T29- Planning

• What are features of a business plan?

  • business model
  • product & market positioning
  • management team
  • market assessment
  • financial forecasts
  • key opportunities and threats
  • investment requirements
• what is the role of a business plan in raising finance?

  • Helps finance – providers assess the business model
  • Provides a structured assessment of the opportunities and risks
  • Essential analysis of the competitive position of the business and the market attractiveness
  • Provides a benchmark against which progress can be measured
  • Helps determine the amount and type of finance required
• what happens when cash flow information changes?

  Sometimes cashflow information changes. It is only a forecast. Therefore, the cashflow forecast will have to be amended. Often excel spreadsheets are used for this purpose and what if analysis (easy to change data).
• what are cash flow problems?

  • When a business does not have enough cash to be able to pay its liabilities

  (Sales prove lower than expected)

  • Easy to be over – optimistic about sales potential
  • Market research may have gaps

  (Customers do not pay up on time)

  • A notorious problem for businesses, particularly small ones

  (Costs prove higher than expected)

  • Perhaps maybe because purchase prices turn out higher
  • Maybe also because the business is inefficient

  (Imprudent cost assumptions)

  • A common problem for a start-up
  • Unexpected costs always arise – often significant
• what are limitations of cash flow forecasts?

  • as some financial information is based on an estimate the outcome may not be always be accurate
  • Business activity is subject to external forces that are beyond the control of the owners
  • A cashflow forecasting focuses just on cash, it ignores profit
  • A lot of time and resource is spent preparing a cashflow forecast