Video Notes: Business Plans and Command Terms — Vocabulary Flashcards

What is a business plan?

• A business plan is a report detailing how a business sets out to achieve its goals and objectives.

• It is useful:

  • As a planning tool.

  • To reassure financial lenders that the business idea is sound.

• Maxim: If you fail to plan, you are planning to fail. — Benjamin Franklin

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Contents of a business plan

• The business

• The product

• The market

• The finance

• The personnel

• The marketing

• Evaluation of business plans

Key elements of a business plan

• A business plan typically contains the following information:

• The business

• The product

• The market

• The finance

• The personnel

• The marketing

• The structure emphasizes how these areas interrelate to reach objectives.

The business

• Name and address of the proposed business (for new businesses).

• Cost of premises and other start-up costs (for new businesses).

• Details of the owner(s) and past business experience.

• The type of business organization (e.g., sole trader or partnership).

• Quantifiable objectives of the proposed business or project.

The product

• Details of the good(s) and/or service(s) being offered.

• Supporting evidence showing why customers will pay for the product(s).

• Where and how production will take place (e.g., equipment needed).

• Details of the suppliers of resources (raw materials/components).

• Pricing methods to be used.

The market

• The expected number of customers or forecast level of sales.

• The nature of the market (customer profiles and market segmentation).

• The expected growth of the market in the foreseeable future.

• Competitor analysis (market share, strengths and weaknesses).

The finance

• Proposed sources of finance.

• Break-even analysis.

• Collateral in case the borrower defaults on the loan.

• Cash flow forecasts and plans to deal with cash flow problems.

• Forecast profit and loss account for the first year of trading.

• Forecast balance sheet.

• Forecast rate of return for investors.

The personnel

• The number of people and details of the job roles likely to be employed.

• Organizational structure of human resources.

• Details of payment systems (wages, salaries, remuneration packages).

The marketing

• Market research and test marketing.

• The distribution plan (where the products will be sold).

• Details of the promotional mix to target customers.

• Details of any unique or distinctive selling point to differentiate the product from rivals.

The business plan framework (overview of pages)

• Overall: The business, The product, The market, The finance, The personnel, The marketing.

• Each section interlinks to justify feasibility and strategic fit.

Evaluation of business plans

• Evaluation is the process of assessing the overall value, risks, and potential for success of the plan.

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Advantages and disadvantages of business plans

• Advantages:

  • Helps to form strategic focus.

  • Provides a framework to manage priorities.

  • Helps manage change in the firm.

• Disadvantages:

  • Time consuming and costly.

  • Does not eliminate risk.

  • Plans by new entrepreneurs may lack depth and breadth due to lack of experience.

Command terms (IBDP Business Management Exam Technique Guide)

• Analyse: Break down to reveal essential elements, structure, underlying assumptions, and interrelationships.

• Discuss: Offer a considered and balanced review; support opinions with evidence.

• Compare: Describe two or more situations and highlight similarities.

• Contrast: Describe two or more situations and highlight differences.

• Define: Give a clear meaning of a term (e.g., define the term “stakeholder”).

• Describe: Present characteristics of a topic.

• Distinguish/Evaluate/Examine/Explain: Clarify differences, assess, and interpret.

• Identify/Justify: Recognize key points; provide evidence to support a choice.

• Calculate: Provide a precise numerical answer.

• Classify: Organize into categories.

• Formulate/Interpret: Present concepts clearly; derive inferences.

• Use knowledge to explain and apply ideas; draw inferences from a problem.

• Make an appraisal: Weigh strengths and limitations of evidence.

• To what extent: Evaluate the level of success of an argument or concept with evidence.

• Comment: Explain or give commentary on information related to a problem.

• Consider/Advise/Apply/Complete/Construct/Outline/Prepare/Recommend/Put data into a format: Action-oriented tasks for answering exam questions.

Practice questions and exam tips

• Practice questions: Multiple-choice questions (MCQs) and exam practice questions provided in the slide deck (InThinking platform).

• Emphasis on applying case study analysis to questions requiring the use of the business plan framework.

• For a 4-mark question, candidates are expected to apply the case study context rather than rely solely on generic content.

Practical formulas and equations (business plan finance)

• Break-even point (units):
  $ext{BEP}_{ ext{units}} = rac{FC}{P - VC}$
  where FC = fixed costs, P = selling price per unit, VC = variable cost per unit.

• Break-even point (revenue) using contribution margin ratio:
  $ext{Contribution Margin Ratio} = rac{P - VC}{P}$
  $ext{BEP}_{ ext{revenue}} = rac{FC}{ ext{CMR}} = rac{FC}{(P - VC)/P} <br>$

• Net profit (simple P&L relation):
  $ext{Net Profit} = ext{Revenue} - ext{Costs}$

• Cash flow concept:
  $ext{Net Cash Flow} = ext{Cash Inflows} - ext{Cash Outflows}$

• Balance sheet relationship:
  $ext{Assets} = ext{Liabilities} + ext{Equity}$

Case study and real-world relevance

• A business plan serves as a bridge between an entrepreneurial idea and financial reality, making assumptions explicit, and providing a roadmap for operations, marketing, finance, and personnel.

• It supports decisions on resource allocation, growth strategy, and risk management.

• Real-world relevance includes presenting a convincing narrative to lenders/investors and aligning team actions with strategic objectives.

Ethical, philosophical, and practical implications

• Ethical: Transparency in assumptions; avoidance of overstating projections; accuracy in market data.

• Philosophical: Planning discipline vs. entrepreneurial flexibility; balancing long-term planning with agile iteration.

• Practical: Time/resource investment in planning; ensuring data quality; recognizing that a plan should be updated as conditions change.

How these notes connect to foundational principles

• Planning as a fundamental management activity: setting objectives, allocating resources, monitoring performance.

• Link between marketing, finance, and operations evidenced by the integrated plan.

• Risk management through cash flow forecasts, break-even analysis, and scenario planning.

Real-world relevance and recommendations

• Use a business plan to test ideas before committing capital.

• Use the plan as a communication tool with stakeholders (investors, banks, government).

• Regularly revisit and update the plan as market conditions change and new data emerges.