Business plans

Question 1

Why might a new business create a plan?

Answer 1

For the owner to clarify their thoughts and plans for a potential investor like a bank manager.

Question 2

Why might a business looking to raise finance create a plan?

Answer 2

Investors and banks need in-depth financial information to help aid their decision as to whether they want to give finance to a business.

Question 3

How can a business plan help businesses’ select achievable objectives?

Answer 3

They can predict what is possible to achieve in the future and how they can do that.

Question 4

How does a plan help small businesses grow?

Answer 4

Helps smaller businesses to think logically about the most efficient way to run a business. Also details how functions of the business will be organised.

Question 5

What are the main parts of a business plan?

Answer 5

Executive summary, Mission statement, Products or services, Market Analysis, Organisation and management team, Production details and Finance.

Question 6

Name 3 advantages of creating a business plan:

Answer 6

1. Provides parameters for
   setting targets.
2. Management can check staffing, incomes and product ranges etc against previous business plans.
3. Can be compared to the behaviour of competitors and the business’ own performance in past years.

Question 7

Name 3 disadvantages of making a business plan:

Answer 7

1. Businesses need to be flexible, a business plan may stop a company changing.
2. Business plans can be costly and time consuming to make.
3. Forecasts of revenue and profit may be misleading and lead to bad decisions.

Question 8

What are the 4 key reasons why businesses create plans?

Answer 8

Important for new businesses
Raising finance
Setting objectives
Business organisation