Useful Tips

BUSINESS PLANS – GENERAL

  1. The main benefit of the business plan is that it is your route map for success.
  2. After starting the business, the business plan financials should be used to regularly compare the actual progress of the on-going business as this will assist in evaluating progress and identifying areas that need timely and corrective action.
  3. Business plan financials convey the viability or otherwise of a business idea – a business plan that demonstrates that an idea is not viable has also fulfilled its purpose by saving a considerable amount by way of investment that may otherwise have been lost.
  4. Financial or Budget Projections should cover a period of at least three to five years.
  5. Business Plans and Forecasts should include the detailed assumptions that have been relied on to arrive at the projections

PRICING & SALES FORECASTING

PRICING

  1. Setting winning pricing objectives is key to getting the best results both, in terms of sales volume and profits and developing a winning pricing strategy is very essential in formulating a successful marketing and business plan.
  2. A successful pricing plan is one that optimizes sales volume and profits while delivering value.
  3. While customer acceptance (market factors) will determine maximum price levels, costs will determine the base level below which it is not feasible to sell the product or service.
  4. If the product or service is sold at the optimum price, and this price covers costs, then profits will also be optimized.
  5. A pricing strategy should take in to account various factors such as competition pricing, costs, customer acceptance, seasonality, etc.

SALES FORECASTING

  1. The success or otherwise of the proposal and the business is dependent on a reasonably accurate sales forecast.
  2. The accuracy of the sales forecast depends to a large extent on how effectively the market research has been carried out and analyzed.
  3. Knowledge of the product or service, the market research findings and the marketing plan need to be harmonized so as to project the most accurate forecast.
  4. It is important that the sales projections are realistic and are based on the analysis and findings of the market research.
  5. Developing the sales forecast based on UNITS, whether the units represent number of product items, billable hours or number of contracts etc. is the most reliable and convenient basis for developing the sales fprecast and the pricing decision can then easily be factored in and what if scenarios can be easily developed.
  6. The sales forecast should be estimated on a monthly basis.

FINANCIALS & CASH FLOW STATEMENT

FINANCIALS

  1. To be able to develop accurate financial statements it is necessary to understand the main financial terms involved and the relationship between each of these.
  2. Sales forecasting and a winning pricing strategy are the first step in developing the estimated or projected financial statements
  3. The sales forecast is a very important part of the budgeting process and is critical to the outcome of the projected financials.
  4. Just as it is important to have a reasonably accurate sales forecast, it is equally important to estimate costs as accurately as possible.

CASH FLOW

  1. “Cash is King” in the running of a business.
  2. Surprising as it may seem, a business can make huge profits and yet go bankrupt due to a lack of liquidity – i.e. the business must be able to pay it’s employees, suppliers and other creditors e.g. landlord, electricity, etc.
  3. The cash flow statement is probably the most important financial statement for any business.

Effective Cash Flow Management

  1. Use Cash for the purposes for which it has been budgeted.
  2. Payroll and payroll statutory deductions should be your priority.
  3. Managing Receivables are a very important aspect of good cash management.
  4. A sale is only good when it is invoiced and collected on a timely basis.
  5. Carry out credit checks on major customers.
  6. Invoice customers on a frequent and regular basis.
  7. Follow up regularly to collect outstanding invoices.
  8. Try to set up auto payment procedures including credit card or direct debit type of arrangements
  9. Under this very important heading do not forget to include HST receipts and payments
  10. Agree the best possible credit terms when negotiating terms with
    suppliers.
  11. Stretch credit terms beyond the maximum where ever possible e.g.
    if agreed credit terms stipulate 30 days stretch this to 45 days or
    more
  12. In instances where early payment discounts are offered by suppliers take advantage of such discounts even if early payment is not being made.