Monday, 20 June 2011

Is your business plan insane?

In business planning, variance analysis is a way to sanity-check the assumptions underlying your plan

-          It compares the planned or forecast figure to the equivalent figure in a previous comparable period – usually the previous year

-          It expresses the difference as a percentage

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Previous year
Budget year
Volume of sales

Average unit price

Sales income

Average unit cost

Direct costs



Net profit

-          Your wider business plan (strategy, market positioning, sales performance, supplier management and so forth) must then provide an explanation for any difference

-          This will expose any assumptions you have made and the potential impact on your business should they prove to be wrong

-          In the above example, the plan is based on increasing the number of sales as well as the price whilst holding unit costs and salaries to the previous year’s level

-          These might all be reasonable and achievable but a credible business plan must explain how and why these things are going to happen
  If you'd like to know more about developing a business plan then this event is for you.

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