ideas to numbers .. simple financial projections
Limiting factor analysis is a technique used by a business to identify which of its products should be manufactured in order to maximize profits when there are scare resources. It can be used as part of a financial projection in order to ensure that unit sales forecasts do not exceed available production capacity.
All businesses develop products which have a limited economic life and defined product life cycle. Each year a business will develop new models of a product and introduce them to the market to replace older models which are starting to become obsolete.
It is important that the financial projections and the business plan make allowance for these product life cycles, as any errors in the timing of product development can lead to revenue, net income, and cash flow shortages, ultimately resulting in the failure of the business.
This is one of a series of articles on the contents of a simple business plan.
The product and technology section is the place where you describe what your product is and the technology behind it. It should also cover the products uses and the current state of its development and readiness for the market.