4. Business Plans

What is a business plan?

A document produced by the owner at start-up, which provides forecasts of items

What are the elements of a business plan?

• The business idea

• The business aims and objectives

• The target market

• The forecast revenues, costs and profits

• The cash-flow forecast

• The sources of finance

• The business location

• The planned marketing mix

What is the main of producing a business plan?

To reduce the risk associated with starting a new business and help the owners to raise finance

What does producing a business plan force an owner to do?

Think about every aspect of the business before they start which should reduce the risk of failure

What is the importance of a business plan in obtaining finance?

• Informed Decision-Making: Research helps businesses understand potential problems and the chances of success, allowing them to select the most appropriate source of finance.

• Attracting Lenders & Investors: A well-written business plan helps banks, venture capitalists, and other investors assess whether the business is credible and worth the financial risk.

• Investor Confidence: Investors use the business plan to determine if they can increase the value of their investment and make a worthwhile profit.

• Provides Direction: A clear action plan boosts lender and investor confidence in the business’s future success.

• Templates for Finance Applications: Most high street banks offer detailed templates for business owners when applying for finance.

How does a business plan help lenders and investors?

• It provides a clear, structured plan of how the business will operate and generate revenue.

• Lenders (e.g., banks) use the business plan to determine if the business is credible and financially stable.

• Investors (e.g., venture capitalists) use it to assess the profitability potential of their investment.

• A strong business plan increases confidence in the business’s success, making it easier to secure funding.

Why is research important in creating a business plan?

• Helps identify potential risks and challenges before launching the business.

• Enables the business to select the most suitable source of finance.

• Ensures the business is well-informed and can make strategic decisions.

• Increases the likelihood of securing investment or loans by demonstrating market understanding.