A Comprehensive Plan
Chances of success for any new business are greatly increased when attention is first directed to a comprehensive business plan. A complete business plan provides a total visualization of the firm before operations are started. When financial assistance is necessary from bankers, trade creditors, or investors, their first request will be to see the total business plan. With it they can visualize the creditworthiness1 of the business.
There is no one sequence2 of steps in planning that is agreed upon by all authorities in the field. The most important thing in planning a new small firm is that all phases of its operations must be considered. The person planning a new firm should have very definite ideas about profits, financing, accounting records, merchandising plans3, location, market and customers, general method of operation, policies, advertising and promotion, amount and type of expenses, break-even point4, legal form of organization, depreciation policies, and inventory valuation methods, among other factors.
The desired income approach to the entire planning process suggests that the planner's first question should be, "How much profit do I expect to receive from this business in return for investing my time and money in it?" This approach is based on the Conviction5 that this question has been Neglected6 much too often by new firm planners. No commitments7, contracts, or obligations relative to a new business should be undertaken without a clear idea of what profits are possible over at least the first year of operation.
Using the desired income approach, there are 14 major steps in planning.
Step 1. Determine what profit you want from the business, recognizing the time you will give and the investment you will have. Then complete a projected income statement based upon your decision.
With the profit figure clearly in mind, it is possible, using statistics that are Abundantly8 available, to calculate the sales volume that is necessary to produce that particular profit.
Step 2. Survey and test the market you plan to serve to Ascertain9 if the necessary sales volume required to produce the profit called for in step 1 is obtainable.
The basic objective of step 2 is to find out what can reasonably be expected in sales if the business is established within the intended market area.
Step 3. Prepare a statement of assets to be used.
A statement of assets to be used is a list of assets that are essential to the operation of business. Value10 in monetary units11 Should be attached to each asset.
Step 4. Prepare an opening day balance sheet.
Step 4 involves close study of the asset needs of the business as determined in step 3 and decisions on how they are to be met. Here we decide whether to rent or buy the business building; whether to buy delivery trucks and on what terms, or whether to Hire12 A delivery service or even Eliminate13 such service. Every asset to be used, every liability to be incurred14, and the resulting necessary investment by the proprietor must be clarified in this step. This will involve knowing the various types of financing available in providing each asset and how they should be spent without fear of loss. Basic information provided by a balance sheet and by an income statement is necessary to do this task well.
Step 5. Study the location and the particular site chosen for specific characteristics.
Too many small firms are located in space that just happened to be available without any analysis of the suitability of that space as a location for the specific type of firm planned.
Step 6. Prepare a layout15 for the entire space to be used for business activity.
Step 7. Choose your legal form of organization. Planners should not only study the characteristics of the three major legal forms of organization (proprietorship, partnerships or corporations); they should also seek out the true management advantages of each.
Step 8. Review all aspects of your merchandising plan.
Merchandising is a broad term. It is popularly known today as "the total marketing concept". It covers many things – plans for presenting products to customers, inventories In money Terms16 and lines of goods, sales promotion plans, advertising plans, pricing policy, public relations, markups17, markdowns18, seasonable variations in business, planned special sales, and other associated activities.
Step 9. Analyze your estimated19 expenses in terms of their fixed or variable nature.
Step 10. Determine the firm's break-even point.
Step 11. If you are even considering sales on account review the advantages and administrative decisions involved. Then establish a credit policy.
The process of selling to customers on credit has many more implications than generally assumed. Credit-card sales cost money. Open accounts risk uncollectibility.
Step 12. Review the risks to which you are subject and how you plan to cope with them.
The more we know about the risks around us, the better we can prepare the firm to protect itself against them.
Step 13. Establish a personnel policy at the outset.
How will you attract and keep good employees? Will you understand employee needs and desires? How will you establish policies regarding them?
Slop 14. Establish an adequate system of accounting records.
Good accounting records are essential to decision making in any business. They are also necessary for government reports, tax returns20, and operations analysis. Every new firm should provide for an adequate system of accounting records in the planning stage.
Notes: 1. кредитоспособность; 2. последовательность; 3. коммерческое планирование производства; 4. точка нулевой прибыли; 5. убеждение;
6. упускать; не обращать внимания; 7. обязательство; затраты, вложение (капитала), 8. обильно, в изобилии; 9. устанавливать, выяснять; 10. стоимость; 11. денежная единица; 12. нанимать; 13. устранять; исключать;
14. подвергаться; потерпеть убытки; 15. схема расположения; 16. в денежном выражении; 17. повышение (цен); наценка; 18. снижение (цены); величина скидки (с цены); 19. предварительно подсчитывать; оценивать; 20. налоговая декларация.
1. Match the words with their definitions.
VALUE, LAYOUT, BREAK-EVEN POINT, TAX RETURN, COMMITMENT, MONETARY UNIT, MARK-UP, MERCHANDISING, MARK-DOWN
1) The level of sales at which the income from goods sold is just enough to cover production, neither profit nor loss being made.
2) A promise; something to which one has committed oneself, which one is bound to do; a payment which one is bound to make.
3) The amount that can be obtained for something by exchanging it for money or goods.
4) The standard unit of the currency of a country.
5) The active planning and organization of various ways of attracting the public to buy a particular product in the shops such as displays, free samples, free gifts, competitions.
6) A reduction in price, usually to encourage a quick sale.
7) An increase in the price of something, for example the difference between its cost and the price that you sell it for.
8) In Britain, a statement which every taxpayer must by law make once a year.
9) The way the building and its contents are arranged. A drawing or diagram showing this.
2. Supply the sentences with the missing words.
ASCERTAIN, ABUNDANTLY, SEQUENCE, ELIMINATE, INCUR, HIRE, NEGLECT, CREDITWORTHINESS, ESTIMATE, CONVICTION
1) He has... expenses while travelling.
2) The company faced with the debt problem and the need to prove... .
3) The cost of production is £2 per article. I... that owe me £75.
4) I complete all calculations in the correct ... .
5) The government has been criticized because of its... of the working class area.
6) Nothing would budge him from his... that he could run a newspaper successfully.
7) Raw materials are... available in Britain.
8) We're unable to... who the owners are.
9) Poverty must be... .
10) Skilled men were... and construction got under way.
3. Choose the correct word for each sentence.
1) I'll ask my bank manager for (advice/advise) About investment.
2) He first spoke (briefly/shortly) about the agenda for the day.
3) She took her case to an (industrial/industrious) tribunal.
4) Unfortunately we have (mislaid/misled) the original invoice.
5) The secretary made (notes/notices) of what was said at the meeting.
6) If you pay too much tax you get a (discount/rebate).
7) Lawyers here only get their (fee/wages) if they win the case.
8) The (income/salary) from the investment is £52,000 a year.
9) She hopes to get a (chair/seat) on the board.
10) We (check/control) each new consignment very carefully.
11) I enclosed (complements/compliments) slip with the catalogue.
12) Do these cars (confirm/conform) to the new safety regulations?
13) You shouldn't read (confident/confidential) documents!
14) Normally, she's a very (conscientious/conscious) worker.
15) The unions criticized the government's (economic/economical) policy.
16) The (overtake/takeover) bid from Jenkins came as a complete surprise.
17) Please send me your latest catalogue and (price/prize) list.
18) We've increased (produce/productivity) by 10 % in this factory.
4. Complete the following sentences by putting the verbs into either the Present Perfect or the Past Simple.
1) We... (reach) our targets last year.
2) Sales... (fall) since the beginning of June.
3) Contracts... (be signed) but work... (not begin) yet.
4) The marketing department... (recruit) two new assistants so far this year.
5) We... (start) the advertising campaign last month and since then sales... (rocket).
6) Our research... (be carried out) last year but I still... (not see) the results.
7) Turnover... (rise) dramatically since we ... (be founded).
8) We... (expect) a fall in profits last year as our costs nearly... (double).
9) We... already (sell) more units this year than we... (do) in the whole of last year.
10) He... (feel) we should... (not take on) so many salespeople last year.
5. Complete the following sentences with: either neither too nor or both
1) John and Sam... agree. Peter does... .
2) ... Simon... Ann agree with you. They... think you are crazy.
3) You can... leave the firm of your own free will... be fired. In any case, I want you out.
4) ... Peter... Roger like living in London. I don't like it ...
5) ... Marketing and Production share the same opinion about the need for higher quality. However, ... of them have come forward with any concrete proposals.