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.
2.
3.
4.
5.
Planning
Organizing
Staffing
Directing
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
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