Business plans Flashcards
define business plan
provides information on a new business or venture.
a statement that outlines the way that a business will achieve its aims and objectives. the business plan should describe in detail how it intends to exploit the market opportunities and what resources are required in order to achieve the objectives
give 4 purposes of a business plan
provide a sense of direction.
allow strengths and weaknesses to be fully assessed.
providing details of the market and financial information such as profit forecasts to convince creditors they have a good chance of being repaid.
convince investors there is a good market for the product or service and so have a good chance of receiving a return on their investment.
what are the 5 key elements of a business plan? expand on each one
1 - overview - clearly describes business idea/sets out all the aims and objectives
2 - marketing plan - based on field and desk research, need to establish the size of the market, needs of the customers and level of competition, once research done then marketing strategy can be prepared
3 - operations plan - where the business will be located, production methods and any equipment needed, costs of production and where the business will buy supplies
4 - human resources plan - number of employees , skills experience and qualifications they require and management team outlined
5 - financial plan - sales forecast indicating potential revenues, cash flow forecast for the first 12 months, profit, loss and balance forecast for the end of the first year, break-even analysis, where the finance for starting and running the business will come from indicating start-up capital and any potential borrowing needed
evaluate 3 reasons of the importance of a business plan
well constructed business plan forces entrepreneurs to look at all aspects of a business rather than one area to identify any weaknesses before the business starts however if poorly constructed then it will be of little use and inaccurate so the plan must be properly researched otherwise poor decisions will negatively affect the business
essential for convincing lenders that they will be repaid through providing details of break even and profit forecasts since small businesses often need external sources of finance to start however it’s only useful if figures are realistic and business plans can become quickly outdated as the external environment is susceptible for change for example new competitors and cost changes
financial forecasts can act as a monitoring tool once businesses start as actual figures can be compared to those forecasted to ensure the business is on course with meeting their aims and objectives however it cannot account for sharp economic downturns such as recessions
the need for a business plan depends on the nature of the business and it is not guaranteed that a business plan will help with success
what are 4 sources an entrepreneur can use to help construct their business plan?
bank managers - provide templates and advice
small business advisors - independent advice
accountants - support with business plan writing and setting appropriate targets
local enterprise agencies - offer impartial and independent advice, support and training on starting/developing a small business
