Financial Aspects, Budgeting, and Pricing for New Businesses

This assignment delves into the critical financial aspects of launching and managing a small business. It begins by emphasizing the importance of financial planning, particularly for new ventures. The document explores the necessity of a personal survival budget to ensure the owner's financial stability and compares it with cash-flow forecasts. It then examines key cost considerations, including premises costs, equipment and supply expenses, and the impact of employing staff, including minimum wage and National Insurance contributions. Furthermore, the assignment analyzes various pricing strategies, such as cost-plus, penetration, premium, price skimming, economy, psychological, promotional, and value pricing, providing a comprehensive understanding of how to set prices effectively. Overall, the assignment offers a practical guide to the financial challenges and strategies essential for small business success.

FINANCIAL ASPECTS
STARTING A SMALL BUSINESS

WHAT IS FINANCIAL ASPECT IN TERMS OF A BUSINESS?
• Financial Aspects are financial tools that can help to bui
up and planning financial Activities in the business.
• A new business is more likely to fail if it does not
place good financial planning.
• key consideration of any new business owner will be to k
the start-up costs as low as possible.

PERSONAL SURVIVAL BUDGET
• It is a estimated forecasted budget for the current pe
time.
• Start-up businesses will need a personal survival budg
ensure that the owner has enough money to live whilst
building and growing the business.
• This personal survival budget should be compared with
cash-flow forecast to give an indication as to whether
business will generate enough income for financial surviva

COST OF PREMISES
• Choosing appropriate premises is crucial to the success of
business as is the cost of the premises.
• Many business owners decide to rent their premises, wh
renting or leasing they need to check that there are nohidde
charges(e.g. service charges) that have not been budgeted for
• It is a good idea to set a monthly/annual premises budget.
• it is always worth attempting to balance the financial
constraints of the business premises against that of the ac
business requirements.

COST OF EQUIPMENT AND SUPPLIES
• Any equipment or supplies that a business needs
purchasewill typically end up being a substantial
financial cost and must be decided upon before puttin
together a cash-flow forecast.

EMPLOYING STAFF
• One of the major expenses incurred by any business is
the employment of staff.
• The law requires that businessescomply with the
current minimum wage legislation and make National
Insurance contributions for each employee.

PRICING POLICY
• The policy of a company or business that guides
the price setting of its goodsand services that are
offered for sale.
• Products or services need to be priced correctly or the
business may not succeed.

TYPES OF PRICING
Cost-plus pricing - thebusinessadds up the cost of the item with the
overheads, then marks up the product/service for the profit.
Penetration pricing - the business charges low prices in order to o
market share. Once it has achievedan acceptableshare of the market, it
increases the p rice .
Premium pricing - the business will price unique products/services
This strategy is used when the business has a significant competitive advan
Price skimming - this method is used by businesses that have a competiti
advantage which is not sustainable.
• The high price attracts new competitors into the market , which re
prices being lowered due to increased supply.

Economy pricing - a business sells its products/ services at a low price.
All business activities are kept at a minimum, including marketingan
manufacturing. Examples include supermarket own brands.
Psychological pricing - this strategy is used by businesses that wa
consumer to believe they are getting a product/service much cheape
actually is.
Promotional pricing - this method is used when a product/service has be
on the market for some time and demand is beginning to fall. Example buy
and get one free.
Value pricing - this approach is used when external factors, such as incre
competition in the market or a recession, force a business to provid
products and services in order to retain sales