Break-even Analysis and SME Management

This assignment provides an in-depth analysis of break-even analysis and its relevance to small and medium enterprises (SMEs). It includes a literature review of various sources, including academic papers and articles, which discuss the application of break-even analysis in SMEs. The assignment also touches upon the importance of business process management, knowledge management, and entrepreneurship in SMEs. It provides a comprehensive overview of the topic, making it suitable for students looking to understand the principles of break-even analysis and its significance in SME management.

Managing and Running a
Small Business

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Consideration need to address when planning and allocating resources to achieve objective
.....................................................................................................................................................1
TASK 2............................................................................................................................................3
P2 Different processes of customer relationship management ..................................................3
P3 how business can develop transnationally and determine the benefits and drawbacks.........4
TASK 3............................................................................................................................................5
P4 Annual itemised monthly cash flow forecast showing fixed and variable costs against
income.........................................................................................................................................5
P5 Break – even analysis.............................................................................................................8
P6 Key financial statement in relation to their contribution to the successful management....10
TASK 4..........................................................................................................................................11
P7 Key legislation and regulations that have implication on business....................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................12

INTRODUCTION
Small business is contributing huge amount in development of economy because when
new venture comes in market there is requirement of employees for doing day to day activities.
Thus, it provide employment opportunities to the persons who are not employed. Along with this
it help in raising living standard of people as well as assist in development of economy. For
managing company is proper manner there is requirement of strategy and policies so business
can run in appropriate manner (Ali and Babiker,2017). Business environment is dynamic in
nature when it change this gives its wide impact on operational department of small business.
This assignment is based on Carter Lane Coffee House which is an small business of London.
The same is coffee house which is serving their products and services in London only. products
serving by them are cold and hot coffee, variety of sandwiches, pizza, burger and many more.
Under this report several topics are discussed related to small business such as planning and
resources allocation should be done in fine manner for achieving objectives. It also through light
on customer relationship management which is important for sustain in market. Cash inflow and
outflow of company with cash flow forecast and budget is prepare along with break even
analysis. In the end implication of regulation and legislations on small business are also
discussed (Williams, 2012).
TASK 1
P1 Consideration need to address when planning and allocating resources to achieve objective
Carter Lane Coffee House is small coffee shop in London which is serving variety of
eatable and drinking items to customers. Small companies don't have huge money for spending
on purchasing of resources for providing food to its customers as per demand. Main aim and
motive of starting this enterprise is to capture whole market of coffee and also in grabbing
customers from whole market. Instead of all these resources are important and required for
meeting day to day activity of business. Because with proper raw material their will be no
production of goods and services. When planning for al these done in proper manner objective
and goal can be achieved in effective manner (Winarno and Wijijayanti, 2018). There are several
other factors also which are needed to address through management respect to the planning for
future actions to accomplishing the common aims. Few of the main thought are mentions below:
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Goals and objective, vision- it is important for company to share their objectives, goal
and vision with everyone working in Carter Lane Coffee House. So employees can do work in
such manner that all these activity help the chosen small business in achieving their goals and
objective. Because this entire framework gives proper guidance to each and every personnel that
in what manner they have to work in effective manner for achieving goals. For this there is
requirement of proper training and development which must be planned by manager of Carter
Lane Coffee House (Bridge and O'Neill,2012). Because his program will enhance skill and
knowledge of employees and through this they know how to use this technique in better manner.
staff members and their skills- Employees are assets of organisation because they are
the one who meet day to day target of company and serve products on time to customers. As per
need and wants of every individual. For their welfare it is duty of human resource manager to
place such candidate who is capable of managing this according to requirement along with this
training and development program should be arranged for new as well existing employees.
Along with this there are some more responsibilities of HR such as they must have to involve
new creativity in decision making for better outcomes. Hence, this assist in achieving target of
Coffee House on time.
Financial resources- finance is backbone of every business without this no company
can survive in market because for meeting day to day activity it is important to have proper
finance. When there is not required amount of fund it is not possible for management to do work
in proper manner and achieve objective. Simply minimum funds give adverse effect on
organisation. For better management of finance department in Carter Lane Coffee House it I
necessary to appoint a accountant who make proper accounts like balance sheet, cash flow
statement, profit and loss account and several other. Whether business is small or large finance
should be required according to its size.
There are several other benefits of planning and resources allocation are: assistive in
achieving more profit in better manner, growth and development in skills of staff members as
well this entire process improve internal strength of enterprise by achieving flexibility in
business operations (Weske, 2012).
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TASK 2
P2 Different processes of customer relationship management
CRM(customer relationship management) is an approach which help organisation in
managing their interaction or communication with existing and target customers. For better CRM
company have to do market research which is important for knowing need and demand of them.
This entire process is helpful in increasing or improving profit level of Carter Lane Coffee House
(Burns,2016). CRM take big step in converting customers to its loyal customer and also improve
company's selling procedure. For collecting data or information related to customer several tools
and techniques can be used by enterprise such as Email, MMS, Telephone, SMS and many other.
In general term, it can be said that customer relationship management refers to analysing needs
and wants of customers and providing them best results of this. Their are some more need of the
same for satisfying customers, long manner in retaining existing clients, ensure happy customers
and it improve relationship between organisation and its employees.
several channels which can be utilised by Carter Lane Coffee House for holding
customers relationship management are as follows:- Assessment of customer value:- It is necessary for organisation in making good
relationship with customers. Although for maintaining good relation with client it is
necessary to analyse their need and wants which is related to the cost and quality of
goods. Assessment of customer is good technique which help in taking feedbacks and
also in taking views of customers with help of market research. This entire procedure
assist Carter Lance Coffee House in identifying current market trend and taste,
preferences. So that enterprise can make changes in their existing products and services
thus they can satisfy their customers. Hence, these type of activities aids in executing best
practices for satisfying serve need and in converting to loyal or trust wrought towards the
product and services. Multimedia Message service (MMS):- such technologies used by company for providing
information to customers about new product or for updation in existing also. At same
time multimedia message can be send to several people in a particular time period
(Stanciu,2015). MMS can be attracting and easy way for attracting customers because
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this include several images and text is full of colour. With this Customer relationship
management channel respective Coffee House can communicate with their guest easily. Events and road shows:- with this company can meet numerous of people at single time
even face to face meeting can be done (Chauma, 2017). Events and road shows help in
meeting several people at particular time and it is easy to explain offers as well render
information to several people at particular time. Social Networks:- through this Coffee house can communicate with their customers and
even launch their products and services in market. Although, this help in offering
products and services to several customers at specific time. Some example of social
network are Facebook, twitter and many other.
 Role of Digital marketing and E-Mail for effective relation:- for maintaining good
relation with customer it is necessary that company have to use proper communication
channel for this (Smit and Watkin, 2012). Digital and E-Mails are best example of
communication channel as well these both assist in creating and generating awareness in
customers about goods and services.
P3 how business can develop transnationally and determine the benefits and drawbacks
Transactional sales simply means enhancing and increasing sales of company. As well it
assist in generating more and more revenue which is important for survival in competitive
business environment. This sale is done in the boundary of country according to demand of
population of that particular nation or market. For improving sales Carter Lane Coffee house
have to use several strategies and tactics for this.
This is important that same company have to serve goods and products to consumer at
their affordable price which they can easily purchase and consume. There are many drawbacks
and benefits which are ascertained through firm by enlarging business activities are given below:
Benefits:-
Lifestyle: In small scale organisation each and every individual is following a uniform or
particular style of working in the company (Cojoacă, 2017). When company is doing
transactional sale which is important because through this enterprise gain lots of profit which is
important for sustain in competitive environment.
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Independence: manager of Carter Lane Coffee house have rights and authority to take decision
for expanding their operational activities or business. Every one have right for taking decision in
the favour of company (Drucker,2012). All these should be on regular basis or in some time
period gap and such activities provide better opportunities for growth and development of
business.
Efficiency: for bringing efficiency in working of Carter Lane Coffee Shop company have to
follow proper proper structure. All these give various advantages to working of business.
Drawbacks:-
Lengthy: for doing something innovative and creative Carter Lane Coffee house have to take
proper time because without giving time it is not sure that what they have did is properly correct.
Which assist in raising business operations in better way and in making profit.
Financial risk: Expanding business at international level is risky for carter Lane Coffee house
because setting up business in other nations need finance (Skolud and et. al., 2016). Suppose, if
firm don't gain profit in that country then this will be financial hazard which is taken by
respective organisation.
TASK 3
P4 Annual itemised monthly cash flow forecast showing fixed and variable costs against income
There are many ways through which company can raise their monetary value because for
meeting day to day activity of Carter Lane Coffee House. With proper finance no one can
survive in this competitive business environment. Below mention are some sources through
which company can generate monetary value and become stronger to compete with others in
market. Explanation of these are given below:-
 Bank Loan: Carter lane Coffee Shop can take loan from bank also on which bank will
charge some amount of interest. When someone don't have any option for raising fund in
that condition bank is last option. Amount paid by organisation is on annually basis. In
banks RBI is the last lender resort. Apart from this several documentation also done by
the manager of bank and even they take security amount while giving loan.
 Equity Finance: this is process of raising capital of company with help of selling shares
in an enterprise. In general it refers to sales of ownership interest with the motive of
raising funds for running business (Durst and Runar Edvardsson, 2012). Equity finance is
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different from debt financing, which is related to funds lend by an company. Instead of
this fund can be raised when it was listed in stock exchange and share where taken by
private and public company. New venture ca come with their IPO(Initial public offerings)
in market for raising fund. Shares are listed at NSE and BSE.
 Higher and Leader Purchase: this is also an method through which company can
generate funds for their daily activities like production, marketing and several others. In
this process Carter Lane Coffee house gives their properties and equipment on rent to
other people against money according to the duration of its usage. In this method money
is generate with the amount paid by the person who taken property and equipment is
known as rent or interest amount.
 Government grants and subsidies: there are some government agencies which provide
finance such as grants and subsidies. For this several program are started by government
at the federal and provincial level (Durst and Wilhelm, 2012). These all help in raising
capital of Carter Later Coffee Shop.
Balance Sheet, P&L and cash flow statement of Austin Fraser organisations:
Year 2017 (value in £) 2018 (value in £)
Fixed assets 130 210
Inventory 20 35
Debtors 70 55
Bank 20 30
Total 240 330
Creditors 120 180
Bank overdraft 90 70
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Total 210 300
Working capital 30 80
Profit and Loss Account at the year ended
2017 2018
Sales 20 30
Cost of sales 10 15
Gross profit 30 45
Overheads 6 7
Net profit 24 38
Cash flow Statement
Cash budget for the year
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year
Initial cash balance 25000 32250 31750 29750 26750
Initial cash receipts 12400 1600 1100 1000 15000
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Total cash available 37400 34850 32850 29850 28250
Cash distributed
Direct material 1400 1150 1150 1300 1500
Direct labour 1200 650 650 650 650
Overhead 900 600 600 600 600
Selling and distribution 650 700 700 700 700
Total cost utilized 4150 3100 3100 3100 3100
Cash surplus/ deficit 32250 31750 29750 26750 2515
P5 Break – even analysis
Break even examination will demonstrates when there is situation of no profit and no loss. This
is considered as a financial technique which will be utilized by company so that they will
determine profitability ratio. This is most needed tool which is using by Carter Lane Cafe House;
thus, they will find out revenue. Along with, sales will be identified which need to be finished by
enterprise either monthly or annual basis. Hence, it is termed as most significant methodology by
which firm will able to reach at no profits no loss condition. With support of this, organisation
will develop some strategies to enhance sales on less cost (Introduction to Break-even Analysis,
2015). This assists to generate maximum profits for affiliation effectively as well as efficiently.
In this manner, sales of an enterprise will get improved.
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Illustration 1: Break-even Analysis
Along with this, it is needed for Carter Lane Cafe House to do forecasting of sales and in
addition production. By doing this, they will be able to reduce unwanted wastage from working
process. As a result, production process of an enterprise will get improved effectually
(Hammer,2015).
For instance:
Variable Cost: Rs. 8 per unit
Fixed Cost: Rs. 1600
Selling Cost: Rs. 10 per unit
Hence, break even point for this will be:
BEP = Fixed Cost / Construction margin per unit
= 16000 / (10 – 8)
= Rs. 8000
Application of break even point on distinctive organisational situation:
 To identify point of profitability: If company is not gaining revenues in an effective way
then they will not maintain their position in market for longer time span. Thus, it is must
for manager of firm to focus on profits; therefore, expenses will covered effectually. If it
get completed then, enterprise will be on the condition of no profit and no loss.
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 To price a product or service: This is essential for company to possess proper
understanding about the BEP.
This is needed for firm to examine variable as well as fixed cost of items and services.
Therefore, they will easily maintain significant position in market (Harmon, 2015). This assists
them to maintain reputation in market and as a result, they will take benefits from contenders at
competitive world.
P6 Key financial statement in relation to their contribution to the successful management
Each type of enterprise needs to formulate some financial statement for business as this enables
them to maintain their revenues and in addition control on unwanted expenditure. Superior of
company needs to interpret their financial documents and for this, they have to gather requisite
data as well as information. Therefore, they will be able to formulate budget for each division
and allocate them resources in a proper manner. In context of Cater Lane Cafe House, they have
to develop those statements which are mentioned as beneath:
Balance Sheet: It is considered as foremost document for every type of company. It
demonstrates about overall assets and liabilities of firm. This will be examined by investors;
thus, they will obtain judgement regarding investment of fund (Jasra and et. al., 2012).
Profit and loss account: With assistance of this statement, an enterprise will present their
entire profits as well as loss which is associated with a specific period of time. Through this,
unwanted expenditures area will be determined. In this manner, superior will get motivated and
accomplish targets timely by reducing unnecessary cost. It aids to improve working efficiency
and in addition association will be able to enhance revenues.
Cash flow statement: This needs to developed by company and through this they will be
able to maintain inflow and outflow of finance which is associated with particular time span.
This helps to enhance management effectiveness and in addition they will be able to use
accessible resources in a proficient way. If there is any differences amongst them then, this will
show in the balance sheet of enterprise. This has been analysed that bondholders as well as
creditors are interested into this kind of document.
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TASK 4
P7 Key legislation and regulations that have implication on business
Every company has to apply significant laws as well as acts into business irrespective of their
size i.e. small, medium or large. If they are unable to do this then, regulatory body will impose
some penalties on them. In context of Carter Lane Cafe Home, they have to implement some
legislations into firm which are stated as beneath: Health and safety act, 1974: It is termed as foremost law which has to be applied into
every premises. Superior has to cater an effective working surrounding to employees as
this assists to motivate them. Manager will render training sessions to staff members;
therefore, they will be able to complete their work in an appropriate and efficient way. If
safety is maintained at workplace then, it assists into retention of employees at premises
for maximum period of time (Jenkins and et. al., 2013). Data protection act: In recent time duration, latest techniques and methodology is using
by organisation; thus, they will easily secure information and data from use of others.
Fundamentally, this act is developed by regulatory body; therefore, they will be able to
protect any type of data, either it is professional or personal in nature. In context of Cater
Lane Cafe House, it is essential for them secure information of workers in an appropriate
way (Schaper and et. al., 2 014). This has been examined that, only limited data is
operated by another persons.
 Record keeping act: This is needed for each organisation to keep up books of accounts in
a proper way. For above stated aim, certain specified standards need to be follow by
superiors. In this manner, they will easily make specific entry of each transaction
effectually. This document needs to attested by each employee who are working with
company. Each and every factor needs to be clear to every staff members in an effective
and efficient manner.
Therefore, it is required for company to implement proper laws and legislations into firm;
therefore, they will be able to do business in an ethical manner. This assists them to survive in
market for maximum period of time. In this manner, they will keep up reputation at domestic and
international level.
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CONCLUSION
From the above assignment it has been concluded that small business is contributing huge
amount is development of economy. As well it increase Gross domestic production and national
income of particular nation. When new business starts it require employees which create
employment opportunities for several unemployed people and enhance living standard. Carter
Lane Coffee House is small business of London which help in development of economy. Entire
report explain how to manage and run small business in better manner with help of proper
planning and resource allocation. Customer relationship this is important term for every
organisation for creating brand image in marketing. Budgeting of the coffee house is also done
by cash flow and budget statement. In the ending of project break even analysis is done to
several situation of firm. Along with this it also discuss about regulation and legislation which
have implication on small scale organisations.
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REFERENCES
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Burns, P., 2016. Entrepreneurship and small business. Palgrave Macmillan Limited.
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projects in Western Cape (Doctoral dissertation, Cape Peninsula University of
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Drucker, P., 2012. The frontiers of management. Routledge.
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Online
Introduction to Break-even Analysis, 2015. [Online]. Available Through
<https://www.tutor2u.net/business/reference/operations-introduction-to-break-even-
analysis>
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