Unit III Functional plans for Entrepreneurship Mcom sem 3 Delhi University
Unit III Functional plans for Entrepreneurship Mcom sem 3 Delhi University – The entrepreneur is understood as a person who owns the business which he has started (often a small), bears risks involved in the process of starting it and in running it, innovates and provides leadership to the venture he runs. He is so attached to the business venture that the progress of the business is intricately linked with his own personal development. A manager is understood as a person who works for a master, who has a professional approach to getting things done and who ensures that the enterprise build up by the entrepreneur runs successfully in attaining the goals set by the promoter.
Unit III Functional plans for Entrepreneurship Mcom sem 3 Delhi University
Unit III Functional plans for Entrepreneurship Mcom sem 3 Delhi University contains following topics.
Unit III Functional plans: Marketing plan– for the new venture, environmental analysis, steps in preparing marketing plan, marketing mix, contingency planning; Organizational plan – designing organization structure and Systems; Financial plan – pro forma income statements, pro forma cash budget, funds Flow and Cash flow statements; Pro forma balance sheet; Break Even Analysis; Ratio Analysis.
Unit III Functional plans for Entrepreneurship Mcom sem 3 Delhi University – A marketing plan is a business document outlining your marketing strategy and tactics. A company needs a marketing plan just as it needs a business plan.
Benefits to a Marketing Plan
Unit III Functional plans for Entrepreneurship Mcom sem 3 Delhi University – The importance of a detailed marketing plan can’t be overstated. Marketing is as important as the product or service you provide. Without marketing, consumers and clients can’t find out about you. If they don’t know about you, they can’t buy fro you, and as a result, you won’t make money.
- Gives clarity to who your market is. It’s easier to find clients and customers if you know who they are.
- Helps you craft marketing messages that will generate results. Marketing is about knowing what your product or service can do to help a target market. Your messages need to speak directly your market.
- Provides focus and direction. Email, social media, advertising, guest blogging, direct mail, publicity, and on and on. With so many marketing choices, you need a plan for determining the best course of action for your business.
Steps in preparing marketing plan
- Mission: This is your cornerstone. Write a short paragraph that defines what compelling advantage or value you offer, including how it solves a problem and makes the customer’s life easier. Be specific. Pinpoint the customer “pain” that your product or service will relieve. Before you can effectively market yourself — create ads, websites or online campaigns — you must decide what type of problem solver you want your business to be.
- Market research: This is how you identify customers’ needs and wants. Build a detailed, trait-by-trait profile of your ideal prospects. Again, be as specific as possible. Later, when you create your marketing messages, aim those messages at those prospects. The research does not need to be complex or costly. Online research, one-on-one interviews with prospects, informal focus groups and email or web-based surveys are all inexpensive and relatively easy to do.
- Define your product or service: Carefully identify every product or service you offer. Some products or services can be broken into pieces and priced separately. List all the benefits that you can offer. You will want to incorporate those in your marketing message.
- Check the competition: Identify your key competitors – both direct and indirect – including their strengths and weaknesses, and how your business compares. Write down your analysis and make it part of your plan.
- Prepare proper pricing: Analyze your pricing structure and avoid the “markup mistake.” That is when a business merely calculates the costs and adds a set markup. Instead, use your market research to establish what customers are willing to pay and build the pricing around that.
- Build a budget and promotion mix: Don’t think of marketing as a cost, but rather as your ace in the hole. This is what gives you the edge over competitors who don’t do marketing or do it poorly. Also, your employees are better motivated when your business is in the public eye. Look for marketing partners that can offer you multiple ways to split your spend through a single provider, or that offer some type of action guarantee.
- Match marketing to your target terrain: If yours is a local market, then that’s where your marketing focus should be. Once you have the basics covered, consider marketing neighborhood by neighborhood, block by block and even customer by customer.
- Marketing metrics: Build testing and metrics into your plan. Marketing should not be risky or single-focus. One advantage of advertising online is the ability to track results effortlessly.
- Prepare a marketing message that resonates: Craft a rallying cry – a small, repeatable phrase that becomes the slogan for promoting your product, idea or business. Fine-tune all messages. Edit, revise and hone every word so they are as focused and punchy as possible. Coordinate key phrases in all your marketing materials. For maximum impact, repeat critical messages verbatim whenever you can.
- Include an action plan: Simplify everything; eliminate potential interruptions in the sales process and make decision-making as painless as possible for your customers. Make sure your employees grasp your objectives and strategy and plan to market continuously. Your effort must be ongoing or people will quickly forget.
Unit III Functional plans for Entrepreneurship Mcom sem 3 Delhi University – Planning is a key management role in any organization, whether a private business, a nonprofit organization, a corporate business or a government agency. Managers engage in different types of organizational planning to strategically steer their companies towards profitable and successful futures.
Design of Organization Structure and Control Systems
Unit III Functional plans for Entrepreneurship Mcom sem 3 Delhi University – Organization structure refers to the role-responsibility relationships of different employees in an organization along with their pre-defined interaction patterns. It facilitates the flow of information both vertically and horizontally in an organization.
Unit III Functional plans for Entrepreneurship Mcom sem 3 Delhi University – The structural dimensions of organization design are – formalization, specialization, hierarchy of authority, centralization, professionalism, and personnel ratios. Some of the contextual dimensions of organization design are – organization size; the technology it uses; and the environment in which it operates.
The various types of organization structures include – functional, divisional, matrix, horizontal, and hybrid structures. The functional structure is characterized by grouping people based on their expertise and skills. In the divisional structure, the divisions are formed based on an organization’s product range, the specific markets the organization caters to, or the geographic locations in which it operates. The matrix organization tries to integrate the desired features of both the functional and divisional structures. In this structure, an employee reports simultaneously to two different supervisors. One of these supervisors represents a functional department and the other represents the division, product, market, geography, or project. The horizontal structure prevents the rigidity and departmentalization existing in a vertical system by grouping the managers and employees into synergistic teams for problem solving. When organizations use a combination of any two structures (say, functional and divisional or functional and horizontal), the resulting structure is called a hybrid structure. It combines the strengths of the structures being merged.
Financial Planning is the process of estimating the capital required and determining it’s competition. It is the process of framing financial policies in relation to procurement, investment and administration of funds of an enterprise.
Pro forma income statements
A pro forma income statement is planned and prepared in advance to of a transaction to project the future status of the company.
Pro forma Income statement includes revenue, COGS, operational expenses and non-operational expenses.
Pro forma figures should be clearly labeled as such and the reason for any deviation from reported past figures clearly explained. A pro forma Income statement could be planned and prepared in advance, which includes the items below:
- Revenue – Cash inflows or other enhancements of assets of an entity during a period from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major operations. It is usually presented as sales minus sales discounts, returns, and allowances.
- Expenses – Cash outflows or other using-up of assets or incurrence of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity’s ongoing major operations.
- Cost of Goods Sold (COGS) / Cost of Sales – represents the direct costs attributable to goods produced and sold by a business (manufacturing or merchandizing). It includes material costs, direct labour, and overhead costs (as in absorption costing).
- Selling, General and Administrative expenses (SG&A or SGA) – consist of the combined payroll costs. SGA is usually understood as a major portion of non-production related costs, in contrast to production costs such as direct labour.
- Depreciation / Amortization – the charge with respect to fixed assets / intangible assets that have been capitalised on the balance sheet for a specific (accounting) period. It is a systematic and rational allocation of cost rather than the recognition of market value decrement.
- Research & Development (R&D) expenses – expenses included in research and development.
- Other revenues or gains – income from other than primary business activities (e.g. rent, income from patents). It also includes gains that are either unusual or infrequent, but not both (e.g. gain from sale of securities or gain from disposal of fixed assets)
- Other expenses or losses – not related to primary business operations, (e.g. foreign exchange loss).
- Finance costs – costs of borrowing from various creditors (e.g. interest expenses, bank charges).
- Income tax expense – sum of the amount of tax payable to tax authorities in the current reporting period (current tax liabilities / tax payable) and the amount of deferred tax liabilities (or assets).
- Irregular items – these are reported separately because this way users can better predict future cash flows – irregular items most likely will not recur. These are reported net of taxes.
- Discontinued operations is the most common type of irregular items. Shifting business location(s), stopping production temporarily, or changes due to technological improvement do not qualify as discontinued operations. Discontinued operations must be shown separately.
Pro forma cash budget
Unit III Functional plans for Entrepreneurship Mcom sem 3 Delhi University – The purpose of a cash flow budget is to show the cash inflows and outflows, usually on a monthly basis and for the next 12-month period. Pro forma cash flow budgets usually have three sections for operating, investing and financing activities. Management can use a cash flow budget to identify and plan for potential cash shortfalls. Planning may include reducing expenditures and arranging a line of credit to fill temporary cash needs. Companies should use realistic ratios for projecting collections on outstanding invoices. Established companies can use their historical results, while new companies can make projections based on industry averages. Changes in business and economic conditions can affect cash flow. For example, if a company usually collects 80 percent of its invoices within 30 days and economic conditions are worsening, it should use a lower collection ratio for its cash flow budget. Management should review differences between actual and projected cash flows at the end of each month and make the necessary adjustments to the budget for the remainder of the year.
Funds Flow and Cash flow statements
Cash flow statements
1. In a Cash Flow Statement how much of the opening cash and Bank balance are to be changed at closing cash and Bank balance due to normal operational activities throughout the year can be known. It deals with the changes of cash only.
2. Cash basis of accounting is followed here since actual amount of cash receipts and payments are incorporated.
3. Cash Flow Statement is prepared by taking the opening balance of cash and bank and closes with the closing balance of Cash and Bank.
4. It is used for cash-generating capacity of a firm.
5. It measures the changes of cash and cash equivalent during the period.
Funds Flow statements
1. A Funds Flow Statement reveals the consolidated result of changes in current assets and current liabilities without, however, giving any particular importance to change of cash only. It deals with the changes of working capital position.
2. Accrual basis of accounting is followed here since it deals with those adjustments which are involved in making adjusted trading profit.
3. This is not followed in preparing Funds Flow Statement.
4. It is used for fund-generating capacity of a firm.
5. It records the changes of funds or changes in working capital, changes of individual components are not measured.
6. Funds Flow Statement is not classified like Cash Flow Statement.
7. It shows the changes of not only the Cash but also the changes of other assets, e.g. Stock, Debtors etc. and records the changes of current liabilities.
8. Funds Flow Statement is much more informative since it informs about the fund.