2.3. Company & Management

Definition and Introduction

The objective of strategic corporate planning is the effectiveness of a company. In order to make the right decisions, the management of a company must obtain the relevant information, process it and decide. The company must develop, design, produce, procure, store, market and finally sell the services to be sold. The enterprise must be designed as an efficient and effective organisation. The value creation process is to be described.

Corporate governance is of crucial importance for the provision of services. Not only the legal form and ownership are important, the employees with their qualifications and competences are just as decisive. The organisation of the business helps to determine whether the work processes run smoothly and efficiently. The entrepreneur himself must set the goals for his enterprise. A roadmap (milestones) for the implementation of the business idea must be provided in the management process. Managing means leading people in a business system the sense of an organised value chain in a goal-oriented way.

The production of services must be planned in such a way that costs are as low as possible (cost minimisation) and profit is as high as possible (profit maximisation). For the entrepreneur, the optimal utilisation of all resources presents itself as the central challenge for management. The coordination of work processes and time schedules is a critical success factor in many companies.

2.3.1. Legal Forms and Ownership

When founding a company, the company form must be determined. This is done with the definition of the legal form. It defines the framework conditions for the enterprise. The entrepreneur is free to choose the legal form. The legal form can be changed as the enterprise develops if this becomes necessary.

A basic distinction must be made between the "partnership" and the "corporation". It is typical for partnerships that the owner or owners of the company are personally liable with their assets. corporations that the partners or owners are only liable with the share capital of the company.

The legal form determines the ownership structure. When founding a company, it is advisable to check carefully which form is the right one and which formal requirements must be observed. Liability plays a role here. There are differences in the costs of formation, e.g., articles of association with notary, as well as in accounting obligations, e.g., balance sheet with annual accounts in accordance with tax laws. A decisive factor for the legal form is always the question of the equity and debt capital that a company needs. If investors or banks are involved, the question of participation and control rights arises. The corresponding formal requirements and laws sometimes differ greatly in individual states and must be considered individually.

2.3.2. Business system, organisation chart, corporate goals

Managing a company means running a business with structural and procedural organisation. In order to successfully organise a business idea in competition, a business system must be developed. The business system model describes the main activities of the enterprise in its structural composition. It is about the value chain of the enterprise. The way of producing services, the sequence of work processes, the rational design of the business organisation including payment and personnel management must be determined.

Note: Every company needs a specific business system. The value creation process for a start-up is structured differently than that for a medium-sized production company or that for a trading or service company.

Management and organisation chart

With the decision of the ownership structure, the management of the enterprise is defined. With the determination of the process flow, the organisation of the employees based on the division of labour and the responsibilities are to be determined. In the case of partnerships, the owner is the decision-maker and the managing director at the same time. He can also appoint a third party to manage the enterprise.

In corporations, the ownership and management of a company are usually legally separate. In a corporation, management is the responsibility of one or more managing directors or a board of directors. Management is responsible to the owners for the overall running, including profit-making, of a business. Managers act on behalf of the owners like entrepreneurs.

company structure is usually represented in an organisation chart This defines the persons with their functions, tasks, and responsibilities. There are different forms of organigrams. An example of a staff line function is shown:

Corporate goals

One of the basic operational decisions is that the entrepreneur must define the goals for his business. The business goals are determined by the founders and investors. With the formulation of goals, the strategic orientation is formulated as well as the operative actions in the company.

The corporate strategy is the definition of the entrepreneurial intention, where and how the company wants to stand in the market in the future (3 to 5 years)

A distinction can be made between long-term and short-term corporate goals. Strategic goals are mostly long-term. In the operational area, the short-term goal description is helpful.

objective can be subdivided into overall, intermediate objectives and sub-objectives as well as formal and factual objectives.

The formal objectives include the definition of entrepreneurial success This is measured in terms of turnover, profit, and liquidity targets. The material objectives provision of services in terms of type, quantity, quality, place, and time

The business objectives must be formulated in a business plan in such a way that they are measurable and thus verifiable. This means that they must be operationalised.

The top priority in a business plan is the annual turnover and profit targets. These are calculated concretely with the sales and turnover forecast. The targets are to be determined for the first three years. They should be oriented towards growth. The turnover and profit targets must be justified. They have strategic significance for the company.

Liquidity planning is existential for the company. The liquidity targets are to be defined as corporate goals. The amount of liquidity is determined in the liquidity calculation.

The material goals include quantitative and qualitative goals for the production of goods and services. Quantity to be produced, quality, continuous performance improvement, customer orientation, the conquest of regional markets, the acquisition of new target groups, the completion of a significant project, the improvement of employee motivation or a new Internet presence If a new product is to be introduced to the market or the price structure is to be changed, intensive preparations are required.

However, the definition of the goals in the business plan alone is not sufficient. The desired business objectives must be justified.

Defining turnover and profit targets is particularly difficult for start-ups because they do not yet have sufficient experience with their businesses. One must be warned against "high" profit expectations. High is a relative term, and it is open to interpretation. In reality, many companies make a few percentage points of profit on turnover (e.g., 2 % - 8 %). In a few cases, more than 10 % or even 20 % profit on turnover is achieved.

In the first months or even up to two years, company targets can also define losses from turnover. The turnover targets are determined with the help of the sales and turnover forecast. The profit/loss targets are determined with the P&L statement. Commercially sound planning is the basis for a successful business plan.

When defining long-term corporate goals perspective is important If you want to become the market leader and challenge the market leader, you will only achieve your goal in differentiated process steps and corporate goals. The goals must correspond to the development status of the company, then they have a high plausibility.

2.3.3. Personnel Planning

The successful development of a company needs efficient and motivated employees. Human resource planning must define with which specialists and managers the business idea is to be implemented. In the case of a start-up, the founder will often be the only employee and managing director. In the case of a small or medium-sized enterprise, systematic human resource planning is necessary, especially when the company is growing in the market and can hire new employees.

The business plan should show which skilled workers and managers are needed to provide the services. Job descriptions can help to characterise the task profile. This can also be used to decide how the employment contract will be structured and how to ensure optimal utilisation of the business organisation.

Mistakes are often made in human resource planning. They start with misjudging the importance of staff.

The right structure of the staff composition is decisive for the success of the service provision. Every company needs certain employees:

• at different levels of the company hierarchy (e.g., management, department, group, processing, production) - managers,
• with different professional and formal qualifications (e.g., vocational training, academic education and training, experience abroad, semi-skilled work, etc.) - skilled workers, unskilled workers,
• with different competences (e.g., with direct customer contact, with personnel responsibility, with representation duties). Especiallyto customer orientation, personal and social competences

From a business point of view, hiring an employee is an investment in the company's know-how. In this sense, investments are not only made in tangible assets or machines, but also in equipping a workplace. The expansion of workplaces costs money and is an investment. It is indispensable to build up a company.

Operational investments in machinery or equipment can turn out to be bad investments without suitable employees who can use them effectively.

2.3.4. Personnel costs

From an entrepreneur's point of view personnel costs not only consist of wage and salary costs They also include ancillary personnel costs in the form of the employer's contribution to social security. They also include the costs of setting up and maintaining the workplace. Depending on the basis of calculation in a company, these are recorded separately or included in the overhead costs. When financing start-ups, particular attention must be paid to identifying and financing investment costs for equipping the workplaces.

When determining remuneration, several operational and personal criteria must be taken into account. When setting up a company, regulations that are customary in the sector, collective agreements or local regulations should be taken into account in particular in order to be able to use competitive advantages.

• Industry is the part of an economic sector that has developed special "rules of the game" in business transactions For example, the following can be distinguished: the automobile industry and within it the car dealers, the telecommunications industry and within it the large telecommunications providers, the telecom retailers, etc., the construction industry and within it the road builders, the building constructors, the construction companies that only build commercial real estate or only residential buildings.
• Collective agreements are negotiated between organised workers (trade unions) and organised employers (employers' associations) They usually apply only to their members. If more than 50% of the member companies and members of an industry are organised, collective agreements can be declared generally binding by government decree. They then apply to all workers in an industry and must be respected.
• Local regional differences and particularities in the market Different salaries are paid in metropolises, small towns or structurally weak areas. Purchasing power also varies in the regions.

In order to keep up with national and international competition in terms of personnel costs, every entrepreneur must seriously consider joining collective bargaining arrangements. Negotiating individual salaries at company level can bring cost advantages.

When calculating wages, the hourly wage is usually set as the basis of remuneration, for salaries the monthly salary and, more frequently for managers, the annual salary, plus performance-related components.

salaries can rise more in times of a shortage of skilled workers than in times of a surplus of skilled workers Wages and salaries move within a certain range within a sector. Local wages must be determined as part of the market analysis. Each employee must be integrated into the company organisation in the best possible way, tasks and goals must be defined as precisely as possible. Teams must be formed so that complex tasks or projects can be realised with the know-how of the individual specialists and managers. The "right" employees must be found and "correctly" paid. The achievement of goals must be motivated and controlled. This is done today with modern methods of management. Without permanent leadership of the employees, no company is successful.

One of the fundamental issues of management is to plan resource and personnel capacities. In this context, capacity planning is mostly based on flow planning, because all operational resources must be included in the utilisation considerations. The lower limits and the capacity peaks must be planned. Capacity planning is about the optimal combination and utilisation of operational possibilities.

From a business perspective, capacity planning must start with the customer. The question is what does the customer want and how can the products and services be offered to the customer in the best possible and most economical way.

·         Best possible means: best or a defined quality

·         Promptly means: immediately or by a certain date

·         Local means: at the client's home or where the client wants it.

·         Ambience means: with lots of service staff or spartanly simple

·         High-tech means: with the highest technological commitment and the latest

·         Price means: low-level or "money doesn't matter", it should be the best.

Depending on the customer's wishes and defined entrepreneurial requirements, there are quite different organisational and personnel capacities. These must be worked out and determined within the framework of the business plan.

In capacity planning, for example, the following resources must be combined according to economic aspects:

-       Space capacities: Commercial and private real estate, rental property, production rooms, sales rooms, parking spaces, room sizes, utilisation areas, rental periods, rental prices, etc.

-       Market capacities: Purchasing of goods locally or worldwide, delivery times, logistics, transport routes, customs duties, taxes, etc.

-       Organisational capacities: production with own employees, external services, production sizes, size of existing organisational units, delivery times, etc.

-       Personnel capacities: sole trader, number of employees, type and duration of contractual relationship, start and end of work, time of hiring, work peaks, etc.

With capacity planning, the minimum and maximum sales or turnover can be defined. For example, if a restaurant were to open only in the evening between 19.00 - 22.00, and had 20 seats, and the seats were only allocated once, the evening customer capacity would be equal to a maximum of 20, and a minimum of 0 if no guest came. If an evening meal including drinks cost €55, the maximum evening turnover would be equal to €1,100. The question remains, with what effort must and can the evening dinner be created by the restaurant? When it comes to the economic effort, all resources and the costs for it must be determined. Only then can it be decided whether the offer can generate a profit or a loss.

2.3.5. Site selcetion

The location of a company must be determined from the customer's point of view. The location is optimal when customers can reach the company easily and quickly. The choice of location is about proximity to customers and accessibility, it is about transport connections. This can be, for example, a special location in the centre of a city or in a preferred place in a district. Precise market and consumer knowledge is crucial for the location question. The location analysis is part of the market analysis. In order to find the right location for one's own company, location factors should be defined that are relevant for one's own company.

In the following, individual location factors and their potential are discussed in more detail:

• Type of business: The type of business determines the location. In the case of a retail shop, a restaurant or a shop, the importance of location is immediately obvious. The choice of location arises in different ways depending on the type of business and the industry. Businesses serving a residential area have to define different criteria than businesses that want to sell their products or services in an entire city or internationally in domestic and export markets.
• For an internet shop, the physical location is relatively unimportant. However, if the latter wants to sell goods on a large scale, the company location becomes a central issue from a logistics perspective. The packaging and shipping costs could easily exceed the value of the goods to be sold.
• Market and customer potential: The location should be based on the market and customer potential Proximity to the sales market offers logistical advantages. These must be determined. Market data must be collected. This is provided by statistical offices such as population registration offices, state and federal offices.
• power: Purchasing power is an indicator used in consumer research Information and data are provided by the Statistical Yearbook of the Federal Republic of Germany or the Gesellschaft für Konsumgüterforschung GfK, Nuremberg. Each city, each district has a certain purchasing power, which is defined by the population structure, commercial settlements, etc.
• Competitors: The determination of the location must be made dependent on the competitors This requires a competitor analysis.
• Location: The traffic situation must be taken into account in view of the mobility of customers Parking spaces are extremely important for individual traffic. The connection of local public transport must be examined.

A high density of passers-by, such as in city centre locations, pedestrian zones and arcades This is associated with correspondingly higher shop or office rents.

The company must weigh up whether a prime location or another location is better. The proximity of shops in other sectors with high customer frequency, doctors' surgeries or banks argues for a more favourable location. Shops with complementary offers in the vicinity can bring synergy effects. The existence of consumer markets, specialist markets or hypermarkets in the catchment area has a negative or positive effect depending on the nature of the own product range.

• Workforce: With an increasing shortage of skilled workers, the question of the right employees in the company is becoming more and more important. The regional or even supra-regional labour potential can become significant for a particular company. An essential factor here is which qualifications are available on the labour market and which the company needs.
• Trade tax: A commercial enterprise depends on well-developed transport routes. The trade tax burden depends on the respective assessment rate of the municipality. If the general conditions are otherwise similar, it may be worthwhile to make a comparison. Cities and municipalities like to promote the settlement of a company. The trade tax burdens show clear differences.
• Commercial space: In principle, a permit for commercial use must be available for production rooms, shops, offices, workshops or warehouses Information on permissible use can be obtained from the relevant town hall / building administration. The premises must comply with building regulations and the Ordinance on Industrial Premises (e.g., recreation room for staff). Contact the Employer's Liability Insurance Association and the State Office for Occupational Safety and Safety Engineering. The area and layout of the rooms should be suitable for sensible use. Are there any possibilities for expansion? Large shop windows are alwaysadvantageous.
• Work and residential premises: If a business is to be run from a flat, the consent of the landlord or the co-owners is required. As a rule, an activity as a commercial agent, typing office, etc. is unproblematic, as long as no substantial public traffic is associated with it. However, intensive use could be inadmissible as a misuse of residential space. If in doubt, contact the housing office at the town hall.
• Regulations: Producing companies usually must comply with extensive environmental regulations Energy aspects are gaining increasing economic importance.

The business plan should highlight both the development prospects of an attractive location (e.g., is it possible to expand the area, is it in an attractive location, does it have good access) and the costly effects and investments (extensions and conversions, parking spaces, contaminated sites, industrial estate).

In the competition for customers, the quality of the premises and the equipment play an important role. For a tanning salon, it is important that it is perceived by the "walk-in customers", the ambience should invite a feeling of well-being and the equipment should be state-of-the-art.

Equipment and location cannot be left to taste alone. There are legal requirements that must be considered in the investment and cost calculations of a business plan. The Workplace Ordinance and its guidelines define minimum standards for room size and height, temperature and ventilation, lighting, windows, traffic routes, toilets, washrooms, break rooms and changing rooms, sound levels. Furthermore, the trade regulations, accident prevention regulations or emission protection values must be observed. Fire protection measures can be particularly costly. Responsible authorities are the employers' liability insurance associations, the trade supervisory authority and the fire brigade.

Checklist for your business plan: Company & Management

How do you want to build and manage your business?

• What is the appropriate legal form?
• What are the company's goals?
• How should the company be set up and structured (organisation chart)?
• Which employees does the company employ (personnel planning and personnel costs)?
• What is the optimal resource and personnel planning?
• Where is the appropriate location for the company?
• What are the milestones for building the business?