Page 335 - Business Principles and Management

Chapter
13 Planning and Organizing

13.1 The Planning Function

13.2 Using Planning Tools

13.3 The Organizing Function
13.4 Developing Effective Organizations

RE ALITY CHECK

Not So Fast!

ldron Huntley was excited after attending a seminar titled “Moving
Your Business to the Internet.” He felt he had discovered a whole
Enew idea for expanding his 10-year-old catering business.
People told Eldron that he offered menu items they could not find any-
where else. In addition, they could always count on the quality and great
taste of the meals. Customers who had moved from the area frequently
called his business to purchase their favorite meals. Eldron had been look-
ing for ways to serve those customers and others like them.
At the seminar Eldron attended, the speaker explained the growth of Inter-
net commerce and suggested that any business with a successful product
should consider using the Internet to expand its market. That was just the
idea Eldron was looking for. Most of his out-of-town business currently
came from the word-of-mouth recommendations of satisfied customers.
The Internet provided a way to affordably get his business name and menu
to people all over the country.
Eldron estimated it would take about $80,000 for the computer hardware
and software for reliable Internet service; an additional $200,000 to expand
his food preparation and shipping facilities; and probably $50,000 to pay the
expenses of additional personnel for several months until adequate sales were
generated to meet the payroll costs. He anticipated the new business would
ultimately result in a nice profit. He scheduled a meeting with his banker to
request a loan for the expansion.
The banker was not quite as excited as Eldron. She explained, “Every-
one seems to want to use the Internet for their business. I agree it has a lot
of potential, but there are no guarantees you’ll be successful. Before I can
loan you the money you want, I’ll need to see a business plan that demon-
strates how you’ll repay the loan. Who will be your customers and com-
petitors? How much will each customer buy and what will they be willing
to pay? Will this new business affect your ability to serve your current cus-
tomers? What will it cost to ship the food to customers so that it arrives in
perfect condition? When do you expect the new part of your business to
start making a profit?” Eldron recognized that the answers to those ques-
tions were important but had not thought about preparing a written plan.
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