business-planning-revenues-and-costs 1.4

Business Plan

Helps in decision-making by showing the aims and objectives of a business and the strategies and requirements needed to achieve these.

Why draw up a Business Plan?

It will be needed by banks before lending money, shows how the business will be run, demonstrates that the business has been researched and thought through, and highlights opportunities and problems.

Contents of a Business Plan

Aims of business, cash flow forecast, owner's CV, type of ownership, marketing plan, location and premises, financial information.

Aims of Business / Mission Statement

Gives the business direction/goal and motivates workers/management.

Cash Flow Forecast

Predicts future financial liquidity by estimating cash inflows and outflows.

Owner's CV

Identifies if they have the skills/experience to make the business work.

Type of Ownership

Assesses the liability versus advantages and disadvantages for running the business.

Marketing

Outlines the marketing mix, price setting, product range, attracting customers, and market research.

Location / Premises

Assesses suitability in relation to main factors.

Financial Information

Includes how much is needed, cash flow, balance sheet, profit and loss account, and anticipated sales.

Turnover (Revenue)

The amount of money taken in by a business when selling a good or service.

Turnover Calculation

Selling Price × Quantity Sold.

Ways to Improve Turnover

Increase price, reduce price, or increase promotion/advertising.

Fixed Costs

Costs that always stay the same regardless of the quantity produced.

Examples of Fixed Costs

Rent, monthly lease on equipment, payment of business rates.

Variable Costs

Costs that change with the number of goods produced/sold.

Examples of Variable Costs

Raw materials, electricity, and gas.

Total Costs

The full amount of money spent by a business when producing goods.

Total Costs Calculation

Fixed Costs + Variable Costs.

Profit

The difference between total revenue and total costs.

Profit Calculation

Total Revenue – Total Costs.

Cash Flow

The net amount of cash being transferred into and out of a business.

Gross Profit

Revenue minus the cost of goods sold.

Net Profit

Gross profit minus all other expenses.

Break-even Point

The level of sales at which total revenue equals total costs.

Business Strategy

A plan to achieve specific business goals.

Market Research

The process of gathering, analyzing, and interpreting information about a market.

SWOT Analysis

A framework for identifying Strengths, Weaknesses, Opportunities, and Threats related to business competition.

Capital Expenditure

Money spent to acquire or upgrade physical assets.

Operational Expenditure

The ongoing cost for running a product, business, or system.

Liquidity

The availability of liquid assets to a company.