Business plans Flashcards
What is a business plan?
A document that outlines what a business wants to acheive and how they will do so. It is important for both new businesses to plan for their future, but also established businesses to monitor where they are at and where they aim to go.
What should a business plan contain?
There are no rules, but a good plan would usually include a business overview (who is setting, why, what they will sell, where etc.) As well as aims and objectives, marketing and sales strategies, who will work in the business and financial forecasts.
Should also include, cash flow forecasts, sales forecasts, Break even analysis, budgets and projected statements of comprehensive income and financial position. - These should be done for the short and medium term (3-5years).
How do business plans help to obtain finance?
It proves owners have done their research, and everything has been well thought through, thus the risk is lower.
- It describes the products and people running the business - this is helpful as some lenders are more concerned about helping owners that are passionate for a project who have the drive to be successful as opposed to ROCE.
- A plan shows how profitable a business is likely to be, so when investors are likely to make returns.
- Ultimately, a good plan should help a business maximise the amount of sources and methods of finance they can obtain, it can also help businesses to get cheaper long term finance. E.g. if a business can show they will pay loans back in time, they may be perceived as lower risk and will receive lower interest rates. Also venture capitalists may agree to own less of the business if they are confident in success.
