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Business Planning

Stage 6 Business Studies - Preliminary Course - Business Planning Unit
by

ellen beaton

on 18 September 2018

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Transcript of Business Planning

The Focus of this topic is the processes of establishing and planning a small to medium enterprise
Importance of a business plan
1. When establishing a business, the entrepreneur risks capital and personal confidence.
a) describe the personal qualities essential to all entrepreneurs
b) discuss entrepreneurship and its importance in terms of development of new businesses

2. Outline two advantages and two disadvantages of buying an existing business

3. Discuss why franchises have become so popular in recent years

4. Government regulations are necessary for the business sector to function efficiently and equitably
a) describe two legal requirements to which businesses must adhere
b) discuss the accuracy of this statement and give reasons for your answer

5. Define the term 'business plan'
6. Explain the purpose of a business plan
7. Recommmend three strategies a small business could implement to increase revenue as a result of engaging in e-commerce.
8. Distinguish between debt and equity financing
9. Assess the relationship between key success factors and the competitive advantage that a small business should seek
10. Analyse why it is important for small business owners to have a detailed understanding of the market in which the business will be competing
Stage 6 Business Studies Preliminary Course
Business Planning
Small to Medium Enterprises
Influences in establishing a small to medium enterprise
The Business Planning Process
Critical Issues in business success and failure
THINK!!
It is hard to establish a clear-cut definition of a small to medium enterprise (SME).
It is easier to describe rather than define a SME.
There are a number or quantitative and qualitative measurements that can be used to determine whether a business is small or medium sized:
number of employees
type of ownership
sources of finance
legal structure
market share
management structure
One of the most widely accepted quantitative measurements used to determine the size of a business is that devised by the ABS (Australia Bureau of Statistics). This measurement uses the number of employees as its benchmark
Australian SME:
employ about 73% of all the people working in the private sector (51% small, 22% medium)
have created 80% of Australia's employment gains during the past ten years
produce approximately 50% of all the products produced each year
generate an increasing amount of out total exports
account for 20% of all money spent on R&D
provide a wide range of products used by large businesses
earn more profits and pay more taxes than do large businesses
Economic Contribution of SMEs
Summarise each economic contribution of SMEs p.327-330

(GDP, employment, balance of payments, invention and innovation)
Success and/or failure of SMEs

Starting and operating a SME is appealing, which is why so many people dream of doing it. Many entrepreneurs are driven by the desire to be their own boss, do what they want to do and turn passions into profit-making businesses.

While many people are successful in their business ventures, many others unfortunately experience failure. In fact, of every ten SMEs started, about seven go out of business within five years after opening their doors.

The financial risks of running a SME are very high, although some businesses are more risky than others.

In addition to psychological and financial pressures, SME owners tend to be victims of physical stress.
Success of SMEs


Failure of SMEs
Sometimes enthusiasm and optimism cloud the owner's vision of reality and poor decisions are made. In the real world success can be hard to achieve. Unfortunately, many SMEs end in failure.

From statistics collected from the ABS one in four businesses will fail within the first year of being established. This means that approximately 80,000 Australian small businesses fail each year - roughly 219 per day.

Within the first five years of commencement, approximately seven out of ten SMEs will fail. Female-owned businesses have a higher survival rate than those operated by men, and businesses jointly operated by both men and women have the highest survival rate of all.

An SME can be classed as a failure when it is:
unincorporated and declared bankrupt - a legal process of distributing among the creditors the property of a business or person who cannot or will not pay their debts
incorporated and either forced into liquidation or voluntarily closes down because it cannot pay its debts and faces cash flow problems
Reasons for SME failure
failure to plan
lack of information
leadership crisis
inaccurate record keeping
failure to delegate
complacency
incorrect marketing strategy
poor location
lack of financial planning
negative cash flow
new competitors
illness
supplier problems
poor use of external support services
economic downturn
new taxes
change in government policy
insufficient capital
partnership problems
lack of management expertise
incorrect pricing policy
failure to seek advice
not enough sales
staff difficulties
being under-insured
Summarise in your own words the 5 keys to success
Review
1. Explain how a SME owner can maximise his or her chances of success by using the five 'keys' of success
2. Outline two main reasons for small business failure
3. Account for the high rate of failure of small businesses in the first few years of operation
4. What needs to occur for a business to be classed as a failure
5. Complete "Alex Gillan - Stonker Boards" Snapshot questions 1,2 & 3
Personal Qualities - All types of people own and operate the thousands of businesses in Australia today. Not everyone, however, is suited to the role of business owner as certain skills and personal qualities are required to succeed.

There is not simple checklist of skills and personal characteristics that will guarantee business success. However, many studies have shown that certain personal characteristics are helpful in operating a business, and that the potential owners should be aware of their own strengths and weaknesses in certain areas
QUALIFICATIONS - For some types of SMEs there are few or no formal academic requirements needed to commence operating. However, there are tertiary courses available. Such course give you knowledge and understanding of what is required to successfully own and operate a SME. Knowledge and understanding can also come from experience through working for other businesses. eg. your part-time job provides you with experience in whichever industry you work in.

SKILLS - Skills are essential when running a business. These skills can be attained through experience, education and/or training.

Experience:
If a person has been working the last few years as a dedicated employee, then during that time, they will have gained valuable experience. They probably also developed new skills as a result of training or exposure to various aspects of the business's operations. Consequently, apart from well developed management skills, a person with hands-on experience will have a greater chance of achieving business success.

Education and/or Training:
Universities, TAFE and business colleges offer courses in many business and industry fields. These courses may be broad in nature, eg. a degree in business management, or specific, eg. diploma in marketing.
MOTIVATION - Refers to your personal drive, determination and desire to achieve a goal or objective. Many people start their own business because they believe they can do better for themselves than if they remain with their present employer.
ENTREPRENEURSHIP - An entrepreneur is someone who starts, operates and assumes the risk of a business venture in the hope of making a profit. The term can be applied to any person - male or female, mature age or young - willing to establish a business in a bid for success.
Summarise in your own words the benefits and burdens of entrepreneurship

CULTURAL BACKGROUND - A person's cultural background can influence their reasons for establishing a business. Cultural influence can arise from a community's traditions, beliefs, such as 'work ethic' - the willingnes to work long and hard in an effort to be successful - which is strong in many European and Asian cultures. Many migrants come to Australia with few resources except a strong desire to improve their lives. This determination often translates into business success.
Cultural influence can also arise from centuries of experience in certain trades or services, enabling a person to use this knowledge to achieve business success.

READ THE SNAPSHOT "Kath Fry and Eisha Saleh"
Complete Questions 1,2 & 3 pg. 347-348
GENDER: Governments of developed economies are realising that employment growth will not come from established large businesses but from the creation or expansion of the small business sector. Policies are specifically being created to assist small business in contributing to the national economy. In response to this and a general change in social attitudes, many women are setting up their own businesses (in particular in self employment) at three times the rate of men.

Research undertaken by both federal and state government departments highlighted the following points regarding women in business:

1. Women own approximately one-third of all small businesses operating in Australia
2. The major industries in which women own businesses are service oriented.
3. Women setting up businesses from home is the fastest growing sector of the Australian economy.
4. Women-owned businesses have less external debt, are more profitable and are profitable much earlier than those owned by men.

SME owners cannot be experts in all areas of their business. Further, they do not normally have the funds to employ a specialist or consultant to assist with management. Therefore they need to possess a variety of skills, including marketing, personnel, finance, administration and public relations skills. Obviously this is not an easy task but the business owner can receive assistance from a large number of government and private support agencies.
Summarise the different professional advisers that are available to SME's. (4)

Explain the role of Federal, State and Local governments (3)

Identify and outline the other sources of information that are available to SME's (5)
The business idea - SME owners need to have a clear idea of what they wish to sell. Sometimes this is an original idea for a good or service that is quite different from anything on the market, or a distinct improvement on something already available. It may even just be that a particular good or service is unavailable in a particular area.

The source of a business idea might come from a person's own experiences, interests, abilities or imagination. Inspiration for ideas can also be generated by:
listening to people about the goods and services they want
reading magazines, books and researching on the internet
assessing government statistics and research information
identifying a 'gap' in the market
determining improvements that could be made to an existing product.
Competition is rivalry among businesses that seek to satisfy a market. For this a business needs to decide what its market is and whether they will cater to a mass market or niche market.

The business owner must decide how to make the business competitive or how to develop a customer base or gain market share.

There are two main ways in achieving competitiveness -
cost of production
and
differentiation of the goods and services.

Summarise both of these


Influences in establishing a small to medium enterprise
Establishment Options

There are two main ways of going into business:

1. Setting up a new business from scratch, which may involve buying a franchise
2. purchasing an existing business
Franchising: some people chose to start a franchise in the hope of avoiding many of the problems associated with starting a new business. For a set fee, the small business owner receives the benefits of a successful business formula, a well-recognised name and established trademarks. Franchises are the fastest growing area of small business with approximately 1300 franchises in Australia
Market Considerations

Many business owners are so enthusiastic about starting that they often overlook these three crucial questions:

Who will buy the goods or service?
What is the most suitable price for the goods or service
What is the most appropriate location for the business?

More than anything else, the success of any business depends on the research and planning done to answer these three fundamental questions, because sales are the life-blood of a business and the source of its income.
Finance

Finance refers to the fund required to carry out the activities of a business. It is a crucial issue when an entrepreneur is identifying a business opportunity, especially considering it is difficult to raise

A number of factors need to be considered before any action can take place.

How much debt can the business afford?
how much do I need or expect to earn from the business?
How much will it cost to start the business?
How much capital do I need to operate the business?
What financial success have similar businesses achieved?
What funds do I have available and what will I need to acquire?
From where will I finance capital requirements?


Finance can come from a variety of sources, but there are two main types of sources available to a business. The business owner can contribute their own funds (equity or capital), which is an internal source of funds. The business can also obtain loans (debt) from external sources.

Answer the following questions using your textbooks:

Debt financing can take the forms of :(page 372)

Overdrafts are:

Mortgages are:

Equity finance is: (372)

Some advantages of equity finance are: (372)

The cost of debt finance is: (372)

Interest is calculated as:

The Cost of Equity finance is : p( 373)

Equity finance is based on the level of:

Equity finance results in a liability. Liability is:

The difference between establishment cost and operating costs are:(page 374)

Legal Considerations


There are many licenses, permits, approvals and authorities that must be taken into account by SME owners.

All business owners have a legal obligation to observe the statutory regulations when commencing and operating a business. Fulfilling all legal obligations may be frustrating at times, particularly when more that one level of government is involved.

The 3 levels of government (federal, state & local) all have regulations to which small business owners must adhere. The regulations are impose primarily to promote fairness, protect customers and encourage efficiency.


Considerations need to be made with regards to:

1) Registration of a Business Name
and
Registration of a business Trademark.

2) Zoning- Limits the type of activities that can be conducted in a particular place. Eg Separation of residential and business activities.


3) Health - Regulation of preparation and sale of food and drink to protect consumers from contamination and food poisoning.

4) The Trade Practices Act 1974
Use the table on page 379 to define/ list the functions of this consumer protection law.

Main Sources of employees for a business
Advertisements in the media
Word of mouth
Temporary/Casual services
Internal Searches
Schools, Universities or TAFE colleges
Private employment/ recruitment agencies
Job Services Australia
Human Resources

Employees are the most valuable resource of any business. Hiring the 'right' people at the 'right' time, with the 'right' skills and the 'right' quantity is crucial for business success.

Consequently, one of the most important influences in establishing a SME is staffing: the people side of the business
Once the business is operating and if people are employed, the SME owner must fulfill a number of important human resource requirements that deal with such things as:
staffing objectives
specific duties to be performed
the forecast of future staff requirements and skills
administrative records to be kept to manage the employees.

Employee Costs: wage and non wage

Salary- a set amount to perform a particular job, eg. Teachers- Wage
Shop assistant - an hourly rate

On-costs:
Workers compensation. Ie Insurance against accidents
Superannuation ie 9% of the employees wage
Payroll tax paid to the State Government based on total payroll bill.
Sick leave
Holidays + leave loading. eg. 17.5% extra pay for holidays.
Recruitment.

Taxation

Taxation is the compulsory payment of a proportion of earnings to the government. Taxation is an important issue when a person is considering all aspects of opening a business

Summary of Taxes p 386

Create a table - name each of the eight taxes listed, define each and include who the tax goes to.
Calculate the tax payable on the following incomes.

a) $37,000

b) $80,000

c) $180,000

d) $200,000


Sample: Calculate the tax payable on an annual income of 150,000
Tax payable = $17,547 + 32.5c for ever $1 over 80,000
-> =$17,547 + (0.325 x $69,999)
= $17,547 + $22,750
=$40,297
Solutions
a) $3572
b) 3572 + (42999 x .325) = $17,546.67
c) 17547 + (99999 x.37) = $54,546.63
d) 54,547 + (20000 x .45) = $63,547
GST - Goods and Services Tax

10% on most goods and services.
Business claims a tax credit for any GST it pays from its suppliers so the GST is ultimately paid by the final consumer.
Each business fills in a BAS (Business Activity Statement) to account for GST collected, its tax credits and GST it passes on to the tax office.
Each business must have an ABN (Australian Business Number) to allow it to collect GST and claim tax credits for the GST it pays.

Local Government Tax

Land rates imposed on owners
To pay for:
• Local roads
• Water/Sewerage
• Garbage collection
• Parks
• Libraries

A business plan is the 'road map' for future growth and development within a business. It sets out the desired goals and direction of the business.
Case Study: Kikki K pg. 393.
Complete all questions
Reasons that some people don't make business plans:
"Too busy to plan"
"Small Business doesn't need a plan."
"I already know everything about my business"
"Not enough time, planning costs money."
What's in a plan???

Executive Summary -
a brief overview of the plan
Goals -
what the business hopes to achieve
Strategies to achieve goals -
an overview as to how the business will attempt to achieve the goals
Situation/ SWOT analysis.
Management structure and ownership.
the nature and type of organisational structure
Operational plan-
What to produce, how, by who. - details the product process and the people required now and in the future
Marketing plan-
How to promote/advertise - the product, price, promotion and distribution details
Financial plan-
Where is the money coming from, how to judge financial performance - a description of the business's financial needs and methods for evaluating its performance
Human resources plan-
Who are the staff, how many now and in the future - details both the present and future staff requirements

The Business Planning Process.

What you do in a Business Plan

Forecasting = Predicting
Setting Goals = Targeting
Programming = Mapping
Scheduling = Timing
Budgeting = Economising
Implementing = Doing
Monitoring = Checking
Evaluating = Judging
Modifying = Rearranging/adjusting

Take each part of the Business Plan and use it to create a plan for organising an overseas holiday.
Your plan should include
at least
the elements listed below.

Call it "My Travel Plan" I should include the following elements.
White Text)
® I think I'd like to go to…..Making a decision
(Programing/Goal Setting)
® How long will I go for…...Deciding on times
( Scheduling)
® I'll need to arrange this before my annual leave...Coordinating
( Scheduling)
® What documents do I need….Making arrangements
(Programing)
® What will I take with me….Listing what's needed
( Forecasting)
® Who will I be travelling with…. Choosing travel mates
(Programing)
® Arrange the money….. Credit/debit cards…...Implementing
® How much money do I need...estimate/calculate costs
( Budgeting)
® Where do I get my travel advice.. visit a travel agent
( Programing)
® Check that everything is taken care of...last minute checks
(Monitoring)
® What do I want to see and do...making an itinerary
(Programing)
® Sharing experiences with friends and family….Photos, blogs, face book
( Evaluation)

List these in the order that you think they should be addressed.
Look at table 12 .5 page 397 and set them out in a similar table and be sure to include what part of your plan you think each part is doing . Eg Budgeting, programming, implementing.


Take each part of the Business Plan and use it to create a plan for organising an overseas holiday.
Your plan should include at least the elements listed below.

Call it "My Travel Plan" I should include the following elements.

(White Text)
® I think I'd like to go to…..Making a decision (Programing/Goal Setting)
® How long will I go for…...Deciding on times ( Scheduling)
® I'll need to arrange this before my annual leave...Coordinating( Scheduling)
® What documents do I need….Making arrangements (Programing)
® What will I take with me….Listing what's needed ( Forecasting)
® Who will I be travelling with…. Choosing travel mates(Programing)
® Arrange the money….. Credit/debit cards…...Implementing
® How much money do I need...estimate/calculate costs( Budgeting)
® Where do I get my travel advice.. visit a travel agent( Programing)
® Check that everything is taken care of...last minute checks(Monitoring)
What do I want to see and do...making in itinerary (Programing)
® Sharing experiences with friends and family….Photos, blogs, face book ( Evaluation)

List these in the order that you think they should be addressed.
Look at table 12 .5 page 397 and set them out in a similar table and be sure to include what part of your plan you think each part is doing . Eg Budgeting, programming, implementing.


SWOT
STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATS
Write down some examples of each element pg. 402
Vision Statement

The vision statement broadly states what the business aspires to become; its purpose and its function. Vision statements may relate to customers or employees. A clear vision statement should be concise, creative, focused and realistic. It may contain special features of the business, what it values and what it hopes to achieve.
Organising Resources

Summarise each aspect of organising resources (operations, marketing, finance & human resources) pg. 409-413
Monitoring & Evaluating

Devising a business plan will not guarantee the achievement of the business's goals. The plan must be constantly monitored and evaluated so the business can make accurate modifications as necessary

MONITORING: the process of measuring actual performance against planned performance. This process involves constantly asking 2 questions:
1. What does the business want to achieve (its goals)?
2. Are these goals being achieved?

EVALUATING: evaluating a business's performance to determine whether the goals have been achieved. This can be done by constantly asking:
1. how is the business performing with regards to profit?
2. whether the business is performing as planned
3. whether its performance has improved over time
4. how its performance compares to that of similar businesses


Taking corrective action - modification

Modifying is the process of changing existing plans using updated information to shape future plans. Sometimes the planned performance standards are unrealistic when they are first formulated. At other times, changes to the external environment make the standards unattainable. Whatever the case, the situation cannot continue and the business owner must undertake some corrective action/modification.

Corrective action may involve changes to the materials, products that are the firm's output, the costs of turning raw materials into products, management practices, delivery of products to the market and so on. It may also involve changes to the organisation's human resources, because each individuals performance in the organisation is as important as the finished product.
Management - Staffing & Teams

Read Snapshot "External recruitment consultants" and answer the question

Read Snapshot " Teaming with ideas" and answer all questions

Identifying & sustaining competitive advantage

Competitive Advantage are those aspects of a business that are done better or more cost efficiently than competitors.

How????

Prices v's Costs. eg. Lower costs to achieve the most competitive price by:

> Use machinery/technology
> Use an assembly line to improve productivity ( Output per worker)
> Locate to where the labour is cheapest eg Asia.
> Economies of scale ie) Cost per unit can decrease as more and more is produced. Eg Buy materials in bulk, employ specialist workers, invest more capital.
> Use technology eg. Computerisation and robotics.

Differentiation ie) Make yourself different from the competition.
Eg Better customer service
An exclusive image
Better quality
Celebrity endorsement
Avoiding over-extension of finance and other resources
Business Technology

Smart Phones
e-mail
E-Business- the full range of business activities including buying, selling,
Skype
marketing, communication, research, track stock and finance, make applications
Robotics
E-Commerce- buying and selling via the internet.

Long term success. (How to protect the competitive advantage.)
Research ie) Get better
Copyright/Patent ie) Control the right to a name, symbol or idea
Exclusivity of contract ie) Only deal with one supplier.
Convince government to limit competition/offer protection from competition.
Develop a dynamic and proactive management culture.
Economic Conditions

The "Boom" and "Bust" (Recession) Cycle

All economies fluctuate in cycles with periods of increased and decreased economic activity.
These are influenced by government spending, taxation and the level of interest rates.

Effects on Business:

® Varying levels of consumer confidence and spending.

® Changes in the level of government spending, taxation and regulation of the rate of interest on deposits and loans.

® Fluctuations in the level of unemployment and hence spending/saving.

® Changes in the level of demand for goods and service overall and for essential and non-essential items.

Goals and/or objectives

Once the owner has formulated the vision statement for a business, they can determine specific goals.

Goals for businesses could include the following:
to become the largest business in the market
to improve market share
to provide a reasonable return for investors
to contribute to the wellbeing of the community
All these goals have one thing in common; they are the motivating force behind the business
There are 3 different types of goals

Strategic - Long term, broad goals applying to the whole business.
Eg Increase profit by "X" %

Tactical - Short to mid term goals. These describe the ways to achieve the Strategic goals. Eg Market research to find what the customers want and expect

Operational Objectives- Specific and short term. Eg To write a customer survey.

Differentiate between financial and social goals. Provide examples pg. 405-406.

Summarise what is meant by 'long-term growth'. How would a business achieve this?
Forecasting = predicting or projecting

Forecasting Total Revenue and Total Costs.

Total Revenue = Price X Quantity sold.

Total revenue forecasting depends on forecasting sales based on demand and competition.


Total Cost = Fixed Costs ( these remain constant regardless of how much is produced.
Eg Rent on premises.
+

Variable Costs (these change with volumes produced)
eg Cost of raw materials.


Break even analysis

How much revenue needs to be made to cover costs.

Sales > Break Even = Profit
Sales < Break Even = Loss.

Break Even Formula

Quantity to be sold to Break Even =Fixed Costs
____________________

( Price per unit - Variable Cost )per unit

(EXAMPLE ON PG 416 OF TEXTBOOK)

BREAKEVEN ANALYSIS WORKSHEET
1. Write a sentence that explains the difference between Fixed and Variable Costs and use an example for each.

2. Write the Break Even Analysis Formula

3. Explain why the Break Even Analysis is one of the most important tools a business can use. (Write a whole sentence explanation.)

4. Explain what a builder might consider in terms of his/her Break Even point when quoting for a job.

5. Calculate these using the Break Even Analysis formula:
The Break Even point given:
fixed costs of $50,000, variable costs of $11 per unit and a selling price of $16 per unit.

6. Now calculate it for :
Fixed cost $600,000
Variable costs $500 per unit
Selling price $2,000 per unit.
Cash Flow Projections
• ie) Estimates of the amount of cash into and out of the business for a future period.

• Made by calculating upcoming cash receipts- Cash sales, collection of accounts and
debits - payment of accounts.

• Predicts when a cash shortfall will occur-- Solution--- cover with an overdraft.

• Predicts when a cash surplus will occur --Solution--- make a short term investment.
Using your text starting on page 426 respond to each of the following and give each response a heading.

Business Plans
List three things that make a good business plan. p 426

List the people who would be likely to use and scrutinise and business plan 427

Skills of Management
Look at the list of management skills on pages 428-29. Choose and list five that you think are the most important and rank them in order of importance.

Staffing
List the stages that apply for the management of staff through their cycle of employment.429

Describe what you understand by the terms "skills audit" and "skills inventory". 430-31.

List the advantages of teams over individuals.431

Describe what you understand by the term "Trend Analysis" 433

List some of the trends that may be tracked by a business. 433.

What's in a Business Plan

1) A statement of goals. What does my business hope to achieve???

2) Specific plans to achieve its goals.

3) A method to measure if goals are met.

Who wants your business plan?
Banks, accountants, purchases, partners, financial advisors.


4) What should be addressed in a B P _ The four key areas of business


1) Human Resources - Who will be employed, how many, what skills are needed.

Getting the right staff.
Option 1- Source the staff internally.
Option 2 Source the staff externally.
Conduct a skills audit. - Identify the current skills of staff members and identify the future skills needed.


Suggested skills you might have:
Selling experience/retail/ food preparation/serving/cooking/computing/typing/communication/team leadership/public speaking/manual craft/wood/metal work/language/ dance/music/ art/child care/work experience.

Future skill/qualifications might include: HSC/First aid/ Lifesaving/Bronze medallion/ VET Certificate/ University Degree/ TAFE Diploma Trade Certificate

2)
Finance
- Where is the money coming from and how should it be spent. What will we earn in the future.

a) Look at pages432/33. Define trend analysis, list what things might be included in a trend analysis and why they might be useful for a business.
b) Look at pages 434/35 and define Competitive Advantage.

c) Think of one business/product you know and identify its competitive advantage.
d) Explain a set of price/cost strategies that a business could employ including:
Productivity/Efficiency
Economies of Scale
Technology/machinery


3)
Marketing
- How will the business be promoted.
Look at page 436 and define Product Differentiation including one way to differentiate a product from its competitors.

Brad Pitt's Brother - An anti-celebrity endorsement


4)
Operations
- What will be produced, how will production be organised, where will it happen, what technologies will be used.
How not to overextend the finances

Lease before you buy.
Manage the level of debt to equity.
(How much you owe compared to what you own.)
Develop a workable business plan
Start small and don't overcommitt
Plan for the long term.
Accurately predict demand so as to manage stock and staff
- Outsource tasks
- Order small amount regularly( "Just in Time" stock management)


Read and complete ALL questions for the Snapshot "The school dance"
Question 1.
Claire is selling t-shirts for $40. The t-shirts cost $16 to produce, and her overheads for fixed costs of manufacturing are $120000.
Using the break even formula, calculate the breakeven.
Question 2.
Peter’s factory manufactures tables. Each table is sold for $1000, but it has variable costs of $300. The total fixed costs at the factory are $1400000. How many tables does Peter’s factory need to produce to break even?

Question 3.
Claire’s factory produces surfboards. Each surf board is sold for $100, and has fixed costs of $40. The overheads fixed costs for the factory are $300000. Calculate the break even, and draw a break even graph.

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