A COMPREHENSIVE PLAN

Chances of success for any new business are greatly increased when attention
is first directed to a comprehensive business plan. A complement business plan
provides a total visualization of the firm before operations are started. When
financial assistance is necessary from bankers, trade creditors, or investors, their
first request will be to see the total business plan. With it they can visualize the
creditworthiness of the business.
There is no one sequence of steps in planning that is agreed upon by all
authorities in the field. The most important thing in planning a new small firms is
that all phases of its operations must be considered. The person planning a new
firm should have very definite ideas about profits, financing, accounting records,
merchandising plans, location, market and customers, general method of operation,
policies, advertising and promotion, amount and type of expenses, break-even
point, legal form of organization, depreciation policies, and inventory valuation
methods, among other factors.
The desired income approach to the entire planning process suggests that
the planners first question should be. How much profit do I expect to receive
from this business in return fro investing my time and money in it?. This
approach is based on the conviction that this question has been neglected. Much
too often by new firm planners. No commitments, contracts, or obligations
relative to a new business should be undertaken without a clear idea of what
profits are possible over at least the first year of operation.
Using the desired income approach, there are 14 major steps in planning.
STEP 1. Determine what profit you want from the business, recognizing the time
you will give and the investment you will have. Then complete a project income
statement based upon your decision.
With the profit figure clearly in mind, it is possible, using statistics that are
abundantly available, to calculate the sales volume that is necessary to produce that
particular profit.
STEP 2. Survey and test the market you plan to serve to ascertain if the necessary
sales volume required to produce the profit called for in Step 1 is obtainable.
The basic objective of Step 2 is to find out what can reasonably be expected in
sales if the business is established within the intended market area.
STEP 3. Prepare a statement of assets to be used.
A statement of assets to be used is a list of assets that are essential to the operation
of business. Value in monetary units should be attached to each asset.
STEP 4. Prepare an opening day balance sheet.
Step 4 involves close study of the asset needs of the business as determined in
Step 3 and decisions on how they are to be met. Here we decide whether to rent or
buy the business building; whether to buy delivery trucks and on what terms, or
whether to hire a delivery service or even eliminate such service. Every asset to
be used, every liability to be incurred, and the resulting necessary investment by
the proprietor must be clarified in this step. This will involve knowing the various
types of financing available in providing each asset and how they should be spent
without fear of loss. Basic information provided by a balance sheet and by an
income statement is necessary to do this task well.
STEP 5. study the location and the particular site chosen for specific
characteristics.
Too many small firms are located in space that just happened to available
without any analysis of the sustainability of that space as a location for the
specific type of firm planned.
STEP 6. Prepare a layout for the entire space to be used for business activity.
STEP 7. Choose your legal form of organization.
Planners should not only study the characteristics of the three major legal forms
of organization ( proprietorship, partnership or corporations); they should also
seek the true management advantages of each.
STEP 8. Review all aspects of your merchandising plan.
Merchandising is a broad term. It is popularly known today as the total marketing
concept. It covers many things plans for products to customers, inventories in
money terms and lines of goods, sales promotion plans, advertising plans, pricing
policy, public relations, markups, markdowns, seasonable variations in business,
planned special sales, and other associated activities.
STEP 9. Analyse your estimated expenses in terms of their fixed or variable
nature.
STEP 10. Determine the firms break- even point.
STEP 11. If you are even considering sales on account, review the advantages and
administrative decisions involved. Then establish a credit policy.
The process of selling to customers on credit has many more implications than
generally assumed. Credit card sales cost money. Open accounts risk
uncollectibility.
STEP 12. Review the risks to which you are subject and how you plan to cope with
them.
The more we know about the risks around us, the better we can prepare the firm to
protect itself against them.
STEP 13. Establish a personnel policy at the outset.
How will you attract and keep good employees? Will you understand employees
needs and desires? How will you establish policies regarding them?
STEP 14. Establish an adequate system of accounting records.
Good accounting records are essential to decision making in any business. They
are also necessary for government reports, tax returns, and operations analysis.
Every new firm should provide for an adequate system of accounting records in
the planning stage.