Business Planning

Question 1

What is a business plan?

Answer 1

A business plan is a written document defining a business’s future objectives and strategy, i.e., what it wants to achieve and how it will do this.

Question 2

What are the basic principles of a business plan?

Answer 2

• A business plan should contribute to the achievement of corporate objectives.
• Should be regularly reviewed and updated to take account of market changes, business changes, amended objectives or new strategies.

Question 3

What can a business plan be used for?

Answer 3

• Raising funding or finance;
• Gaining new instructions, clients or customers;
• Focusing on priorities;
• Responding to change;
• Budgeting or managing financial resources;
• Setting staff targets.

Question 4

What are some of the key elements included within a business plan?

Answer 4

• Executive summary;
• Mission statement;
• Vision statement;
• Description of business opportunity or idea;
• Team;
• Operations;
• Marketing;
• Sales;
• Competitive analysis;
• Forecasted cashflows;
• Objectives and goals.

Question 5

What is a strategic business plan?

Answer 5

• A strategic business plan is a strategy that is devised to achieve overall goals set by a business.
• Provides a framework for tactical business decisions and approvals.
• Sets its sights on the future – reviews Strengths, Weaknesses, Opportunities and Threats

Question 6

What is a corporate business plan?

Answer 6

• A corporate business plan is similar to a strategic plan but is generally used where a group company has a complex structure with various subsidiaries or business units.
• More inwardly focused on operations.
• May include: vision statement, mission statement, resource, objectives and strategies.

Question 7

What is a departmental business plan?

Answer 7

• A planning document focusing on a particular department within a company.
• Activities include reviewing periodic metrics within that department.
• Do the metrics meet goals? Do goals need adjusting? What are the departmental needs to meet goals?
• Individual staff metrics

Question 8

What is an operational business plan?

Answer 8

• Work planning stage
• Delivery stage
• Sets out how a company will execute its strategies and turn a strategic plan into action plans

Question 9

What is the difference between a mission statement and vision statement?

Answer 9

• Mission statement - will define and focus on the business and its objectives today.
• Vision statement - will consider these in the future.
• The mission statement will drive the company, whereas the vision statement will direct the company.

Question 10

What is the RICS’ mission statement?

Answer 10

To promote and enforce the highest professional standards in the development and management of land, real estate, construction and infrastructure.

Question 11

What is the SMART model?

Answer 11

A model used for setting of goals for a business.

• Specific
• Measurable
• Achievable
• Relevant
• Time-bound

Question 12

What is a SWOT analysis and when might they be used?

Answer 12

A SWOT analysis identified a company’s:

• Strengths
• Weaknesses
• Opportunities
• Threats

Question 13

What are some different types of organisational structures?

Answer 13

• Functional (departments based on work specialism),
• Divisional (groups based on shared services, products or locations),
• Matrix (mixed specialism teams with separate managers),
• Team (with each delivering one product or service),
• Network (joining together multiple businesses or contractors),
• Hierarchical (direct chain of command with various levels of seniority)
• Flat / Flatarchy (typical in small companies with fewer employees where seniority is not defined between employees).

Question 14

What is the RICS business plan?

Answer 14

RICS Business Plan - Building towards a new future Business plan 2021–22.

Question 15

What is the key legislation relating to company law?

Answer 15

The Companies Act 2006.

Question 16

Do sole traders need to register with Companies House?

Answer 16

No, although they do need to register as self-employed with HMRC.

Question 17

What are some of the key financial terms relating to businesses?

Answer 17

• Liabilities – debts that a business owes;
• Current liabilities – debts that a business owes and must pay within 12 months, e.g., VAT bill, wages owed or credit card debt;
• Assets – what a business owns;
• Current assets – what a business owns and expects to use or sell within 12 months, e.g. inventory, cash in the bank or invoices owed by clients;
• Stock – the value of goods that a business has to sell to customers. If a company solely sells services, then it will not own any stock;
• Debtor – who owes the business money;
• Creditor – who the business owes money to.

Question 18

What are the key financial ratios?

Answer 18

• Working capital ratio – the difference between current assets and current liabilities, or the ability of a business to cover its outgoings in the short term. This ratio should be positive, showing that the business can meet its liabilities and may have a surplus to invest in the business;
• Quick ratio / liquidity ratio (acid test) – this is calculated by dividing liquid assets (i.e., cash or close to cash) by current liabilities. It shows that a company can meet current liabilities with assets that can be converted quickly to cash. This ratio can be compared between companies and used as a snapshot of financial health;
• Debt to equity ratio – this is calculated by dividing a company’s total liabilities by total shareholder equity. It shows a business’s reliance on debt finance, such as loans, otherwise known as leverage;
• Return on equity – this is calculated by dividing net income by average shareholder equity. It measures a business’ profitability and efficiency in generating profits. Generally, a higher ratio shows that a business is better at converting equity into profit – which is great for the shareholders of a business!