This week we will have a dual focus for our business plan. Our first area of concentration will be on the discussion of business risks. Here we will outline different ways to handle our business if the assumptions in our SWOT analysis are incorrect. We will then build on this by researching the current economic environment. By analyzing the economic conditions, we will be more justified in our beliefs about trends that may occur in our industry, and will be better equipped to manage our business. Our second area of concentration will be on finding as much data about the expenses of our business as we can. In order to be able to complete a break-even analysis, and later determine how much profit we plan to earn in the future, we must first know the true cost of running the business.
Here’s how we’ll eat the elephant this week:
Monday: Discussion of Business Risks
Have you ever heard someone break down the word assume? If not, let’s just consider you to be one of the lucky few. In any case, the assumptions made in our SWOT analysis are likely to be backed by research about our industry. Unfortunately, even with hundreds of hours of research, some assumptions end up being incorrect. Today’s classwork deals with handling business risks and incorrect assumptions. From the rubric:
· Discussion of business risks - 5 points
o Identify the risks that will occur if assumptions you have made are incorrect.
o Provide a strategy for dealing with the risks identified.
Essentially, we’re making sure we have all bases covered. Today’s work should be somewhat challenging, but fun. Your final draft for discussion of business risks should be about 100-150 words.
Tuesday and Wednesday: Current Economic Conditions
While you’ve already completed an industry analysis, on Tuesday and Wednesday, you will take a look at the economy from a “big picture” perspective. Here’s a breakdown taken straight from our rubric:
· Current economic conditions: a “snapshot” of the economic environment that may include information such as employment levels, interest rates, rate of inflation/deflation, rate of change of GDP, balance of trade, exchange rates, and/or any other information you think is appropriate.
Now, this “snapshot” is essential to determine what effects the economy will have on your business. It’s one thing to report to me that consumer discretionary income is dwindling as a result of inflation. It’s a completely different (and more thorough) situation when you explain that because of dwindling discretionary income, your profits will be negatively affected, since fewer consumers will be capable of actually paying for your products/services.
Thursday/Friday: Expenses (Fixed/Variable) and Blog
The time has come to begin looking for real numbers for our business. How much money does it actually cost to run your business? Many of you have already done at least some research about renting a facility, paying employees, advertising expenses, etc. For Thursday, the plan is to first list as many costs as you can for your business. Consider these questions:
o Will you have a facility?
o How much is the rent for the amount of square footage you need?
o Will you hire employees?
o Will you advertise?
o Approximately how much does the utility bill cost for a facility you plan to run?
o Do you sell merchandise? What is the cost to make or procure the merchandise?
o What other consumable assets will you use on a monthly basis? (landscaping companies use fuel on a regular basis)
The list can go on and on. My suggestion is that you find as many fixed and variable expenses as possible for your plan. A simple web search can greatly help you.
Once you’ve sufficiently completed these tasks (or if we only have about 20 minutes left in class Friday), it’s time to blog about your progress. Feel free to tell me:
What have you learned about being prepared for anything?
How did you react to having to deal with the possibility that your original assumptions may have been wrong?
What did you learn about our economy? Has your opinion changed about anything?
How will the economy impact your business?
Were you aware of all the expenses your business would have to pay? Which expenses stood out during your research?
That’s it for this week. See you in class!
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