Page 171 - Finance for Non-Financial Managers

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Finance for Non-Financial Managers
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Challenges to be addressed might include a large competi-
tor with a similar product, an aging product that hasn’t kept up
with market demands for change, strong demand for quality
salespeople that keeps compensation high and candidate quali-
ty low, or pricing pressures caused by a bad economy. These
challenges might be addressed by simply lowering the revenue
forecast, but that indirect approach sidesteps the much more
effective method of approaching each obstacle directly and
identifying steps that might be taken to mitigate the potential
damage.
Research & Development/Product Development Plan—
Bringing New Ideas to Market
Some companies provide services that drive their sales, and
continuing sales depend mostly upon delivering reliable levels
of service at reasonable prices. Other companies sell products
that they buy from others, usually based on the desires of their
customers, and they don’t create or manufacture any products.
But many other companies sell proprietary products, that is,
products they have developed and that they make or over
which they at least maintain manufacturing control. Such prod-
ucts have typically been developed at some cost in time and
money by these companies; that cost must be identified and
reflected in their planning, along with the expected fruits of that
effort in terms of new research advances, technological break-
throughs, new products developed and brought to market, and
so on. For these companies, a research and development sec-
tion of the operating plan is essential in order to ensure
resources are allocated to these activities and to clearly set
forth the expected results from use of those resources.
Their plans might identify the new products that they intend
to bring to market during the coming year, based on projected
outcomes of development efforts. For a drug company, for
example, results might simply include a key drug moving from
basic testing to first clinical trials. While the company is still
years away from marketing a new product, it can still plan for