by Jim Watters
The Oklahoma Main Street Center has recently added 4 planning tools to aid business owners and managers in implementing profitable operations of their companies. The tools are found on the Oklahoma Main Street website under Main Street Links … http://www.okcommerce.gov/mainstreet
The planning tools are oriented to the future contrasted with traditional business reports like income statements and balance sheets that represent recent company history. When business managers can better plan short-term future goals, the more time they have to correct and offset negative changes.
The “before-the-fact planning tools are:
1. Break-even sales and profit plan
2. Estimating how price changes impact profit
3. Forecasting short-term cash demand and
4. Operating planning – backwards
1. Break-even Sales Analysis Tool –
Every business owner should know how much revenue is needed to pay all bills and produce a fair profit. Annual profit is determined by the company’s cost structure and sales volume. This tool calculates how much business you’ll need to pay all costs and still reach your profit goal.
Break-Even Sales Analysis Tool
2. How Price Changes Impact Profit –
Gross Profit is the income received after paying for the products/services you sell. This management tool estimates how much more business will be needed to reach the gross profit goal if merchandise is “discounted”. It also estimates how much business you can lose resulting from a price increase and still meet your gross profit goal.
How Price Changes Impact Profit
3. Cash Management –
What’s the cash demand on your business over the next 5 weeks? This planning tool guides managers through the process of estimating short-term cash flows into and out of the business. Not all bills are due on the first of the month. It’s good management practice to anticipate cash flows in and out of the business before they happen.
4. Operating Plan –
Whoever started the rumor that new businesses should plan on losing money during the first few years was full of horse feathers. There’s no such business principle. Planning to lose money is a hard habit to break. Plan to succeed in business from day one. If you have never done an operating plan, don’t worry. Just start with one number, net income, perhaps better known as the “bottom line”. Net Income is the reward for business owners and investors. If you don’t plan for it, it probably won’t happen.
[…] tools available for our use located on the Oklahoma Main Street website. In a recent post on the Oklahoma Main Street blogsite, Jim Watters, the Oklahoma Main Street Management Consultant, gives a brief description of these […]