chapter 12: business planning process Flashcards
common mistakes regarding business plan
making a business plan and not referring back to their plan or not being flexible enouhg to modify their bus plan as the internal an externa bus enviro chnages ie sticking too rigidly can be detrimental
unfavourablel conditions: new compeititors
favourable conditions: new marketing opp
both require modification of plan seize opp
what is a bus plan
a written statement of the bus’s goals and steps taken to acheive them
a comprehensive plan will assist when arranging finance, show bus properly organised and managed
what are the main reasons for not preparing a bus plan
- waste of time and effort –> impulsive deicisons and mistakes
- expensive
- need to be an academic to plan
- already a small business owner
- tell me what i already know
- ill do it later dont need at this stage
what are common elements of a bus plan
executive summary
goals
tsrats
bus decrip and outlook
management and ownership
operational plans
marketing plans
financial plans
human resource plans
idefntify the benefits of developing a bus plan
- help tests the viability of the bus
- assists the bus to be proactive rather than reactive
- assists in maintaing bu ops focusing attention on the goals and objectives
- indicates owner’s ability and lvl of commitment
- forces justification of plans and actions
- identifies the bus’s strengths and weaknesses
define planning
the preparation of a predetermined course of action for a bus. it refers ot the process of setting objectives and deciding on the methods to achieve them
what are some sources of info to help a bus develop a bus plan
having access to up to date, relevnat and accurate info will allow bus to prepare much superior bus plan –> employee input in goals or R&D may extensively contribute to planning
-accountants
- finance brokers
- consultants
- bank managers
- solicitors
define SWOT analysis
involves identification and analysis of the internal strengths and weaknesses of the bus, and the opportunities in, and threats from, the external environment
powerful tool that can be used at all stages of the planning process
strengths and weaknesses (internal analysis) –> stronger financial position –> set new goals
opps and threats (external analysis –> identify unmet or unsatisfied demand –> convert threats into opps
define a visions statement
boradly states what the bus aspires to become in the future
a clear visison statement should be concise, creative, focused and realistic –> what it values and what it hopes to achieve
main purpose: guide and direct owners, manager, and employees. acts as a benchmark to measure all the bus’s decisions and operations
what is usually included in a bus’s goals
what bus expects to acheive over a set time eg:
- to become the largest bus in the market
- imporve market share
- to provide a reasonable return for investors
- contribute to the wellbeing of the community
commonality: motivating force behidn the bus
define objectives
the action plan breaks down goals into objectives - specific statements detailing what a bus needs to achieve in order to accomplish its vision
outline the different types of goals and objectives
- strategic goals: focus on long-term, broad aims and apply to bus as a whole eg increase market share
- tactical objectives: focus on mid-term, departmental issues and describe the course of action necessary to achieve the bus’s strategic goals eg researching consumer tastes
- operational objectives: focus on shot-term issues and describe course of action necessary to achieve tactical and strategic eg focus groups
define long term growth
ability of bus to continually expand and use its asset structure to increase sales, profits and market share
important goal to ensure bus is sustainable in future, sustainable competitive advantage and consistent marketing plan
what are some other strategies that successful buses have used to achieve long-term growth
- customer feedback
- supplier and customer partnerships
- cost
- sigma six - 99.99% of all manufactured products are defect free
define an organisational structure
framework in which the bus defines how tasks are divided, resources are used and departments are coordinated
what are the benefits of a properly implemented organising process
- establishes a chain of command that results in an orderly way of comms within a bus
- creates a coordinated work enviro by outlining sensible guidelines for responsibilities for various activities
- provide sense of common purpose –> all employees working towards a common goal/objective
- organises resources is moat efficient manner
define resource allocation
resource allocation refers tot he efficient distribution of resources so as to successfully meet goals established
- establishes delegation of tasks
adequate resources must be devoted to the marketing plan
what is the formula for total costs
total costs = fixed + variable costs
what is a break even analysis
determines lvls of sales (total revenue) that need to generated to cover the total costs of production ie break even point is when profit = 0
what is the break even sales quanitity formula
total fixed costs divided by unit price - variable costs per unit
what are cash flow projections
shows chnages to the as position brought about by the operating, investing and financial acitivities pf the bus
- expected cash flow receipts (cash inflows
- cash payments (cash outflows)
- over accounting period (12 months)
- month by month projection of the flow of money
able to:
- estimate bus’s bank balance each month
- identify extent and duration of possible cahs shortfalls
- clear indication of how much capital investment bus reqs
- bank loans officer evidence for good credit risk
cash flow statement is PAST cash flows whereas cash flow projections is expected cash flows in FUTURE
define monitoring
the process of measuring actual performance against planned performance
reqs two distinct steps:
1. establishing forecast performance standards
2. comparing actual performance with forecast performance
a performance standard is a forecast lvl or performance against which actual perfomance can be prepared eg
- a 5% increase in monthly sales
can evaluate results thru budgets, sales statistics and cost analyses
what questions should a bus owenr ask themself to evaluate a bus’s performance
- how the bus is performing in terms of profit- whether the bus is performin as planned
- whether its performance has improved over time
- how its performance compares to competitors
this task is evaluation - the process of assessing whether or not the bus has achieved its stated goals
what are the three areas that need constant monitoring and evaluating
sales, budget and profit
why are budgets important
- provides insight wehther bus is achieving goals
- monitorign performance
- limit expenditures
- create a financial road map
- secure loans
- bring on board new partners and attract investors
- provide basis for administartive control
- direction of sales effort
- production planning
- control of stocks
- price setting
-financial reqs - control of expenses
- production cost control
should be regularly compared with actual revenue and expense amounts to detect any discrepancies
what are the reasons for evaluating budget and profitability
calculate the three financial ratios:
- net profit ratio
- gross profit ratio
- return on equity ratio
