Why Write a Business Plan? (OCR GCSE Business)

The Role of a Business Plan

• A business plan sets out key aspects of a business and how the owners intend it to develop

It reduces the risk at start-up

• Producing a business plan helps reduce the risk associated with starting a new business

  • It forces the owner to think about every aspect of the business and organise business activities before they start, which should increase its chance of success

  • It helps a business focus on its chosen target market, as it includes market and competitor research, which provides clear direction

It helps the business raise funds

• A business plan can help the owners raise funds

  • A well-written business plan can help a business obtain financing

    • 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

It helps identify the operational resources required

• The business plan can help identify the key resources required to operate

  • Equipment, premises and vehicles that may be required should be included in the plan

  • Staffing needs, particularly if employees with specialist skills are required, should be considered

  • Infrastructure, such as power and communications networks, should be included in the plan

Benefits of Business Planning

• While business planning has numerous benefits, it should be weighed against a range of drawbacks

  • A business plan is only as good as the research behind it and the individuals who produced it

Evaluating Business Planning