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Mistakes in Business Planning - Essay Example

Summary
The paper "Mistakes in Business Planning" tells that David Perryman mentions in his plan that he has thought about the financial considerations, however such financial projections over a few years are not included in his report, and he naively assumes that the market will remain static…
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Mistakes in Business Planning
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Extract of sample "Mistakes in Business Planning"

Business Plan (a) The essential elements that should be included in a Business plan according to Business link are (a) an executive summary (b) a description of the business opportunity (c) marketing and sales strategy (d) management team and personnel (e) Operations and (f) financial forecasts (www.businesslink.gov.uk). David Perryman’s layout of his plan does not follow this format. It does provide a description of the business opportunity but does not provide an executive summary outlining the elements highlighted in the plan. His plan is not systematically structure and clearly demarcated into its various component elements. He merely sets out a list of all the projected costs for an entire year as well as the projected sales figures, providing details of these financial projections in terms of units. In just one sentence, he states that he requires eight employees and then winds up his plan with a request for funds. In effect therefore, the Perryman plan is little more than a list of projects costs and incomes for one year after starting the business. It reveals a short sighted approach to the business proposal, which does not take into account, all the necessary elements and does not demonstrate a comprehensive and long range level of thinking about the business proposal. He mentions in his plan that he has thought about the financial considerations, however such financial projections over a few years are not included in his report, and he naively assumes that the market will remain static. (b) The Perryman proposal is lacking in several of the subdivisions outlined under Business link. (a) Financial Forecasts: Perryman’s financial projections cover only one year of operation, and he assumes that the market will be static, which may not be a realistic projection. (b) Management team and Personnel: Perryman does not provide details about his own credentials and experience acquired in his family business, and while he provides a flat requirement of eight employees, he does not provide any details about the qualifications and experience that will be required of such employees and the wages that will be paid to them. (c) Management team and Personnel: The single most important element lacking in the Perryman plan is marketing and sales strategy. While Perryman lists the costs for individual items, he does not provide a capsule of information detailing how he proposes to promote his business and ensure that the projected volume of sales is achieved. His plan should have emphasized the absence of competition and the projected gains that could accrue to his business, while his projections into future years should have made provision for the possible emergence of competitor bakeries and the impact on his business. Therefore, on the whole, Perryman’s plan reveals a short sighted approach. (c) Perryman’s business strengths lie in the fact that his business will be the first of its kind to be set up on the islands and there is no existing competition. This will ensure that he is able to gain profits if he is able to successfully market his business to the residents of the island. Secondly, Perryman’s prior experience in his parents’ business enterprises in the same area would be a distinct advantage, and his knowledge of the local area, its residents and marketing possibilities would also be a great advantage in the successful operation of his business. Perryman’s weaknesses lie in his lack of foresight and adequate planning. He is short sighted and has a vague idea of how to go about his business. Although the bank manager’s questions have resulted in him drawing up a detailed projection of expected inflows and outflows for one year, he has done little or no thinking about possible changes in the market and unexpected events that could affect his business. He also assumes that he will have a certain level of sales but has not thought about marketing aspects and how he will go about capturing 75% of the business – he just automatically assumes that it will happen. He fails to provide expected incomes and expenses over a three to five year period and show the break even point when profits can be expected. (d) Perryman demonstrates character and ability. Owing to his prior experience in doing business in the area, he has the knowledge of local practices and customers. He also demonstrates a sense of purpose, since he is able to recognize the potential inherent in opening a bakery in the area. The fact that he has already identified premises where the bakery could be set up also demonstrates the sense of purpose. He is also knowledgeable on the amount he will need and how he will go about repaying the amount loaned to him. The areas where he is lacking is in a demonstration of management skills, because he fails to show how he will go about securing personnel and managing the operational aspects of his business. (e) If I were a bank manager, I would hesitate to support Perryman’s business proposal. The Plan as it is currently laid out appears sketchy and rather lopsided. It provides details of projected costs and incomes for a year but is silent on almost all other aspects that are required in a good business plan. There is a good business opportunity identified in the plan, i.e, a bakery where no competition currently exists, thereby providing potential for good profits to be made. However, these financial projections do not take into account potential changes that could occur over the coming years. It does not show the point at which break even will be reached and the exact projected time frame within which the business will be profitable and how these profits can be expected to multiply over the years. There is no indication in the plan how the business is going to be marketed and what is the sales strategy that will be used. The Plan as it is presented now, does not present a holistic, over all picture of the business. It does not allow a person pursuing the Plan to get an overall sense of where the business is going and the concrete elements of how success scan be projected. There is no indication of how changes and adaptations will be made to adjust to changing market conditions, rather a naïve assumption has been made that the market will remain static. All of these elements result in the overall plan being rather unconvincing, as a result,I, as a bank manager might not approve of the proposal. References: * What the Plan should include. http://www.businesslink.gov.uk/bdotg/action/detail?r.l1=1073858805&r.l3=1073869162&r.t=RESOURCES&type=RESOURCES&itemId=1073791229&r.i=1075193719&r.l2=1073859137&r.s=sc; May 11, 2008 Read More

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