Business Plan: Financial and Legal Viability
3. FINANCIAL VIABILITY
Business Plan Investment Elements
Once activity levels are determined and the right technology chosen, a detailed business plan is presented and each component of the economic structure is evaluated to ensure feasibility. The most common investment plan components are:
- Initial Fixed Investment:
- Tangible fixed assets: land, buildings, machinery, facilities, equipment…
- Intangible assets: patents, trademarks, software applications…
- Incorporation expenses: company creation costs,
Economic Services: Trade, Finance, Transport, and Media
Services: Consumer and Producer
Services encompass activities not directly involved in raw material transformation. They are categorized into consumer services, offered directly to individuals, and producer services, provided to businesses and public administrations. Services can be managed publicly by the state or privately by companies and organizations.
Outsourcing and Economic Development
As economies develop and basic needs are met, the demand for services increases, leading to prosperity. In
Read MoreForeign Exchange Risk Management for Businesses
Foreign Exchange Risk Management
Risk Attitudes
A firm can adopt different attitudes towards foreign exchange risk:
- Risk-Neutral: Accepts the inherent risk.
- Risk-Seeking: Aims to profit from favorable exchange rate movements.
- Risk-Averse: Uses hedging instruments like insurance contracts.
Hedging with Derivatives
Derivatives are contracts to buy or sell currencies at a future date and predetermined exchange rate. Forward contracts are a common hedging tool, allowing businesses to lock in exchange rates
Read MoreEssential Marketing Terms and Techniques
Flat Rate Pricing
The price of items remains constant regardless of the quantity purchased. This is common in industrial markets.
Fluctuating Demand
Variations in the demand for a product or service, typical in industrial markets.
Market Futures
Contracts for purchasing goods or securities at current prices, similar to stock market shares.
Frequency Marketing
Rewarding frequent customers with benefits and incentives.
Freelance Workers
Journalists or writers who contribute to publications without being staff
Read MoreUnderstanding Macroeconomics: Key Concepts and Applications
Deflationary Gap: A deflationary gap, also known as a recessionary gap, occurs when aggregate demand falls below the full-employment level of national output. This gap, represented by the vertical distance between the 45-degree line and the aggregate demand curve at the full-employment output, indicates the amount by which aggregate demand must increase to reach full employment. Fiscal policy, specifically increasing public spending, can be used to close this gap.
When the government increases public
Read MoreDistribution Channels: Strategies and Market Access
Distribution Policy and Channels
The main challenge in distribution policy lies in the dispersed locations where goods must be retrieved. This necessitates the creation of efficient distribution channels.
Choosing a Distribution Channel
Several factors influence the choice of distribution channel:
- Market Entry Strategy: The chosen market entry method will significantly impact the distribution policy.
- Desired Level of Control: Maintaining control over distribution, including aspects like transportation