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 visualise the credit worthiness of the business.

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Generally there are 12 major steps in planning.

Step1. Determine what profit you want from the business, recognising 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 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 ascertain if the necessary sales volume required to produce the profit is obtainable.

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. Value in monetary units 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 buildings; whether to buy delivery trucks and on what terms, or whether to hire a delivery service or even eliminate such service. Every asset to be used, every liability to be incurred, 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.

Step 5. Choose your legal form of organisation.

Step 6. 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 terms and lines of goods, sales promotion plans, advertising plans, pricing policy, public relations, seasonable variations in business, planned special sales, and other associated activities.

Step 7. Analyse your estimated expenses in terms of their fixed or variable nature.

Step 8. Determine the firm's break-even point.

Step 9. Establish a credit policy.

Step 10. Review the risks to which you are subject and how you plan to cope with them.

Step 11. Establish a personnel policy that is attracting and keeping good employees.

Step 12. 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 returns and operations analysis.

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Answer the questions:

1) What is a comprehensive plan? Why is it necessary for starting a business?

2) What is included into a plan?

3) Do you agree with the steps for developing a comprehensive business plan outlined in the text? How would you change them?

DISCUSSION

1) What is the danger of starting a new firm without adequate financing?

2) Do you think it is advisable for someone planning a new firm to think about what profit it will produce before beginning operations? Why?

3) What do we mean by "planning a new investment"?

4) Could you suggest a business plan for Harper and Grant, using all the information you have about the company and its plans.

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