Introduction to financial planning for our young enterprise company When planning the short- or long-term funding requirements of a business, it is
Our young enterprise business consist of six members which include 4 males and 2 female students, each member is being posted or put in apposition in which he or she must be responsible with the role in which he or she plays. The aim of this is to sell our products to people in which at the end of it we should make profit. The products we are offering to people are mainly accessories products like belts, glasses, handbags and jewelleries.
The company's organisational structure
Our companies' secretary who is her roles include.
* To keep records of all meetings as required by the company.
* Set agenda's for meeting as required.
* Maintain a database of all company members.
* Keep files of the company's correspondence and archive where appropriate.
The companies marketing director's roles include.
* He is concerned with informing the customer that a product is on sale and persuading them to buy the product.
* He also collects information about customer's wants and needs.
The role of the finance director includes
* Financial planning
* Advising the company on raising finance
* Financial control
* Costing; Estimating cost of new products or products we intend to purchase
* Record keeping of transactions
* Preparing financial statements and reports
The role of the research and development director includes
* Researching new products for the company if the product we intend to sell is not a success
* Research on prices of the products.
The main role of the human resource director includes
* Performance of the management.
* Members relations
* Health and safety of each member.
The companies director roles includes
* Since he is the leader of the company he is responsible for any thing that happens to the company
* He supervises everyone.
* He also has the ability and power to remove anyone from the group.
* He has the final say to every decision made by the group members.
Primary research is information that does not already exist. In other words, it has to be collected by the researcher. Most primary information is gathered by asking consumers questions or by observing their behaviour. The most accurate way to do this would be to ask or observe all consumers of a particular product usually known as the population. It is usual to carry out a survey of a sample of people who are thought to be representative of the total market. There are various types of primary data's used by organisations which are listed below.
* Questionnaires-There are certain features that a business must consider when designing a questionnaire. If it is poorly designed it may not obtain the results the firm or organisation is looking for. This was the type of research we actually used in our Young enterprise and it actually helped us to know what our customers needed.
* Personal interviews-This involves an interviewer obtaining information from one person face to face.
* Telephone interview-This method allows the interview to be held over the telephone.
* Postal surveys- This involves the use of questionnaires sent out to consumers through post.
Advantages of primary research
* You collect exactly the data elements that you need to answer your research question.
* You can test an intervention.
* You cam control the data collection process, so you can ensure data quality, minimize the number of missing values, and assess the reliability of your instruments.
* Another advantage is that the firm that initially collects it will be the only organization with access to it.
* Can cover a large number of people or organization.
* Relatively cheap.
Disadvantages of primary research
* Design problems.
* Questions have to be relatively simple.
* Historical low response rate.
* Time delay whilst waiting for responses to be returned.
* Require a return deadline.
* No control over who completes it.
* Problems with incomplete questionnaires.
This is information collected by other to be re used, that is information which already exists in some form. There are various sources of secondary data.
* Internal sources.
* External sources.
Advantages of secondary data
* Little or low cost.
* Less effort.
* Fast and inexpensive.
* Avoid data collection problem.
* Less time taken.
* Sometimes more accurate than primary data.
* Some information can only be obtained from secondary data.
Disadvantages of secondary research
* The quality or reliability of the data may be in question.
* The data may not be precise or specific enough for the current investigation.
* The data may be out of date.
* May not be reported if required.
* The data may be in wrong format.
* May not be very accurate.
* May not meet data requirements.
Questionnaire results
Male Female
. Age group:
14-16 17-19 20-23 24-34 35+
2. Would you be willing to purchase the following products?
Hats leather gloves scarves wristwatches jewellery
3. How often would you buy these products?
Weekly= 7 Monthly= 28 6 months= 41
Yearly= 24
4. Where would you normally buy these products?
Retail shop market other
5. How much are you willing to spend?
£1-5 £6-10 £11-15
6. What area do you come from?
Hornchurch Newham
Ilford Upton Park
Barking Upminster
Romford Other
7. What do you look for in a fashion accessory?
Quality Style Colour Use all of these
8. How much do you normally spend on the following
Belts Wristwatches Hats Costume Jewellery
Scarves Gloves
9. Are there any specific features you would like to see from the above:
People didn't know what to write
0. What is your favourite colour?
Red Blue Green Pink White Black
Brown Beige Other
1. What is your preferred material?
Cotton Silk Polyester Plastic Leather
2. At what times would you like to see the above products sold?
9-11 11-2 2-5
3. How often do you come to college a week?
day 2 days 3 days 4 days 5 days
4. What days would you prefer the products to be sold? Please tick 3
Monday Tuesday Wednesday Thursday Friday
5. What do you expect from customer service?
Friendly staff= 91 other comments= 9
The questionnaire results for our young enterprise company
The number of males and females who voluntarily filled in the questionnaire form.
With this we can see more female students filled in the questionnaire forms.
The age group of students who filled in the questionnaire. This statistics shows more of the students are within the ages 17-19. So our products should be focused on this particular age group.
Number of students who will purchase each product, each product is rated 100, for example 83 out of 100 students are willing to purchase hats. This shows more students will purchase more of hats out of the other accessories products we will be selling. This also tells us we should sell more of hats than the other products.
This shows the number of times students purchase our products. We can see most people often buy these products every 6 months, this tells us not to buy too many stocks of these products or we might end up ...
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Number of students who will purchase each product, each product is rated 100, for example 83 out of 100 students are willing to purchase hats. This shows more students will purchase more of hats out of the other accessories products we will be selling. This also tells us we should sell more of hats than the other products.
This shows the number of times students purchase our products. We can see most people often buy these products every 6 months, this tells us not to buy too many stocks of these products or we might end up not selling.
Most students purchase accessory products from the market, this statistics will also tell us where our competitors are.
This shows the amount students are willing to buy our product; most students are willing to buy these products between £6-10.
This statistics shows where Havering college students reside. We can see most people who filled in the questionnaire come form Newham.
Generally students are concerned with all these features in fashion, so our young enterprise company should make sure we have all these features in our products.
This shows amount student will purchase a product or amount they can spend buying a product.
With this we can see most students who filled in the questionnaire prefer blue as their favourite colour.
We can see most students preferred material is polyester.
This statistic shows the time at which students will be available to purchase our products, as we can see most students will be available between 2pm-5pm. This should definitely be the time at which we will sell the products.
This shows the amount of students that come to school weekly, most students come to college at least 5 times in a week, and this tells us our products should be available for sale at least 5 times in a week.
This statistic shows that87.26% of students who filled in the questionnaires come to college on Tuesdays.
Ethnic grouping of students in Havering College. From the statistics we have more white British in Havering College than other ethnic grouping
This shows the frequency of students coming to college both in the morning and evening. With this statistics we can see there are more full-time students than part-time students.
This shows we have more students over age 19. So our target market should be students over 19.
This statistics tell us the sex group of students in Havering College. This statistics tells us there are more females than males in Havering College, so our products should be more of female accessories than male.
Secondary research
The resident population of Squirrel's Heath, as measured in the 2001 Census, was 11,780 of which 48 per cent were male and 52 per cent were female. The resident population of Havering was 224,248, of which 48 per cent were male and 52 per cent were female.
People statistics
Resident population (percentage)
Squirrel's Heath
Havering
England and Wales
Under 16
8.7
9.8
20.2
6 to 19
4.6
4.8
4.9
20 to 29
1.6
1.1
2.6
30 to 59
43.2
41.6
41.5
60 to 74
3.8
4.4
3.3
75 and over
8.2
8.2
7.6
Average age
40.0
39.8
38.6
Ethnic grouping
Resident population (percentage)
Squirrel's Heath
Havering
England
White
94.8
95.2
90.9
of which White Irish
.3
.5
.3
Mixed
0.8
.0
.3
Asian or Asian British
2.2
.8
4.6
Indian
.4
.2
2.1
Pakistani
0.3
0.2
.4
Bangladeshi
0.1
0.1
0.6
Other Asian
0.4
0.3
0.5
Black or Black British
.4
.4
2.1
Caribbean
0.6
0.7
.1
African
0.6
0.6
.0
Other Black
0.1
0.1
0.2
Chinese or Other Ethnic Group
0.8
0.6
0.9
Economic activities
Resident population aged 16 to 74 (percentage)
Squirrel's Heath
Havering
England and Wales
Employed
65.5
63.0
60.6
Unemployed
2.4
2.6
3.4
Economically active full-time students
2.4
2.0
2.6
Retired
4.6
5.5
3.6
Economically inactive students
3.0
2.9
4.7
Looking after home/family
6.7
7.3
6.5
Permanently sick or disabled
3.0
4.1
5.5
Other economically inactive
2.6
2.6
3.1
Within squirrel's heath, 23 percent of those unemployed were aged 50 and over, 5% had never worked and 24 percent were long termed unemployed.
This map shows the location of our competitor claires accessories
Swot analysis for our young enterprise company
Swot analysis focuses on the internal and external environment of our business, examining strengths and weaknesses in the internal environment and opportunities and threats in the external environment. Swot Analysis is a very effective way of identifying our strengths and weaknesses, and of examining the opportunities and threats we face.
Swot analysis looks at the factor that affects the success or failure of our business.
Our company's strengths includes the following
* We have a well-motivated workforce.
* Well and good established types of products.
* Our young enterprise group has a strong sales force.
* Some students in my group have past sales experience.
* We can also change direction quickly if we find that our marketing is not working.
Our company's weaknesses includes the following
* Our company has no market presence or reputation.
* We have a small staff with a shallow skills base in many areas like Marketing research area, financial area. Etc.
* We are also vulnerable to vital staff being sick, leaving or not coming to college to make sales.
* Products might waste if we don't sell any.
* If there is inadequate research and development we might not innovate new products.
* Lack of information could hinder our sale of products.
* Consumers might not rely on our products because of the price so they might think it's inferior.
* Lack of raising funds.
* Our suppliers might not be reliable.
Our company's opportunities includes the following
* We are virtually the only group selling fashion accessories in the college; this will bring about less competition.
* We could expand or extend.
* Our local competitors could have poor or lower quality products than ours.
* We could seek better supplier deals.
* Our competitors may be slow to adopt new technologies.
* We could also change our consumers taste.
The treats against our company includes the following
* Competition is the biggest threat facing our young enterprise group, a company producing similar products as ours is Claire's accessories in which they sell gift products, fashion accessories like ladies hand bags, head bands, jewelleries. Etc. this store is located at Romford market.
* Change in consumers taste, this may make consumers stop buying our products.
* Change or reduction in population of students
Pest analysis for our young enterprise group
PESTEL analysis is used to scan the political, economic, social, technological environment within which the company operates in order to identify changes in trends. This might include change in fashion of students, new type of products and services, change in life style. Identifying PESTEL is a useful way of summarising the external environment in which our business operates.
Political factor affecting the young enterprise business
The government affects our business locally since we will not be exporting our products outside UK we would only be affected locally. if we are selling our products on the street we would have to collect permission or license from the local council. Government policies, trading policies and regulatory bodies also affect our young enterprise company.
Economic factors, which affect our young enterprise group includes the following
* Level of interest rates, this might reduce peoples spending that is consumers would want to save more, this will make consumers purchase less of our products. It's also an advantage if we borrow money from the bank at the time of low interest rates.
* Taxation specific to product/services.
* Change in consumer demand.
Social factors affecting our young enterprise business
* Our consumers buying pattern, attitudes and opinions.
* Ethnic or religious factors can affect our business because some religions prohibit the wearing of jewelleries which may affect the sales of our products.
* Students' lifestyle trends.
Technological factors
Changes in technology could affect us in a great way. For example we can be using computers to email our leaflets to consumers instead of distributing them by hand. Some consumers might also want to buy some products of Internet.
Product life cycle
The product life cycles shows the different stages that a product passes through and the sales that can be expected at each stage. Most products usually pass through 5-6 stages that are development, introduction, growth, maturity, saturation and decline.
Development; during this stage the product is being designed. Suitable ideas could be investigated, developed and tested. A decision will later be made whether or not to launch the product. During the development stage it is likely that the business will spend to develop the product. As there will be no sales at this stage the business will initially be making a 'loss' on the product.
Introduction; this stage is when the product is new on the market and sales are often slow. Costs are incurred when the product is launched. The length of this stage will vary according to the product.
Growth; once the product is established and consumers are aware of it, sales begin to grow rapidly. The product then becomes profitably. If it is a new product and there is a rapid growth in sales, competitors may launch their own version. This can lead to a slow-down of the rise in sales.
Maturity; at some stage the growth in sales will level off. The product has become established with a stable market share at this point. Sales will have peaked and competitors will have entered the market to take advantage of profit.
Saturation; as more firms enter the market it will become saturated. Some businesses will be forced out of the market, as there are too many firms competing for consumers.
Decline; eventually sales of products will decline. This is usually due to changing consumer tastes, new technology or the introduction of new products. Most products have a limited life, although some firms are still enjoying the profits from products that were launched many years ago. Products like Kellogg's Cornflakes which was launched in 1906.
Applying product life cycle with marketing mix
Marketing teams watch for changes in the business environment and react to them. They respond to consumer needs, the actions of competitors or government and use the following strategies during each stage of the product life cycle.
Introduction:
The new product is heavily promoted to make the target market aware of it. A special introductory price may help push the product.
Growth:
As sales and profitability increase, the selling price may be reduced to make the product more attractive. Continued advertising around the brand name will help to sustain sales. The marketing team may consider expanding its distribution, to reach more consumers.
Maturity:
Competitors will usually have entered the market at this stage. If their products are as good but cheaper the company may lose some of its market share. The pricing strategy must be reviewed. Marketers may also add value to their product, by offering accessories or insurance.
Decline:
Marketing cannot save a product at this stage, but targeting a different and smaller segment can prolong its life.
Marketing mix
The marketing mix refers to those elements of a firm's marketing strategy that are designed to meet the needs of its consumers. There are four main types of marketing mix - product, price, promotion, and place. To meet consumers' needs, firms must produce the right product, at the right price, make it available at the right place, and let consumers know about it through promotion.
* Products-we must make sure our product is meeting the needs of our customers. This has to be done by
-How consumers will use the product
-The appearance of the product; sell products with attractive of favourable colour.
* Pricing- since the products are going to be sold to students we should make it affordable and we should not maximize too much profit. At first when we enter the market we will be using the penetrating pricing strategy in order to gain more customers from our competitors, this strategy will make us to loose a little profit or we will make no profit at all. After this we will adopt the competitive pricing where we choose to set the price of our product not according to the price of purchase, but according to the prices that other businesses are charging (other competitors like Claire's). We can see from the questionnaire students will spend between £6-£10 on our products.
* Promotion- There are different methods of promotional methods in which we can use including TV advertising, posters, Newspapers and personal selling. Since it is a small business TV advert will be excluded so we will be focusing on local newspaper and posters since they are cheaper and also quite effective.
* Place- this refers to the means by which our product will be distributed to the consumers. The product must get to the right place, at the right time. It also means taking into account how the product will be sold; it should be a place that is convenient for our consumers. From the questionnaire results our consumers will prefer our products to be sold between 2pm-5pm every week day in college probably at the schools canteen because we didn't disclose the place our products will be sold in the questionnaire.
Health and safety and legal aspects
* Sales of goods Act 1979: the 1979- Act lays down the contractual arrangements implied by the purchase of an item. It specifies that goods must be of 'merchantable quality', i.e. our products should fit the purpose for which they were purchased.
* Trade description Act 1968 and 1972- this prohibits false or misleading descriptions of a product's contents, effects or price. This affects packaging, advertising and promotional material. This is one of the key pieces of consumer protection legislation.
* Supply of goods and services Act, 1982-this seeks to protect users of services, ensuring services are of good quality and at reasonable rate. For example if we advertise that our products are going to be of high quality and it turns out to be of low quality, i.e. if a consumer buys a belt and after two days of wearing it the product should start cracking or should tear
* Consumer protection Act, 1987- this law was introduced to bring British in line with other European Community nations. it ensures that firms are liable for any damage which their defective goods might cause to consumers. For example if we where supplying defective electrical equipment we would be liable for any injuries caused to consumers using that equipment. It also seeks to outlaw misleading pricing, such as exaggerated claims relating to price reduction to sales items.
* Consumer credit Act, 1974- this aims to protect the rights of consumers when they purchase goods on credit, such as hire purchase or credit sale agreements. For example, if a consumer purchases any product from our young enterprise company the consumer should be given a copy of any credit agreements into which they enter. It also ensures that only licensed credit brokers can provide credit.
* Unsolicited goods Act, 1971- this law seeks to prevent the practice of sending goods to consumers that they had not ordered, and then demanding payment. It states that unsolicited goods need not to be paid for and that consumers can keep such goods after six months if the seller does not collect. Since we will not be taking others in our young enterprise this law will not affect us.
* Food safety Act, 1990-This is a wide-ranging law which strengthens and updates consumer protection in the food sector. This brought food sources, and implication farmers and growers, specifically under food safety legislation for the first time. It made it an offence to sell food that is not of the 'nature or substance or quality' demanded by the purchaser. Since we are not selling food products we will not be concerned about this law.
Objectives of our young enterprise business
These are statement of what our young enterprise wants to achieve through our operation, in both the short and long term. We are planning to deliver and make good services for our customers that include the following.
* Firstly we will establish good market presence. At this stage we will try and survive with our competitors this may require the offering of goods and services at highly competitive prices which, in turn, do not initially provide profits, so therefore making large profits may be of secondary importance at this time.
* Breaking even, in this situation, we will either reduce the prices of our product or increase advertising in order to generate greater awareness of our products. Once a larger market share has been secured, we have the option to increase prices and return to profitability.
Cash flow forecast for our young enterprise
Cash flow refers to the movement of cash into and out of a business. Watching the cash inflows and outflows is one of the most pressing management tasks for any business. The outflow of cash includes those checks you write each month to pay salaries, suppliers, and creditors. The inflow includes the cash you receive from customers, lenders, and investors.
Months
January
February
March
April
May
June
Sales
£139.50
£150.50
£120.50
£127.50
£140
£139
Cost of sales
£76.20
£76.20
£76.20
£76.20
£76.20
£76.20
Total sales
£63.30
£74.30
£44.30
£51.30
£63.80
£63
Total income
Advertising
£10
£15
Stationary
Pens and paper for staffs
£2
-
-
-
-
Staff wages: £5 per month for each member
£5
£5
£5
£5
£5
£5
Office Expenses
Registration
£80
Telephone
£2
£2
£2
£2
£2
£2
Total expenses
£175.20
£85.2
£83.2
£98.2
£83.2
£83.20
Cost of advertising our product
The Romford recorder is published on a Friday and is the lead paper to three others, the Brentwood recorder, the Harold hill recorder and the Thurrock recorder. A display box advertisement will automatically go in all 4 papers.
The rate is £8 per centimetre with a minimum charge for a 3cm box which takes approx 18 words. If we wish to include our logo or picture we must look at the minimum size of 4cm. The amount of wording we can use will depend on the size of the logo/picture required, a good tip to remember is the more words we put into a display box the smaller the type face.
If we require colour the cost of this is £25 per colour used, plus an initial set-up print cost of £100 per colour.
The purpose of financial planning to fancy fashion
Financial planning is concerned with the following:
* Profitability: this is making sufficient profits to reward investment made by a business either by a sole trader, the partners or the shareholders. This is usually the main aim of a business
* Cash flow ensures that a business from day to day has sufficient cash available to pay its way. Without working capital it will survive long enough to make profit.
Financial planning acts as an information system processing business data so that the interested parties can be provided with the means to understand how well or badly the business is performing.
Information obtained may be of interest to other people who wish to assess the performance such as.
* Shareholders and potential investors who wish to assess the likely return on their investment
* Banks or other providers of finance to assess the potential risk of not being repaid
* Customers who need to be confident of receiving supplies and after sales services if appropriate
* Suppliers, particularly creditors who want to be sure that debts can be paid
* Government, particularly for taxation purposes. The tax authorities need to be satisfied that the accounts supplied to them represent the true results of the business
* Competitors who may wish to make comparisons
* Employees whose jobs and wage increase may depend on it
* Financial advisors and business analysts who need to be able to advise their clients
Reasons for a business performance to be monitored
A business needs to monitor and control its performance for a number of other reasons including the need to:
* It must meet taxation which must be paid on profits
* Maintain finance-regular repayments will have to be made to banks and other lenders if they are to continue to provide finance.
* Provide comparison with targets to check whether these are being achieved or exceeded. Progress can be assessed and corrective action taken if necessary.
* Achieve profitability that is it is not enough simply to meet its debts. At the end of the trading period it is important that an organization also makes a profit in order to survive and prosper.
* Improve performance- monitoring and control can provide opportunities to do these e.g. Reducing costs, improving efficiency and output, reducing bad debts, increasing profitability.
Ways in which monitoring of the business is carried out
There are different ways in which monitoring and measuring performance. Below are some of them.
* Financial controls in particular keeping costs and budgets within agreed targets. Budgeting is an important part of an organisation's planning processes.
* Performance ratios based on an analysis of the accounts, in particular the balance sheet, which are examined later.
* Productivity measurement which defines performance as a ratio output to input
* Quality control which can help to increase customer satisfaction and therefore sales and also reduce costs such as those of wastage and returns.
Introduction to financial planning for our young enterprise company
When planning the short- or long-term funding requirements of a business, it is more important to forecast the likely cash requirements than to project profitability etc. Whilst profit, the difference between sales and costs within a specified period, is a vital indicator of the performance of a business, the generation of a profit does not necessarily guarantee its development, or even the survival.
What will happen to a business without sufficient cash flow? Without effective cash flow management, a business faces a number of risks, such as cash shortages, inability to pay bills, bankruptcy, or even failure.
What would happen to wages and salaries? A business needs to know how much it pays its employees
What would happen to the business buying capital assets? A company buying capital assets this will reduce the income of employees.
What would happen to tax bills? If more profits are being made in our young enterprise company this will also increase tax bills.
The Gantt chart contains a list of all major deliverables, activities and the subtasks needed to be done in order to complete those Tasks. It will also contain the expected time to finish the task. The actual time to finish each deliverable and subtask.
Gantt chart for our young enterprise
Tasks
October
November
December
January
February
March
April
May
June
Generating ideas
Business name
Logo
Deciding role
Questionnaire
Analysis results
Where to get stock
Where to sell
Marketing strategies
Loan money from bank
Contribute money
Financial plan
Advertise Products
Start selling products
Revise for exams
Stop selling products
Cal profit and loss
Conclusion
Our young enterprise business overall was successful. However if we had more time we would have improved firstly on the primary research in which we distributed questionaires, we could have used different methods, which include one on one talking this, would have helped us understand what our consumers needed more. Also we also had problems with some of the members in our groups Joanne li and Jenny Mia who left the group half way, this affected the contribution for the stocks of our products. We also had problem with advertising we never advertised our products in the college instead we advertised in the rcorder a romford newspaper, if we had advertised our products well enough we would have sold more and made more profits.
On entering the market we used the penetrating pricing strategy that helped us a little bit because if we sold our products with the same price as our competitors (Claires) we might have sold a little, it was also a disadventage to some consumers because with the low price some thought our product was inferior i.e of low quality.
Quality assurance
Quality is the value of judgement usually thought as the following concepts: reliability, durability, better, well-finished, good service, up to standard, well designed, what the consumers want.
Quality assurance means using production and management procedures to ensure that the process of product or service design, production and delivery is as faulty-free as possible. Quality control is the process of checking a product or service against specifications. If a product or service meets its specification, it is said to be confirmed, in our young enterprise company all our products are up to standard and should meet our consumer's needs. All our products will be inspected before leaving the manufacturer.
Course work
