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August 2011 Archives

Here are some suggested new year resolutions for 2010 for better business planning applicable to any established business:


When preparing a business plan (or a "standalone" marketing & sales plan), Marketing Strategies, Sales Plans & Projections is a critical section within the overall plan.

In simple terms, marketing and sales plans should cover the 4Ps - Product, Price, Place and Promotion. The following issues need to be considered:

  1. What are the key market entry/development strategies? Explain how your business will continue to market its products/services and sell them to customers.
  2. What are the plans and projected costs for marketing, selling, promotion, advertising, representation etc.? Discuss conversion rates and cost effectiveness.
  3. How will your products be presented to customers? Discuss packaging, physical distribution, sales support and product support and forecast the related costs.
  4. Explain pricing policies and credit terms (be realistic !). What discounts will apply and to whom? Will there be bad debts and what provisions should be made?
  5. What will be the end-user prices for each market and offering?
  6. Assess the competitiveness of your business's offerings in terms of price, quality, features etc. at the level of sales outlets or end-users.
  7. How will you deal with the competitors and how will they respond?
  8. What are your contingency plans in the event of sales targets not being fully realized?

Based on these marketing strategies and plans, you can compile detailed sales (volumes and prices) projections and marketing expenditure forecasts for your various segments and products/services. These projections should be monthly for one year ahead (or longer if the business is seasonal or growing rapidly) and either annual or quarterly (much better) thereafter to cover 3-5 years.

For in-depth help, review Marketing Strategies, Sales Plans & Projections within our Business Plan Guide.

Also check out the Plan Write Market Planner - a software tool to generate a comprehensive marketing plan with examples, checklists and expert advice.

Improving Cash Flow

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Cash flow is the life blood of every business and lack of cash is a much more significant cause of business failure than trading losses. The management and preservation of cash is a priority task which must be performed day in and day out in every business. This task is so routine that its importance is often overlooked.

Here are some ways to improve cash flow:

  • Sales - Become more selective when granting credit.
  • Costs & Systems - Improve systems for billing and collection.
  • Credit Management - Generate regular reports on receivable ratios and aging.
  • Purchasing - Make prompt payments only when worthwhile discounts apply.
  • Inventory - Sell off or return obsolete/excess inventory.
  • Investment - Use leasing etc. to gain access to the use of productive assets.
  • Financing - Use factoring or discounting to accelerate receipts from sales.

For a list of over 30 ways of improving cash flow, visit the Checklist for Improving Cash Flow.

Central to any program to improve cash flow is an accounting system to handle inventory, invoicing, receivables and payables. Allied to this is the need for frequently-updated cash flow projections to provide early warnings of possible liquidity problems and a foundation for improvement plans.

For more on this, see the paper on Making Cash Flow Forecasts and download and try our Cashflow Plan software tools for making rolling 12-month forecasts and creating cashflow improvement plans.

When preparing financial projections for a business plan, you may need to consider raising finance from venture capitalists, business angels and/or banks.

Here are some tips. They assume you are using a fully-integrated financial planning tool, like our Exl-Plan range, to prepare projected income statements, cashflows and balance sheets covering a time horizon of 3-5 years or so.

  1. Use "most likely" (highly probable) assumptions to generate initial projections but exclude, for time being, any assumptions about external funding. When the financial model runs without this funding, it should automatically build up a substantial overdraft (cash shortfall) based on projected net cash outflows.
  2. Review the trend in the overdraft and identify its peak month/quarter and value.
  3. Review the desired mix of external funding - overdraft, grants, loans and equity - and inject funding amounting to the peak overdraft into the model.
  4. Rerun the model and check that key ratios - especially debt/equity and quick ratio - look sensible for all months/years. If needs be, adjust the mix of funding to improve these ratios. For example, if the debt/equity ratio is 100%, consider reducing the debt level and increasing the equity content.
  5. Take note of the timing and amounts of proposed external funding.
  6. Undertake sensitivity analyses by running the model with revised projections for sales volumes/prices, costs and/or overheads in order to identify a realistic "worst" case.
  7. Repeat points 2-5 to determine "worst" case funding.
  8. If desired, raise the projections with altered sales volumes/prices, costs and/or overheads to see the "best" case funding and help sell the business's potential to investors.

Base funding needs on the "most likely" projections but take account of higher requirements suggested by the "worst" case. - it may be prudent to seek too much money rather than too little!

For more guidance:

About this Archive

This page is an archive of entries from August 2011 listed from newest to oldest.

July 2011 is the previous archive.

September 2011 is the next archive.

Find recent content on the main index or look in the archives to find all content.

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