business plan

what is a business plan

a document which sets out future plans for a business, explaining how they will turn their idea into a successful business, may show the plan to a bank or another investor to help expand

why does a business write a plan

to persuade lenders that the business will make enough profit to be able to pay back interest and loan capital on any finance taken out, attract potential investors, give owners more direction, to set targets (SMART), identify early on problems, monitor effectiveness

what does SMART stand for

specific, measurable, achievable, realistic, time

what is included in a business plan (cash flow reasons)

cash flow forecast will show expected income and expenditure over the coming year, show a bank interest rates can be afforded on any finance that they borrow, show the liquidity of the business and ability to pay bills, does not improve cash flow

what goes into a business plan

name of business, product or service and market it is aimed at, 4Ps of marketing: product, price, place and promotion, human resources: who works there, production costs and potential suppliers of materials, premises and how will be financed, financial info: sales forecast, expected costs and profits

purpose of a business plan (to help set up a new business)

will help an entrepreneur decide what resources they need: human resources ie staff, equipment, raw materials, technology, vehicles

purpose of a business plan (to help the business raise finance)

persuade lenders that the business will make enough profit to be able to pay back interest and loan capital on any finance taken out: explain how borrowing will be paid back, cash flow and sales forecast, help to obtain finance ie from banks, lenders want to see data suggesting business will grow

purpose of a business plan (to negotiate better rates of interest on finance)

negotiate a lower rate of interest on a bank loan, help owner to negotiate a lower percentage of equity that will be given to venture capitalists or angel investors

purpose of a business plan (to help the business to set objectives)

how a business aims to achieve its goals, show any planned activities of business, amount of sales and profit want to achieve

purpose of a business plan (to outline how functions of the business will be organised)

show how many staff and location of following departments: production, marketing, purchasing, human resources, accounting and finance