Financial management and planning Chapter 2 Adelman & Marks

You will know… 5 basic functions of a manager Difference between strategic plans and functional plans 3 factors that must be addressed when establishing goals Financial goals of a for-profit company 3-step process to take when using control How to compare and contrast different forms of business ownership The basic components of SWOT analysis What goes into a business plan

5 functions of managing 1.Planning 2.Organizing 3.Staffing 4.Directing 5.Controlling operations

Planning A systematic process that takes from a current state to some future desired state Strategic planning is development of long-term (> 1 year) plans for the business Functional planning relates to the different functional areas that are driven by the strategic plan Financial planning is determining monetary requirements Goal setting forces you to identify measurable objectives that are achievable and have timelines

Organizing Defining structures, responsibilities, and lines of communication This comes from the functional plan: –Who will do what? –What skills they need? –When do we have to accomplish specific tasks? –How do we accomplish them?

Staffing Obtaining the most capable personnel to implement the business plans Each functional plan involves people assigned to specific jobs – you will have to write the job requirements (education, personal skills, training) and the job description

Directing Providing proper guidance and direction to others who will accomplish the organizational mission Good managers and employers have good long-term, loyal employees Directing in the financial arena is done through the budgeting process

Controlling A three-step process that involves: 1.Establishing a standard of measurement 2.Measuring actual performance against the standard 3.Taking corrective action when actual performance deviates from established standard

Business organizations and ownership

Starting a business One of the first decisions is legal formation (no “business” until owners establish it) Owner must determine how much money is needed to start the business (owner’s equity, outside financing) SWOT analysis

Strengths, weaknesses, opportunities, and threats Strengths: the core competencies of your business – succeed because you do these better than competitors Weaknesses: areas where your business needs improvement (old equipment, untrained workers, no $)

SWOT analysis Strengths, weaknesses, opportunities, and threats Opportunities: factors that exist in the business environment that will help the business grow Threats: factors…that will impede the business

SWOT analysis Note: opportunities and threats are also shaped by your own strengths and weaknesses “Given my superior ability to write apps for iPhones, I can take advantage of the growing base of iPhone owners who use apps”

The business plan Tend to cover a common format to make it easier for investors to read The executive summary is everything. It is the first thing readers will see, but you should write it last You must convince your audience in two pages or less that they need to read the rest of your plan Autoshop example on wiki space