Business plans

Overview

What a business plan contains and why, from market research to forecasts, finance and location, how it reduces risk and wins loans, and its limitations.

What you need to know

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Questions from this subtopic

Each one with the model answer underneath.

1. 1

   What is a business plan?

   Model answer

   A business plan is a document describing a business idea and how it will be put into practice. A business plan sets out the aims, market, finances and marketing.

2. 2

   Name the eight things a business plan should identify.

   Model answer

   A plan sets out the business idea, its aims and objectives, and its target market. A plan also covers forecast revenue, costs and profit, a cash-flow forecast, sources of finance, location and the marketing mix.

3. 3

   Why does a business plan include the results of market research?

   Model answer

   Market research evidence shows there is a target market that wants the product. Lenders trust a plan backed by evidence more than one based on guesses.

4. 4

   Why does a business plan include forecasts of revenue, costs and profit?

   Model answer

   The forecasts show whether the business can expect to make a profit, and when. The owner can check whether the idea is financially worth pursuing.

5. 5

   Why is a cash-flow forecast included in a business plan?

   Model answer

   A cash-flow forecast shows when the business may run short of cash. The owner can arrange finance before a problem arises.

6. 6

   Why should a business plan state the sources of finance?

   Model answer

   The plan shows how much money is needed and where it will come from. Lenders can see how much the owner is investing personally.

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