81. Economies of Scale Analysis

By Roger Bryan

This section indirectly deals with the expected fluctuation of certain revenue streams over a period of time owing to certain factors. You can look into this section from various perspectives.

Fixed Costs – Are the fixed costs associated with business are not certain. For e.g. the rents of a premise may increase or decrease. A look into the past market trends can help you determine the fluctuation levels with regards to rent. Also, some fixed costs like inventory maintenance may come down after a period of time. These should be detailed and mentioned in your business plan.

Buying Power – As the business grows, the demand for the product also increases. This in turn creates a void for more suppliers. Since the volumes of your procurement will increase, you can sketch out a plan wherein you can reduce the procurement costs owning to increase in the buying power. This is normal practice is the corporate world. Mention the expected results and effects of the increase or decrease of your buying power in your business plan.

Managerial Specialization – While starting a business you may need expert opinion on certain areas. However, after gaining some experience, these decisions can be taken by the company staff itself. Hence, this reduces dependency on external agents and also minimizes the costs associated with the same. All these details should be listed in this section. You should use graphs, figures and charts to portray a clearer picture.

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