C1O Planning Flashcards
(24 cards)
5 parts of a business plan
Executive summary Marketing plan Operations plan Human Resources plan Financial plan
Benefits of business planning
Monitor cash flow
Clear instructions
Check objectives
Help seek finance
Drawbacks of a business plan
Research costs money
Unreliable as hard to predict future
Inaccurate plan can lead to failure
Some don’t need a plan
Location of a business determined by…..
- access to consumers
- costs (business rates/rent/labour)
- infrastructure
- labour
- competition
Costs in locating a business
- planning permission
- purchase/rental/leasing
- refurbishment
- business rates
- labour costs
- transport costs
Internal sources of finance examples…
Retained profit
Working capital
Asset sales
External sources of finance examples..
Bank loans Overdraft Trade credit Factoring Lease & hire purchase Mortgages Venture capitalists Share capital Sale & lease back Government assistance
What is factoring?
Turning invoices into cash by selling them onto an external business
Finance depends on…..
- how much is needed
- time its needed for
- use of the finance
- affordability of repayment
- willingness to give up shares
Equation for revenue
Revenue = qty sold X selling price
Equation for profit
Profit= total revenue X total cost
Define fixed cost
Cot that doesn’t vary with output
ie. rent, salaries, business rates
Define variable costs..
Cost that very with output
ie. materials, wages,
Define semi-variable costs…
Costs that can be fixed, but sometimes vary over time
ie. fixed up until a level of output where they then become variable
Eg. Overtime, commission
Equation for total cost
TC = fixed cost + variable cost
Define direct costs….
Costs that arise specifically from the production of a good
Define overheads..
Non-direct related costs related to production
Equation for average cost
AC = total cost / output
To break even a business must…
Cover all its costs
Equation for break even
BE= fixed costs / contribution p/u
Equation for contribution p/u
Cont = selling price - variable cost
Equation for margin of safety
MOS = output level - breakeven point
3 reasons why breakeven is useful
+ simple and easy to use
+ useful in seeking loans
+ allows ‘what if’ analysis
4 drawbacks of breakeven
- assumes 1 product is sold
- assumes all stock sold and @ same price
- linear relationship is questionable
- some fixed costs are stepped
