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Business Investigational Planning.
Investigational Questions & Considerations. Products & Services, Industry & Scale of Operation, Finance, Strategy, Operations and much more.

 

 

Questions & Considerations

Q1. What product or service are you offering?

Q2. What Industry will you be Operating in?
Current trends in the industry
Long term future of the industry
Average sales
Gross profit margins
Terms of credit from suppliers
Terms offered to customers
Names and addresses of suppliers
The competition

Q3. What information do you have about your industry?
Can the business be started on a small scale?
Can the business be started from home?

Strategic Phase: SWOT Analysis
Operational Phase: Marketing Plan / Policies / Budget / Nature of the Business / Your Market
See Also: Market Research & Promotion / Financial Plan / Accounting & Financial Matters
Costing the Products or Services / Break-Even Point

Considerations

Market Research & Promotion

Have you defined your market by:
Size, Geographic location, Age, Income level, Taste preference of customers, Llife cycle of product.

On what basis can you set your prices? Same as competitors, Cost plus.

What sort of packaging will you need?
Cost of packaging?
What do you know about your potential customers in terms of:-
What they buy, Why they buy, Where they buy, How often they buy
What pre- and after-sales services do they expect
Who are your competitors?
What will you offer customers that is better or different?
What is your competitive advantage?
What is your competitive disadvantage?
How can this competitive disadvantage be overcome?

What will affect your market?
Fashion trends, Dsposable income, Consumer confidence, Industrial relations, The economy

What forms of promtions will best suit your type of business?

  • Direct mail
  • Newspapers
  • Yellow pages & similar business registers
  • Magazines & trade journals
  • Radio
  • Television
  • Sponsorships

What will these forms of advertising cost?
Do you know the what level of sales will be required to break even?

Financial Plan

Do you know how much capital you will need to start up?

  • Equipment
  • Fixtures & fittings
  • Office furniture & equipment
  • Tools of trade
  • Motor vehicles
  • Initial supplies/stock in trade
  • Legal & accounting fees

What will your monthly expenses be for?

  • Stock
  • Wages
  • Advertising
  • Electricity
  • Insurance
  • Motor vehicle expenses
  • Maintenance
  • Rates
  • Postage & stationary
  • Telephone

How long will it take for the business to start showing a profit? 1 month / 3 months / 12 months

How much money is required to start and run the business until it is profitable?

  • Prepare a simple cash flow (money in, money out) for the first 12 months
  • Add up all the shortfalls of cash

Does the plan provide for an adequate return on the money which you propose investing in the business?

Accounting & Financial Matters

Do you know what record-keeping books you will require?

Do you know...
How to keep records? Where to obtain a bookkeeper?
Do you know how to prepare a cash flow statement?
Can you prepare budgets?
Can you reconcile accounts & bank statements?

Costing the Products or Services

    Can you calculate an hourly rate?
    Do you know how to cost the materials?
    How are the overheads allocated on a unit price basis?

Break-Even Point

    What is the minimum production level to cover the cost of running the business?

    Which Laws & Regulations Affect:
    Warranties or Guarantees?
    Terms offered to customers?
    Debt recovery?
    Advertising & other forms of promotion?
    Labelling & packaging?
    Safety standards?
    Trading Hours?
    Have you contacted the Business Licence Centre in your state about regulations, permits and licences which may apply to your business?

    General
    Have you discussed your insurance needs with a broker?
    Have you decided to register a business name?

    Do you plan to operate as a Sole trader? Partnership? or a Proprietary Company?
    Have you organised supply of stock?
    Are your suppliers reliable?
    Have you considered joining an Industry Association?
    Do you need training?

Strategic Phase

Business' Objectives

  • Stated in measurable terms:
    • Percentage return on invested funds
    • Earnings per share

    Determine Your Business' Strategic Position
    There are four considerations which will determine the business' strategic position.

  • The nature of the business.
    • What are the products or services offered?
    • Which market does the business serve?
  • The competitive position of the business.
    • How does the business compete in the market place?
  • The attitudes of the decision makers
    • How do the decision makers react to risk?
    • Are they innovative or conservative?
  • The image of the business.
    • What relationship does the business wish to have with:
    • customers, mamgement, staff, suppliers, the community at large?

SWOT Analaysis

What factors affect the performance of the business?
Has the business the resources to achieve its objectives?
A useful technique for determining the answers is a SWOT analysis; that is, assessing the business' strengths and weaknesses and, identifying ooportunities and threats in the business environment.

Strength & Weaknesses
The internal analysis should cover:

  • Products and product range
  • Market share
  • Profitability
  • Level of borrowed funds
  • Staff skills

Opportunities & Threats
The external research should cover such factors as:

  • Competition
    • Their present position
    • Likely future
    • Reason for success or failure
  • Politics
    • Tax
    • Environment
    • wages
    • regulations
  • Economics
    • the state of the economy
    • interest rates
    • level of employment
  • Social Position
    • changes in social behaviour
    • attitudes
    • standard of living
    • levels of incomes
  • Technology
    • changes to existing products
    • methods of distribution and production
  • Health and Safety
    • changes in zoning regulations

Action Required
Following the analysis, you are now in the position to decide upon: What steps to take and what resouces have to be acquired in order to achieve your business objectives.

Operational Phase

The Operational Planning has two phases.
The first phase is the preparation of the marketing, stock turnover plan, and personnel plan. The second phase draws together these plans in the financial plan which includes the annual budget and the cash flow.

The Marketing Plan

The research will seek to answer the following questions.

The Market
Who are your potential customers ?
Whare are they ?
Why do they buy your products or services ?
When do they buy them ?
How do they buy them ?
How much will they buy ?
How often do they buy them ?
How can you communicate with them ?
(what do they read/listen to ?)
What are they prepared to pay ?

This information may be available from:
The Australian Bureau of Statistics, Trade associations or chambers of commerce, State government departments, Trade journals or similar publications, Suppliers, Customers.

The Competition
The records of business
Who are your existing/potential competitors ?
What can you offer that is different or better than what your competitors offer

Personnel
What skills are needed by the staff involved in the marketing and selling of your products?
What skills are available, in house or in the market place?
What training is available?

Regulations - Which laws and regulations affect the way you:
Warrant or guarantee products?
Offer terms to customers?
Recover debts?
Promote your products?
Label and package your products?

Setting Sales Targets
Sales targets are set to achieve a predetermined level of profit and return on investment. The proposed level of sales should be compared to the estimated total market for the product. Check that the proposed market share is realistic. Include a Breakeven Analysis.

Developing Policies

These decisions should cover:
Product/ product range, Pricing, Promotion, Advertising, Packaging, Publicity, Method of distribution, Customer Service, Purchasing.
Effecting these decisions will provide the unique mixture that will distinguish your business from its competitors.

Annual Budget & Cash Flow

The annual budget consists of a budgeted profit and loss account and a budgeted balance sheet. The profit and loss budget shows the proposed trading activities of the business usually on a monthly basis. It will show your projections of: Sales, Stock movements, Gross profit margins, Fixed and variable costs, Profits, Return on investment.

The budgeted balance sheet will show your projected changes in:
The net worth of the business, Assets, Working capital.
The cash flow statement will indicate how the trading activities and asset purchases/disposals affect the availability of cash in the business. In other words how much money is needed and for what purpose.

Defining the Nature of your Business

The nature of the business is determined by the products or services offered and by the market served by the business. The following questions will help you define the nature of your business.

Products or Services Offered
What products do you currently sell?
Which products contribute most to your turnover?
Which products contribute most to your gross products?
What competing products are available?

How do these items compare in terms of:
Price, Nature of use, Terms of payment, Availability, Method of distribution, Customer accessibility, Customer awareness, Depth of range, Profitability, Demands on resources, What is the status of the product's life cycle, What new products are coming onto the market.

The Market Served by the Business

What customer needs are being met in terms of:-
Geographic location, Buying patterns, Use of product, Source of purchase,
Pre-Sale & After-Sales Service.

Which of the following factors about the consumer are important?
Age, location, sex, occupation, income level, family status?
Which customers contribute most to turnover?
Which customers contribute most to gross profits?
How many competitors are there in your industry?
How many competitors are there within 5km?
How many competitors have started/ceased trading in the last twelve months?

To develop a statement which clearly describes your business, you now answer the following questions:
Is your business conservative or trendy?
Is your business capital or labour intensive?
Does your business have a large or small number of competitors?
Are your customers easy or difficult to define and identify?
Is the image of your business important?
Does your business work on high or low profit margins?
Is the location of your business important?
Are specialist selling skills required?
Is the promotion by your competitors low or high key?

Your answers to the checklist will give you the information you will need to:-
Describe your industry
Describe your business in relation to your industry
Define your competitive advantage