Financial aspects
Financial aspects are very important as it helps to secure the success of the business. This means it helps to identify how to manage costs and expenses effectively so the business does not go into debts. This is essential for new businesses such as Wedding Planner & Co as poor financial planning can lead to failure thus, they should know all procedures well so they can protect the business from failing. At the same time, they should ensure that the start up costs of the business is low. Hence, for the benefit of the business they will have to rent/lease assets rather than buying them, therefore, the money left can be spent elsewhere. In this case, business makes use of a breakeven chart, profit and loss account and a cash flow chart. Wedding planner & Co can also make use of a personal survival budget that will classify all the costs and expenses that should be made accordingly. Some of the other aspects to be considered are:
Ø Cost of premise: this means that the business should choose appropriate premises meaning that they should visit a couple of sites before coming to an end decision so they can choose the cheapest one and save the money for something else. They should also keep in mind that the location is accessible for people and that there will be space for expansion of the business in the future in case they are making a lot of profit.
Ø Equipment: this should be considered before designing a cash flow chart sop they know how much to buy and how much to pay for it. This will help controlling expenses. Furthermore, if they want to save money they can rent resources.
Ø Suppliers: Wedding Planner & Co will have to find out for the cheapest and reliable supplier on the internet. It is very important that they find the right one so they can get offers and discounts on raw materials and packages.
Ø Employing staffs (my assistant): the firm will have to employ an assistant to assist me to wedding venues so we can share the burden. This means I will have to consider the cost of recruiting.
Ø Running costs: it will be considered when the cash flow forecast will be plotted. There are a few ways of pricing a product or services. They are:
ü Cost- plus pricing: this is where a percentage is added to the cost of making the product/services in order to make a profit.
ü Demand- oriented pricing: many companies prefer to use this method because they want to increase prices because of demand and not based on the cost of production. Wedding Planner & Co might consider using this method.
ü Penetration pricing: this is mainly use by new business launching new products/services. This happens because firms are not sure about how good the popularity of their products or services is. In this case, Wedding Planner & Co will have to lower the price of their services if they want to gain customer’s attention.
ü Competition pricing: this will be used when Wedding Planner will become competitive and prices will be placed based on competitor’s prices.
This is my cash flow forecast for the business.
Breakeven
In order to calculate breakeven point, a cash flow chart can be used. This is very useful for new businesses as it will illustrates how much sales are needed to make a profit. The formula for breakeven point is: Fixed Costs / Unit contribution (selling price – variable costs). For the process, expenses, fixed costs and variable costs will be taken into consideration. For example if fixed costs for Wedding Planner is £1200, variable cost is £50 and selling price is £100. Therefore, BEP will be £1200/ (£100 - £50) = 24. This means that the company should sell at least 24 to breakeven.
Sources of finance
My sources of finance will be mu own savings and some from friends and families. This is because if I get a bank loan and I agree to pay them every month but I don’t sell enough. Then I have a chance of ending up in debts. At the same time it is not costing me anything thing because if I make a profit, I will be able to keep it. By investing money from friends and families mean that there will be no interest to pay back. However, I might consider a venture capitalists if I am still unsure as they are there to help new venture to enter the market. These capitalists will first interview the one looking for the help then buy shares from them so the business can invest the money. This will help towards a good success and growth of the business. One benefit for Wedding planner is that they will always receive vice and support from them.
Record keeping – it is very important that businesses keep their records well and update them for future improvement of the business. Some companies prefer having an accountant to work for them but based on my own skills, I can manage financial aspects and keep record of them.
No comments:
New comments are not allowed.