Level 3 Applied Business Studies AO 1a Business Planning

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What is a business plan?
A business plan is a document that sets out where the firm is headed and how it intends to get there.
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When do business usually draw up a business plan?
•Before they start trading •When they are expanding •When they are implementing a new strategy
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What are the different sections of a business plan?
1. Summary of proposal's key features 2. Aims and Objectives 3. The strategy 4. Description of business 5. Market research 5. The firm's operations 6. Resources needed for proposal 7. Info on manager(s) 8. Financial forecasts (profit & loss/cashflow)
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Is a business plan a one-off process?
No. A plan should be updated to allow for new information or any unexpected changes that may occur. The business world is constantly changing, (new laws, new competitors) so plans need continually updating in order to stay relevant.
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Why is the business planning process useful for an entrepreneur?creating a business plan a useful exercise for an entrepreneur?creating a business plan a useful exercise for an entrepreneur?
•Helps entrepreneur to think in depth about their business proposal and concentrates their mind. Will indicate whether profitable or not. 2. Helps them consider whether they have the right skills to run enterprise successfully.
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What does a business plan help the entrepreneur to clarify?
•Makes you look in detail at your idea, helps you to consider problems & find solutions. 2. Helps clarify what needs to be done & when. 3. Useful for other employees, helps them understand what/how business seeks to achieve. Helps coordinate actions.
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What is the use of a business plan as a management document?
The plan can be used to monitor success and to see whether the business is performing as expected. If something is going wrong (e.g. sales lower than forecasts) managers receive an early warning and thus can take corrective action.
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Why might the bank/potential funders be interested at looking at a firms business plan?
Most business are likely to need external finance at some point. The bank will want to see a thorough business plan to make sure the business will be able to repay the loan and any interest over time. They want to know if the business is profitable.
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Why might suppliers be interested at looking at a firms business plan?
If business has drawn up financial plan & is identifying times in the year when they may have a cash shortage and thus planning for them, the supplier will be reassured they will get paid on time, & this will assist them to manage their own cash flow
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Where might an entrepreneur gather the information required for a business plan?
1. Market research- could be from asking friends or potential customers or watching competitors (primary) or government stats/newspaper surveys (secondary). 2. Experts e.g. professional consultants, government advisers, bank, accountants
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What are the disadvantages of the market research you undertake?
•Research may be limited because you are constrained in terms of time and money •Danger of research being biased because you conduct in a way to get the results you want.
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What are the advantages of seeking outside business advice?
•They can help identify how much money may be needed for your business •Help with cashflow •Can help decide on the best source of finance •Have more experience •Accountants can give expert financial advice
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What are the disadvantages of seeking outside business advice?
Usually costs money.
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State the three elements of the financial plans...
1. Statement of sources of finance 2. Forecasting cash flows 3. Forecasting profits
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What is a statement of sources of finance?
Details how the business will pay for its capital expenses. States whether the money is to be borrowed, raised by selling shares or obtained from other sources such as retained profits, redundancy pay or savings.
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What is a cash flow forecast?
A measure of the amount of money moving in and out of a business over time.
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Why is forecasting cash flow important?
If a business has a poor cash flow, the business cannot pay it's expenses promptly. If suppliers are not paid, this could force a new business to close down. Suppliers and potential funders will want to see to ensure no major cash problems.
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Why is it important to forecast profit?
•Potential lenders interested in profit •Shareholders will want to see as they will want to receive a return on their investment in the form of dividends financed out out profits.
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What are the limitations of a business plan?
...
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To what extent does a business plan guarantee success?
...
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Card 2

Front

When do business usually draw up a business plan?

Back

•Before they start trading •When they are expanding •When they are implementing a new strategy

Card 3

Front

What are the different sections of a business plan?

Back

Preview of the front of card 3

Card 4

Front

Is a business plan a one-off process?

Back

Preview of the front of card 4

Card 5

Front

Why is the business planning process useful for an entrepreneur?creating a business plan a useful exercise for an entrepreneur?creating a business plan a useful exercise for an entrepreneur?

Back

Preview of the front of card 5
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