5.3 Importance of a business plan

Define what is meant by a business plan

• A written document that details an idea and how a business aims to achieve its objectives. Usually created when a new business is forming or when a business is applying for finance.

• A financial statement that summarizes the revenues, costs, and expenses incurred during a specified period, usually a fiscal quarter or year.

Why is a business plan needed?

Identify 3 reasons

• To obtain finance

• Help identify potential problems .e.g financial shortages

• Measures progress towards goals e.g. sales forecasts

• Generate revenue for a brand

Identify what information is likely to be included about the business idea

• The goals of the business, usually set as S.M.A.R.T and how it will achieve them.

• Information about its customer, including customer profiling

• Outline of costs to include: staff, stock, buildings, insurance etc...

• What product or service the business will provide

Identify what information is likely to be included about a businesses target market

• The goals of the business, usually set as S.M.A.R.T and how it will achieve them.

• Information about its customer, including customer profiling

• Outline of costs to include: staff, stock, buildings, insurance etc...

• What product or service the business will provide

Identify what information is likely to be included about a businesses aims and objectives

• The goals of the business, usually set as S.M.A.R.T and how it will achieve them.

• Information about its customer, including customer profiling

• Outline of costs to include: staff, stock, buildings, insurance etc...

• What product or service the business will provide

Identify what information is likely to be included about a businesses costs

• The goals of the business, usually set as S.M.A.R.T and how it will achieve them.

• Information about its customer, including customer profiling

• Costs arising from: staff , stock, buildings, insurance etc...

• What product or service the business will provide

Identify what information is likely to be included about a businesses source of finance

• Where finance has been obtained, the amount and term i.e. NatWest £35,0000 secured over 5 years at £660p/m

• Information about its customer, including customer profiling

• Costs arising from: staff , stock, buildings, insurance etc...

• What product or service the business will provide

What information is likely to be included on the business plan about marketing?

• Presents, premises, promotion and price

• Product, price, place and promotion

Why is cashflow important to a business?

• It informs customers about the products (goods or services) a business is providing

• If a business runs out of cash, it won't be able to pay for stock, its workers or the day to day running of the business.

Identify a business decision that an entrepreneur would make if their business ran out of cash

• An entrepreneur would seek additional finance to pay their liabilities.

• Invest in an advertising campaign to encourage customers to purchase their products.