4: Developing business plans

Question 1

Business plan

Answer 1

A written document describing the nature of the business, its objectives, marketing strategy, and projected cash flow forecast and income statement.

Question 2

Purpose of a business plan:

Answer 2

• to help the entrepreneur set clear objectives
• to guide the entrepreneur towards strategies or actions needed to meet these objectives.
• to pursuade lenders to invest capital in the business by demonstrating why it is likely to succeed - bank managers will want to see a business plan before giving bank loans or overdrafts.
• To help in the running of the business’s progress can be reviewed regularly.
• To encourage entrepreneurs to plan ahead in a realistic way.

Question 3

Contents of business plan:

Answer 3

Executive summary: Summary of main features of the business.
Business description: Start date, type of business, sector of market, the legal structure - sole trader, partnership or limited company?, entrepreneurs vision.
Product/ Service: What makes it different from competition, what benefits will customers gain, info on copyrights, designs, trademarks.
Market analysis: the market (data about the size and growth), the customer (key features - who & where?), the competitor (who, strengths, weaknesses), the future (how might market change in future and how can bus respond)
Strategy and implementation: Pricing, promotion, sales strategies.
Management team.
Financial plan - cash flow forecast, break-even analysis, profit and loss account etc.

Question 4

Sources of help and guidance for business planning:

Answer 4

Accountants - financial advice.
Bank managers - financial advice.
Business Link - a government-funded service that provides general info, advice and support to start ups.
Local enterprise agencies.

Question 5

Resources needed to create a business plan:

Answer 5

• Time. more time taken, the better the plan is likely to be.
• Determination.
• Vision. Clear idea of business and its USP.
• Numbers. Cannot be afraid of numbers.
• Planning. Ability to be organised and plan a number of activities at once.

Question 6

Problems for small business planning:

Answer 6

• Time. An entrepreneur may feel he/she doesn’t have the time to devote to putting a business plan together. E.g. if an entrepreneur wants to start trading quickly.
• Money. Not expensive, but a plan costs some money, even if it is just in terms of the entrepreneurs own time. Any advice about planning might cost money.
• Expertise. May not know enough about product/service or market initially to be able to construct a business plan.
• Opportunity cost. Some may feel time spend on business plan is ‘wasted’ when it could be spend actually trading.