1.4.4 Business Plans

Question 1

Business plan:

Answer 1

a plan for the development of a business, giving forecasts of items such as sales, costs and cash-flow

Question 2

Purpose of a business plan:

Answer 2

• To identify:
  
  • Business idea - outline of the business idea and concept so all stakeholder’s understand the owners’ intention
  • Business aims and objectives - SMART → means business can measure its success against these targets
  • Target market (market research) - market research identifies the business’s target market as well as market conditions and any other competitors
  • Forecast revenue (financial forecasts) - forecasts of the business’s costs, revenue, profit, cash-flow, budgets and BE point
  • Sources of finance - how the business will be financed and how any borrowings will be repaid
  • Location - location of business and the reasons for that choice of location
  • Marketing mix - how the business wi;; use the marketing mix to develop a successful product or service
• convince a bank to loan the business money
• forecast financial projects
• identify needs of customers
• formulate market research into important info e.g. about competitors
• provide info e.g. about competitors
• provide owner with ‘plan of action’ that will minimise risk

Question 3

What is the purpose of planning business activity?

Answer 3

to minimise risk and obtain finance as a detailed business plan reduces the risk associated with unforeseen problems and poor decision-making, and increases the likelihood of success

Question 4

Who uses a business plan?

Answer 4

• owners - as a guide and working doc
• partners and employees - anyone wanting to work with/for the business
• investors - to assess the risk and reward of investing in the businesses (e.g. Ltd or Plc)
• lenders - e.g. banks will want to investigate the likely success and risk of lending to a new business