Business Plans (Edexcel GCSE Business)
Revision Note
Written by: Steve Vorster
Reviewed by: Jenna Quinn
Using a Business Plan to Obtain Finance
A business plan is a document produced by the owner at start-up, which provides forecasts of items such as:
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
The main aim of producing a business plan is to reduce the risk associated with starting a new business and help the owners to raise finance
Producing a business plan forces the owner to think about every aspect of the business before they start which should reduce the risk of failure
Elements of a business plan
Having carried out research to support the plan, the business will be well-informed about the potential problems and chance of success
The most appropriate source of finance can be selected, based on this information
A well-written business plan can help a business to obtain finance
Lenders (e.g. banks) and other investors will be able to explore the plan and make an informed decision about whether the business is credible and worth the financial risk
Investors (e.g. venture capitalists) will use the business plan to explore whether there is an opportunity to increase the value of their investment and make a worthwhile profit
The business, having carried out research to support the plan, will be well-informed about the potential problems and chance of success and can select the most appropriate source of finance based on this information
A clear action plan provides direction for the business
It helps lenders and investors have confidence in the future success of the business
Most high street banks can provide a detailed template for business owners to complete when applying for finance.
Examiner Tips and Tricks
A business plan cannot guarantee success - though it is very unlikely that investors or financial institutions such as banks would consider risking their money on a business without one!
Managers and business owners should keep the business plans up to date, treating it like a Curriculum Vitae (CV) for the business. It can help focus business activities and identify resources the business needs as well as providing justification to potential investors.
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