Business Planning & Financial Terminology Explained
Business Planning Essentials
Product & Service Description
This section describes the product or service in detail, including relevant criteria such as weight, color, shape, texture, and volume.
Production Process
This outlines the logical phases that must be followed in the manufacture of our product, detailing the steps involved in achieving the desired output.
Production Plan
These plans are outlined in more detail within our product or service description. They encompass the overall strategy for producing goods or services efficiently.
Legal & Employment Definitions
Employment Contract
An agreement between an employer and an employee, where the employee commits to working for the employer under their leadership and organizational direction.
Collective Wage Agreement
A contract negotiated and completed by representatives of the workers and their employer to regulate working conditions during a particular period.
Financial Concepts & Funding
Investment
Expenditure made by an entrepreneur for the purchase of goods that will help produce other goods. These acquired assets must have a useful life of more than one year, such as machinery, tools, facilities, vehicles, and furniture. This also includes costs related to company formation and implementation.
Funding Sources
The first step is to secure more than 30% of total investments from internal capital or venture capital. Alternatively, one can obtain a loan or turn to renting and leasing companies.
Venture Capital
Success in venture capital lies in investing in fast-growing companies with the aim of selling shares for profit. The inconvenience is the limitation imposed by the venture capital society’s demand for its managers to participate in the company’s financial management.
Leasing
In exchange for a monthly fee, leasing provides not only assets (like cars) but often includes additional services. For vehicles, these services may include:
- Roadside assistance
- Vehicle maintenance and revisions
- Insurance
- Tire replacement
You may acquire movable or immovable property through leasing. The maintenance responsibility falls on the lessee. Minimum lease terms are typically 2 years for movable property and 10 years for real estate. Deductibility limits apply to the lease payments.
Temporary Cash Deficit
The status of a company when it is momentarily without sufficient cash.
Loan
Access to the full loan amount from the first day, with interest paid from day one on the total amount. Early repayment may incur a penalty. Loans are typically used to finance purchases or investments, or to meet significant liquidity demands.
Credit Line
Funds are made available to the customer, who can draw on them as needed. Interest is paid only on the amount used and for the duration it is borrowed. Repayment can be arranged at any time without suffering any penalty. Credit lines are used to address a lack of liquidity or for flexible investment needs.
Commercial Discount
An advance payment on a bill of exchange, for which the bank charges a commission.
Factoring
In exchange for a commission, the factor assumes responsibility for collecting all bills from our customers.
Business Classification & Planning
SME (Small and Medium-sized Enterprise)
An enterprise is considered an SME if it meets the following requirements:
- Less than 250 employees
- Annual business volume of €40 million or less, or an annual balance sheet not exceeding €27 million
- Not owned by a company or group of large companies at a rate greater than or equal to 25% of the capital
Investment Plan
A detailed outline of necessary investments for manufacturing the product or providing the service. This includes items such as machine tools, facilities, local land, and furniture.
Expense Plan
A detailed breakdown of necessary expenses to obtain the product or provide the service. This covers costs like raw materials, wages, and social security contributions.
Financial Plan
This plan determines whether an idea or project is economically feasible. It typically includes the cash flow statement, income statement, and balance sheet.