Small Busines Planning - Chp 3 Flashcards
Planning
The process of formulating objectives and determining how to achieve them.
What are the benefits of developing a business plan?
- helps tests the viability of the business
- assist the business to be proactive rather than reactive
- assist in maintaining the business operations
- indicates the owners ability and level of commitment
- forces the small business owner to justify their plans and actions
- identifies the businesses strengths and weaknesses
What are the element of a business plan?
An executive summary, an operations plan, a resources plan, a financial plan, and a marketing plan.
An Executive summary
A document describing the business and its objectives.
An operations plan
Outlining how the business will be set up and the human and physical resources needed.
A financial plan
Details how the business will be financed and the projected revenue, Expenses and profit.
A marketing plan
Outlines the key information from the industry the business will be entering and how it fits in, and the marketing strategies of the business.
Resource
An person or product that will help in the production of a good or a service.
Human resources
The employees who provide their time energy, skills and effort towards the business activities
Physical resources
Refer to the equipment such as computers, machinery, office equipment and stock that are needed to run the business.
Asset
Any item of value owned by the business
What is a business plan
A written statement of the business’ goals and objectives and the steps to be taken to achieve them.
Why is a business plan essential?
It is set up to act as guide or map on which the business can plot out its journeys to success. It also links the business owners ideas and the actual operations to achieve such ideas.
Human resource planning
Should include detail on the present and future staff requirements
Present staff requirements
- the number of people needed to operate the business
- the staffing objectives
- the methods the business will use to recruit extra staff
- a form on the organisational chart
- the specific duties to be preformed
- the administrative records to be kept to manage the employees
Future staff requirements
- holiday periods
- at peak production times
- the introduction of new technologies
Physical resource planning
Should include detail on the types of assets required for the business and the associated costs of each asset
What does a well researched plan help with?
It helps improve the chances of accessing adequate finance, by providing a finance plan that describes the effectiveness and value of the business
Effectiveness
Viability
Value
Profitability
Viability
Capable of working successfully
What are the 2 curtail questions in relation to financial plan
- How much money will I need to commence operation?
2. Where will I get the money?
Establishment costs
Include those expenses involved in setting up the business, must be paid in order to commence business.
Examples of establishment costs
Legal fee, furniture, computer hardware and software, vehicles, fixtures and fittings, phone and electricity connection, stock and advance rent.
Operating costs
Include those expenses involved in the ordinary day to day running of the business, must be paid in order for the business to continue to trade.
Examples of operating costs
Wages, advertising, insurance, interest in loans, telephone and electricity costs, stationary, rent, accountants fees, vehicle running costs.m
What are the two main sources businesses can obtain finance?
From either internal or external sources
Internal funds
Owners personal funds
External funds
Debt and Grants
What are the two types of debt
Short term and long term
Types of short term debts
Bank overdraft, bank bills, and trade credit
Types of long term debt
Mortgage and leasing
Equity
The funds contributed by the owner(s) of a business to commence and build the business
What is equity’s advantage over other sources?
It does not have to be repaid unless the owners leave the business, it is also cheaper as there are no interest payments for the business to pay.
Debt
Refers to the funds provided by sources outside the business, such as banks, other financial institutions, government and suppliers. Which must be paid back overtime, with interest.
Short term borrowing
Funds provided for the use of financing temporary shortages in cash flow or finance working capital, and must generally be paid within one or two years.
Working capital
The finds available for the short term financial commitments of a business.
Bank overdraft
The bank allows a business or individual or overdraw their account up to an agreed limit for a specified time, to help overcome temporary cash shortfall.
Bank bills
Written statement for a business to borrow a certain amount and pay at future time. A type of bill exchange for larger amounts of money.
Trade credit
Suppliers provides products to a business with an agreement to charge for the goods or services later.
Long term borrowing
Relates of funds borrowed for periods longer than two years at variable interest rates that can be secured or unsecured.
Mortgage
A loan secured by the property of the borrower. To finance property purchases, through regular payments over an agreed period.
Leasing
A way of facing the purchase of assets without a large initial capital outlay.
What does leasing involve?
Involves the payments of money for using equipment that is owned by another party
Lessee
The person or business to whom a lease is granted
Lessor
The owner of an assets that is leased under an agreement to the lessee.
Advantages of leasing
- enables a small business to borrow funds and use equipment without the large capital outlay required
- provides long term financing without reducing control of ownership
- permits to 100% financing of assets
- payments tax deductible
- cash flow more easily monitored as repayments are fixed
Grants
Government provided finance for business development, and to promote exports.
How can grants be obtained?
Obtained through both federal and state government grant programs. And are administered by departments of business development.
Marketing
Ways in which a business tries to appeal to potential customers. The activity designed to plan price, promote and distribute goods and services to the market place.
What are the 5 steps of a marketing plan?
- Market analysis
- Establishing marketing objectives
- Identifying target markets
- Developing marketing strategies
- Managing the marketing effect
Market analysis
Analyse the market the business is planning to enter. To gain information about the markets strengths and weaknesses, by researching the market size, number of competitors, overall growth and target market.
marketing objectives
A statement of what is to be achieved through the marketing activities
Establishing marketing objectives
Determining what the business expects to achieve through their marketing actives. These become the business’s marketing objectives and are an essential part of the marketing plan.
Target market
The group of customers to which the business intents to sell its products to
Identifying target markets
By determining the group of customers intending to purchase products, the business can concentrate all their marketing strategies towards that group.
Developing market stratagies
Action undertaken to achieve the business’s marketing objectives. With careful consideration given to the marketing mix. These stratageis have a direct influence on the future success of the business
Marketing mix
Refers to the combination of the four elements of marketing; product, price, promotion and place, that make up the marketing strategy.
Common marketing strategies
- timing the introduction of a new product
- channels of product distribution
- product pricing
- forms of promotion / extent of coverage
- packaging design
- product differ action from competition
- niche marketing (selling to a particular segment of the market)
Marketing management
The process of monitoring and modifying the marketing plan
Managing the marketing effort
The marketing plan cannot operate unless it is well managed. It needs to be monitored, by comparing actual performance with predetermined standards to evaluate effectiveness of market plan. Then modified in the case of poor performance resulting from the plan.
Product
Involved deciding what product to develop and determining the products quality.
Price
Selecting the correct price for a product is vital, as it gives customers an interpretation of the product being provided
Promotion
Involves informing, persuading and reminding customers about the product.
Place
Proving the product at a place where customers can easily access the product more accurately.
Distribution
The means by which the product will be revived by customers
What are the ways in which business owners can adapt ethical and socially responsible management in their business plan?
By using the economic model or the socioeconomic model, and planning for the triple bottom line
The economic model
Where profit is the owners focus and attempts to maximise profits by using resources effectively, to satisfy a good return on investment. The more profitable the business the greater the chances of survival resulting in the business expanding, creating employment and promised greater funds for the needs of society through paying tax.
The socioeconomic model
To not only put an emphasis on profits but also the impact the business has on the whole of society. When planning business objectives, there is a consciousness for ethics and social responsibility. Business are often rewarded with improved business performance, as society has greater expectations of business behaviour.
Enlightened self-intrest
The belief that a business ultimately helps itself when it helps solve society’s problems
Triple bottom line
Refers to the economic, environmental and social, performance of a business
Triple bottom line accounting
Takes into account the economic, social and environmental impact of the business, and is used to evaluate business performance.
Promotion mix
Th promotion method a business uses in its promotion campaign. Methods include personal selling, advertising, and publicity and public relations
Personal selling
Involves the activities of a sales representative directed to a customer in an attempt to make a sale. Where complex products require a sales repressive to familiarise the cut toner with the product.
Publicity
Any free news story about a businesses product, that is not controlled by the business. The main aim of which is to enhance the image of the product or the business.
Public relations
Those activities aimed at creating and maintaining favourable relations between a business and its customers. To implement publicity for the business
Advertising
A paid, non-personal message communicated through a mass medium. Providing the business with the flexibility to reach an extremely large audience or target market.
