BSBESB403: Plan finances for new business ventures Assessment Answers

Course: TAFE

Assessment Type: Practical

A business plan is a valuable tool for any new business venture. It can help you to assess the feasibility of your idea, and to identify the key areas where you will need to focus your effort in order to make your business successful. In this assessment, you will be required to develop a business plan for a new small business. You will need to consider all aspects of the business, from its products and services to its marketing and financial planning.

Your business plan should be tailored to the specific needs of your business. However, there are some key elements that all good business plans should include.

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In his section, we are describing some tasks. These are:

Assessment Task 1: Prepare to plan finances

Planning your finances is a necessary step in any business. Though it can be difficult to plan for the future, doing so will allow you to manage your money better and grow your company. In this task, you will need to gather information about your business and its finances.

1. Identify costs associated with the production and delivery of business products and/or services

Production and delivery costs are major expenses for any business. They include costs such as materials, labor, and transport. If you are manufacturing a product, your production costs will likely be higher than if you were just simply selling a service.

For example, It is not easy to determine how much it will cost to manufacture and deliver a service that is delivered remotely, such as online marketing or accounting, when compared to a local service, such as a plumbing business. However, A business that delivers products will have higher production costs than one that does not (e.g. a bakery versus a clothing store).

It is important to remember that delivery costs also need to be considered. If you are manufacturing, it is more expensive to transport the materials than if you were delivering a product yourself (e.g. groceries or homewards).

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2. Set profit targets according to business venture requirements and workplace procedures

In addition to production and delivery costs, you will need to set a profit target for your business. To do this, begin by adding up all of the money that you expect to bring in from sales revenue. In order for your business plan to be viable, this amount should cover all of your costs and leave a definite profit margin.

Remember to also take into account workplace procedures. For example, if your business is required to pay income tax, you will need to factor this into your profit calculations.

3. Calculate prices based on costs and profit targets, as a charge-out rate for labor or unit price for products and/or services

After you know your costs and have set a profit target, it is time to decide what prices to charge for your product or service.

If you are selling a product, one option is to add together all of your production costs (e.g. materials and labor) and then add in the standard mark-up that you expect will be enough to cover the business’s expenses and provide a profit. This method should assure that you are not selling your product or service below cost, but it will also limit how much money you can make on each sale.

If what you are selling is a service, determining prices can be more difficult. Using an hourly rate as an estimate for what customers will pay will not work if you need to increase your prices to cover costs. In this situation, it is a good idea to estimate how many hours of labor the creation of one product or service takes and then come up with a price that works for you. This way, even small adjustments can be made as necessary without losing too much money on every transaction.

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4. Calculate break-even sales points to assess the viability of the business venture

The break-even sales point is the number of sales that your business must make in order to cover all of its costs and make a profit.

To calculate it, take your fixed costs (e.g. rent, equipment, etc.) and divide by the contribution margin (sales revenue minus cost of goods sold). This will give you the number of units you need to sell in order to break even.

It is important to remember that the break-even sales point does not take into account expenses that may vary, such as marketing or employee wages. As a result, your business may not be profitable until it exceeds the break-even sales point.

By understanding how to calculate production and delivery costs, profit targets, prices, and the break-even point, you can create a sound business plan for your new venture. With this information in hand, you will be able to make informed decisions about what is best for your business and how to reach your goals.

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5. Evaluate and select pricing strategies in relation to market conditions to meet profit targets and according to workplace procedures

Pricing strategies are used to determine how customers will pay for products and services, as well as how much money the business will make.

Generally, pricing can be either competitive (where prices are based on what other businesses charge) or noncompetitive (where everyone charges the same amount).

When thinking about pricing strategy, it is important to consider market conditions. For example, if there are many competitors in your industry, then it would be more difficult to attract customers with prices that are much different than other businesses in the area.

Another factor to take into consideration is labor costs. If you have employees who receive a salary or wage, be sure to set prices high enough so that the business makes a decent profit as well as compensates workers fairly.

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6. Prepare projected profit statement to supplement business plan

Accurately projecting future profits is an important task for any business owner. By creating a profit statement, you will have a better understanding of how much money your business can make in the short and long term.

A profit statement is a financial document that shows the expected income and expenses for a specific period of time (usually a year). It can also be created for a single month or quarter if you do not have enough historical data to make larger projections.

To create a profit statement, follow these steps:

  1. Collect the necessary data
  2. Adjust for noncash expenses (e.g. depreciation)
  3. Determine the gross margin
  4. Subtract the variable costs from the gross margin to calculate the net profit
  5. Report results in a table or as a graph

In order to determine if your business plan projections are reasonable and achievable, compare your financial documents (e.g. balance sheet and cash flow statement) with your profit and loss statement to ensure that they are in line. If they are not, you may need to revise your plan.

By taking the time to create a projected profit statement, you will have a clear understanding of how much money your business can make and what steps need to be taken in order to reach your goals. With this information, you can confidently make decisions that will help your business grow.

Now that you understand the basic concepts of production, delivery, and pricing, you can apply this knowledge to your specific business. By setting realistic profit targets and using sound strategies, you can ensure that your venture is successful. Remember to keep in mind the break-even point as you move forward; it will help you stay on track so that you can achieve your goals.

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Assessment Task 2: Develop a financial plan

The analysis of the retail pricing strategies is a very important element in a business plan. Retailers need to understand how their prices compare with competitors and the market demand for their products. Additionally, they should also know who their target customer base is before determining what price they will charge them. In general, retailers attempt to set a price that will allow them to achieve their desired profit margin.

Retailers have to carefully balance the price they charge for their products with what customers are willing to pay. At times, retailers have to adjust prices in order for consumers to not find out that the item is being sold at a reduced price elsewhere. Additionally, sales are often used as promotional events for retailers to attract new customers and bring back old ones. Retailers need to carefully monitor the frequency of sales as well as the timing of those events in order to avoid discount fatigue among their customer base.

1. Identify working capital requirements necessary to attain profit projections

In order to attain the profit projections in your business plan, you will need to identify the working capital requirements for your business. Working capital is the amount of money that is necessary to maintain and grow a company’s operations. It includes the funds needed to cover short-term expenses such as inventory and accounts payable.

In order to calculate your working capital, you will need to know your accounts receivable and inventory levels as well as the average collection period and turn rate. The equation for working capital is:

Working Capital = Accounts Receivable / ((1 – Inventory Turnover) x Collection Period) + Inventory.

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2. Identify non-current asset requirements and consider alternative asset management strategies

In order to maintain and grow your business, you will need to identify the non-current assets that are necessary for your operations. Non-current assets are long-term in nature and include items such as land, buildings, and equipment.

When determining the amount of non-current assets needed for your business, you should consider alternative asset management strategies that will allow you to reduce the cost of your debt. Assets are often acquired through loans or lines of credit, so it is important to determine how much money you need before applying for a loan so that you can pay back the debt in a manageable way.

3. Prepare cash flow projections to enable business operation according to the business plan and legal requirements

Cash flow is the lifeblood of your business. It should be one of your primary concerns as you set out to create a financial plan for your business. The cash flow projections should identify how much money will flow into and out of your company throughout the year.

In order to determine this, you must first calculate your net income and then determine your cash flow from operations. This should include accounts receivable, inventory funding, accounts payable, and other factors that will affect how quickly your company can turn its profits into cash.

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4. Identify capital investment requirements accurately for each operational period

In order to maintain and grow your business, you will need to identify the capital investment requirements for each operational period. This includes the money needed to cover short-term and long-term expenses.

Short-term expenses are those that are due within one year of the date of the financial statement. These include items such as inventory and accounts payable. Long-term expenses are those that occur over a period of time longer than one year, including items such as equipment and land.

Every business is different, so the amount you will need to invest in your company for each operational period will vary. Your capital investment requirements should be calculated by determining how much money is needed to maintain and grow your business. This will help you to ensure that you have the necessary funds to achieve your long-term goals.

Now that you know what is needed to create a financial plan for your business, it is time to get started. By taking the time to identify the working capital, non-current assets, and capital investment requirements for your company, you can ensure that your business is on a solid financial footing for years to come.

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5. Select budget targets to enable ongoing monitoring of financial performance

Once you have developed your financial plan, you will need to create budget targets for each operational period. These targets allow you to measure the company’s performance throughout the year and help to bring in more accurate information.

Each operational period should have its own budget target so that it is possible to assess the company’s performance. This allows you to make changes in your operations as needed and to ensure that you are on track to reach your long-term goals.

Budget targets also help you to identify areas where you can save money and improve your company’s profitability. By setting realistic goals and measuring your progress against them, you can make the necessary changes to ensure that your business is successful.

Assessment Task 3:  Plan to acquire finance

When looking to acquire finance, there are many questions you should be able to answer. You will need to determine your short-term and long-term needs for financing.

Short-term financing is often required whenever the business has accounts receivable or inventory that need immediate funding. For example, if you have an order for one of your products that is going to be delivered in three months, you will need to have the money available at that time to pay for it.

Long-term financing is often needed for investments such as purchasing property or equipment. It can also be used to cover gaps between short-term needs and the company’s ability to generate cash flow from its operations.

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1. Identify start-up and ongoing financial requirements according to financial plan and budget

In order to acquire the necessary funds, you will need to identify your start-up and ongoing financial requirements. This includes both short-term and long-term needs.

Your start-up financial requirements are those that are needed in order to get your business up and running. This often includes money for things such as inventory and marketing. Ongoing financial requirements are those that are needed in order to maintain your business. This may include items such as rent and employee salaries.

By knowing both your start-up and ongoing financial requirements, you will be able to identify the funds that you need in order to get your business off the ground and keep it running. This will make it easier for you to acquire the necessary financing.

2. Identify sources of finance for required liquidity according to business goals and objectives and workplace procedures

Once you know your financial requirements, you need to identify sources of finance that will be able to meet them. This includes both short-term and long-term needs.

Your short-term sources of finance are those that can be used to cover things such as accounts receivable and inventory. Long-term sources of finance are those that can be used to cover gaps between short-term needs and the company’s ability to generate cash flow from its operations.

Some common sources of finance include banks, private investors, and venture capitalists. You will need to research each of these sources in order to find the one that is best suited for your business.

Once you have identified the best source of finance for your company, you can begin working to acquire it. This will generally require a business plan and collateral such as property or equipment.

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3. Research and assess the cost of securing finance on optimal terms

When identifying sources of finance, you will need to take into account the cost of securing them on optimal terms. This includes things such as interest rates and fees.

Interest rates can have a significant impact on your business’s finances. The higher the interest rate, the more it will cost you to acquire the necessary financing.

Fees are another important factor to consider. Some common fees that you may incur include loan origination and application fees. These can vary greatly depending on several factors such as the lender and type of finance required.

Once you understand these costs, you will be able to make informed decisions about the best sources of finance for your business. This will allow you to acquire the funds you need while keeping your expenses as low as possible.

Now that you understand the basics of financing, you can begin working on securing the funds your business needs to succeed. By following the tips in this article, you will be able to get started on the right foot.

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4. Develop strategies to obtain finance as required to ensure the financial viability of the business venture

The length of time it takes to secure the necessary funds depends on several factors. These include how much money you require, your business growth plans, and the type of financing that you are trying to acquire.

As you begin working towards acquiring the necessary financing for your business, you will need to develop strategies that allow you to do so as required. This may include working with your bank to ensure that you can acquire additional funds if needed.

Once you have identified the best source of finance for your business, you can begin the process of acquiring it. This will generally require a business plan and collateral such as property or equipment.

Working with your bank to develop strategies that allow you to acquire additional funds if required is an important part of ensuring the financial viability of your venture.

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