BUS3 Putting a business idea into practice mind map

Objectives

• Aim / target: Broad intention versus a measurable target
• Financial: Survival, profit, sales, share and security; priorities vary
• Share: Business sales ÷ market sales × 100; £24k ÷ £300k = 8%
• Other aims: Social benefit, satisfaction, independence; objectives can conflict

Trading

• Revenue: Price × sales quantity; not the same as profit
• Costs: Fixed + variable per unit × output = total costs
• Profit: Revenue − total costs; stall: £3,200 − £2,200 = £1,000
• Interest %: (Repayment − borrowing) ÷ borrowing × 100; state period

Break-even

• Contribution: Price − variable cost per unit; must be positive
• Output: Fixed costs ÷ contribution; round up whole units
• Chart / safety: Revenue = total costs; safety = sales units − break-even units
• Assumptions: Constant unit values; costs or prices alter break-even and demand

Cash

• Timing: Cash pays bills; credit sales and loans show why cash ≠ profit
• Flows: Receipts/finance in; supplier, wage, equipment and loan payments out
• Balances: Net = inflows − outflows; closing = opening + net
• Forecast: Predict gaps; monitor seasonality, late receipts and repairs

Finance

• Short term: Overdraft: agreed limit/cost; trade credit: supplies paid later
• Owner / profit: Savings risk owner’s cash; retained profit may be unavailable
• Loan / shares: Loan: repayments/interest; shares or venture capital: shared control
• Crowdfunding: Many funders; fees, obligations and uncertain success

Decisions

• Cash response: Chase receipts, delay spending or negotiate; consider consequences
• Finance fit: Match amount, purpose, term, cost, ownership and risk
• Seasonal gap: Temporary overdraft may fit if later receipts repay it

Connections

• Trading → Break-even: Contribution links unit costs to the output needed
• Cash → Finance: Forecast gaps guide suitable finance