Question

Question: Critically discuss the role of the profit plan in implementing strategy. (300 words)

Answer 1

The role of profit plan in implementing strategy is very high. It helps in business improvement therby affecting its profitability. It identifies the strengths and weakness of an organization. It helps in setting a better future for the organization. It helps in improving the company's financial performance. Without a profit plan, the organization may land in financial loss. It helps in expand the regions where the product is sold. It helps to lower the financial risks. It also helps in increasing the capacity of the business. Key to success of profit planning lies in the competence of the management to plan activities of the enterprise. The management must have absolute confidence in its ability to establish realistic objectives and to devise effective means to attain these objectives for the enterprise.Flexible profit planning will enable the management to size upon favourable opportunities even though they are not covered by the budget.profit planning is a vital part of any business plan structure for a small or medium business.The profit plan serves as a basis for financial planning. With the information developed from the profit plan, you can anticipate the need for increased investment in receivables, inventory, or facilities as well as any need for additional capital.

A realistic profit plan, supported by a description of specific steps proposed to achieve sales and profit objectives, will inspire the confidence of potential lenders and investors. This confidence will not only influence their judgment of you as a business manager, but also the prospects of your business' success and its worthiness for a loan or an investment.

I gives  planning directives for preparing detailed operating plans.I helps in maintaining the liquidity. The business plan includes a forecast that tries to anticipate the business growth and determine the revenue that could be generated in that particular year. Here’s a look at the basics of profit planning for your business: