Business Planning and Budgeting

Three key budgets for a start up
1. Income budget
  1. Difficult for startup
  2. Needs to take into account market size, existing competitors and capacity of the business
  3. What sales will be achieved?
2. Expenditure budget
  1. What it will cost to deliver the planned product and support the business
    1. Fixed costs?
    2. Variable costs?
    3. Delivery?
3. Profit budget
  1. Highlight cash flow problems
  2. This budget is the difference between the sales and the expenditure budget
  3. Enables owner to look at costs and how to reduce them
Limitations of budgeting a start up
1. Assumptions about a new business are uncertain
2. Entrepeneurs are often optimistic by nature
3. Competitor response is unceratin
4. Market research may be unreliable
Why a start-up needs a business plan
1. Clarifies thoughts and identifies gaps
2. Provides a focus on the business idea
3. Provides a logical structure
4. Encourages business owner to focus on what the business is about
5. Helps test the viability of the idea

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