#Immediacy on speech making

Alan and Ted had rent and rates to pay regardless of how ...

Alan and Ted had rent and rates to pay regardless of how much work they did while their variable costs' mostly spare parts were increased only when work was done. In addition to the fixed and variable costs, allowance must also be made for a number of other elements in the income/expenditure equation, and these should be built into the cash-flow forecast: Maintenance Roofs leak, machines break down, rust forms on iron tools, floors wear out, and paint will peel off the window frames Contingencies A fall-back position is needed to guard against the sudden bankruptcy of a customer, a rail strike which forces the hire of an extra lorry, or a dramatic increase in interest rates which may add to out-goings Replacements One day the milling machine must be replaced, the old van traded in, or a new fork-lift obtained for the warehouse Keeping track of the fixed costs Whether or not business is booming or slack, whether or not debtors are paying up, the fixed costs will always be with us. It is easy to overlook them in the day-to-day rush, and a useful control is to keep a fixed-cost budget, regularly checked and updated, which can be set alongside the cash-flow forecast to ensure that the fixed costs can be met on time either from income or from resources. Making a comparison It is also highly desirable to know how well you are doing in comparison with other ways of making a living and other companies in the same business.

It is rarely possible to obtain honestly, that is the performance figures of a competitor, but you can ask your accountant if, in his experience you are doing as well as you should. No respectable accountant will tell you what his other clients are achieving, but he will know whether you are doing as well. There are other more formal sources of comparison which may be tried, including; Published accounts of limited companies Such accounts must be treated with some caution as they may have been 'dressed up' for the occasion. It is worth looking at, say, three or four companies in the same queue of business and taking an average of their profit/capital ratios; Stockbrokers Normally only available to their private clients, some stockbrokers produce reports on companies in various businesses with ratios which can be of value for comparison; Trade associations It is probably necessary to be a member to obtain the information; British Institute of Management The BIM publishes Inter-firm Comparison' study results which are available at a modest price to non-members.

Otherwise there is a standard yardstick which can be tried: Profit before tax as a percentage of capital employed. N.B. Capital should include fixed assets at present-day value, share capital, reserves, and any money borrowed from the bank or elsewhere. The result should be at least as good as the rate of return which can be obtained on a long-dated government security.

If it is not, you will know that action needs to be taken not excluding selling up and investing the proceeds in government securities Finally, making comparisons of your own results over the years can be revealing.

The first year is almost bound to be unexciting at least in profit terms but a comparison between, say, years 2 and 3 using the profit/ capital ratio is worthwhile. If the ratio has become less favourable in year 3, then the causes should be clearly identified and dealt with A more favourable result in year 3 should also be closely scrutinized It could point you in the best direction for year 4. What do we have to do to make a profit? Any number of businesses have failed because, despite being very active and despite much hard work, the 'break-even point' has never been calculated.

The break-even point can not only avoid the problem of flogging a dead horse, but can also be a valuable tool in setting prices, evaluating machinery, and providing a clear target to go for. The technique works using the fixed and variable costs which have already been discussed. Let us examine the technique with a very simple example: Bob is thinking of renting a portable machine which will on the spot make souvenir ashtrays which he believes can be sold at seaside resorts, at exhibitions, at football matches, and anywhere else that the public can be found.

The machine can be set to print an appropriate slogan on each ...

The machine can be set to print an appropriate slogan on each ashtray and, if required, the name of the purchaser.

Bob believes that a mobile phone cover marked, say,... read more

Having costed out both scenarios, the result may suggest that even in ...

Having costed out both scenarios, the result may suggest that even in the worst circumstances a decent profit is on th... read more

Clearly, if any of the credit business can be replaced by cash ...

Clearly, if any of the credit business can be replaced by cash sales then an improvement will be achieved.

One way to do this is to look for means of 'vertical integration'. This is