Business Finance for Managers: A Detailed Business Plan for PC Manufacturing

This report provides a detailed business plan for PC manufacturing, including risks, potential funding sources, fixed and variable costs, profit forecast, cash flow projection, break-even point, margin of safety, and key performance indicators.

Business Finance for
Managers

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY ..................................................................................................................................3
A ) A detailed summary of the business idea including the risks that the business will face in
its working and the potential sources of funding of the business...............................................3
B ) Discussion on the key fixed and variable costs of the business............................................5
C ) Projected profit forecast for the first year.............................................................................6
D ) A Projected cash flow for the first year................................................................................6
E ) Calculation of Break-even point and Margin of safety.........................................................7
F ) Discuss the key performance indicators (KPIs) to check the progress of the business.........7
G ) Recommendations based on the above report.......................................................................8
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Business finance refers to the monetary funds that are available for the entrepreneur to fund the
business. These are investments done in the business by the owners of the business. Business
plan helps the entrepreneurs to have a detailed insight on the resources that are needed by them
to start a business. Business plan refers to a written detailed plan about the business that the
owners are planning to start. This plan generally contains the long term visions, missions,
strategies and aims of the business that would help them to achieve the predetermined objectives
(Peters-Destéract, 2020). Business strategies is usually made for 3 to 5 years. This plan also
includes all the necessities regarding the management staff, sales strategy and operating and
economic plan. This report talks about the business plan that the owners are planning to start up.
The business basically deals in manufacturing of PCs. The report highlights the costs, projected
profit and loss statement, break-even point and other necessities that the owners need to consider
before starting the business.
MAIN BODY
A ) A detailed summary of the business idea including the risks that the business will face in its
working and the potential sources of funding of the business.
Business Idea: The business idea followed in this report will be discussed below. In the world of
growing technology, people who are tech-savvy are gaining a lot better profits than those who
follow the traditional systems. Technological advancements are present in almost every sector.
Keeping that in mind the manufacturing of PCs is potentially a beneficial business to start.
Personal computer is a type of inexpensive computer which is designed in a way for an
individual users (Keshishian, 2017). PCs mainly helps the individuals or businesses in managing
their tasks. They have become an important part of the society as people are dependent on them
for different activities like business, entertainment or education. PCs have seen a really high
demand in the year of pandemic as almost all the learning and working have gone indoors from
the home. Providing advanced technologies at a generally low costs would come off as
tremendously profitable for the venture. The name for the business chosen by the management is
“Decked up PC Manufacturing”.
Conducting Market research: Analysing the market and the researches done in the field, the
analysts claim that the trends and demands shows a positive trend and in the coming years the

need for technology and PCs will be going up. The emergence of cloud computing platforms and
other needs have made the needs for PC permanent in not just the private sector but in public
sector as well. Artificial Intelligence is another emerging technology which is also contributing
to the trend.
Location: The owners now needs to decide where the company will operate and manufacture the
products. The PC production unit is profitable to be established in an industrial area as the land is
provided at a cheaper rate and from there the company and produce and assemble the PCs and
then transport them to the local markets (Karrar, 2020). For this the Industrial park situated in
Beckton, London can be taken up as the production area and London city centre as the potential
market. The industry at Beckton offers 10-20000 square feet of area, enough for setting up a
manufacturing unit.
Competitors: there are mainly two local dealers in PC equipments and software services. These
are Novatech and Chillblast but the products of these firms are not advancing with the
technological up-gradation happening in the market. This new business unit will provide more
better and advanced products.
Customers: The major marketplace the business is going to operate in is the UK. UK is one of
the developed economies with wealthy residents having a large population of working class and
students. The goal of the business is to provide these people with better quality PCs which would
assist them in learning and performing their day to day tasks (Barrow, Barrow, and Brown,
2018).
Why customers prefer these products and services: The customers of the business will prefer
buying from the business because of its innovative products, technological advancements and its
after sale services. The marketing strategy of the business is made in such a way that it caters the
needs and demands of the customers and influence more customers in buying the products. The
main focus is given to the transportation of products to customers and after sales services like
managing customer grievances etc.
The Major risks that can be faced by the company while manufacturing and selling PCs are:
Financial risk: The main risk that could be faced by a new manufacturing unit is the risk of
inflow of funds. The business can face a slowdown in the market if the necessary funds are not
supplied in right quantity and at the right time. The financial risk also arises if the resources of

the funds are not used optimally in the working. The business have to be economical with the
resources and the financial funds that have been extended to them all the time.
Mismanagement of resources: New business units have the ability to not use the resources at
their optimal efficiency. This reduces the profitability of the businesses and also deceases the
proficiency of resources (Temesgen, and Assefa, 2017). This is known as mismanagement of the
resources. Manufacturing industry have to make sure that they are using the resources with
utmost efficiency and not facing any wastages of these resources.
Location and leasing agreement: Another risk arises when the company has to set up the
industry for the production of different computer equipments to be used in assembling in the
computer. The business will go for lease option as the business does not want to purchase the
land and machinery for the production in the first year of starting the business. They might face
risks in lease and agreement related issues and with the danger of using the machinery which
were leased out but others. To safeguard this the business will take up necessary steps like
learning how to operate the machinery and saving the important dates of payment of lease
amount to the lessor.
B ) Discussion on the key fixed and variable costs of the business
After making a detailed plan, the first thing to decide is what are the costs that would be faced by
the entrepreneur. Manufacturing PCs require large funds of establishing the business as most of
the funds would be used in purchasing the machinery to produce. The main part of the funds
would be required to assign to the research and development team as extensive research is
required to be taken up due to changing technology in the field of software and cloud computing.
The two main costs that would be faced by the business are discussed below (Altobella, 2018).
Fixed cost: These costs make up the majority of costs that are faced by any business. These costs
refers to those which the company incur even if they are not producing any goods. These costs
include the rent, employee expenditure, monthly instalments, taxes and insurance. PCs
manufacturing unit have to deal with all of these costs even if the business is not producing.
Variable cost: These costs refers to the costs which are related to production. The company
incur these costs while producing the desired commodity. These costs changes with the change
in the level of production in the business. In the case of PC manufacturing company the firm
needs to address the costs related to the mechanics, software production, research and
development, collection and transportation.

C ) Projected profit forecast for the first year
Budgeted Profit and Loss Statement ( for the first year of operation)
Particulars Amount Amount
Sales 400000
Less: Cost of Sales 114680
Gross Profit 285320
Operating Expenses:
Salaries 50000
Rent 11500
Freight & Postage 5000
Stationary 4000
Promotion & Advertisement 8529
Legal 6000
Transport 5960
Vehicles 2956
Insurance 9800
Maintenance 14000
Loan Repayment 7000
Interest on Loan 700
Miscellaneous 3100 128545
Net Profit for the year 156775
D ) A Projected cash flow for the first year
Budgeted Cash flow (for year 1)
Particulars Amount
Cash flow from Operating Activities
Cash Sales 400000
Less: Operating Expenses 128545
Salaries 50000
Rent 11500
Freight & Postage 5000
Stationary 4000
Promotion & Advertisement 8529
Legal 6000
Transport 5960
Vehicles 2956
Insurance 9800
Maintenance 14000
Loan Repayment 7000
Interest on Loan 700

Miscellaneous 3100
Net cash from Operations 271455
Cash Flow from Investing Activities
Purchase of Machinery -135000
Net cash from investing activities -135000
Cash Flow from Financing Activities
Capital Investment -40000
Net Cash Flow from Investing Activities -40000
Net Cash flow 96455
E ) Calculation of Break-even point and Margin of safety
Break-even point refers to that point where the income and expenses are equal for the business
and there is no profit-no loss situation. Calculation is as under:
Break even point = Fixed costs / contribution per unit
= 96485 / 4599.25 = 20.9 or 21 Ut
Contribution margin = price of product – variable cost
= 5000 – ( 32060 / 80 ) = 4599.25
Margin of safety= (Current Sales – Break even sales) / Current Sales *100
= ( 80 – 21) / 80 * 100 = 73.75%
F ) Discuss the key performance indicators (KPIs) to check the progress of the business
Key performance indicators refers to an indicator or a metric which measures the working of a
business and evaluates the performance over time. The manufacturing take use of these
indicators to monitor and analyse its operations and compare the efficiency to that of the
competitors (Mahamad Saad, 2019). Following are the KPI that can be used by the company to
measure its performance.
 Throughput: This is one of the most important KPI used in the manufacturing industry. It
helps the business measure the production capacity of the machinery, staff and also the
amount of goods that can be produced over a period of time. '
It is measured using the following:
Throughput = quantity of units produced / time ( wither hourly or daily)
PC manufacturing can use this as a good tool to give insight about the
 Cycle time: It refers to the average time taken by the industry to produce a product. This
indicator can be used by the company to measure the time taken to produce a finished

product, a part of product or the time taken to deliver the product to the end user (Klante,
and Thiex, 2020). It can analyse the overall efficiency of business. It can be measured
using the following:
Cycle time = process end time – process start time
G ) Recommendations based on the above report.
It can be recommended from the above report that the projected budget of the business is overall
good. The company is focusing on earning profit starting from the first year. The main focus of
the business owners should be on the research and development as the company is working in an
industry which is highly volatile market where the technological advances can cater the business
or create a potential threat to the businesses.
CONCLUSION
From the above mentioned report it can be concluded that business plan is an important tool for
managers to handle the tasks required to start a business more efficiently. The budgeted cash
flow and statement of profits shows that the business have a bright future if the business works
efficiently. The report ends with a recommendations for the business owners that would help the
business in understanding the need of research and development.

REFERENCES
Books and Journals
Klante, M. and Thiex, M.A., 2020. The Role of Business Plan Competitions and Start-up
Success Drivers in New Venture Development.
Mahamad Saad, M.F., 2019. Faculty Business And Management Fundamentals of
Entrepreneurship Topic: Business Plan (BP).
Altobella, G.J., 2018. You’ve Got Skills—to Write a Business Plan: If you can execute a
treatment plan, you can also craft (and tweak) a business plan for your practice. The
ASHA Leader. 23(1). pp.40-41.
Temesgen, K. and Assefa, R., 2017. Feasibility studies on grape production and business plan
development in Axum, Ethiopia. Vegetos. 30(1). pp.92-98.
Barrow, C., Barrow, P. and Brown, R., 2018. The Business Plan Workbook: A Step-by-step
Guide to Creating and Developing a Successful Business. Kogan Page Publishers.
Karrar, H.H., 2020. Business plan.
Keshishian, S., 2017. Microbrewery Business Plan (Doctoral dissertation, California State
University, Northridge).
Peters-Destéract, L.C.M., 2020. Innovative business plan for a brunch restaurant in Toulouse,
France (Doctoral dissertation).