Business Plans

Question 1

Define a ‘business plan’.

Answer 1

A document that prepares for the future start of a business. It contains the business’s aims, objectives and marketing, human resources, financial and operational plans.

Question 2

What are the components of a business plan?

Answer 2

• Executive Summary
• Business Overview
• Market Research & Marketing Strategies
• Management Structure
• Financial Forecasts (Break-Even, Budget, Cash Flow, Profit Expectations)
• Start-Up Finance (how much will be required from a bank loan, owners savings, etc.)

Question 3

What are the main sources of guidance to help an entrepreneur create a business plan?

Answer 3

• High street banks
• Accountants
• Small business advisors
• Government agencies, e.g. Prince’s Trust

Question 4

What are the advantages of a business plan?

Answer 4

• Make entrepreneurs examine all aspects of their business, which enables them to identify unique selling points.
• Banks will not lend without a business plan.
• When trading, a business plan can be used as a monitoring tool in comparing forecasts with reality to assess any problems that are emerging.
• Can act as a motivator as managers seek to meet the planned targets.

Question 5

What is the disadvantages of a business plan?

Answer 5

It’s about the future and it may be hard to predict things such as:
- Competitor actions
- Any new competition that enters the market
- The economy, e.g. recession
This makes a business plan less likely to guarantee success.

• Depends on how accurate the information is in the business plan and how good the research is that went into it. If it’s not accurate or there is limited research this will not help success.

Question 6

What is some evaluation for business plans?

Answer 6

• Anyone who plans will stand a greater chance of covering all aspects, allowing them to be successful in the future. Nothing guarantees success but a business plan can help as the entrepreneur can plan for all key tasks and foresee potential problems before they happen.
• Depends on its accuracy, amount of research gone into it, whether it is realistic, and the level of competitors.