Ministry of Education
Cyril Potter College of Education
TVET Department
Business Studies Option
PBS 261: Cost and Management Accounting
Week Seven (7)
Topic: The business Plan
Sub topic: Budget: Sales and Production
The Business Plan
A business plan is a document which states the details of your business, the products or services
you sell or supply, who you are targeting as customers, your goals and how you plan to achieve
those goals.
Reasons for Preparing a Business Plan
A business plan is prepared for a number of reasons:
• to assess the viability of starting a business
• to obtain a loan from the bank, local credit union, other financial institutions
• to apply for grant funding if applicable
• to encourage others to join you in the business as partners, or investors
• if already running a business to make plans for expansion
• for decision-making processes.
The content of a business plan
The sections below are those typically included in a business plan:
• Executive summary
• Overview of the business
• Marketing plan
• Marketing analysis
• Operational plan
• Management plan
• Financial plan
Executive summary – summarises the contents of a business plan which form part of a longer
report or document. It is produced for business purposes to enable the reader to have an overview
of the report/document prior to reading the whole document. The summary appears first in the
business plan yet it is prepared last after the body of the report has been written. Overview of the
business – this section gives details of the business and would include the following:
• Aims/objectives – of the business
• Description – of the products/services
• Features – special features which are attractive to the customer
• Market – potential market for the products/services
• Location – of the business
Marketing plan – it is essential to assess the market in order to sell the goods or services
provided by the business. Consideration should be given to:
• Target market – for potential customers
• Market need – is there a niche market for the products/services?
• Market research – carrying out market research to identify competitors, market changes
Competitive strategy – to attract customers to the business’s products/services and away from
those of the competitors, various strategies can be used, for example cheaper prices, better
products and services.
Marketing and promotions – effective methods to inform customers about the business’s
products/services, for example, using sales and marketing representatives, advertising (television
and radio), social media such as, Facebook, e-mail, flyers, business cards and newspapers.
Marketing analysis –
• Define and research the target market the business aims to trade within – see above.
• Ensure that there is a continuing process of collecting information of demand for the businesses
products/services.
Operational plan – the process of operational planning is ascertaining in advance the aims and
objectives of the business and how this is to be achieved in a specific timescale. Management
would need to consider the following areas when planning how to operate the business.
Premises – the office, factory and/or warehouse’s location should be in a safe and accessible
situation with room for expansion.
Machinery and equipment – details of machinery and equipment required and its cost.
Materials – types of materials required and their sources.
Labour – the number of employees required, both full- and part-time, and their skill levels.
Working hours – operational business hours to be decided and known to employees and
customers.
Manufacturing process – details of the manufacturing processes should be comprehensive to
ensure high standards of the goods to be produced.
Management plan – a management team needs to be established with manager’s responsibilities
and areas of work defined. Each member of the team needs to be highly motivated, competent
and be experienced.
Financial plan – the financial plan is an overview of the business’s financial accounting
requirements and consists of three main documents, namely:
• cash flow statements
• trading and profit and loss account (income statement)
• statement of financial position.
There are other financial documents that could also be included such as a Sales forecast,
Production forecast.
Sales Budget
A sales budge is a prediction of the number of unites that a business will sell and their value for
the future period. Normally the budget is prepared on a month-by-month basis. The sale budget
is often the single most important key to future planning because from it derive so many aspect
of a business’s future cash inflow, purchasing or production requirements.
Example:
Dylan manufactures a single product. He forecast that sales for each of the three month ended 31
May, 2019 will be:
2019 Units
March 420
April 440
May 400
The selling of the product is $60 each.
Sales budget for Dylan for the three month ending May 2019.
March April May
Sales Units 420 440 400
Sales Value $25,200 $26,400 $24,000
Production Budget
Manufacturing organisations prepare production budgets to calculate the number of units that the
factory can produce in a specific period to meet expected sales.
Example:
