The next stage is writing up a business plan. Business plans are very useful and have many benefits. For instance, a business plan can show strengths and weaknesses of the business idea and highlight financial risks involved. Therefore, if there are any issues the business can then find solutions for this before they become an issue. Furthermore, a business plan can help obtain finance. When the business is asking for a loan, the business manager will ask for the business plan, if they don’t have one they won’t get any finance. If there is no business plan many problems may arise for the business owner. If the business doesn’t plan sales and marketing they will not know the amount of products they will need to make and may lead to losses, either producing too little or too much produce. Also if they don’t plan their customer base they may be in a location where the certain customer base may be limited or the location may be inaccessible and customers may struggle to get there. Moreover, if they don’t research their competitors it may lead to problems as a competitor may be selling similar products at a cheaper price and therefore customers will not shop with you. Lastly, if key personnel is not planned, the company will not know the right qualifications that staff will need and won’t be getting a good service as they will have unqualified staff. If you plan you would have considered all of these things and it wouldn’t become an issue.
Financial planning benefits the business greatly. It’s important to plan your finances. One way to plan is pricing. If this is not done correctly it will lead to many problems. If the prices are too high the company will lose customers. Whereas if the pricing is too low they will be losing money and may not be able to pay for expenses. Also if a cash flow forecast isn’t done you won’t be able to identify problems before they happen, if you don’t know what months you will have a cash flow problems you won’t be able to solve them and it could result in the business being unable to pay monthly bills. Furthermore, it’s important to have a contingency plan. If a problem arises and there isn’t a plan you won’t have reserves for problems that may occur. For instance, if machinery breaks down and there is not a contingency plan or reserve fund, the business may not be able to operate as they won’t have the funds to repair or replace the machinery. Lastly, it’s important for the business to consider online operations. The majority of people prefer to shop online as it is easier and more convenient. Therefore, if the business doesn’t provide an online service for customers to buy their products they will be loses a lot of sales as customers will go to their competitors who do sell online.
If you move markets, for example, local to a global market it may lead to problems. If a business is operating in a different country, there may be different laws and regulations that you need to follow. Therefore, it may cause issues as you will have to abide by the laws in order to operate. Also operating in different markets may lead to problems if research is not done effiecently. Therefore, if research on products and customers isn’t done well it may lead to less customers as products may not be suitable for the particular area.
SLEPT factors can also lead to problems. First is social. The main factor that effects a business is demography. This is the study of the population. Firstly, they will need to think about the working population. They will need to identify the people who are able to work and where they are located. This is important for them as it will identify the amount of workers that are available for them. This may cause problems for them as if research is not done they may not be able to hire workers to work for them and therefore won’t be able to operate. They will also need to consider the whole population. Changes in the population will change the demand for the businesses products therefore, the business to be aware of how many customers they will have to target and where they are located as if they don’t they may have poor sales and make losses. Next is legal. It is very important that a business operates within the law as if they don’t, it can lead to serious consequences. For instance, they may be forced to shut down or they may have to make large payments of fines if they don’t abide to laws such as the minimum wage. Then there is environmental and ethics. It’s important for a business to run environmentally and ethically as if they don’t customers may not want to shop with them. For instance, may people have interests in animal rights therefore if you test your products on animals customers won’t want to purchase goods from you; compared to companies who don’t test on animals. The next factor is SLEPT analysis is political factors. Any change in the government will affect the political balance of a country and as such will impact upon the business. Therefore, the entrepreneur need to be aware of political factors that could affect their business. For example, the minimum wage is always changing, therefore they would need to change their wages for their staff to ensure they are keeping within political factors. If they don’t do this, they may have to pay fines or have to shut down. The last factor in SLEPT analysis is technological factors. Technology is always changing therefore the business will need to keep up to date and incorporate the new tech into their business to be profitable. For instance, they may need to provide an online shopping service. If they don’t do this they may lose sales as the majority of customers like to buy online.
Seasonal factors is another factor that needs to be considered. Seasonal factors can affect their profit margin. They need to be aware that some products won’t sell as well at certain times of the year. For instance, shorts and flip flops won’t be in high demand in winter but will be in the summer. Therefore, they need to be aware so they can take advantage of it. If they do not do this they may lose sales and make losses.
There are many ways in which a business can gain initial finance. The business owner has a range of different sources of finance. However, some of the methods they may use to gain the finance contain an element of risk and some may be risk free. If the business owner uses a mortgage to gain a property you will have to pay interest. This interest can vary; you can have fixed or variable interest or interest only, or interest and repayment mortgages. If you don’t pay, your property can be repossessed. Also, if loans and overdrafts are used as ways to gain finance the business will now have to pay lots of interest which reduces the amount of money on other things such as raw materials. Furthermore, credit cards may be used and also have high amounts of interests which could put the business in more debt. Moreover, the business may make use of angels, dragons or venture capitalists and they now own a certain percentage of the business which means you will have to share your profits with them. In addition, if you don’t meet the criteria for investment, nobody will want to invest in your company for instance, when obtaining a loan, overdraft or being invested by venture capitalists.
There are many steps needed to happen when starting up a business. If these steps are not completed efficiently the business won’t be able to operate successfully.