than borrowing money from bank.

2. As he is going to sell Ice cream and Shakes the product mix of this business will be:
Different flavors of (I) Ice creams (II) Shakes (III) Juices (IV) Customer’s satisfaction is
compulsory, so these should be sold at reasonable rates.

3. As Amjad his starting is business on a stall, so it is obvious that he will not be requires so
many employees. As of my opinion, he should not hire anyone as it is the start of his
business and he is not sure whether his business will run successfully or not. Hiring an
employee will be a financial burden on him and he will have to give some of his profit to
employee which he will hire. So at start, Amjad should do his business chores by himself.

4. Utility cost estimation is that value that comes out by adding all expenses and cost in a
given amount of time. For business startup, he should add all the expenses like expense
of materials or ingredients used in making of ice cream, cost of fruits for making shakes
and juices. If he take a loan from bank and hires an employee then, he should add interest
money of bank as well as salary of his employee. So, these total expenses are collectively
called or known as Utility cost estimation.