3 Unit 4 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.