#Immediacy on speech making

The machine can be set to print an appropriate slogan on each ...

The machine can be set to print an appropriate slogan on each ashtray and, if required, the name of the purchaser.

Bob believes that a mobile phone cover marked, say, 'Wayne Rooney and Johnny Blake Cup Final, Wembley 2012� will be something that Mr Blake will want to buy.

Bob has checked on the cost involved and has drawn up a table to show what the total cost will be for various levels of sales. Bob has added to the table further columns showing prices and income.

He believes that he can sell his ashtrays for £11 each, materials variable cost work out at 80p per mobile phone cover, and renting the machine costs £140 per day. Bob must objectively consider the position by answering the following questions: What is a worthwhile profit to compensate me for my efforts? Can I sell enough ashtrays to achieve this profit? How much will I be out of pocket if I have a bad day? Can I at least break even? How much will I make if I have a really good day and sell, say, 1000 ashtrays? If there is no competition and I can raise the price to £11.50, what then is my break-even price? and If competition is fierce or sales slow, what will be the break-even point if I reduce my price to 80p? In answering these questions and perhaps others. Bob is establishing whether or not the venture is likely to be very risky or slightly risky.

He is giving himself a 'feel' for the business and, if he goes ahead, will be able to judge from his results whether or not it is worth continuing. It might be argued that if he sells only, say, 30 ashtrays at his first attempt, he will know it is not worth continuing without bothering with a table of figures. This is by no means necessarily the case because, with the break-even point available to him / her, he can assess, under the circumstances, his chances of being profitable next time.

The circumstances could have included: Bad weather which kept the crowds away; He started late and missed the people arriving; He was in the wrong place, etc. In other words, instead of giving up a potentially good, opportunity, he might conclude, quite correctly, that given the right circumstances he could easily sell enough to pass the break-even point. Increasing the turnover a warning As will be seen from Bob's calculations, increasing the turnover increases the profit providing fixed costs stay the same. Sadly, fixed costs tend to go up and, when they do, they do so in large leaps.

When planning an increase it is important to re-cost the fixed-cost budget and re-calculate the break-even point. Any increase in fixed costs will shift the break-even point further away, and the business could end up doing more business but making less profit. Activity should therefore be increased to the maximum possible before taking on more premises, labour, machinery or whatever, and it must be realized that after taking on the additional costs a new, higher level of sales is needed to reach the new break-even point and even more to reach the former level of profit.

The best and worst case. Allied to using cash-flow forecasts, budgets and break-even calculations is another technique which can be a valuable guide and further enhance control of the finances. This technique involves preparing two or more 'scenarios' in which an attempt is made to establish the risk element of a prospect or development. Scenario 1 could be an optimistic view of the prospect including, say, the highest level of sales believed to be achievable, top prices, low materials cost, and so on Using these optimistic but not unrealistic.

figures, a cash-flow forecast and break-even analysis can be made and the result in profit terms determined. Scenario 2 will then look at' the opposite extreme pessimistic, but still realistic, view of likely circumstances.

This scenario can include, in addition to modest sales figures, potential threats such as competitive action,-higher interest rates, increased taxation, etc.

Having costed out both scenarios, the result may suggest that even in ...

Having costed out both scenarios, the result may suggest that even in the worst circumstances a decent profit is on the cards. A... read more

Clearly, if any of the credit business can be replaced by cash ...

Clearly, if any of the credit business can be replaced by cash sales then an improvement will be achieved.

One way to do this is to look for means of 'vertical i... read more

The reasons for this are: Many companies put high-value invoices through a ...

The reasons for this are: Many companies put high-value invoices through a more rigorous checking procedure which takes longer; Payments of large amounts may require approval at a high