Premium Essay

A One Horse

In: Business and Management

Submitted By mistake94
Words 393
Pages 2
Determine the Feasibility of the Company
When you begin to contemplate starting a business, you assume it will be successful, but many entrepreneurs find out after launching the company that success can be elusive. Creating a business plan with the accompanying financial plan is really a feasibility study of what it takes to be successful. If the resources are out of your reach, you don't have the experience or the market is too unstable at the moment, the financial plan will make that clear. You may find that the price you plan on charging for your products or services is materially higher than what your competitors are charging. Or perhaps the price is fine, but your manufacturing costs are too high and it will be difficult to earn a profit.
Variance Analysis
Monitoring the actual results against the line-item budget in the financial plan gives you the opportunity to take whatever steps are necessary to get back on track. For example, if you're not reaching the projected revenue, either the projections are wrong or the marketing program is not as effective as you thought. Knowing the assumptions behind the projections is important to find out why the projections have been missed. In other words, you need to know what you did right and what went wrong.
Forecast Financing Requirements
Starting a business requires money. The forecast financial plan demonstrates how much money is required and when. If you don't have the required amount of funding to start the business, you may have to begin on the smaller scale your funding allows. The financial plan also shows you where a shortfall will occur. Adjust the revenue and expense projections to avoid the shortfall or make sure you have other funds available, such as your own savings or a loan to cover any cash deficit.
Obtain Funding
Investors and lenders request to see the entrepreneur's business plan, including the

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