Business Plan Lecture Notes

Flashcards covering key concepts from the business plan lecture.

Why is a business plan vital for a business?

It gives the business a clear idea of what it's going to do to be successful.

What is the purpose of a business plan?

To outline what a business will do and how it aims to do it.

How does a business plan help the owner?

It forces the owner to think carefully about what the business is going to do, how it will be organised and what resources it needs.

How does a business plan help reduce risk?

It helps the owner or financial backers realise if the business is a bad idea before they've wasted too much time and money.

Who are business plans useful for?

People starting a business and also when an existing firm wants to make changes.

How does a business plan help in identifying markets?

It explains who the business is aiming to sell to, backed up with market research showing that the target market will be interested.

What are resources in the context of a business?

All the things a business needs to operate, including time, money, labour, buildings, fuel and machinery.

How does a business plan help with resources?

It helps a business to identify and cost up all the resources they will need.

How can a business plan be used to get finance?

The plan can be used to convince financial backers (e.g. banks) that the idea is a sound investment.

What should a business plan include to attract finance?

Explanation of how much money is needed, where it will come from, a cash flow forecast and forecasts of costs, revenue and profits.

What is the difference between aims and objectives?

Aims are general, e.g. 'To be the market-leading sandwich shop'. Objectives are specific, e.g. 'To average 160 sandwich sales per lunchtime over 4 years.'

What personal risks do entrepreneurs take?

They may lose a lot of money and time if the business fails.

What happens if a business makes a financial loss

It won't be able to pay back all the money that's been borrowed, and it may struggle to survive.

What is the reward for entrepreneurs?

Seeing their business idea become a success, earning more money, and having independence to choose what they do day-to-day.

What is business enterprise?

The process of identifying new business opportunities, and then taking advantage of them.

What is an entrepreneur?

Someone who takes on the risks of enterprise activity.

What qualities do entrepreneurs need?

Creativity, risk taking, determination, and confidence.

What does unlimited liability mean for a sole trader?

If the business goes bust owing money, the owner is legally responsible for paying back all of the debt.

What does unincorporated mean for a sole trader?

The business doesn't have its own legal identity, so if anyone sues the business, they'll sue the owner personally.

What are the advantages of partnerships?

More ideas, a greater range of skills, more people to share the work, and more capital can be put into the business.

What are the disadvantages of partnerships?

Each partner is legally responsible for what the others do, most have unlimited liability, more disagreements, and profits are shared.

What does it mean for a company to be incorporated?

It has a separate legal identity from the owners.

What does limited liability mean for owners of a limited company?

The owners only risk losing the money that they have invested.

Who owns a limited company?

Shareholders-people who own a portion (share) of the company.

What does 'private' mean in the context of a private limited company?

Shares can only be sold if all the shareholders agree.

What are the advantages of a private limited company (Ltd.)?

Limited liability, the company can continue trading after a shareholder dies, it's easier to get a loan, and the owners keep a lot of control.

What are the disadvantages of a private limited company (Ltd.)?

They're more expensive to set up, and the company is legally obliged to publish its accounts every year.