chapter 12: business planning process

Question 1

common mistakes regarding business plan

Answer 1

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

Question 2

what is a bus plan

Answer 2

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

Question 3

what are the main reasons for not preparing a bus plan

Answer 3

• 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

Question 4

what are common elements of a bus plan

Answer 4

executive summary
goals
tsrats
bus decrip and outlook
management and ownership
operational plans
marketing plans
financial plans
human resource plans

Question 5

idefntify the benefits of developing a bus plan

Answer 5

• 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

Question 6

define planning

Answer 6

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

Question 7

what are some sources of info to help a bus develop a bus plan

Answer 7

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

Question 8

define SWOT analysis

Answer 8

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

Question 9

define a visions statement

Answer 9

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

Question 10

what is usually included in a bus’s goals

Answer 10

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

Question 11

define objectives

Answer 11

the action plan breaks down goals into objectives - specific statements detailing what a bus needs to achieve in order to accomplish its vision

Question 12

outline the different types of goals and objectives

Answer 12

1. strategic goals: focus on long-term, broad aims and apply to bus as a whole eg increase market share
2. 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
3. operational objectives: focus on shot-term issues and describe course of action necessary to achieve tactical and strategic eg focus groups

Question 13

define long term growth

Answer 13

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

Question 14

what are some other strategies that successful buses have used to achieve long-term growth

Answer 14

1. customer feedback
2. supplier and customer partnerships
3. cost
4. sigma six - 99.99% of all manufactured products are defect free

Question 15

define an organisational structure

Answer 15

framework in which the bus defines how tasks are divided, resources are used and departments are coordinated

Question 16

what are the benefits of a properly implemented organising process

Answer 16

• 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

Question 17

define resource allocation

Answer 17

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

Question 18

what is the formula for total costs

Answer 18

total costs = fixed + variable costs

Question 19

what is a break even analysis

Answer 19

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

Question 20

what is the break even sales quanitity formula

Answer 20

total fixed costs divided by unit price - variable costs per unit

Question 21

what are cash flow projections

Answer 21

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

Question 22

define monitoring

Answer 22

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

Question 23

what questions should a bus owenr ask themself to evaluate a bus’s performance

Answer 23

• 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

Question 24

what are the three areas that need constant monitoring and evaluating

Answer 24

sales, budget and profit

Question 25

why are budgets important

Answer 25

• 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

Question 26

what are the reasons for evaluating budget and profitability

Answer 26

calculate the three financial ratios:
- net profit ratio
- gross profit ratio
- return on equity ratio