the elements of a business plan

8/8/2019 The Elements of a Business Plan

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Marketing

Marketing is a total system of interacting activities designed to plan, price, promote and

distribute products to present and potential customers.

y Involves a wide range of activitiesy Is directed at a wide range of both ideas and productsy Stresses the importance of satisfying exchanges- that is, something in returny Is not limited to the activities of the business

Successful marketing uses the four Ps:

y Product: Brand name, packaging, positioning and warrantiesy Price: List price, discounts, credit terms and payment periody Promotion:Advertising, sales, promotion and publicityy Place: Location of markets, warehousing, distribution

Accounting and Finance

Accountingis a managerial and administrative tool that involves the recording of financial

transactions so that a clear summary of what has happened to business money can be

traced over time

The main accounting reports and statements are:

y Balance Sheets: Annual or interim balance sheetsy Budgets: E.g. cash budgets, sales/income budgets, balance sheet budgetsy Cash Flow Reports: Statements of liquidity (e.g. monthly or quarterly cash flow

statements)

y Revenue Statements:Also called profit and loss statements or income statements

Accounting provides information about the following:

y Profitability and return oninvestment

y Trends in earning, borrowing, salesand so on that together indicate

the risks the business faces

Financial status/position

y Cash status/positiony Financing informationy Cash flows

This information will encourage; Good decision making, planning that is purposeful,

confidence in the businesss management and accountability


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Finance refers to how a business funds its activities for instance where it gets the money

to trade why it chooses to use certain lenders as well as the cost, risk and benefits of

different types of borrowings

y Debt Finance is money borrowed from external lendersy Equity Finance is money borrowed from internal lenders

Monitoring

Monitoringis the process of measuring actual performance against planned performance.

The process involves constantly asking two questions about business plan:

1. What does the business plan want to achieve that is, what are its goals?2. Are these objectives being achieved?

Such monitoring involves two distinct steps:

y Establishing forecast performance standardsy Comparing actual performance with forecast performance

A performance standard is a forecast level of performance against which actual performance

can be compared.

A performance standard can be for example:

y A 5% increase in monthly salesy A production quota of 1000 units per week.

Evaluating

Evaluating is the process of assessing whether the business has achieved stated goals.

Once measurements have been collected in the monitoring process, the business owner can

identify and investigate any discrepancies in comparison with the or iginal planned

outcomes. If they arent achieving desired results, they must work out where they are

failing.If they are, they should examine what is making it succeed and re -use these

strategies.


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Calculate COGS, gross profit, net profit/net (loss)

Gross profit is the term given to the sales less cost of goods sold (COGS) or, mathematically.

Gross Profit tells the business how much its mark -up is on the cost price of the goods it hassold. This is calculated by:

Gross Profit = (Sales COGS)

Given that opening stock is the value of stock that the business has at the start of the

financial year and that closing stock is the value of stock on hand at the end of the financial

year. This is calculated by:

COGS = (Opening stock + Purchases closing stock)

Net sales are the amount of revenue a business has earned from sales when the effects ofsales returns are deducted. This is the way to calculate it in the revenue statement:

Net Profit/Net (loss) = Expenses Total Revenue

Opening Stock is the value of stock that the business has at the start of the financial year.

Closing Stock is the value of stock on hand at the end of the financial year.

The SWOT analysis

SWOT analysis is a strategic planning method used to evaluate the Strengths,Weaknesses,Opportunities, and Threats involved in a project or in a business venture.

Strengths

y Locationy Managementy Any aspect of business that adds value to your product or service

Weakness

y Locationy Managementy Damaged Reputation

Opportunity

y A developing market such as the internety International Market


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y Mergers, joint ventures or strategic alliancesThreat

y New Competitors in your markety Price wars with competitorsy Taxation

The Importance of Business Planning

The planning process is a series of actions to achieve an objective set by the business. The

planning process acts as a link or bridge between the owners ideas and the actual operation

of the business; it is a way of turning dreams into reality.

Any business with a plan has direction, which ultimately saves money, time and effort. The

business plan needs to analyse the whole business by examining all parts of the operation.

As a result, each part of the business can function effectively and achieve its ob jectives,

helping the overall success of the business.

The Importance of accurate financial and business forecasting using

Financialforecasting is important for several reasons. First, it enables management to

change operations at the right time in order to reap the greatest benefit. It also helps the

company prevent losses by making the proper decisions based on relevant information.

Organizations that can create high quality and accurate forecasts are able to "see what

interventions are required to mee t their business performance targets" (Vadasz).

Forecasting is also important when it comes to developing new products or new product

lines. It helps management decide whether the product or product line will be successful.

Forecasting prevents the company from spending time and money developing,

manufacturing, and marketing a product that will fail.

Accurate Financial

1. Good records help increase profitability by providing the financial data to help youoperate more efficiently.

2. Accurate and complete records enable you to identify all your business assets,liabilities, income and expenses. This information can then be compared to


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appropriate industry averages to help you determine what phases of your business

operations are strong and which ones are weak.

3. Good records are necessary in order to prepare current financial statements likeyour Income Statement/ Profit and Loss Statement, your Cash-flow Projection, and

youre Balance Sheet, all of which may be required by your banker a nd will be

necessary if you ever seek additional funds.

4. Good records are also beneficial when the time comes to file taxes. If you havekept meticulous records, you will not over- or underpay, you will have

documentation in the case of an Internal Revenue Service audit, and can help you to

maximize your deductions.


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The importance of Target Market

Doing business without knowing what your target market is will prevent you from reaching

your objectives: increased sales, market share or brand awareness.

Choosing your Target Market:

I. Identify Potential Customers

There are two types of customer groups that you can target: individual consumers or

other businesses.

II. Conducting Market Research

III. Choosing a Target Market

y has easy access to your products and services, whether it is by visiting your store,or ordering by phone, fax, email or your Web site

y is not inundated with other products and services that are indistinguishable fromyours

y is willing to pay a price for your products and services that all ows you areasonable profit margin

IV. Compiling a Customer Profile

y Just as a mission statement guides the operation of your company, a customerprofile will guide your sales effort. Develop an overview of your target customers

so that you and all of your employees are clear about whom you are selling to.

The importance of employees

Employees must be regarded as the companys biggest asset. They are the primary builders

of a profitable organisation the quality of the companys employees in turn; determi ne the

profitable success of the business.

o Without them, the company would cease to exist (i.e. the backbone of the workforce)

o Providing a safe, enjoyable working environment leads to happy workers which leadsto a more positive working environment and business image

o It takes a strong team to get the job doneo They are the ones who develop the relationship between the customers i.e.

Answering the phone, handling complaints, the ones trying to gain more customers

They may be overlooked, but they are the eventual success of the business.


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Hiring Staff

Many sources are available for a business looking to hire staff:

o Temporary/casual serviceso Schools, universities or TAFE collegeso Internal searcheso Public employment agencies for example, Employment Nationalo Private employment/recruitment agencieso Advertisements in the media

Selecting a candidate for a position is important the decision maker must choose

appropriate devices for screening applicants, until they find the most suitable person.

ApplicationF

orm

Candidate outlines information about themselves such as name, address, personal

history, skills and experience.

Written Tests

These assess aptitude, intelligence or ability however they are not always reliable as

the sole indicator of an applicants suitability for a position.

Performance Tests

Stimulations of situations that occur in that particular workplace that require theapplicant to address activities and situations that will be apart of the particular

position. For example, the use of mac hinery or computer equipment.

Interviews

The most common device used in the selection process. It most cover a set of

common questions that allows a consistent basis for selection.

Background Checks

Verifies information on the application form by contacting referees for informationabout the persons previous experience and performance.

The above selection process helps employers assess the need for promotions and pay rises

and identifies needs in r elation to training and development.

the elements of a business plan

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