Business planning and growth Flashcards
What is a business plan?
a document which sets out future plans for a business
What is a business plan usually made from?
the busniess idea
aims and objectives
target market
location
profits
What is profit?
Revenue - total costs
the money you have left after paying for business expenses
What is revenue?
the total amount of money brought in over time before deducting anything
What are the total costs of a business made from?
fixed cost and variable costs
What are fixed costs?
costs that do not change with rate of output eg rent over a certain amount of time , rent may change but DOES NOT affected by output
What are variable costs?
costs that change with level of output eg the more sandwiches made by a cafe in the more bread will be used therefore bread is a variable cost
What is gross profit?
the profit a business makes after variable costs have been deducted
What is net profit?
the amount of money a business makes after all costs and expenses have been deducted
Benefits of business planning
help plan for future
help show if idea is realistic
Drawbacks of business planning
can make you become funnel visioned
may not be accurate
What is growth?
increase in a company’s size, revenue, market share and profitability over time
What are the two main types of growth?
organic and inorganic
What is organic growth (internal growth)?
occurs when expansion happens from within the company
When does organic growth occur?
franchising
opening new stores
e-commerce
outsourcing
What is inorganic growth (external growth)?
happens when firms join together through a merger or takeover
What is a franchise?
when a business sells the right to another business to use its name and sell its products
Advantages of selling a franchise
can grow quickly and less money
franchisee provides some of the finance
Disadvantages of selling a franchise
lose some control
danger of problems with one franchisee affecting the whole brand
have to share profits
What is a franchisee?
the person buying the finance
What is a franchisor?
the person selling the franchise
Advantages of buying a franchise
established brand
share marketing costs
learn from other franchises
Disadvantages of buying a franchise
have to share profits
sales may suffer if another franchisee gets a bad rep
What is outsourcing?
when a company gets other organisations to produce its products for it, if demand is growing but the business does not have time or does not want to take the risk of expanding its own production facilities it can outsource its products to another organisation.
- enables a business to grow quicker
- need to be carful controlling quality and it may cost more than producing the items itself
What is a merger?
two business merge to become a new entity
Advantages of a merger
international expansion
increased revenue and market as company has more power as it’s twice as big
Disadvantages of a merger
clash of cultures
possible communication problems eg now too many employees
unreliable merger partners
What is business takeover?
one business will take over another (buying more than 50% of the shares)
Benefits of business takeovers
buying a competitor eliminates threat
less expensive to buy than opening new site
Drawbacks of business takeover
may be additional legal costs
retrain staff
What is inflation?
measures how quickly the price of goods and services are rising
What does inflation do to people?
reduces consumer spending power when wages don’t increase
Example of inflation
if a soda costs £1 and that rises by 5 cents compared with a year earlier then soda inflation would be 5%
