Do you think in the real world of business that break-even is important/useful?
In my opinion by using breakeven for a business in the real world is a advantage because it isn’t complex to do and the results are presented fast and another advantage of breakeven analysis is that it does not cost to make it.
By using breakeven analysis it shows the business how many units are still needed to be sold before the business reach their investments. Breakeven then can summarize what the businesses profit is going to be with the remaining units.
Some small businesses don’t think of using breakeven analysis because the calculations are not too big and because they estimate their data. They would usually get the product that will sell in a lot, they buy the product in quantity in order to get it cheaper and insure they are saving enough money from every unit that they sell. People that own the property don’t get concerned about the rent and they mainly focus on making the profit by selling a unit.
Major organisation like: Tesco, Sainsbury’s and Asda, they might consider using the breakeven analysis because they are around the UK and they need to know about their turnover for the financial years.
Are budgets really necessary?
Budgets are necessary in every business whether the business is small or large. A small business that has just of 2 people working will set themselves budget for example; for this financial year the business needs to spend £60k and want £80k of a turnover. Large businesses will also do the similar however as it’s a large business they rather spend in millions and not in thousands or hundreds so in order for them to receive cheaper priced units and have a larger turnover. It is essential for a business to set themselves budgets so for any other investments or back up they have some additional money.
By setting budgets it will let the business gain what they want in that certain amount and it is likely for some fund to be left over in order for it be spent on other investment. If small business it is important for the business to show that they have a budget if they have a big client, they would try to get as much out as possible.
Why may budgets not be that useful?
Budgets may not be that useful because they may not worry an organisation because if the businesses want products in a great quantity and know that the business is selling the product quickly then they would buy as much of the product as they can and they know that they are making a profit. Another reason why it budgets may not be useful is, that when a business has a budget the reason for this is that they want money left over to do further investment. The business may realise that at the end of the month or 2 by setting a budget and saving money, that the money that they saved could rather of gone to buying larger quantity of the product with a cheaper price because that money was no use to them.
In the restaurant business are these things any use to the owner?
In my opinion these things would be a use to the owner in the restaurant business because first thing they would think about is resources.
Human resources: the business have to monitor their employees and see whether or not if they are working effectively and providing excellent service to the customers and if they don’t then they should be replaced because if the service is not good then the business could lose customers which will be bad for the business.
Physical resources: the business has to have a shop first that is in a busy area. The business would need some computer system so that they can take notes of delivery etc, so that they do not lose count and end up paying for something that they might have not received.
Financial resources: The business would generally start off with a internal finance sources and if the business does well and grows they will then think about expanding and get loans to expand their business.
In my opinion breakeven analysis will not worry the business a lot because they are going to have their product stored and they know that the products are going to be sold soon, which will then make their profit for the business.
Setting budgets will be essential for the restaurant because after their restaurant has been open for 1 to 2 months, they will know what product is being sold more and which one isn’t. So therefore they will set themselves budgets, the less the product is being sold then they will order it less and the more a product is being sold then they will order more of it.