Business Plans & Government Support (Cambridge (CIE) O Level Business Studies): Revision Note

Contents of a business plan

• A business plan is a document produced by the owner at start-up, which provides forecasts of items such as sales, costs and cash flow

• 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

• The business idea

  • A clear explanation of the goods or services provided by the business, helping to attract investors

  • May also include the history of the business idea

• Business aims and objectives

  • What the business wants to achieve in the medium and long term

  • Aims can be both financial and non-financial depending on the business

• Target market

  • Explains who the business aims to serve, including age, gender, and income

  • Forms part of the firm's marketing strategy

• Forecast revenue

  • Projects the business’s anticipated income from sales

  • Calculated as: Sales Revenue = Price x Quantity Sold

  • Helps plan for break-even levels of output

• Forecast costs

  • Predicts fixed, variable, and total costs to manage spending effectively

  • New businesses often have high startup costs, such as initial stock

• Profit forecasts

  • Investors review profit forecasts to assess the business’s ability to repay borrowed funds, such as bank loans

• Marketing mix

  • Outlines the marketing strategy for attracting customers

  • Includes Product, Place, Price, and Promotion

• Cash-flow forecast

  • Explains management of cash inflows and outflows monthly to prevent liquidity issues

• Sources of finance

  • Details funding sources for the new business, such as loans, owner’s funds, or venture capital

• Business location

  • Describes the proposed business location, including a map and advantages like good transport links or customer proximity

How do business plans help entrepreneurs?

• The main aim of producing a business plan is to reduce the risk associated with starting a new business and help the owners raise finance

• Having carried out research to support the plan, the business will be well-informed about the potential problems and chance of success

• A well-written business plan can help a business 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

• A clear action plan provides direction for the business and 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

Government support of business start-ups

• Governments often provide support to entrepreneurs

  • This encourages them to set up new businesses or take steps to grow their business

• Reasons for providing government support include:

  • Increase the country's level of output to achieve economic growth

  • Reduce the level of unemployment as new or growing businesses create jobs

  • Improve choice for consumers by providing competition for existing businesses

  • Encourage entrepreneurs to set up social enterprises which may support disadvantaged groups or improve communities 

How governments support business start-ups

1. Training and support sessions

   • Advice regarding finance, operations and marketing can often be accessed through local authorities

   • Support sessions offered by business mentors allow entrepreneurs to ask specific questions related to their business

2. Enterprise zones

   • Enterprise zones are geographic areas which provide tax breaks and Government support to help businesses grow

     • Enterprise Zones can provide access to low-cost premises and incentives such as reduced business rates

     • They are often linked with universities that share expertise and facilities, especially in less economically-developed regions

3. Finance

   • Some governments provide low-interest start-up loans and grants for new or growing businesses that create jobs or invest in training workers