Break-Even Analysis: Strategic Financial Performance

This assignment requires applying break-even analysis to evaluate strategies aimed at improving an organization's financial performance and increasing profitability. You'll assess multiple strategies, such as business process reengineering, innovation in business models, competency management for change, systems thinking, entrepreneurship, and monkey management techniques.

Managing and Running a Small Business

Table of Contents
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
P 1 The main considerations a small business needs to address when planning and allocating
resources to achieve business objectives. ...................................................................................4
TASK 2............................................................................................................................................6
P2 Explaining and evaluating different procedures of customer relationship management for a
small business .............................................................................................................................6
P 3 Explaining the way small business can develop transnationally and determine the benefits
and drawbacks. ..........................................................................................................................7
TASK 3............................................................................................................................................9
P 4 Preparing a monthly cash flow forecast showing fixed and variable costs set against
income for a specific organisation. ...........................................................................................9
P 5 Explain how break- even analysis could be applied to an organisational situation. ..........10
P6 Interpretation of key financial statements for an enterprise in context of the way they
contribute to the management of business................................................................................11
TASK 4..........................................................................................................................................12
P 7 Key legislations and regulations that have implications on small businesses ..................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Small business enterprise are those which have few numbers of employees. These firms
are also recognised as privately owned corporations, or sole proprietor business units. Small
business enterprise generally have low revenue. These business units are recognised or
considered to be small in terms of size , scale of operations , business activities etc. In UK Small
medium enterprise are contributing a lot towards generation of employment as well as economic
development of nation. Managing the small organisation is considered to be as less difficult task
as compared to controlling or monitoring the operations of big companies. Whether its small or
giant business unit , an entrepreneur need to posses specialised skills , knowledge as well as core
competencies in order to manage business in systematic manner. An organisation which are
operating at small scale have high potential to foster growth.
The purpose of the project is to highlight the abilities or core competencies which are
required to be achieved by an entrepreneur for running and managing business. It also intends to
enable an individual to develop understanding about important aspects of running a small
business in Context of
TASK 1
P 1 The main considerations a small business needs to address when planning and allocating
resources to achieve business objectives.
Resource allocation is considered to be very much difficult as well as critical task
especially in small enterprise like Razzmatazz. An organisation is recognised as children's
theatre and drama company. Business entity have achieved leadership position in entertainment
industry. Resource allocation is also considered to be as important part in making plans for
business. It is required by manager in Razzmatazz company to formulate suitable strategies or
plans for allocating resources. As this will help management team in identifying the need for
material and resources for conducting several operations within an enterprise. It will also assist
manager in ensuring the effective as well as efficient utilisation of resources. There are various
types of resources which might be required for executing various functions within an
organisation such as assets, finance, employees, equipment, technology, machinery, land, labour,
expertise, time, information, equipments etc. It is very important for manager to include detail
information about resource requirements in business plan and to ensure that an organisation have

sufficient resources to increase their activities. There are several techniques which can be
adopted by the manager in Razzmatazz company for allocating resources these are:
Business budgeting- It is required by manager in an enterprise to prepare the special budget and
decide he right level of resourcing for each department. Manager in an organisation should
prioritise resources. It is very much crucial for management to ensure that funds are allocated in
such a way that all the business needs can be fulfilled as well as organisational objectives can be
achieved.
Determining the scope of business-Manager in an enterprise analyses the scope before
allocating the resources. Determining the scope of projects is considered to be an important
activity will assist an entrepreneur in identifying the several activities, and determining the
amount of resources which will be required for accomplishing organisational objectives.,
Forming a clear idea about the project scope assist an entrepreneur or manager in allocating
resources in effective manner. In context of Razzmatazz , business entity has scope to attract
customers of every group.
Identifying the resources which are required by an organisation -after analysing or
determining the project or business scope , an entrepreneur or manager in an enterprise get a
suitable guild lines which helps them in identifying the techniques which can be used for driving
firm towards accomplishment of objectives. Now , it is required by business owner to recognise
or develop the understanding about resources which are essentially required for establishing ,
managing and running a business in systematic as well as smooth way. In context of
Razzmatazz, an organisation needs to work on in bringing some new technologies and
equipments for the drama and theatre training sessions (Goksoy,Ozsoy and Vayvay,2012)
Evaluation of human resource- business persons or manager utilise an organizational chart
which is considered to be as an effective tool. As it helps in getting the idea about the workers
roles as well as responsibilities. Human resource allocation is a chart which helps management
team in identifying the person accountable for executing specific operation or activity within an
enterprise.
Prioritizing the task- As this activity will assist business person or management team in
identifying the important activity.

designing or formulation of resource allocation Plan- It is very much important for an
entrepreneur or manager to include detailed information about resources used in specific activity
or task.
communication objectives as well as coordination- Communicating the objectives as well as
coordination with team members helps in preventing the wastage of resources.
Business plan Razzmatazz company
It is required by management team in an enterprise to concentrate on new targets.
Presently business entity is targeting youngsters belonging to the age of 2 to 18 years. An
enterprise is required to established higher Objectives. It is required by an organisation to
develop innovative products with the support of technology and offer additional facilities to
customers. As this strategy will help in delivering high level of satisfaction to client (Giesen,
Riddleberger and Bell, 2010)
TASK 2
P2 Explaining and evaluating different procedures of customer relationship management for a
small business
Customer relationship management is defined as an approach which is implemented by
management team in an organisation for managing the interaction of company with customers.
The objective of customer relationship management is to help an enterprise in increasing sales
and building strong relationship with client. It also assists business entity in retaining profitable
customer for long time. Customer relationship management procedure assists business entity in
identifying as well as targeting the best customhouse also supports workers in analysing the
techniques which can be used by them for identifying the needs of customers. When an
organisation interacts with customers the procedures might involve internal as well as external
stakeholders using a variety of different methods (Eckerson,2010) There are six stages are in
involved in procedures such as:
Customer service-This process in an organisation is conducted by the employees works in front
office. These are the people who interact or communicate first with client. customer service is
considered to be as important activity which helps an enterprise in increasing sales. It also
enables business entity to sell products and services to customers.
Sales force automation-This process is conducted by the sales department in an organisation.
Employee in sales functional unit explores as well as captures several opportunities with existing

and new customers. There are some software or system such as CRM software enables
employees to record each interaction with customers. This procedures in conducted with the
intention to kept data which can be utilised in future for product planning.
Campaign-In this procedure , employees in sales department approach prospective customers in
order to gain feedback or idea which can be used for establishing new business. When planning
for organising campaign , manager in an enterprise target specific customer group on the basis of
set criterion (Achtenhagen, Melin and Naldi, 2013)
The procedures of the evaluation criteria for measuring CRM include:
Phase 1: Selecting the customer relation management vendors for evaluation- It is required by
manager in Razzmatazz company to develop understanding about the concept as well as
importance of customer relationship management. Management in a company required to
formulate suitable strategy and need to implement appropriate technology. As this tactics will
help firm in generating effective outcomes.
Phase 2:Choosing a list of selection and evaluation criteria -It is essential for manager to set clear
selection criterion. As this will help management in making suitable decision.
Phase 3:Providing score for each criteria -At this phase, manager is required to rate every vendor
for each criterion and prepare a score card.
Phase 4:Filling out a score card to receive a total score for each CRM vendor
Phase 5:Compare results and choose the vendor with the highest scores – Selecting the vendor
with the highest score (Crawford and Nahmias, 2010)
P 3 Explaining the way small business can develop transnationally and determine the benefits
and drawbacks.
A transnational business strategy includes the combination of worldwide configuration as
well as coordination of several business activities with local responsiveness. As per this strategy
an organisation can spilt its operations into several component globally. By adopting this strategy
an enterprise can have control on its each international operations. It will also help company in
entering as well as participating in global markets. Transnational business strategy will assist
business entity in developing additional core competencies which further help company in
gaining other value added advantages. This coordinated international business action is taken
under one differentiated business structure (Brown, 2013)

Licensing- This way of entry into global market include franchising. In licensing route, an
organisation has to pay money for utilising technology, brand name, expertise etc. It is
considered to be as appropriate way for those firm who desires to expand business operation at a
large scale.
Strategic alliance-In this method of entry two firm form professional relationship with each
other in international market. The benefit of this entry method is that an enterprise remain
independent and separate. The major challenge associated with this entry mode is that there high
chances of conflicts.
Joint venture- it is recognised as equity-based method for entering into international market .In
this ,method two companies collaborate with each other. The major advantage of this entry
method is that it provides business an ease to enter into global market and develop the
understanding about same.
Exporting- There are two approaches which can be used by Razzmatazz company these are
direct as well as indirect exporting. In direct exporting method , business entity makes
commitment to foreign market on its own behalf.
Global branding is considered to be useful technique which can be adopted by
management team in Razzmatazz company. As this strategy will help firm in achieving desired
outcome. It will also help firm in getting the brand recognition in international market.
By utilising the transnational business strategy Razzmatazz company can decentralize
their operations. The major advantages of transnational business strategy is that it helps business
entity in gaining the economic advantage.
Disadvantage or drawbacks of transnational business strategy is that a one-size-fits-all
approach does not work in all markets. The another drawback is that there is high chances of
operational as well as financial risk. If in case there is amendment in company or employment
legislation it might have significant effect on business plans , policies , procedures and
operations.
Stages model of internationalisation – This model is based on the assumption that business entity
with low market share knowledge about a specific foreign market prefer a low commitment in
this market. This hypothesis suggests that an organisation often select foreign markets based on
the psychic distance to that market (Gharajedaghi, 2011)

TASK 3
P 4 Preparing a monthly cash flow forecast showing fixed and variable costs set against income
for a specific organisation.
A cash flow forecast is defined as the document which helps management in managing
as well as controlling the flow of information. This document also includes the detail about
incomes and expenses during specific financial year. It assists an entrepreneur in determining the
need of funds in the future as well as recognising the sources from where financial resources can
be obtained (WALL, CODAY and MITCHELL, 2014)
Itemised monthly cash flow statement
Particula
rs Jan Feb March April May June July
Augus
t
Septe
mber
Octob
er
Novem
ber
Decemb
er
Income
Sale of
fixed
asset 20000
2100
0 22050
23152
.5
2431
0
2552
6
2680
2 28142 29549 31027 32578 34207
Revenue 3000 3150 3308 3473 3647 3829 4020 4221 4432 4654 4887 5131
Other
income 0 0 0 0 0 0 0 0 0 0 0 0
Total
income 23000
2415
0 25358
26625
.5
2795
7
2935
5
3082
2 32363 33981 35681 37465 39338
0
Expense
s 0
Direct
expenses 0

Inventor
y 2000 2100 2205 2315 2431 2553 2680 2814 2955 3103 3258 3421
Direct
labour 1000 1050 1103 1158 1216 1276 1340 1407 1477 1551 1629 1710
Fixed
assets 1800 1890 1985 2084 2188 2297 2412 2533 2659 2792 2932 3079
Overhea
ds 0
Worker
costs 1000 1050 1103 1158 1216 1276 1340 1407 1477 1551 1629 1710
Insuranc
e 100 105 110 116 122 128 134 141 148 155 163 171
Premises 3000 3150 3308 3473 3647 3829 4020 4221 4432 4654 4887 5131
Power
expendit
ures 2100 2205 2315 2431 2553 2680 2814 2955 3103 3258 3421 3592
Telepho
ne 1000 1050 1103 1158 1216 1276 1340 1407 1477 1551 1629 1710
Postage
expenses 500 525 551 579 608 638 670 704 739 776 814 855
Bank
charges 100 105 110 116 122 128 134 141 148 155 163 171
Machine
ry 1600 1680 1764 1852 1945 2042 2144 2251 2364 2482 2606 2737
Motor
expendit
ure 600 630 662 695 729 766 804 844 886 931 977 1026

Legal
fees 2000 2100 2205 2315 2431 2553 2680 2814 2955 3103 3258 3421
16800
1764
0 18524 19450
2042
4
2144
2
2251
2 23639 24820 26062 27366 28734
B/F 0 6200 12710 19546
2672
3
3425
9
4217
2 50480 59204 68365 77983 88082
Income 23000
2415
0 25358 26625
2795
7
2935
4
3082
2 32363 33981 35681 37465 39338
Expense
s 16800
1764
0 18522 19448
2042
1
2144
2
2251
4 23639 24821 26062 27365 28734
23000
3035
0 38068 46171
5467
9
6361
3
7299
4 82844 93186
10404
5 115448 127420
B/C 6200
1271
0 19546 26723
3425
9
4217
1
5048
0 59204 68364 77984 88083 98686
Interpretation : After analysing the financial statement it has been analysed that there has been
tremendous increase in sale of an enterprise during the month oct. , nov. and dec. It has been
found that the sales in of the organisation in nov. month was 37645 which has increased to
39338 in dec. But it has also been found that there has been workers which are required to be
controlled by an enterprise as soon as possible as it can have negative effect on the financial
performance of company.
Liquidity ratio 2015 2016
Current ratio
Current assets/Current
liabilities
Current assets 111177 181521

Current liabilities 51862 117089
2.14 1.55
Interpretation : It has been analysed from the above that during the year 2015, The total assets of
an organisation is 11117 which has increased to 18152.
The other thing which has been analysed that the current liabilities of enterprise during
2014 was 51862 which has increased to 117089, 1 which are required to be managed by
company as if it is not controlled that an organisation might have to face great trouble.

P 5 Explain how break- even analysis could be applied to an organisational situation.
Break even analysis is considered to be as important tools which supports manager in
formulating appropriate as well as accurate financial planning. This tool or technique can be
used for examining the short run relationship between changes. Break even analysis is the
analysis of the level of sales at which an organisation make zero profit. It is also recognised as a
point of production where revenue earned by business entity is equal to the total costs of

producing goods or services. Break even analysis as a tool allows management to identify the
suitable ways for increasing profitability (BURNS, 2011) By applying the break analysis the
manager in Razzmatazz company can make major decisions related to safety margin, volume
required to achieve desired target, expand production , purchase and sale decision etc. With the
help of this tool manager in an organisation can easily identify the minimum quantity of sales Up
to which business entity can neglect loss in production of products (Dhaliwal, Li, Tsang and
Yang, 2011)
Fixed cost
Month rent 800/year 100 dollar
insurance 66 dollar
Gross monthly fixed cost 166 dollar
variable cost
Labour 5 $
material 4$
Gross monthly variable cost 9 $
Selling price 15$
Break event point = fixed cost divided by ( selling cost -variable cost)
166$ (15$- 9$) =27 $
An organisation can sell services at 50 $
Interpretation :It has been analysed from the above that the fixed cost of company is too high.
Therefore an enterprise in order to maintain its financial performance is required to maintain it
financial performance required take high initiatives for controlling financial performance.
Business entity can sell its services at 50$.

P6 Interpretation of key financial statements for an enterprise in context of the way they
contribute to the management of business
Manager in an organisation is required to implement accounting software or system. As
this strategy will assist business entity in monitoring as well as regulating cash transactions. It
has been analysed from the cash flow statement that business entity is taking high initiatives for
reducing the variables expenses. It is required by Razzmatazz company to employ the advance
technology at workplace. This strategy will assist organisation in reducing the cost of
production .Another technique is it is required by manager in an enterprise to prepare budget for
each department or activity. This technique will help management in ensuring the effective as
well as efficient utilisation of financial resources.
It is needed by management team in an organisation to make plan as well as facilitate
transactions as per the forecast cash flow statement. As this will help business entity in
increasing profitability as well as improving financial performance (BLANCHARD, ONCKEN
and BURROWS,2011)
` It has been interpreted from the above cash flow statement that business entity expected
to generate sales of 2.72 percent during the month of may 2018. Information in table represents
that the firm has high potential to increase sales and profits. An organisation can achieve
business objectives by concentrating on managing as well as controlling the cash flows.

TASK 4
P 7 Key legislations and regulations that have implications on small businesses
It is very much crucial for an organisation to comply with all the norms as well as
regulation of the country in which an enterprise is operating business. Failure to comply with the
legislations can have negative impact on the sustainability of firm. Changes in Norms have direct
as well as significant effect on the business operations. Some laws which are required to be
followed are:
Company law-This is considered to be the important legislation which every organisation
operating business in UK are required to follow. Company law is applicable when forming ,
establishing or running business.
labour law- This regulation is applicable to the way employees are treated by employer at
workplace. It also includes other acts related to minimum wage , Migrant and Seasonal
Agricultural Worker Protection Act etc.
Reporting law-It regulates the way management team must report their finances to investors and
the government.
Tax law -This legislation governs the way an organisation report its financial status to the
government. It also includes different methods that finance manager in an enterprise must utilise
when reporting income and expenses.
Employment law- It encompasses of all areas of the relationship between employer and
employee.
Occupational Health and Safety-This law is mainly concerned with health and safety of
employees or workers at workplace. Health and safety act has established wide range of duties
that is essential for the employer to perform. The law states that it is the role of employer to
provide healthy and safe working environment to employees (Journal of Small Business
Management,2017)
CONCLUSION
It has been concluded from the report that managing a business is very difficult task.In
project there are several factors are highlighted which require to be considered when planning
and allocating resources to achieve business objectives. It has been concluded from the
assignment that resource allocation is considered to be as very much important as well as critical
task. Manager in an organisation need to make appropriate plan for allocating resources. Study

has successfully explained different processes of customer relationship management especially
for small enterprises. It has demonstrated the way break- even analysis could be applied to an
organisational situation.
Several strategies has been suggested to an enterprise which will herlp firm in improving
financial performance and increasing profitability.
REFERENCES
Books and journal: