Knowing your competitors is central to developing a useful business plan. Without knowing them you cannot sensibly target a specific section of the market, decide on a pricing policy or work out how you will be different and have advantage. Yet when challenged, many entrepreneurs will only have a superficial Read more…
Spreadsheets allow assumptions about the environment to be variables in a formula used in forecasts. So for example: Sales could be based on the formula: Sales = total sales in market X market share So an assumption can be made regarding market share based on the current competitors. Say 5 Read more…
‘Elasticity of demand’ measures the relationship between price and demand (Price elasticity of demand – Wikipedia) In most circumstances the lower the price the higher the demand and vice versa. A pricing strategy should model the influence of price on the demand for a specific good or service, to find Read more…
In a traditional partnership in some ways they face the same risk as a sole proprietorship – full liability for the actions of the owners. In the case of the partnership it is “joint and separate liability”, so a partner is potentially liable for all the actions of all partners. Read more…
To produce a trial balance a firm must operate a double entry system with debit and credits and a general/nominal ledger. A trial balance can be performed at any stage, but normally at the end of given accounting period. Since a double entry system records a debit and credit for every transaction Read more…
Where possible reduce risk, maintain flexibility and keep a contingency fund for the unexpected. Here are some examples of how to achieve this practically: Do not take on long term commitments: leases, hire purchase… Work from home if possible. Keep stocks low and rotate. Minimum Viable Product or Service to Read more…
A business running without inventory must rely on a stream lined and responsive supply chain where customer orders are satisfied directly from suppliers. To achieve this the business needs to develop a close integration and frictionless relations between customer orders, suppliers and potentially manufacture, so called lean production. The idea is that the Read more…
Traditionally any formal document, including a business plan is written in third person. The reasons are as follows: Third person appears to distance the author from the context. This gives the impression of objectivity, which can be more convincing to the audience. Third person may actually increase objectivity. The author Read more…
Writing a business plan is a worthwhile activity for the following reasons: The process itself of thinking through the business model highlights potential opportunities and challenges at the prelaunch stage, much better than discovering them later. Working on the plan gives an opportunity to share ideas with colleagues and get feedback on Read more…
Business plans are often packed with information about the business and even the competitors, but they miss a concise explanation of how competitive advantage (see Porter, 1985) will actually be achieved. A business plan without this explanation does not fulfill its key purpose which is to demonstrate to then reader that the Read more…