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Assessment 2 Individual Forum Contribution 4 Assignment sample
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A business road map is very important to effectively reach the objectives of a company which is provided by the business plan(as cited by Abdullah, 2020). The report includes a general idea of the business plan with arguments of the main sections of a business plan from academic and industry sources. The purpose of each section of the business plan in a company formation is explained in the report with the help of theories, models and concepts. The study also substantiates theoretical reasoning of the bottom of the cash drain of an organization. An in-depth study of the requirements of working capital for an innovation project and start-up business in a company is also considered in the report.
Major sections of the business plan and the purpose of each business plan section
According to Tokhtamysh, Volobuieva and Khazanovych, (2018) the business plan refers to the document that includes the financial and operational plan for a business along with the direction of achieving the company’s goals and objectives. The structure of a business plan is to be made in a manner that contains all essential information that stakeholders are observing. A business plan is a Model which has 10 different sections that align in one part, and those are discussed as follows (McKeever, 2018):
- Executive summary: This section is an ultimate outline of all of the info that the company contains in a business plan. The purpose of making this section is to make the reader excited to know more about the business idea and attract them to explore it more. The executive summary offers the company's mission statement or products and services that an organization plans to provide.
- Business overview: This section serves to define an organization's aims, target market, and products or services which are going to be served by the company. The business overview section provides further details about a company's formation and solution to its daily problems. The rationale of this section is to make a company plan extra credible in the eyes of investors.
- Market strategy and analysis: This section agrees on further investigation of the company's target public and their wants. The purpose of developing this section is to focus on different organizations that provide similar products or services and alternate solutions.
- Marketing and sales plan: This section defines what a company plan to do for the organization's products and services promotion and selling activity in a market. The purpose is to make and mention unique selling schemes and pricing plans in the business plan.
- Competitive study: This section offers an in-depth study of those organizations whose target is to reach out to an identical audience with the same business plan of an organization. This section's purpose is to outline all competitors' strengths and weaknesses to effectively determine the reaction of the target audience to the business plan.
- Management description: This section generally covers an organization and management strategy, containing business leaders. The purpose is to demonstrate to the readers that individuals who are engaged in building an organization are trustworthy and know the way of making the business idea successful.
- Products and services description:This section provides a variety of products and services that the company is going to introduce in the market. The purpose is to make aware the readers and investors about the planned products and services of a company.
- Operating plan: This component defines in what way leaders and managers are planning to operate an organization. The purpose is to provide organizational structure information and the number of employees a business wants to hire.
- Financial planning: This section mention all financial aspects of a company like costs, source of funds, estimated revenue, etc. The purpose is to provide clear actions of a company that how it intends revenue and main streams of revenue to the investors.
- Appendices and exhibits: This section includes any further information that supports the above sections of business plans. The purpose of the section is to offer additional relatable information on business ideas to readers.
Bottom of the cash drain concept
In the context of business,cash drain means an unexpected outflow of cash from a company without getting estimated materials and output. It is also called the dollar drain. A dollar drain occurs when a company imports more and exports fewer goods and services which creates a deficit trade for business operations(Andrejuk, 2019). For clearing cash and currency drain the company should pay attention to balancing the transactions of inputs and outputs of a business. The bottom of the cash drain concept is considered in the report to analyze the conditions related to the shortage of cash, which may occur in the future (as citied by Beck, Thompson, Gyawali, Langan, and Linnerooth-Bayer, 2018). To successfully achieve the planned goal of a new business idea, the company should make better strategies to avoid the situation of cash drain.
Working capital requirements for a new start-up business or an innovation project
According to Godswill, Ailemen, Osabohien, Chisom, and Pascal, (2018) Working Capital (WC) term is used to indicate a short-term financial situation of a company and it is calculated by subtracting current liabilities from current assets. There are three reasons for WC requirements for innovation projects and new start-up businesses that are discussed below (as cited by Barros,Falcão, and Sarmento, 2022):
- Raw materials: This component is crucial for every business as raw materials are the primary materials to make finished goods. Raw materials are purchased daily which requires WC to deal directly with suppliers.
- Costing: It includes three types of costs to make final products those are labor, overhead, and raw material costs. To maintain all these costs on regular basis for continuing the manufacturing process of a company, WC is required on a priority basis.
- Finished goods: These are types of inventory that are ready to dispatch after going through a production cycle. A company needs to pay distribution expenses and maintain inventory which requires daily maintenance costs. WC is a short-term fund of a business that manages all finished goods and inventory management costs.
Theories of an innovation project
There are 15 types of innovation theories available for new innovate projects. But the most effective theories for new innovative project are TRIZ and open innovation. The TRIZ is an acronym of “theory of inventive problem solving”. It is a problem solving tool to analyze and forecast invention patterns that bring solutions for difficult problems. As the technology changes continuously, an innovative project needs to operate with trendy technology. The open innovation theory is an idea of management and Crowdsourcing Company can get through various software solutions like various ideas and suggestions from the general public.
It is concluded that when a company wants to introduce its new innovative project then it has to prepare a business plan to show all relatable information to the readers. The company has to mention all planning and strategies under various sections of the business plan to conclude the way of operating a business in the market. It is also concluded that each section has a different purpose of being in the business plan. The WC also has an important role to run a new business idea and also the company should make a back-up strategy for cash drain situation.
- Abdullah, R. (2020). Importance and contents of business plan: A case-based approach. JurnalManajemen Indonesia, 20(2), 164-176.
- Andrejuk, K. (2019). Ukrainian immigrants and entrepreneurship drain: towards a concept of governance-induced migration. East European Politics and Societies, 33(4), 899-916.
- Barros, V., Falcão, P. F., &Sarmento, J. M. (2022). Are more sustainable firms able to operate with lower working capital requirements?. Finance Research Letters, 46, 102407.
- Beck, M. B., Thompson, M., Gyawali, D., Langan, S., &Linnerooth-Bayer, J. (2018). Viewpoint–Pouring money down the drain: Can we break the habit by reconceiving wastes as resources?. Water Alternatives, 11(2), 260-283.
- Godswill, O., Ailemen, I., Osabohien, R., Chisom, N., & Pascal, N. (2018). Working capital management and bank performance: Empirical research of ten deposit money banks in Nigeria. Banks & bank systems, (13, Iss. 2), 49-61.
- growthink, 2022. Business Plan Template for Small Businesses & Entrepreneurs (online). <https://www.growthink.com/products/business-plan-template> (accessed on 13 october 2022).
- McKeever, M. P. (2018). How to write a business plan. Nolo.
- Tokhtamysh, N. I., Volobuieva, V. V., &Khazanovych, N. A. (2018). The meaning and essence of the business planning.