Module for Week 1 to 4

in
The Entrepreneurial Mind

Prepared by:
DIAHN PRINCESS O. ABAROA, MBA
Topic 1: Analyse the internal and external business environment
Expected Learning Outcomes
1.1 Determine information requirements and undertake research to deliver relevant
information
1.2 Consult with all internal and external stakeholders in the research process
1.3 Use research to assist in the prediction of social, political, economic and technological
trends and developments
1.4 Identify and seek assistance and advice from appropriate experts when necessary
1.5 Review and analyse the existing internal resources and capabilities
1.6 Document and analyse business opportunities and obstacles based on valid and
reliable comparative market information
1.7 Review and analyse current and emerging competitors for their potential impact

Topic 2: Formulate business plans and strategies

Expected Learning Outcomes
2.1 Create or confirm enterprise mission, vision and purpose as the starting point for the
business plan in consultation with stakeholders
2.2 Establish realistic, clearly stated and measurable objectives for the business
2.3 Develop appropriate strategies and tactics to address objectives across all areas of
business operation
2.4 Identify and include opportunities for strategic business alliances
2.5 Develop all aspects of the business plan to ensure the business meets relevant legal,
social, environmental and ethical obligations
2.6 Include appropriate action plans and evaluation processes, including key performance
indicators
Glossary
Term Explanation

Alliance Strategic partnership

Asset Something the business owns or is owed

Any standard or reference by which others can be

Benchmarking
measured or judged

Break-even analysis Determines at which point sales begin to cover costs

Written document that presents detailed information

Business plan about the business, its projected plans and projections
for the future

Contribution margin Difference between variable cost and the sales price

CSI Customer Satisfaction Index

Current To be used within a financial year

Distribution How your products or services are sold to end users

E-business Electronic based business

External environment Focus on forces outside the business

A determination of the initial viability of the core

Feasibility
business concept

Fiscal Financial matters

Fixed costs Costs that remain even regardless of business activity

Inflation Positive economic activity

Intangible Incapable of being perceived by the sense of touch, but

still has value

Intellectual property Property that results from original creative thought, as

patents, copyright material, and trademarks.

Internal environment Focus on forces inside the business

KPI Key Performance Indicator

Liability Something the businesses owes to another

Term Explanation

Mission Statement Purpose of your business

The act of making a condition or consequence less

Mitigation
severe

OHS Occupational health and safety

Activity to generate awareness of an organisation's

Promotion
offering

PLC Proprietary Limited Company

Proprietor Owner of an organisation

Recession Negative economic activity

SOP Standard Operating Procedure

Stakeholder A person who has a vested interest in an organisation

Superannuation Pension, retirement benefits

SWOT Strengths, weaknesses, opportunities, threats

USP Unique Selling Points

Value Proposition Identification of how an organisation provides value to

a customer

Variable costs Costs that vary directly with business activity

Vision Goal or aspiration

Topic 1:
Analyse the internal and external business environment
1.1 Determine information requirements and undertake research to deliver relevant
information

Introduction
A business plan is a written document that presents detailed information about the business,
its projected plans and projections for the future. The plan is based on an analysis of the
business’ current situation (if already existing), and forecasts of future trends within the
relevant industry and economy. It includes results from research into all aspects of the
business operation and is a logical and structured document, with each section of the plan
consistent with and linking to each other.
It has been proven that those businesses’ who have a written
business plan with strategies for its operation, have a greater
chance of success in today’s fast moving and changing
environment. Preparation of a business plan gives a sense of
ownership and involvement in the future of the business, and
ensures that the commercial directions planned have been
tested for their viability in the marketplace.

Importance of business plans for starting or existing organisations

The most important aspect of a business plan for a start-up business is that it forces you to
‘think before you jump’.
A business plan forces you to:
 Seriously think about your new venture in detail
 Research the necessary information
 Document your findings.
For an existing business, it forces you to:
 Reassess that business and its direction and activities
 Plan and prepare for change and growth.
A business plan is normally a requirement if you are borrowing money or attempting to
attract potential investors.
A business plan is the key formal document that sets out a total picture of how a business
will operate. It helps to establish standards for measuring the success of all aspects of a
business.
Establishing a business plan is a planning process. It is also a
control process, in that it sets guidelines and targets for all
aspects of the business. It sets standards to be achieved by all
business activities, and includes measurement processes
against set targets and corrective mechanisms across the whole
organisation. For example, if dollar turnover targets are not being
met in a restaurant, the business plan will identify to what extent
costs have to be trimmed and may highlight the need for implementation of a new marketing
strategy.
By completing a business plan, you are taking a pro-active step, forcing you to think clearly
about where the business is going and how you are going to get there.

Business planning process

Broadly speaking, for a new business, the planning consists of three activities. These three
activities encompass initial research to determine whether your business has the potential to
be successful before proceeding onto more in-depth analysis.
1. Core business concept
This defines the essence of a new business idea. What are the products and/or services
your business will market? What markets will you target with your products and/or services?
2. Feasibility study
In three steps, the feasibility study determines the initial viability of the core business
concept.
 Technical feasibility - Can this business idea be implemented successfully within the
restrictions of our legal, social and environmental constraints? Are the required labour
and technical resources available?
 Market feasibility - Is there room in the market for the
proposed product/s/service? Can the business achieve the
required sales turnover to make it viable? Will the market
pay the price you must charge to meet your sales targets?
 Commercial feasibility - Can the level of sales be achieved
over a set period to make a profit in addition to servicing
any debt and/or providing a return on investment to
investors?
3. Business plan
If the feasibility study indicates that the business concept is a viable proposition, a detailed
business plan must be prepared.

Research process steps

You need to undertake initial research to determine your idea is viable before progressing on
to a detailed business plan.
It is generally accepted that there are five steps in the research process:
 Define the problem – what do you need to know?
 Analyse the situation
 Collect information and data
 Interpret the information
 Decide on a plan of action.

Types of research
Research may include:
 Interviewing colleagues and clients
 Focus groups
 Data analysis
 Product sampling
 Documentation reviews.

Types of relevant information

Whilst each organisation will have different focuses depending on their type of operation and
individual needs, common types of relevant information may include:
 Current performance data
 Sales and contracts
 Forecasted trends and opportunities
 Available resource commitments and capacity.

Sources of research information

You may find the answers from a wide variety of sources, including but not limited to:
 Trade associations
 Unions
 Trade journals
 Daily newspapers
 Internet
 Government departments
 Local council
 Friends, colleagues, business associates
 Other associated businesses in the field, e.g. suppliers.
1.2 Consult with all internal and external stakeholders in the research process

Introduction
When people talk about planning they often use the term ‘stakeholders’. This simply refers to
the people, groups, organisations that may have an interest in the business or be directly
affected by the plan.
As you develop your plan you will think of its stakeholders. Every additional stakeholder is
someone else who has an interest in your business and can, therefore, be another source of
support or contribute information.

Types of stakeholders
Stakeholders may include:
 Customers
 Employees
 Government agencies
 Owners
 Suppliers
 Strategic alliance partners.

Importance of involving stakeholders

Communication throughout the planning, preparation and delivery of business planning is
vital to ensure that all stakeholders:
 Are involved
 Had the chance to contribute
 Provide feedback on initial strategies and approaches
 Understand how business plans and strategies will affect
them
 How the business plan will interrelate or impacts other
stakeholders.
All successful planning activities are a result of effective teamwork.
This highlights the need to involve others so that business planning approaches are
thoughtfully explored.

1.3 Use research to assist in the prediction of social, political, economic and
technological trends and developments

Introduction
When researching information to help facilitate the business planning process, it is essential
to collecting and analysing information in a wide variety of 'environmental areas' that may
impact on an organisation in the future.
Information must ensure it not only explores:
 External environment - what is provided or needed by
competitors and the industry as a whole
 Internal environment - what the organisation provides.

Understand external environment

Development of a successful organisation is an on-going exercise, and involves monitoring
of the internal and external environments, and the integration of findings into future business
planning and the introduction of new concepts.
Market analysis provides us with the information necessary to understand what can cause
changes in our operational environment.
A prime intent of this activity is to gain a more insightful and
detailed view of the organisation and where it sits in the overall
business and other settings.
Market analysis is a fairly generic term that describes an activity
that we are constantly conducting in order to target the right
person with the right product/service at the right time in context
with the workings of the market, our environment and our
competition.

Analysis of external environment

The external environment refers to the area outside the business over which the venue has
little or no control. It normally has the greatest effect on the need for change.
It can relate to changes in technology, changes in legislation, state of the economy, political
situations, and competition in the marketplace.
Service deficiencies caused by external factors may be harder to control, however steps
should be made to understand them and make changes whether the organisation has some
control.
External environment impacts include:
Changes in the competitive environment
As competitors introduce new services and facilities, the nature of
our industry is we are often forced to respond and match their
offerings or introduce something else in opposition to it. The key
here is we have to know what the competitors are doing. We have
to monitor their advertising, visit their premises and talk to our
suppliers about what the opposition is doing.
We then have to take some action to exploit an opportunity or mitigate any potential negative
impacts – whichever way we go; we have to realise ‘knowledge is power’ only if we act on it.
Knowledge on its own is next to useless
As part of this analysis, it may also be prudent and instructive to undertake a similar analysis
of your competitors so that you have a better understanding of the total opposition ranged
against you, and the marketplace in general.
When analysing the competition, it is useful to gather evidence of the following:
 Location and distribution area that they have established
 Target markets they appear to have set
 Product and service mix
 Packaging or presentation
 Access
 Continuity
 Their promotional mix – what they do in terms of advertising,
when and how
 An objective assessment of the quality of their product/service – Are they providing good
quality, costs, variations, reliable service, acceptable trading hours, and value-for-
money?
 Their pricing structure – Do they give discounts, trade-ins, a wholesale and retail
structure?
 Their level of customer service – What do they provide? Are their staff good at selling
and service?
 Their market share – how much of the (local) business do they have?
Economic climate
Monitoring the media and discussion with our finance facility will help identify the state of the
economy. There is no doubt the state of the economy is extremely influential on trade and
we have to be prepared to respond to the emerging economic climate. At times we can offer
indulgent, extravagant, high-roller packages, whilst in other times we need to focus on low
cost, value-for-money deals.
There are economic cycles that need to be taken into account in your business planning.
They are periodic fluctuations that occur quite regularly, driving the general level of
economic activity upwards (inflationary) or downwards (recessionary).
These trends result from a large and complex range of variable economic activity and
government policies which may affect your business and over which you have little or no
control e.g.
 Proposed interest rate increases may lead to lower confidence levels of consumers who
will spend less on non-essential items e.g., holidays
 Lower unemployment rates may increase consumer spending from which your business
will benefit
 Increased numbers of persons from a specific culture living in your area may lead to
greater/lesser demand for your type of operation.
Trends in customer preferences
Whether we lead the pack or follow the opposition (or a combination of the two), we must
respond to customer preferences.

Advent of E-business
More and more people are using the internet to access
information and make bookings. We need to tap into this
emerging but already substantial market and establish a web
site (making sure it is someone’s responsibility to keep it up-
dated weekly) which illustrates our business and describes
our services, facilities etc.
We also need to exploit the opportunities this medium
presents for reservations and various other activities such as
retail sales (internet sales), take-away sales, and a forum for questions and feedback as well
as a platform for information dissemination.
Markets
Markets are complex and rapidly changing with new and more complex customer demands,
products and services.
Internationalisation is increasing and international competition is intensifying in many
markets.
To ensure the right quality, companies must be better at
understanding their environment and building-up the
competence and ability to change before, or at the same
time, as the outside world changes.
The luxury of lagging behind global changes has
evaporated.
International customers expect the same standards here as
they receive in any developed country overseas.
Environmental issues
The demand for quality in the outer environment will place greater demands on how
companies conduct their business, which sources of energy they use, and how they design
their products.
More establishments will seek to portray publicly their environmentally friendly image.
This may mean they subscribe to organisations such as ECO-Buy or Green Globe.
Most organisations appreciate there are cost savings to made from
‘going green’, as well as marketing potential and the obvious effect
of reducing the impact of the business on the planet.
Most businesses today will seek to demonstrate they align with
triple bottom-line principles, taking into account not only the
financial goals of the organisation but also social and environmental
responsibilities too.
Technological development
Technological development has played a key role in the structural changes in the service
sector.
Boundaries between transportation, communication, travel-service
and hospitality industries are disappearing as airlines (and others)
begin to provide direct reservations, tours, conferences, car and
accommodation arrangements, in-flight telephone service, and
electronic retailing package delivery services in competition-and-
coalition with thousands of other service units.
Many customers are looking for seamless service – a one-stop
shop for all their holiday/travel needs, and technology is providing
the means for this to be done.
Technology has also impacted on operational service delivery via computerised reservations
systems, online reservations, hand-held ordering systems in restaurants, bar code scanning
and the growing trend for customers to do their own checkout and payment after selecting
goods.
Political issues
The Political factors are the external factors that influence the business environment.
Government decisions and policies affect a firm’s position and structure. Political factors are
activities related to government policy and its administrative practices that can have an effect
on something. Most business operators will keep a watchful eye on any political factor, such
as new legislation, or regulatory shifts, which could have a substantial impact on how their
company operates and its bottom line. Tax laws, monetary and fiscal policies as well as
reforms of labour and workforce, all of these factors influence companies in different ways.
Social issues and trends
Social significance relates to how a society deems something to be important in their lives.
Social factors are related to the firm’s products and services which they offer or the nature of
the business. It involves the trends of population, domestic markets, cultural trends and
demographics such as age of the population, religious orientation, race and ethnicity,
education, status symbol, economic status and social or ethnic customs. These factors help
businesses assess the market and improve their products/ service accordingly.

Evaluate market trends

Understanding trends of the industry is vital in ensuring that what you are seeking to provide
to the market is not only fresh and relevant but is in demand. Trend analysis is the process
of comparing business data over time to identify any consistent results or trends. You can
then develop a strategy to respond to these trends in line with your business goals and
objectives.
Regardless of types of trends being researched, the basic options for gathering information
have been identified below. The keys however to this step are to:
 Be proactive
 Keep an open mind
 Using a variety of sources
 Recording what you find.

Sources of trend information

There are a number of sources that will be a great starting point to get an overview of the
industry as a whole and the trends that may impact a business and the selection of new
products or services they are thinking of introducing.
 Colleagues, supervisors and managers
 Representatives.
 Developing your own industry network
 Conferences and seminars
 Product launches
 Trade magazines
 Industry publications
 Newsletters and brochures
 Advertisements
 Reference books
 Internet
 Government bodies.
 Customer demands
Customer demands
The key to knowing about changing trends, from a marketing
perspective, is that this information needs to be related to customer-
focussed concerns.
Your market research will have identified the areas and issues that
are important to your various target markets, so profiling the
business’s customers requires that you relate these to the products
and services you are offering.
The point being that you need to be able to identify, understand and
explain how your products meet the specific classifications of
customer demands that exist within your different market segments.
These customer demands may vary according to:
 Personal preference
 Health factors
 Age
 Cultural group
 Dietary issues
 Price
 Contemporary eating habits
 Media influence
 Cultural and ethnic influences
 Seasonal and popular influences
 Major events and festivals.

1.4 Identify and seek assistance and advice from appropriate experts when
necessary

Introduction
Before you start your business it is advisable to consult as many organisations and persons
that you believe can inform and assist you in your planning.
Whilst each organisation will have different requirements, it is wise to speak with a wide
selection of experts. Each of these will not only cover areas that you may not have in-depth
knowledge of expertise, but can also provide a different approach and alternate point of
view.

Types of assistance and advice

Assistance and advice from appropriate experts may be sought for:
 Collection and collation of facts and information
 Review or verification of facts
 Legal or financial advice
 Ensure compliance of regulations and laws
 Issuing of permits and licences
 Strategic planning
 Specialist skill sets.

Sources of assistance and advice

These can include, but are not limited to:
 Local government agencies
 Tourism associations
 Non-government organisations
 Media personnel including journalists
 Copy writer
 Professional research organisations
 Solicitors
 Family
 Existing employees
 Your existing bank
 Your accountant
 Financial adviser
 Your planning consultant
 Your architect
 Your potential financier (if not your current bank)
 Tourism agencies (local/regional/state)
 Tourism operators
 Shareholders/business partners
 Customers
 Suppliers
 Neighbours and the local community.
 Your local council
1.5 Document and analyse business opportunities and obstacles based on valid and
reliable comparative market information

Introduction
Once management have had a thorough look at the external environment, the focus must be
internally focused.
The internal environment is the environment within the
business in term of management, marketing, human resource,
finance and other important departments within the
organization.
It can include the level of staff available, the policies and
procedures of the organisation, the skill and knowledge levels
of staff, the opening hours of the business, the facilities
available within the venue. In theory, a property has control
over these internal factors because it is in a position to influence them.
Any aspects of the internal environment impacting service can be identified, changed and
improved a lot easier than impacts caused by the external environment.

Review internal resources and capabilities

If you have an existing business you will need to assess how the business is currently
positioned in the market place.
 Location including premises - are they appropriate, is there room for growth?
 Market share – how well are you performing against the competition?
 Turnover
 Profitability
 Staff – performance, current skills possessed?
 Resources – physical assets, intellectual property, finance?
 Future potential?
If you intend to start up a new business ask yourself, what internal resources and capabilities
are available, desirable, attainable and affordable from the above listed categories.
Both existing and start-up businesses need to identify, investigate and assess any potential
internal resources and capabilities.

Internal considerations
 Products and or services
 Skill level of staff and management
 Commitment to growth
 Current market share
 Level of debt
 Profit margins
 Capacity to produce goods or services
 Competition
 Skills of the owners
 Location of the business
 Equipment.
Organisational requirements
These will differ between businesses, products and services but may include:
 Access and equity principles and practices
 Maintaining ethical standards
 Meeting goals, objectives, plans, systems and
processes
 Legislated obligations
 Management and accountability channels
 Manufacturer’s and operational specifications
 OHS policies, procedures and programs
 Quality assurance and continuous improvement processes and standards.

Capabilities and resources

The use of resources is important activities in any business, especially when introducing new
concepts.
There is a need to make sure the organisation has the resources it needs to achieve its
identified business objectives, while at the same time, ensuring that money is not wasted on
resources that are not necessary or inappropriate to the task.
Resources can encompass:
 Physical resources
 Human resources
 Financial resources
Intellectual property.

While the exact nature, type and quantity of resources required by an organisation will vary
depending on the products and services being introduced, common resources requirements
include
 Location/premises
 Occupational health and safety (OHS) resources
 Plant/machinery
 Raw materials – used to produce the products or service
 Refurbishment requirements
 Staff amenities
 Stock and supplies – used to support the operation of the
new product or service
 Storage space – for stockpiling items produced and for
business records
 Technical equipment and software
 Staffing & Training
 Training materials.
1.6 Document and analyse business opportunities and obstacles based on valid and
reliable comparative market information

Introduction
In addition to researching published information, it would be prudent to gather information
from direct observation and personal observations. Instinct and “gut feelings” may inspire
brilliant entrepreneurs, but most of us do better with concrete evidence on which to base
decisions.
Reliable statistical information is available from the local
Bureau of Statistics or relevant government agency. Local
authorities and associations can also provide valuable
insight about the location in which you want to start up or
grow your business.
It is essential to analyse the opportunities and obstacles
offered by your proposed business. It is important that you
are confident that the business is a viable proposition and will provide you (and any other
owners) with a satisfactory income or return on investment.
As mentioned before, business exists in a continually changing environment. The operating
environment is made up of the:
 General business environment (external)
 Existing operation, if applicable (internal).

SWOT Analysis
Most businesses undertake a SWOT analysis to gain an understanding of what is happening
both external and internal to the business and the effect it will have on the business. This
process ultimately tries to identify:
 Strengths – what the business does well
 Weaknesses – what the business can improve upon
 Opportunities – where the business can improve or take advantage
 Threats – where the business may become disadvantaged, weakened or susceptible.
Strengths and weaknesses in the internal structure, operations and ability or capacity may
appear in terms of:
 Finance – available cash flow (or lack of it), debt-equity rates,
level of assets, profitability, capital available: this reflects the
previous results the business has experienced and takes into
account the effects of previous marketing programs
 Production – extent and quality of systems and technology to
enable the business to operate. Is it up-to-date or in
desperate need of an upgrade or a replacement?
 Resources – the level, variety and availability of products, raw materials, ingredients and
other requirements to produce the goods and services offered for sale
 Offerings – taking into account the product mix of the business (the products and
services available). Is this mix ‘sufficient’ or does it need growing/expansion into other
areas, products or services?
 Marketing – can relate to customer database information available or existing within the
business, details about price structure (discounts and commissions), distribution
channels (such as other agencies or establishments as a source of bookings), location of
the business (including Internet exposure), promotion undertaken, as well as the extent
of service and product range
 Product life cycle – a product/service nearing the end of its
product life cycle can be a negative (a weakness)
indicating a need to replace it, refine it, re-brand it or add
some new option to re-create it under a different name
 Business relationships – assessing the nature and
effectiveness of the arrangements with suppliers, agents
and head office; how have they changed over time? Are
you dependent on just one supplier or carrier? Are you getting the right quality products
and the service you want? Are you being supported by those who are supposed to serve
and support you?
 Relationships with customers – analysing the extent and effectiveness of the CRM and
the information it contains (in terms of currency, quality, type, quantity)
 Personnel – this looks at number of staff employed (too many or not enough?), their
knowledge, skills and abilities, the level of morale, leadership and internal
communication in the business.
Opportunities and threats that may externally face the organisation can include:
Political considerations
Analysis of political considerations/factors should include:
• The political stability of the country
• Is a change of government imminent and if so what implications can be expected?
• Feelings in relation to international trade/dealings
• Political relationships between home country and those countries with whom you do
a lot of business
• The support available from government (agencies and bodies) for industry training
and/or initiatives.
Economic considerations
The economic environment in which the business operates – addressing matters such as:
 The local economic environment as well as the economic state of other countries from
which the business draws its customers
 Inflation
 Interest rates
 Exchange rates
 Levels of employment and unemployment
 Availability of local skilled/competent staff
 Amount of discretionary income customers have
 Community thoughts on the state and/or future of the economy.
Social considerations
Analysis of social considerations/factors should include:
 Statistics and trends in relation to demographic characteristics of markets – such as: Are
customers getting older or younger?
 What is the ratio of males to females? Is this changing?
 What image does the industry have in the eyes of society?
Is it a positive image? Is it tarnished for some reason and if
so how/why?
 Projected responses of local and other communities if the
business pursues various options - such as entering into a
relationship with a certain organisation, entering into a new
market, erecting a new building
 The status of the business in the eyes of the community/public as a ‘corporate citizen’
 Mobility of people and their ability to travel to and from the venue.
Technological considerations
Analysis of technological considerations/factors should include:
 Does the current technology being used by the business remain effective and efficient?
 Is there new technology in the marketplace which can/should
be used to: Improve business performance/save time and/or
money?
 Provide better/different facilities for customers and perhaps
give the venue a USP or meet identified customer
demand/meet competition?
 Does legislation require use of nominated technology?
When?
 What is the cost of new/required technology and what are supply/purchase options?
 Dangers or problems inherent in adopting new technology and/or integrating it into
existing systems and/or processes.
Legal considerations
Analysis of legal considerations/factors should include the laws and regulations the business
must comply with as well as any new laws being proposed and how these will/may impact
the business.
You may consider the following:
 Industry-specific laws
 Contract law
 Fair trading legislation
 Consumer protection
 Employment legislation
 Environmental protection laws
 Wage rates
 Trends in outcomes/decisions in civil cases
 Penalties for non-compliance
 Application and registration requirements, complexity, costs and timelines.
Environmental considerations
Analysis of environmental considerations/factors should include:
 Sustainability issues
 Use of power and water
 Rubbish disposal
 Pollution – traffic, noise, air, water
 The impact of the venue on local communities.
Opportunities
Opportunities which should be highlighted in the analysis relate to:
 New markets – including niche markets – which may be pursued by the venue in terms
 New (or up-dated or modified) products or services which can be introduced to the
service menu
 Occasions where new/higher prices may be charged
 Problems being experienced by other providers (your competitors) which result in an
opening for you
 Closure of an opposition business
 Fresh markets now available to you as a result of previous action
you have taken – such as how you have trained your staff, new
equipment/resources you have purchased, refurbishments you
have undertaken, new database of information you have about
potential customers/guests.
Threats
Threats may include issues relating to:
 Introduction of new and/or more severe legislation
 Opening of a new competitor
 Worsening economic conditions
 Staff shortages
 Difficulty in obtaining physical resources
 An unsettled domestic situation which scares off tourists
 Negative comparative monetary exchange rates with
countries who are major clients.
1.7 Review and analyse current and emerging competitors for their potential
impact

Introduction
It is important to know who your competition is, including:
 Who are they, and where are they located?
 How significant is their share of the market in your local
area?
 How well do they present to potential customers?
 What are their products and/or services?
It is vital that organisations have knowledge of their competitors.
That said, when visiting and researching competitors, you may also identify other businesses
or organisations that may work with you in the future. Are there any network opportunities in
the area?

Review and analyse current and emerging competitors

Areas of review may relate to:
 Volume
 Price
 Territory
 Customer accounts
 Trading terms
 Market share
 Customer satisfaction.
Developing a competitive advantage
The intent of conducting research is to help determine what competitive
advantages you have over your competitors so that you can exploit
them.
This research helps you to identify your USPs (Unique Selling Points) in
either product or service (or both).
A USP is something your organisation offers that no-one else does –
this makes it unique. The marketing approach says that this USP should
be highlighted in all of your advertising so that customers get to know
that they can only get this particular service, produce, facility, advice,
etc. at your store and nowhere else. The intention is that this USP will act as a motivator for
customers to buy from you.

Current market situation

Information on the current market position is normally drawn from a database of information
that the organisation constantly updates. This includes information on the market, product,
competition, current strategies and macro-environment.
Market situation
 Total market characteristics - size, growth, trends, lifestyle, urgency, speed to market,
high pricing potential, uniqueness, low upfront investment
 Customer needs, perceptions and buying behaviour
- Four typical types of consumer behaviour when making
a purchase includes complex buying, habitual buying,
dissonance-reducing buying, and variety seeking
buying.

 Products - service characteristics

Types of Consumer Products:
1.) Convenience Product- these are products that consumers buy regularly or usually.
Products under this type are bought without a great deal of
comparison and exert minimal buying efforts.

2.) Shopping Products- these are products or services that consumers buy infrequently.
Customers often make comparisons regarding its suitability,
quality, style and price to the other brand. Customer exerts
efforts on getting information on the brands before deciding to
buy.

3.) Specialty Products-these are products that have unique attributes and brand
recognition for which consumers are ready to exert special effort.

4.) Unsought Products- these are products or services that consumers are either not
aware of the brand existence or have awareness of the brand
however not usually consider buying it.
 Industrial Product Clusters:
1.) Materials and Parts- these are raw materials or manufactured materials and parts.

2.) Capital Items- these are products that help the companies in operation, production,
Installation, and accessory equipment.

3.) Supplies and Services- these include operating supplies, repair and maintenance.

 Prices
Price is one of the key factors that most of the customers look in a brand. It is considered as
a major, determinant of consumer buying decision. It is also the amount of money charged
for a product or service. Providing consumers with product or service at the right prices is
one of the trade secrets of many companies in having a profitable sale. That is why setting
prices to products and services is a major decision to all companies.

There are internal and external factors that should be considered in pricing decisions.
Marketers must carefully weigh these factors to arrive at a right decision.
Internal Factors:
1.) Marketing Objectives
2.) Marketing Mix Strategy
3.) Cost (Production Cost, Operational Cost, Supply Cost)
4.) Organization
External factors:
1.) Nature of the Market and Demand
2.) Competition
3.) Other Environmental Factors (Economy, Government, Social, Cultural)
For new products, setting a price I critical. It may gain or lose valuable marketing
opportunities. Thus, marketing practitioners must consider costs, perceived value, and the
competition to arrive in a well-thought price of the product.

Cost is a major determinant in setting the price floors. Consider all the cost of the company
in producing and delivering the product in the market. This includes the costs for the supplies
materials, manpower, and other organizational considerations.

The perceived value of the customers is also important in pricing the product. The marketer
must know how the consumers will value the product. The company should measure the
perceive value of the consumers about the product with outmost accuracy.

On the other hand, competition is always an object in setting prices. Competitive positioning
of the brand is an important factor in pricing. Companies should analyse the competitive
value of the product using the lens of consumers. It will enable the company to position the
product in the market with maximum precision.

Utilizing General Pricing Approaches

The price of a company charges may play between one that is too low to produce a profit
and too high to produce any demand. Marketers must realize that the cost of the product set
the floor for a price while perceptions of the consumers on the value of the product set the
ceiling. Thus, to find the right price with these extremes possibilities, the marketers should
determine competitors price and other external and internal factors.

Companies may set prices through the use of general pricing approach that includes one or
more or more three sets factors.

Major Consideration is Setting Price

1. Cost-Based Pricing- an approach or strategy in pricing that utilizes production costs

as its basis for determining the price to the products. There are two methods to cost-
based pricing.

a.) Cost- plus pricing- this is an approach to pricing in which a standard mark-up is
added to the product cost.

b.) Break –even pricing- this is an approach to pricing in which companies set the price
to break even on the cost of making and marketing products or to reach the target
profit.

2. Value-based pricing- many companies set the price of the products based on
product’s perceived value. This pricing approach utilizes the perception of the
consumers on the value of the product instead of the seller’s cost in determining the
price. The process of this pricing approach in identifying the price is entirely opposite
on how cost-based pricing approach determines the price of the product.

a.) Competition-based pricing- many consumers based their judgement of the product’s
value on the prices that the competitors set for same products. This approach to
pricing pays less attention to the demand of the product or the cost of the production
in setting the price. The main basis of the company in fixing the price of their product
is the competitors prices. The company may charge more or less than, if not the
same, its direct competitors.

Applying New Product Pricing Strategies

The pricing strategy applied to a product may change depending on the stages that it
passes through in the product life cycle. Perhaps the most challenging for a company is
to set the price of the product for the very first time. Thus, pricing is crucial to a product
entering the initial stage. The companies in this situation may use one of the two broad
strategies.

a.) Market Skimming Pricing- The pricing strategy works by setting a high price for the
new product to skim maximum revenue from a set of consumers who are eager to
pay the high price and lowering it as the market evolves.

b.) Market Penetration Pricing- This pricing strategy suggest that to attract a large
number of consumers and to have a large number of market share, the company
should set the price low to enter a competitive market and raising the price later.

 Customer service and distribution

Marketing experts agree that one key determinant of a good marketing of products and
services are making them accessible and available at the right place. Thus, paying too little
attention to distribution channels in marketing is not wise.
Equally important as the other elements of marketing mix, distribution channel helps the
company to make its products or services accessible and available to the consumers.
Hence, when conducting analysis in marketing, it is vital for the companies to take a closer
look at it to ensure the utilization of right channel to get their products to the target buyers.

 Channels - principal channels used, stock turnovers, profit

Distribution Channels
- Or known as marketing channel is a group of interdependent organizations that
participate in the process of making product or services available for the consumption
of the buyer or user.
Appreciating the Functions of Distribution Channel
1.) Provides Information
2.) Maintain Price Stability
3.) Boost Promotion
4.) Finances Manufacturers Operation
5.) Matches Buyers and Sellers

 Communication - principal methods of communication used.

Competitive situation
 Industry structure - type of competition, marketing methods, new entrants, mergers,
competitive arrangements
 The geographic market in which they compete
 Their current marketing performance
 Their competitive position (growing, contracting)
 Strengths and weaknesses, and vulnerabilities of each significant competitor
 Their objectives and competitive strategies
 Industry profitability - financial and non-financial barriers to entry, relative performance of
individual companies, volume, source of and cost of investment, effect and return on
investment of changes in price.

Product situation
For each product/service that the organisation offers, sales,
profits, contribution margins and growth should be displayed
 Product lifecycle and expected demand over the product’s life
should be considered
 Growth of the product/service should be contrasted to total
market growth.
Current strategies
 Current product, price, place and promotional strategies should be included
 Current people, processes and physical evidence strategies should also be included.

Summary
Analyse the internal and external business environment
Determine information requirements and undertake research to deliver relevant information
 Importance of business plans for starting or existing organisations
 Business planning process
 Research process steps
 Types of research
 Types of relevant information
 Sources of research information
Consult with all internal and external stakeholders in the research process
 Types of stakeholders
 Importance of involving stakeholders
Use research to assist in the prediction of social, political, economic and technological trends
and developments
 Understand external environment
 Analysis of external environment
 Evaluate market trends
 Sources of trend information
 Types of industry statistics and trends
 Customer demands
Identify and seek assistance and advice from appropriate experts when necessary
 Types of assistance and advice
 Sources of assistance and advice
Review and analyse the existing internal resources and capabilities
 Review internal resources and capabilities
 Internal considerations
 Organisational requirements
 Capabilities and resources
Document and analyse business opportunities and obstacles based on valid and reliable
comparative market information
 SWOT Analysis
 Strengths
 Weaknesses
 Opportunities
 Threats
Review and analyse current and emerging competitors for their potential impact
 Review and analyse current and emerging competitors
 Developing a competitive advantage
 Current market situation
Explore the potential for joint ventures and strategic alliances

Topic 2:
Formulate business plans and strategies
2.1 Create or confirm enterprise mission, vision and purpose as the starting point
for the business plan in consultation with stakeholders

Introduction
In the previous section, the focus was on researching and collecting information relating to
the environment in general through to internal operations, impact of competitors and any
opportunities that may exist for the business to expand.
Now that persons responsible for the development of business plans have a sound
understanding on the influences on the operation, based on this research, it is now time to
document the path forward in a business plan.

Focus of business plans

The business plan may be for:
 A new or existing small business venture
 A division or department of a large organisation
 A new product development initiative.

Contents of a Business Plan

On the following pages are a summary of the topics normally included in a business plan.
Later these topics will be explored in more detail.

Executive Summary
 Business Profile
 Your Products and/or Services
 The Market
 The Business Potential
 Mission, Goals and Objectives
 Strategies
 Business Structure (Technical, Operational, Organizational)
 Finance
 Conclusion.
The Business Profile
 Business Name
 Business Location/s
 Business Activity/Activities
 Business Objectives
 Business History/Entry Strategy
 Ownership Structure
 Legal Requirements.
The Market Report / Study
 Industry Profile
 Review of Existing Operation (if appropriate)
 Your Product and/Service
 Competition
 Environmental Information and Trends.
The Marketing Plan
 Market Segmentation
 Your Customers
 Target Markets
 Strengths, Weaknesses, Opportunities, Threats Analysis
 Key Issues
 Sales and Marketing Goals and Objectives
 Value Proposition (Competitive Advantages)
 Marketing Strategies
 Pricing
 Promotion
 Sales and Distribution.
Operational Plan
 Premises, Plant and Equipment
 Floor plan
 Production and purchasing
 List of Suppliers
 Stock levels
 Purchasing Policies and Controls
 Break-even Analysis.
Finance Plan
 Current Financial Position
 Capital Requirements and Funding Proposal
 Financial Budgets
 Cash-flow Projection
 Projected Statement of Financial Performance (Profit
& Loss)
 Projected Statement of Financial Position (Balance
Sheet)
 Financial Ratios
 Financial Controls
 Business Insurances.
Risks Plan
 Risk Identification and Mitigation.
Structure and Management Plan
 Organisational Chart and Structure
 Key Personnel
 Labour Requirements and Skills
 Staffing Strategies
 Professional Advisers
 Staffing Controls.
Project Plan
 Action Plan
 Evaluation
 Implementation
Appendices

Executive Summary
The Executive Summary is quite possibly the most important part of your business plan.
Many potential investors or lenders will take their first look by reading only your Executive
Summary. If this section doesn’t entice the reader to want to go into the body of the plan for
additional information, then it has failed its purpose.
Once you have finished the other sections of your plan, focus on the best two or three
thoughts of each section to create a summary. The key to writing a good summary is to write
it with your reading audience in mind. If you are going to use your plan to attract investors,
your Executive Summary should address all the important issues related to your potential
investors. If the plan is going to a banker, the Summary should address the areas of concern
of the financial institution reader. Getting the reader interested enough in your project to
want to read the rest of the plan is the primary purpose for the Executive Summary.
The executive summary is the business plan in miniature. The
executive summary should stand alone, almost as a kind of
business plan within the business plan. It should be logical,
clear, interesting – and exciting. A reader should be able to read
through it in four or five minutes and understand what makes
your business tick. After reading your executive summary, a
reader should be prompted to say, “So that’s what those people
are up to.”
Crystallise your thoughts. Since the executive summary is the business plan in miniature, it
contains the plan’s highlights, its key points. To write an executive summary, focus on the
issues that are most important to your business’s success.
Set priorities. The executive summary, like the business plan, should be organised according
to the items’ order of importance. Writing it forces you to pick and choose from among the
many points you want to make in the business plan and decide on their order of importance.
Your executive summary should have the following attributes:
 Captures others’ interest, attention and imagination
 Makes readers want to read more
 Conveys the flavour of the rest of the plan
 Portrays the writer’s enthusiasm for their business
 It is concise and clearly written.
Business Profile
Business Name
Your business, if not an existing one, needs a name – simplicity is
often the best. It is a good idea to avoid using a suburb name in case
your business moves or expands into other suburbs in the future.
Make it as interesting as possible, and indicative of what products
and/or services you are offering consumers. Think about a logo that
can be used on all your stationery, promotional materials, menus and
lists. Remember you need to register the business name
Mission Statement, Vision
Whilst the Mission Statement and Vision form part of the Executive Statement, it is a good
time to think about what you will write for these now.
The Mission Statement is the purpose of your business, and it should state concisely your
beliefs in the operation of your business. For example, the Mission Statement a travel
agency could be:
“The Singapore Travel Agency will provide creative travel solutions for high end business
and leisure purposes”
The Vision is the goal, or where you want your business to be in three years’ time.
Underlying this should be your consideration of where you want to be in 6, 12 months and 2
years in order to make your Vision viable.
The Singapore Travel Agency's Vision could be:
“The Singapore Travel Agency vision is that in 3 years’ time we will have attracted at least
10% of the potential corporate travel market and be the leading provider of luxury leisure
travel services”
Next you will need to clearly define the core business activity and perhaps some subsidiary
activities. In the case of the Singapore Travel Agency their core business would be to create
compete luxury packages (incorporating accommodation, transport, meals and insurance
solutions) for both corporate and FIT leisure clients, focused on the South East Asian
market. In one year’s time they may plan to create luxury inbound packages for groups.
2.2 Establish realistic, clearly stated and measurable objectives for the business

Introduction
The business profile section of the business plan should include a summary of the key
business objectives for the operation. The objectives are the goals or targets to work
towards and once defined, enable the planning of strategies to achieve them.
It is preferable to have realistic annual objectives, which are later broken down into monthly
targets. They need to be consistent, follow through and relate to each other e.g., if your
sales objective is $250,000 for the first year, then the gross profit margin should relate to that
sales value – perhaps 80% (this will vary according to your industry). It is important to
research industry averages and benchmarks and to strive to achieve equal or better than
their results.
Make sure that the objectives are clearly stated. Set
measurable objectives which are not vague generalisations
(they may not necessarily always be in numeric terms), so
results can be evaluated. They should be achievable, but
provide the motivation for the business to work efficiently and
enthusiastically towards sustainable growth and improved
results.

Types of objectives
Objectives may include:
 Sales figures
 Revenues
 Delivery times
 Service standards
 Client numbers
 Client handling times
 Staff turnover
 Profit margins.

The following table is a very simple set of objectives for the Singapore Travel Agency.
Singapore Travel Agency
NB The owner has invested $100,000 of his own capital, and borrowed $100,000. He has
arranged to pay interest only for the first year, and then commence reducing his debt by
$20,000 per annum.

Items Year 1 Year 2 Year 3

Sales $250,000 $300,000 $375,000

Profit after Tax $12,500 $25,000 $40,000

 Percentage Return 12.5% 25% 40%
on initial investment

Debt level $100,000 $80,000 $60,000

2.3 Develop appropriate strategies and tactics to address objectives across all
areas of business operation

Introduction
Now that clear objectives have been determined as the basis of the business plan, it is now
time to clarify the approach that needs to be taken to help achieve the objectives.
As can be seen in the following section, there are a number of strategic decisions that need
to be considered when identifying a clear path for your business in the future.

Business History/Entry Strategy

There are advantages and disadvantages with both starting up a new business and
purchasing an existing business. A new business is usually less expensive because you do
not have to pay for Goodwill (a value placed upon the business as a result of its good
reputation, established consumer base and physical assets).
However, a new business is riskier because there is no certainty that your product and/or
service will be in demand, and usually it will require more time and effort by the owner and
staff to attract consumers. But of course, there are great opportunities for you to create
something new and special, and perhaps position your business in a niche market.
If the business is a start-up, how will you manage the following situations?
 Promoting the business and establishing customer
demand
 Possible teething problems in setting up operating
systems and procedures
 Sourcing reliable suppliers
 Recruiting and training staff
 Obtaining sufficient capital or borrowings from external
sources
 Coping with the financial pressure of time lag before business is known and
products/services are in demand by consumers.
If you are purchasing an existing business, you will need to review its history and overcome
any inherited disadvantages, such as:
 Obsolete or out-of-date stock
 Run down equipment
 Poorly trained staff
 Poor business reputation.
 Ownership Structure
There are three main ownership structures to choose from for your small business:
 Sole Trader (sole proprietor)
 Partnership
 Proprietary Limited Company (PLC).
Most small business commence as a sole trader or partnership.
However, it is advisable to consider the disadvantages inherent in
these forms of businesses. Although establishing a company is an
additional expense, it offers benefits, not the least being enhanced
ability to source external funds.

The Market Report

Your Market Report should consist of:
 An Industry Profile
 Your Product or Service
 Competition
 Environmental Information and Trends.
Industry Profile
It is useful to write a short outline of the current status of the industry in which you will be
involved. This will focus your planning on current demand (and future demand), what types
and styles of organisations are successful, what is about to be the “next big thing”.
Factors affecting demand are:
 The nature of buyers – what kinds of people are purchasing
your goods or services?
 Market size – how many potential consumers are there in
the area you intend to service?
 Demand patterns – is it increasing or decreasing for your
product or service?
Specific statistics for your goods or services can be found from the government agencies,
industry associations, media, business publications and internet research.

Your Product or Service

Think about the products or services that your business will provide. What are their unique
features that will attract customers? Will you offer a wide range of
complementary products, or do you intend to specialise in a particular
range? Tour Operator A decide to focus entirely on ecotourism
adventures for the under 40’s, whilst Tour Operator B offers a full
range of travel and tour options to all consumers. Both organisations
have advantages and disadvantages.
Operator A
 Will be tapping into a specialised, niche market
 They have a unique product
 Can be at risk if demand falls or costs increase dramatically.
Operator B
 Product available for greater number of consumers, therefore greater turnover possible
 May require more business resources – premises, staffing, and finance – to cover the
range.
If you intend to provide more than one product, you would need to draw up a sales mix table
such as the one below.
Singapore Travel Agency - Sales mix projection (column and row headings only)

Sales Stream Year 1 Year 2 Year 3

Airfare Bookings

Packages

Transportation

Shop items

Travel Insurance

Total Sales

Competition
It is important to identify the main competitors to your business. In your Business Plan, list all
major competitors showing details re their
 Name
 Address
 Number of staff
 Strengths and weaknesses.
This knowledge will assist you in formulating competitive strategies to lure their customers to
your business! What is your competitive advantage?
Environmental Information and Trends
An analysis of the general business environment gives you information about current
conditions within your industry. It is equally important to identify favourable and unfavourable
changes and trends. They indicate possible opportunities and threats to your business.
Considerations include:
 Is the economy currently in a boom or recession cycle and where is it heading in the
immediate future?
 What is the general confidence level amongst business
persons and families?
 Demographic factors in the area, and projected growth
– include population characteristics such as age,
gender, occupation, home ownership, education levels,
attitudes
 Cultural trends and changes regarding life styles
 Technological changes impacting on business and
family life.
In addition to researching statistical information from published quantitative sources e.g.,
statistical generation organisations, it is worthwhile gathering information from direct sources
e.g., direct observation, personal surveys.
Direct observation includes a personal examination of the environment. Personal surveys
are another valuable research tool. It is important to ask open-ended questions that allow
people to give their own opinions. Framing your questions needs to be given careful thought.
Make sure your questions aren’t skewed specifically to confirm your own opinions. From
their answers, you should gain an understanding about their needs as a consumer, their
preferences and dislikes, what they would like to have available in their local area.
Responses to carefully framed questions should assist you in making informed decisions for
marketing your business and its products.

The Marketing Plan

The Marketing Plan must include information about:
 Market segmentation
 Your customers
 Target markets
 SWOT analysis
 Key issues
 Sales and marketing goals and objectives
 Value proposition (competitive advantages)
 Marketing strategies
 Pricing
 Promotion
 Sales and distribution.
Market segmentation
Consumers have different wants and needs. These may change over a period of time
depending upon their age, finances, occupation, etc. a report for a travel organisation may
identify and describe a number of subgroups or target markets ranging from those with basic
needs to those with sophisticated requirements.
Marketing resources and products could be focused to appeal to specific target groups and
therefore achieve high yield results.
Your customers/target markets
As your product or services will be marketed to a diverse range of customers, a profile
should be constructed for each customer group identified. Each group can be classified
according to their:
 Personal characteristics (geographic, demographic,
psychographic, socio-economic)
 Wants and needs
 Anticipated frequency of purchasing and loyalty to your
business.

An example of two sub-groups for the Singapore Travel Agency could be:
Group 1 – “The corporate traveller"
 Characteristics – aged 30-60, busy lifestyle, middle income- high income, budget
restrictions
 Wants and Needs – convenience, essential services such as transport and
accommodation
 Frequency/loyalty – 1 to 2 times a month.
Group 2 – “The high end leisure traveller”
 Characteristics – aged 40-75, married, disposable
income, well educated, limited time restrictions middle
management, well-presented
 Wants and Needs – convenience, seeking
experiences
 Frequency/Loyalty – 1 to 2 times a year.
SWOT Analysis/ Key Issues
In Section 1.6 we have previously discussed the importance and contents of a SWOT
Analysis.
A marketing plan requires answers to many questions. Many of these answers will come
from your SWOT analysis. Consider the following questions:
 Who will buy your products/services?
 Why will they buy your products/services?
 How can you attract potential customers?
 How is your product or service different from or
superior to your competitors?
 Are there seasonal trends?
 Are your products or services price sensitive?
 What price will you sell your products or services for?
From the SWOT analysis of your customer base, you should now be able to identify the key
issues for your business’ marketing plan resulting from your in-depth understanding of your
current and potential customers.

Sales and Marketing Goals and Objectives

Business Objectives were discussed in the above Business Profile (refer to Section 2.2).
Sales and Marketing goals and objectives form part of the underlying basis for the overall
business objectives.
These may be based on:
 Client development
 Geographic expansion
 Organisational growth
 Service growth
 Debt reduction
 Income development.
The sales goal and objective table for the Singapore Travel Agency could be:

Goal Objectives

Develop the business to be the most To increase the number of customers by

profitable of its type in the local area 25% in Year 2, and a further 10% in Year 3
(compared with Year 1 results)

To reduce the costs of operating the

business by 10% in Year 2, and by a
further 10% in Year 3, (compared with Year
1 results)

Sales and marketing objectives should be expressed in measurable terms (sales units, or $
values), and have built into them an allowance for inflation. When setting sales objectives
remember to make them reasonable, attainable, and ensure that they will provide profitability
for your business.
You need to strive for growth in the marketplace, whilst ensuring that you are recovering
your costs. It is pointless to capture the majority of sales in your area by selling your product
and services below cost price. Some businesses do this to attract customers for a short
period of time but it is not a sustainable business practice.
Also remember that you need to be mindful of the operating capacity of your business. If you
are unable to meet the demand that you have created there will need to be an urgent
increase your operating capacity.
This may require more capital and other resources than you are able to access, and you
may not be able to step up volume speedily enough. Your business does not need to have
unhappy or disappointed customers – a poor reputation is easy to earn, difficult to overcome.

Value Proposition
What will value add to your product or service that your competitor’s product does not have?
In the case of a tourism operation it could be:
 Unique features
 Location
 Unique or superior products and services
 Creative packages
 Exclusivity to attractions
 Well versed and experienced staff
 One stop shop for all travel services.
The list is endless. It is important to differentiate your product or service from your
competitors so as to give you that competitive advantage from your competitors.

Marketing Strategies
Marketing strategies are designed to satisfy the wants and
needs of the target customers. If they are satisfied with
your product or services, they will become repeat
customers and will tell others about your business. Word
of mouth advertising is free, and personal
recommendations by existing customers should
guarantee you additional sales. You need to be customer-
focused in designing marketing strategies. Put yourself in
the place of the customer. What strategies assure your
positive response? What turns you off?
The following table shows possible strategies that the Singapore Travel Agency could
implement in order to achieve their Sales goal.

Goal Objectives Strategies

Develop the business to To increase the number Develop a professional

be the most profitable of of customers by 25% in brochure to drop off to local
its type in the local area Year 2, and a further business’ by 31 March, and
10% in Year 3 have it delivered by 15 April
(compared with Year 1
results) Make sales appointments to new
and potential corporate clients

Advertise in media outlets focused

on high end leisure and corporate
target markets

To reduce the costs of Identify all costs of the business in

operating the business the past 3 months (Jan 1 – March
by 10% in Year 2, and 31) by 7 April
by a further 10% in Year
3, (compared with Year Work with employees and suppliers
1 results) to achieve potential cost savings
ideas by 30 April

Implement and monitor the

performance of cost savings
implemented as above each month
end commencing 31 May

In addition to increasing sales to existing customers, this business could consider:

 Modification of product or service
 Increase area serviced
 Diversification.
Pricing
What price do you need to sell your products or services to cover all
start-up costs, fixed and operating costs and make a reasonable
profit? The price must be high enough to satisfy this requirement, but
remain competitive to attract customers.
It must also “fit” with the image of your business as perceived by the
customer. For example, if you are going to focus on luxury travel the
packages developed and prices charged must not be in competition
with the budget travel market. This also relates to whether your
product fulfils a “niche” demand.
When setting your price also decide whether you will offer credit terms. In hospitality and
tourism operations some business’ offer accounts to regular customers e.g., hotel
accommodation/food and beverage bills for corporate customers. If accepting credit card
payments by other customers, you need to build in the operation costs of these cards –
business is charged a percentage of the amount charged by the banks or American
Express/Diners Club.
In your Business Plan you will need to outline:
 The price structure for your product or service
 The basis on which your prices have been calculated
 How your prices compare to your competitors.
Promotion
Thought must now be given to how you can best promote your business to the desired target
market segments
Promotion of your business can be achieved by:
 Advertising – print, TV, etc.
 Direct mail marketing
 Website marketing
 Events
 Sponsorship
 Unpaid advertising – media coverage, word of mouth recommendations
 Customer service
 Personal contact.
Consider what forms of marketing that are you going to use to attract and maintain your
target customers.
Sales and Distribution
How will your customers purchase your products or services?
Will you have a dedicated office? If so, where will it be located – is it convenient and
accessible? What times will you be open for business?
Will you offer:
 Dedicated intranet sites
 Website bookings
 Phone bookings
 Email bookings
 Personal sales visits.
Will other business operations be involved in the sales and distribution of your product, e.g.,
agents, distributors or franchisees?
Plan methods of sales and distributions and their contribution to your revenue

The Operational Plan

An Operational Plan consists of information regarding:
 Premises, Plant and Equipment
 Floor Plan
 Production
 Purchasing / Suppliers
 Stock Levels
 Purchasing Policies and Controls
 Break-even Analysis.
Premises, Plant & Equipment
In the Business Profile you have nominated the location of your business. At this time it
would be useful to give reasons for your choice of location. It could be that you have located
where there is a good flow of passing traffic who you hope will be attracted to your business.
Perhaps proximity to suppliers, or an available workforce were determining factors.
You will need to outline any arrangements that you need to
make re rental of premises, or lease, or purchase. Do you
require local government approval for the use of the
premises for your type of business? Will you need to pay
for a fit-out of the premises, or will you need only to
redecorate and can handle it yourself with the help of family
and friends?
What plant and equipment are you going to need? - will it be new or second-hand, and will
you purchase or lease it? Have you given thought to an efficient workflow when installing
fittings and plant and equipment?
Floor plan
It is a great idea to draw a floor plan of the premises and, to scale, show the position of all
work areas, equipment, etc.
Pace it out and make sure it flows and is comfortable. Would you enjoy working in this
layout, will your customers find it attractive and does it comply with all regulations?
Production
If your business will be manufacturing products, you will need to include information on:
 Production Capacity
 Output Levels
 Production Methods
 Production Quality Controls.
Purchasing/Suppliers
A vital part of any business’ operations is the sourcing and purchasing of goods, products
and services which it requires in order to operate.
This is especially true in the tourism industry where primarily you are selling other
organisation's products and services. Establishing a reliable, cost-effective supply chain is
essential to a small business. Your skills in identifying the most suitable products, then
achieving the best possible prices and supply terms will be very beneficial to your business.
Stock Levels
Again, in the tourism industry, many of your operations, is
based around selling other products and services.
Therefore stock levels may not be a major consideration.
That said, if you offer your own travel related products and
services, careful consideration must be given to ensuring
you have adequate stock.
The purchasing plan is dependent on information from the marketing plan and takes into
account production schedules and requirements. Remember the marketing plan was based
on the sales targets, so you can see the flow on effect from having relevant sales targets.
Think about what supplies your business will require. You will need to shop around, and
perhaps find more than one supplier to avoid being let down if your preferred supplier cannot
satisfy your requirements from time to time. However, if you use one supplier for a certain
type of product will you receive quantity discounts?
Consider:
 How frequently will you purchase supplies?
 How will you set and maintain stock levels? Will you use the “Just-in-Time” practice?
 If you carry too much stock do you risk it becoming unusable, or obsolete?
Purchasing Policies and Controls
It is good practice to document the Purchasing Policies for your business. Consider:
 What will be the terms of payment for each supplier?
 What purchasing procedures will you use? Will you have written purchase orders, or
order by phone or emails? Will you match these and delivery dockets against invoices?
 What controls will you have in place to prevent or detect theft, fraud?
 How will you pay your suppliers? Cash or bank transfer. Is
there any discount for prompt payment?
 What currencies will be used for payment?
 What commissions apply?
 How much of your funds do you want to tie up in stock?
 Analyse the gross profit margin – in dollar and percentage
terms, compare sales against purchases. This important
information is in the annual reports, but should be
checked at least monthly.
For each purchase item, draw up a table of suppliers, including their names, address, what
they supply and their terms. You may like to present this as a spread sheet.
Breakeven Analysis
A break-even analysis determines at which point sales begin to
cover costs. After that, sales revenue becomes profit. There are
several methods that can be used in this analysis.
You may have studied the unit Manage Financial Operations in
which the processes involved in break-even analysis are dealt
with in-depth.
To refresh your memory, the first steps were:
Identify:
 Fixed costs – those costs that remain even when there is no business activity e.g., rent,
insurances, manager’s salary
 Variable costs – those costs that vary directly with business activity, e.g., purchases,
electricity
 Contribution margin – the difference between variable cost and the sales price.

Example 1:
Our tourist attraction has total Fixed costs of $18,000. The Selling price per ticket is $45
and the Variable costs are $15 per unit. Calculate Break-even point.
Ticket selling price $45
Less variable cost 15
Contribution margin 30
To work out the breakeven point, we divide the fixed costs by the contribution margin,
because their amounts contribute to paying out fixed costs.
Breakeven point = fixed costs contribution margin
Breakeven = $18,000
30
= 600 tickets or $27,000 sales revenue (600 x $45)
In other words, in order for the organisation to cover its costs, it needs to sell 600 tickets.

Example 2: Our business also wants to make a profit of $12,000.

Fixed cost Profit
$18,000 + $12,000 = $30,000
30 30
= 1,000 tickets or $45,000 sales revenue (1000 x $45) to realise a profit of $12,000
NB this is more than $27,000 + $12,000 (39,000) because of the apportionment of fixed
costs and variable costs per unit.
This is a significant section of your Business Plan.
You will need to write about:
 Current Financial Position
 Capital Requirements and any Funding Proposal
 Financial Budgets
 Cash-Flow Projections
 Projected Statements of Financial Performance (Profit & Loss)
 Projected Statements of Financial Position (Balance Sheet)
 Financial Ratios
 Financial Controls
 Business Insurances.
The financial objective of the business is to achieve sustainable profits for the owners, to
maximise those profits and ensure compliance with legal regulations.
If the business is a sole trader, it is important that he/she receives adequate remuneration
for the time and effort that is the norm in a small business. If others have invested time and
money in the business, they should be rewarded at better than bank interest rates for that
contribution, otherwise why would they have risked their money?
Current Financial Position
Before purchasing any business or starting a new one, it is essential to establish exactly how
much personal financing you are able to commit to the business. It is highly desirable to
contribute as much of your own capital as possible as this gives you control over the
business.
If you will need to borrow funds, make a list of all your personal assets and personal
liabilities. The difference between the two is your net personal worth, and forms the basis for
an application for loans.
Also make a list of your current monthly personal expenses – this will show how much you
need from the business to contribute to your lifestyle.
Capital Requirements and Funding Proposal
How much capital needs to be invested in the business? This is a complex question, and
needs careful consideration.
If the business is a start-up, you will need to carefully list all the costs that will be required.
This part of the plan would benefit from discussions with mentors, business advisors and
other business owners in a similar field. Even family and friends could make valuable
suggestions. Do not underestimate how much it will cost to cover start-up, and to carry on
the first few months of operation.

For most businesses there are significant Establishment costs. Choose those relevant to you
from the following list. You may find that there are items you will need, some you won’t and
you may find others specific to your business.

Typical Establishment Costs

 Business structure Display materials
Registration Stands
Professional fees Brochures

Purchase price of business (existing) Training

Franchise fee Office equipment Self
Desks Staff
Chairs
Safe Shop fittings
Computers - hardware and software Counters
Telephone system Racks, shelving
Internet systems Storage
Decorations
Vehicles, Plant and equipment
Purchase price/deposit Security system
Delivery Trademark/design/patents
Repairs Registrations
Installation/commissioning Patent attorney fees

Building costs Reference materials

Shop front Land
Electrical wiring and fittings
Floor coverings
Toilets, plumbing and drainage
Painting
Other decoration
Signs

Total capital costs

Initial costs
In addition there will be costs you will need to cover to operate the business in the first
months. If possible, have enough finance behind you to cover the first three months of
operation.
Initial costs may include, but are not limited to:
 Lease
 Legal Costs
 Government taxes, such as stamp duty
 Rent in advance
 Bond
 Electricity, gas and phones:
 Connections
 Security deposits
 Opening stock
 Insurance Premiums:
 Property damage
 Public liability
 Vehicles
 Theft
 Personal disability
 Professional indemnity
 Printing and artwork
 Wages
 Credit card establishment fees
 Promotions
 Loan establishment cost
 Stationery and office supplies
 Computer hardware and software:
 Installation
 Training
 Statutory charges:
 Licences
 Permits
 Registrations
 Subscriptions for publications
 Association membership fees.

Once you have calculated your total establishment and initial costs, you may find that your
personal finances are insufficient, and that you need to borrow loan funds. If possible, do not
borrow more than 60% of the total start-up costs. Capital or interest repayments are a huge
drain upon a new venture, and can put enormous pressure upon the owners.
Often, interest rate movements are difficult to forecast, and when borrowing try to ensure
that you will be able to manage even if the rates move several points upwards. Shop around
for the best deal from reliable lenders.
Divide your requirements into long term (to use for capital projects such as expensive plant
and equipment) and short term (initial costs). Perhaps the short term costs could be financed
with a bank overdraft, leaving longer term loans to be used for capital items.
Budgets
An important element of your business plan is short-term
annual budgets. Quantified targets allow you to measure
performance, and take corrective action to ensure you
achieve your goals and capitalise on any opportunities.
Budgets predict or indicate a future level of business
activity in terms of monetary value and quantities of units
produced, purchased and sold.
Budgets are estimates based on past history in the case of an existing business. For a new
business, they are predictions based on your research and analysis during compilation of
your business plan.
Involving stakeholders in budget process
All decision-makers in the organisation should be involved in the preparation of budgets.
This collective approach helps:
 Ensure that everyone’s efforts are heading towards the same goal
 Bring together a variety of people’s opinions from the collective expertise and experience
within the organisation
 Maximise the motivation and commitment of those involved
 Facilitate a greater understanding of the issues involved
 Provide a forum to discuss and work through budgeting issues.
Persons responsible for setting budgets
Who should be involved? Depending on the size of the organisation, those responsible for
setting the budget would be:
 Owner/operator
 Chief executive officer
 General managers
 Department managers
 Accountants.
All should have some knowledge of the organisation and
the skills required for setting budgets. External accountants
and consultants are available to assist in this process.
Types of budgets
There are many types of budgets, covering all activities of the organisation. The size and
complexity of the organisation determines the mix of these budgets.
 Sales budgets itemise the estimated income from all areas of the organisation. In a large
organisation a sales budget would be prepared for each department
 Variable cost of sales budgets estimate the cost of the materials and services incurred
directly in producing the products and/or services sold. In a large organisation a costs
budget would be prepared for each department
 Ongoing fixed expenses budgets project the cost of items not directly related to
producing the products and or services sold. These are costs incurred irrespective of
how much is produced, such as vehicles, insurance and administration
 Capital expenditure budgets set out the estimated
costs of purchasing, replacing and repairing key
capital items such as equipment, vehicles
 Cash budgets show monthly cash receipts and cash
payments. This budget discloses when you have
surplus inflows, and highlights deficits so that you
can make arrangements to draw down or make
arrangements for additional funds
 Budgeted Profit and Loss Statements forecast the estimated gross and net profit or
losses. It brings together all the operating budgets for the period. It is a pivotal tool used
to take action if operations are not going as planned.
For your Business Plan you will be required to include:
 A cash budget projection for one year (monthly)
 A Projected Statement of Financial Performance (Profit and Loss) for three years
 A Projected Statement of Financial Position (Balance Sheet) for three years.
 Cash Budget Projection
 Cash Budget Projections are best managed on an Excel spread sheet or software suited
to the tourism industry. The following sample may assist you.
 Note: In some months there may not be payments for some expenses.
 Examples of a Cash Budget


MONTH Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Receipts

TOTAL RECEIPTS $ $ $ $ $ $ $ $ $ $ $ $

Expenses
 Start Up Costs

Registration of Business
Name

Operating Costs

Heating, Lighting and

Power

Telephone and Internet

Maintenance

Laundry

Licences

Permits

Rent

Security, Fire and Safety

Stationary, Postage and

Office Supplies

Human Resources

Wages

Superannuation

Work Cover

MONTH Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Finance

Accounting

Loan Interest

Loan Repayment

Bank Fees

Marketing Costs

Advertising Costs

Graphic Design Costs

Web Page
Implementation

Insurances
Public Liability

Building and Contents

Equipment

Repairs and
Maintenance

Rent Payments

Assets

Taxes

GST Payable

Payroll Tax

Other Taxes

TOTAL EXPENSES $ $ $ $ $ $ $ $ $ $ $ $

Surplus/(Deficit)

Bank Balance at
Beginning

Bank Balance at End

Projected Statement of Financial Performance (Profit and Loss)

The following example is very comprehensive; you may not need to include all the accounts
shown. Remember you will need to include three year’s projections.
Example - Statement of Financial Performance
Name of Firm
Statement of Financial Performance
for the Period Ending...............
$ $ $
Sales xx
Less Sales returns and allowances xx
Net sales xx
Less Cost of goods sold
Opening stock (Inventories) xx
Purchases xx
Less Purchases returns xx
Net purchases xx
Freight inwards xx
Customs duty xx
Wharfage costs xx
Insurance on stocks xx
Cost of goods available for sale xx
Less Closing stock xx
Cost of goods sold xx
Gross profit xx

Add miscellaneous operating revenue

Rent revenue xx
Commission revenue xx
Interest revenue xx
Other operating revenue xx
Discount received xx
Total miscellaneous operating revenue xx

TOTAL REVENUE xx

$ $ $

LESS OPERATING EXPENSES

Selling & distribution expenses
Freight outwards xx
Advertising xx
Depreciation of motor vehicles xx
Salesperson’s salaries, wages, commissions xx
Motor vehicle expenses xx
Other selling & distribution expenses xx
xx
Administration expenses
Office stationery xx
Office salaries & wages xx
Rates & taxes xx
Telephone, power, light, etc. xx
Depreciation of office equipment xx
Other administrative expenses xx
xx
Financial expenses
Discounts allowed xx
Bad debts xx
Interest expense xx
Doubtful debts xx
Other financial expenses xx
xx
Miscellaneous expenses
Donations xx
Legal costs xx
Other miscellaneous expenses xx
xx
TOTAL OPERATING EXPENSES xx

Operating profit before abnormal items xx

Abnormal items
- Additional bad debts xx
+/- other abnormal items xx
Operating profit xx
Extraordinary items
+ Profit on sale of major segment of business xx
- Loss on sale of major segment of business xx
xx

NET PROFIT xx
Projected Statement of Financial Position (Balance Sheet)
The following example is very comprehensive; you may not need to include all the accounts
shown. Remember you will need to include three year’s projections. There are several styles
which are acceptable – you may choose this format, or alternatively one which shows the
same information but arranged in a different sequence.
Example -Statement of Financial Position
Name of Firm
Statement of Financial Position
as at .....................................
OWNER'S EQUITY $ $ $
Capital xx
Plus Additional capital xx
xx
Plus Net profit or Less Net loss xx
xx
Less Drawings xx
Total equity xx

Represented by:

ASSETS
Current assets
Bank xx
Debtors xx
Less allowance for doubtful debts xx
xx
Stock/Inventories (closing) xx
Petty cash advance xx
Cash on hand xx
Prepaid expenses xx
Accrued revenues xx
Total Current Assets xx

NON-CURRENT ASSETS
Non-current assets
Motor vehicles xx
Less Accumulated depreciation motor vehicles xx
xx
Equipment xx
Less Accumulated depreciation equipment xx
xx
Furniture and fittings xx
Less Accumulated depreciation furniture & fittings xx
xx
Premises xx
Total Non-Current Assets xx

INVESTMENTS
Shares xx
Bonds xx
xx

$ $ $

INTANGIBLES
Copyrights xx
Patents xx
Trademarks xx
Franchises xx
Goodwill xx
xx
TOTAL ASSETS xx

LESS LIABILITIES
Current
Bank overdraft xx
Creditors xx
Short term loans xx
Accrued expenses xx
Prepaid revenues xx
Provision for annual leave xx
xx
Non-current
Mortgage xx
Provisions for long service leave xx
Long term loans xx
xx
TOTAL LIABILITIES xx

NET ASSETS xx
Financial Ratios
Once you have prepared the projected final statements, it is possible to calculate, analyse
and compare information with the results that you forecast.
To refresh your memory, ratios are listed below.
Types of Financial Ratios
Liquidity (short term stability) Ratios

Current Ratio Current assets divided by current liabilities

(expressed as a ratio)

Quick Asset Ratio Current Assets minus (stock and prepaid

expenses) divided current liabilities
(expressed as a ratio)

Working Capital Current assets minus current liabilities ($

amount)
Activity Ratios

Asset Turnover Total sales divided by total assets (result

in times per annum)

Stock Turnover Cost of goods sold divided by average

stock (result in days)

Debtors Turnover Average debtors divided by average daily

credit sales (result in days)

Profitability Ratios – usually calculated as percentages

Gross Profit Ratio (Gross profit x 100) divided by Net Sales

Net Profit Ratio (Net profit x 100) divided by Net Sales

Return on Investment ((Net operating profit + tax + interest) x

100) divided by average total assets

Long Term Solvency Ratios

Debt to Equity Ratio (Total Liabilities x 100) divided by total

assets

Proprietorship Ratio (Owner’s Equity x 100) divided by total

assets

You will need to calculate these ratios for Years 2 and 3 from your Statements.
Financial Controls
A business is required to have a financial record keeping system. Most small business chose
an off-the-shelf computerised book-keeping system e.g., MYOB, to enter daily transactions
and produce end of month and end of year reports. In addition, they make have some
manual (pen and paper) systems e.g., the daily takings sheet.
Once you have decided on your financial record system, you need to consider what controls
you are going to put in place to monitor and evaluate your performance and overall results.
Types of controls
 Profit controls. Regular detailed profit reports (Statement of Financial Performance) with
variances from budget will highlight any early shortfalls or excellent results
 Financial ratio analysis is another tool to pinpoint strengths and
weaknesses, especially when compared against benchmarks such
as industry averages
 Cash flow controls. The projected cash flows should be closely
monitored – at least weekly in a small business. Problems can be
identified such as slow debtor collection, stock control issues,
possible shortages due to theft
 Financial position controls. Regular reviews of your Statement of
Financial Position (Balance Sheet) will monitor the type and
amount of external debt financing your business.
Relevant financial ratio analysis should be undertaken from this data too.
Business Insurances
You will need to arrange appropriate insurances before you commence operations. Consider
including some of the following where relevant to your business:
 Building – fire and contents, third party property
 Burglary
 Public risk/liability
 Product liability
 Motor vehicle insurances – comprehensive, third party
 Medical insurance
 Monies in transit, or held at home overnight
 Plate glass
 Marine
 Income disability/income protection
 Professional indemnity.

Risk Plan
Risk Identification and Mitigation
All businesses should have a risk plan in place which identifies, evaluates and manages all
the potential hazards and exposures to loss that a risk may cause.
A really good way of getting started with your Risk Plan is to revisit your SWOT analysis and
make a list of the Weaknesses and Threats. Perhaps after discussion with your stakeholders
you can include some other risks that you hadn’t thought of earlier (add these to your
SWOT).
Consider issues such as:
 Economic Downturn
 Technological Breakdown/Advancement
 Human Resource
 Local business
 Occupational Health and Safety
 Supplier Issues
 Managing chemicals within the workplace.
 Financial Errors
 Administrative Errors.
The next steps are to:
 Identify and document the risks associated with the business
 Analyse the risks associated with the business
 Categorise the risks associated with the business
 Establish reporting procedures for your business
 Identify training and education opportunities for you and your staff.
 Monitor activities to identify potential risks
 Minimise and remove risks in accordance with agreed strategies.
The following templates may assist you in developing your Risk Plan. Refer to other
resources and previous studies to complete your own schedules
Risk Treatment Schedule Template

Date of Risk Review …/…/….

Compiled by ………………… Date …/…/….
Reviewed by ………..……….. Date …/…/….

Function/Activity _____________

Result of How will

The risk in cost
Possible Risk Person this risk
priority benefit
risk Preferred rating responsible for Timetable for and the
order from analysis
treatment options after implementation implementation treatment
risk
options treatment Accept / of option options be
register
Reject monitored
Structure and Management Plan
In this section of your Business Plan you will need to discuss the:
 Organisational Chart and Structure of the
business
 Key Personnel
 Labour Requirements and Skills
 Staffing Strategies
 Professional Advisers
 Staffing Controls.
One of the most important “ingredients” in a successful business is the management and
staff. In a start-up business you have the advantage of a clean slate without carry over staff
from the existing business who may find change difficult or who may have workplace
practices that do not conform to your new operation.
Organisational Chart and Structure of the business/Key Personnel
A good starting point is to analyse the tasks required to complete the activities of the
business. From this you can identify the number of staff required, key personnel, job roles,
and whether one employee can undertake one or more of the required roles. In small
business, it is quite a normal occurrence to find one person “wearing several hats”.
A diagram is a useful tool to depict the roles and hierarchy of within the organisation. Key
personnel can be identified on the chart. When new employees commence later, a copy of
the Organisational Chart of the business is a valuable induction tool. Many large
organisations clearly display the Chart (often accompanied by photographs) in their foyer or
other public place within the business.
For each management position you will need to write a summary of their background, skills
and experience, specifying any skill gaps or weaknesses and how you plan to overcome
these deficiencies.
Labour Requirements and Skills
It is necessary to prepare a Job Description for each job, listing the duties of the position,
who the person reports to, and the remuneration to be offered. Are the jobs full or part-time?
Could they undertaken by contractors rather than employees?
You will need to research the regulations and awards which apply to your staff. Consider the
following:
 How to attract quality, skilled, experienced people, recognising that these people will
expect a higher payment?
 Is it preferable to employ younger, inexperienced staff and
train them to suit your business?
 What people skills and customer service skills are we
looking for in our employees?
 Why would staff want to work in your business?
 What can we offer them?
How will we offer career paths and further development?
Staffing Strategies
It is important that the business recruit the best persons to fulfil the positions within the
business. A successful business will have staff that are productive, co-operative, take
responsibility for their own efforts and work as a team.
Your Business Plan should reflect decisions that you have made in respect to:
 Recruitment – will you rely on media advertising, referrals, educational institutions, and
friends of current employees or your family?
 Probation periods – a trial work period may last from one day to six months
 Remuneration – will you pay hourly, weekly? Are you offering casual or ongoing
employment? Are your rates competitive so that you select the right employees? Make
sure you allow for legal required entitlements
 Incentive schemes – would you consider a sales bonus, or some other form of incentive?
 Work environment – both physical and social
environments need to be considered. Physical must
comply with regulations for OH&S and other
government legislation. A friendly, co-operative
workplace where teamwork is practiced can lead to
greater productivity and loyalty
 Training and development – what induction and regular
ongoing training activities will your business provide?
 Your leadership style – will it be autocratic or democratic?
Professional Advisers
Your Business Plan should also name any external advisers (and how they will assist you)
that you will consult with initially then day-by-day.
These can include:
 Accountant
 Lawyer
 Bank
 Insurance agent or broker
 Industry organisations.
Staffing Controls
It is advisable to regularly measure and review labour costs in dollar terms and as a
percentage of sales revenue.
Labour costs may include on-costs such as:
 Superannuation / retirement pension
 Holiday leave loading
 Medical insurance premiums
 Long service leave
 Training costs
 Other incentives and benefits.
There are normally increases in wage rates with inflation that will increase the dollars paid to
employees each year, but sales revenue should increase similarly. To show a more accurate
picture than just using dollar amounts, calculate the percentage of labour costs to sales
revenue. This reflects a truer indication. The formula is:
Total Labour costs x 100
Sales revenue
If the percentage is increasing, you may need to evaluate the performance and productivity
of each of your employees.
Formal, documented Performance reviews are common practice in government and large
organisations. Traditionally, small business has used verbal on-the-spot reviews, particularly
when praising or rebuking an employee. Gradually small businesses are moving towards
more formal practices.
How will your business handle employee theft or any other dishonest practice? In small
business it can be very traumatic for all staff when this occurs e.g., money is missing from
the cash register. It will be useful to include methods you will use to identify and correct any
similar situation as tactless and unproven accusations can lead to legal repercussions.

2.4 Identify and include opportunities for strategic business alliances

Introduction
Strategic planning relates to long term planning. An alliance is a
group, association or partnership. In Element 1.7 Franchise
operations were discussed. Consider if there are any other forms of
alliances that may support or promote your business operation.

Identifying possible strategic alliances

Your industry association can provide substantial information, and through trade shows and
networking you will meet other similar or allied businesses that lead to new and expanded
operations.
2.5 Develop all aspects of the business plan to ensure the business meets relevant
legal, social, environmental and ethical obligations
Introduction
There is a famous adage in law that ‘Ignorance is No Excuse’. You do not have to
understand every piece of legislation or legal principle but you must understand how the law
impacts on your business.
In addition there may be a number of registration and licensing processes that must be
initiated to ensure legal compliance simply to operate.
There are certain legal, social, environmental and ethical requirements to be complied with
by all businesses.
Earlier in the SWOT analysis, a number of legal issues for consideration were outlined.

Requirements and Obligations

Some legal requirements and obligations that must be considered when setting up a
business include, but not limited to:
 Registration of Business Name
 Business Licenses for certain activities such as:
 Required permits
 Approvals for signage
 Approval for shop fit-outs and structural alterations
 Certification required by staff
 Taxation Registration
 Industrial Awards
 Medical Insurance – organise insurance cover and pay premiums to protect staff
employed by you in case of accident and/or injury
 Intellectual Property Registration – to cover any unique trademark or design consult
 Other insurances – consult an insurance agent or broker
 Pollution/environmental controls – comply with relevant government provisions
Include appropriate action plans and evaluation processes, including key performance
indicators

Introduction
One of the key requirements of any business plan is to outline how the goals, objectives and
strategies will be accomplished.
This step is essential in any business plan as it details:
 What actions need to be done
 To what standard must it be done (see Key
Performance Indicators explained later in this section)
 What policies or procedures must be adhered to
 Who is responsible for action
 What tasks are associated with actions
 Timelines for actions
 Support mechanisms.
In addition to having actions clearly identified for completion, evaluation mechanisms must
also be identified to ensure that actions are monitored and controlled on a regular and
systematic basis.

Areas requiring action plans

Areas of business operation in the business plan should have action plans include:
 Business establishment
 Operations
 Marketing
 Technology
 Human resources/labour requirements
 Management and organisational structure
 Financial plan and projections
 Quality management.
Action Plans
It is useful to outline a timetable for completion deadlines of key strategies.
Examples of a an Action Plan - Business establishment

Action Due for completion

Secure bank funding 1 January

Develop company brand and logos 10 January

Move into premises 16 February

Purchase fixed assets 18 February

Finalise production processes and recipes 22 February

Document policies and procedures 28 February

Commence trading 1 March

Monitoring and evaluation mechanisms

Monitoring is an ongoing, regular process of review. Monitoring should occur frequently
throughout the life of the business, both on an as-needed basis (when issues arise) and on
fortnightly, monthly, quarterly or twice yearly basis.
It is important to remember that monitoring is a valuable
tool in measuring the progress of your business which
may fluctuate regularly. For example, if you find that your
income is down for a month you should not take this as a
sign to panic and change/throw out your business plan.
Rather you should take note of it, determine possible
causes, and take prompt, corrective action.
Evaluation is a longer term process which is all about
looking back to see how well you’ve met the goals you set for your business, and if not why
not. Evaluation of your business plan should occur on an annual basis before you set your
budget for the next financial year.
Evaluation is when you review the outcome and effectiveness of all sections of your
business plan to identify successes and problems and if necessary to put yourself back on
the road to growth.
Evaluation processes may include:
 Key performance indicators
 Gap analysis
 Customer feedback
 Compliance reports
 Employee feedback.
If you have developed clear measurable goals, objectives and performance criteria, the
evaluation process need not be an overly difficult or time-consuming exercise.
Monitoring and Evaluation of the Business Plan

Section Frequency

Monitoring Evaluation

Business Plan Ongoing Annually

Strategies Ongoing monitoring change Review annually

in light of changed external
conditions

Objectives Quarterly (every 3 months) Review annually in

conjunction with strategies

Action Plans Monthly/weekly by Evaluation determined by

supervisor, daily by duration of action always
responsible person on completion

Financial Plan Depends on targets but at Annual review to assess

least monthly to check on performance and
cash flow accuracy of projections

Key Performance Indicators (KPI’s)

Identifying a small number of key performance measures (KPI’s) that can be regularly
monitored is an important first step. They provide an early warning system showing progress
or lack of it. Being able to graphically represent them is also helpful since the results can be
displayed for colleagues and staff to see at a glance.
KPIs need to be directly linked to your goals and objectives. You will have to determine the
ones most suitable to your business.
Types of KPIs
Suitable KPIs may be:
 Total number of customers
 Total number of customers per department or market segment
 Average dollar spent
 Total revenue per capita
 Sales per product group
 Average sales per day’s trading
 Average total revenue per client
 Marketing expense per customer
 Marketing expense and sales revenue per customer from a specific campaign
 Total revenue / full time employee
 Gross profit margin.
 To be effective, KPIs should flow directly from your business systems and be
comparable to those used by others in your industry. Information on what is being
measured by others in your industry should be available from your Industry Association.
You may need to reciprocate, by supplying your own figures into the association. Often
industry statistics are collected by an independent third party and used to produce
averages and a range of performance, while protecting the identity of individual
respondents.
 The information gained from these comparisons can identify any problems, shortfalls or
other anomalies within your business.
 Appropriate control procedures and systems need to
be in place in your business so that you can rely on
the results. Simple computer programs can speedily
analyse and generate business indicators
automatically.
 Involving staff in the review process assists in their
perceived ownership of the business’ performance
and financial results. It can also be a forum for
generating solutions for dealing with areas where the KPIs indicate under performance.
 2.7 Error! Reference source not found.
 Introduction
 Many people have an interest in your business and its success. These include
colleagues, employees, suppliers, your customers and the community in which you
operate.
 As a small business operator, you are part of a team and need the effort and co-
operation of other people to achieve your goals. Colleagues and employees are the
people you most rely on, apart from family, to support your business and work for its
success. Involving them at an early stage and giving them an opportunity to contribute to
the planning process will help them “own” the plan and work towards its success.
 Importance of involving stakeholders
 Working through the action plans with those responsible for their implementation, can
provide an early warning of complications and resistance, and may suggest a better
approach than you could have achieved from acting on your own.
 Helping colleagues and employees to understand the goals and objectives of your
business enables them to work independently towards their achievement. It also
empowers them to take actions in your absence in a manner sympathetic to the business
goals. In this way, small issues can be resolved before they develop into major issues for
your business.
 Although an action has been written down to be
achieved in a particular time frame, keep in mind that
the operating environment is not static. You may need to
change suppliers, competitors could introduce new
promotions and products, economic circumstances and
personal situations could change. All or any of these
changes can occur at any time after you have
developed your operating plans.
 Support for employees, in removing barriers to achievement, or providing guidance and
advice, is important to the achievement of the business plan. This is a key role for the
manager or owner of a business, or a project leader. Whilst there appears to be a role
 reversal of you serving those you employ, it is much more efficient to delegate and
empower employees than do the whole job yourself.

 Additional resources in terms of people, supplies or cash can be required as a project or

business develops. Remember that you began with the knowledge available at the time
of establishing your plan. It is probable that you had to make some assumptions and
decisions about the level of resources required. As you get further along the track, the
actual level of resources required becomes apparent.
Summary

Formulate business plans and strategies

Create or confirm enterprise mission, vision and purpose as the starting point for the business
plan in consultation with stakeholders
 End users of business plans
 Contents of a Business Plan
 Executive Summary and Business profile
Establish realistic, clearly stated and measurable objectives for the business
 Types of objectives
Develop appropriate strategies and tactics to address objectives across all areas of business
operation
 Business History/Entry Strategy
 Ownership Structure
 The Marketing Plan
 The Operational Plan
 Finance Plan
 Risk Plan
 Structure and Management Plan
Identify and include opportunities for strategic business alliances
 Identifying possible strategic alliances
Develop all aspects of the business plan to ensure the business meets relevant legal, social,
environmental and ethical obligations
 Requirements and Obligations
Include appropriate action plans and evaluation processes, including key performance
indicators
 Areas requiring action plans
 Action Plans
 Monitoring and evaluation mechanisms
 Key Performance Indicators (KPI’s)
Consult with appropriate staff, management and other stakeholders to encourage support for
the planning process so that all perspectives are taken into account in the development of the
plan
 Importance of involving stakeholders
 Week 1 – Target Market Analysis Activity
Base on your chosen proposed business that you would like to start up,
identify your target market and make a brief analysis of your target market
using SWOT analysis, wants, needs, trends and personal characteristics
(geographic, demographic, psychographic, socio-economic)

Week 2 - Logo and Tagline

Make an official business logo of your proposed business and create a
business tagline. Discuss the importance of business logo and tagline.

Week 3 – Marketing Campaign Activity

Make a marketing campaign for your proposed business and give a sample
output example ( web page, brochure, fliers etc. ) Consider what forms of
marketing that are you going to use to attract and maintain your
target customers including your business goal, target audience,
marketing concept, campaign media, required team and propose budget.

Week 4 - Risk Identification and Mitigation Activity

Develop a Risk Plan outlining strategies you will use to minimise risk in
your business.
Consider issues such as:
Economic Downturn, Technological Breakdown/Advancement, Human
Resource, Local business, Occupational Health and Safety, Supplier
Issues, Financial Errors Administrative Errors.

The next steps are to:

 Identify and document the risks associated with the business
 Analyse the risks associated with the business
 Categorise the risks associated with the business
 Establish reporting procedures for your business
 Identify training and education opportunities for you and your staff.
 Monitor activities to identify potential risks
 Minimise and remove risks in accordance with agreed strategies

Thank you and God Bless! Stay Safe