planning a business and raising finance

Question 1

contents of business plan

Answer 1

executive summary
objectives
market research
employees
finance
production
the market
the marketing strategy

Question 2

advantages/ purpose to business plan

Answer 2

to gain finance
to reduce risk of failure
to give focus and direction
illustrate how the business will be run and provide realistic expectations of what can be achieved

Question 3

defintion of a business plan

Answer 3

it is a document/ plan for the development of the business giving details such as resources needed and cost and revenue forecasts in order to provide to attract investors

Question 4

what financial forecasts might be included in a business plan

Answer 4

sales forecast
cash-flow forecast
break-even calculations
details of cost/ revenues/ profit

Question 5

cash-flow forecast

Answer 5

the predicted flow of cash coming in and going out of the business over a future period of time in form of a table

Question 6

negatives to issues might you see on a cash- flow forecast

Answer 6

decline cash inflow/ sales
a nagative net cash flow

Question 7

the use of cash- flow forecasts

Answer 7

to identify any potential shortfalls in cash flow
to help secure finance
to give confidence for survival
to provide a guide against which to measure actual cash flow
helps prevent the business becoming insolvent
alows to plan spending accordingly

Question 8

how to improve cash flow

Answer 8

speed up inflows
-increase sales/ revenue
- discount for early payments
- reduce trade credit lenght
- destock
-loan/ overdraft

slow down outflow
- delay paying
- reduce costs

Question 9

limitations of cash flow forecast

Answer 9

• based on predicted future inflows therefore may be inaccurate
• baised or flawed
• affected by external influences
• demand may be over
• time and money

Question 10

3 types of internal finance

Answer 10

• owners capital/ personal savings
• retained profit
• sales of assets

Question 11

advantages of internal finance

Answer 11

available immediately
no interest payments
no credit checks

Question 12

disadvantages of internal finance

Answer 12

• might not be enough
• not as flexible as external

Question 13

types of external finance

Answer 13

• family and friends
• bank loan
• bank overdraft
• peer to peer lending
• crowdfunding
• share capital
• trade credit
• grant

Question 14

advantages and disadvantages to external sources of friends and family

Answer 14

+ no interest
- might not be enough

Question 15

advantages and disadvantages to external sources of bank loan

Answer 15

+ can get amount needed
- interest

Question 16

advantages and disadvantages to external sources of bank overdraft

Answer 16

+ instant so improves cash flow
- high interest rates

Question 17

advantages and disadvantages to external sources of p2p lending

Answer 17

+ higher returns than savings account
- high risk as if company goes bust

Question 18

advantages and disadvantages to external sources of venture capital

Answer 18

+ advice and finance
- lose some ownership

Question 19

advantages and disadvantages to external sources of crowdfunding

Answer 19

+ potential to raise large amounts with campaign
- lose share or payment with interest
- might not raise the amount needed

Question 20

advantages and disadvantages to external sources of share capital

Answer 20

+ potential to raise lots of capital
+ no interest has to b paid
+ doesnt have to be paid back
- lose decision makign power
- new shareholders may take over
- have to share profits

Question 21

advantages and disadvantages to external sources of trade credit

Answer 21

+ improves cash flow
- not suitable for large amounts

Question 22

advantages and disadvantages to external sources of grant

Answer 22

+ doesnt have to be repaid
- have to meet certain criteria to qualify

Question 23

liability

Answer 23

refers to the legal responsibility of a busienss towards thier debts

unlimited- owner and the business are the same entity

limited- the business and owner are seperate

Question 24

sole trader define and + -

Answer 24

owns and runs thier own business
+ keeps all the profits
+ complete control
+ quick to set up
- wont benefit from economies of scale
- likely to work long hours
- lenders may be reluctant
- unlimited liability

Question 25

partnership define and + -

Answer 25

usually owned by 2-20 people + patners can being different skill/ expertise to the business + raise more capital + quick/ easy to set up - have to share profits - disagreements - unlimited liability

Question 26

private limited (LTD) define and + -

Answer 26

sell shares priately to friends and family + limited liability + can sell shares to raise capital - have to publish financial information - takes time to set up - profits have to be shared between shareholders

Question 27

(PLC) public limited define and + -

Answer 27

raise capital through selling online on the stock exchange + can raise fiance + limited liability + more reliable to lenders + more public awereness of business - risk of being taken over - financial accounts published - more public scrutiny/ attention - shareholders may have more influence on how business is run

Question 28

franchise

Answer 28

when a business allows another business the right to trade under its name, in return for payments

Question 29

advantages and disadvantages to franchisees

Answer 29

+ established brand training + equipment, training, support, access to goods - costly intial payment - royalty payment - lack of control and decision makings - other franchisees can risk reputation

Question 30

franchisor

Answer 30

gives right to sell

Question 31

franchisee

Answer 31

business that agrees to provide a branded product

Question 32

other forms of businesses

Answer 32

social enterprise- not for profit, aim to make a positive difference lifestyle businesses- sustain a particular level of lifestyle for owners online businesses- providin through the internet online