Business plans

Business plans

What is a business plan?

A document designed to provide sufficient information about a

new or existing business to convince financial backers to

invest in the business. The business plan will cover all

aspects of the business from the proposed marketing

strategies to the financial forecasts.

Business plans

Purpose of a business plan

There are three key purposes of any business plan:

1. To clarify the idea: this is particularly important when the

idea is complex and any potential investors are in doubt on

the viability of the business.

2. To gain finance: a bank or any other financial provider will

not agree to finance any business without a suitable business

plan in place.

3. To monitor progress over time: this links into the

motivational aspect of a business plan and can set targets for

the owners and employees.

Business plans

Contents of a business plan

The contents will vary depending on the type of

business & the expertise of the entrepreneur.

However, these will always break down to

financial and non-financial items.

Business plans

Non-financial items

• Summary of the business

• Personal information (CV of owners)

• Target audience

• Objectives (they should be SMART)

• Marketing plan

• Primary and secondary research

• Competitors

Business plans

Financial items

• Capital input

• Projected revenue

• Projected profit and loss

• Cash flow

• Budgets

Business plans

Real-life business plans

Go to the following websites:

- www.natwest.com

- www.barclays.co.uk

Look at the example business plans that potential lenders will

need to complete. Compare them to the previous two slides.

A bank will ask a number of questions on the potential

competitors and will go into depth on the 4 Ps of marketing.

These are priority questions in identifying a viable business

proposition.

Business plans

Pros and cons

There are a number of advantages and disadvantages of completing a business plan.

Business plans

Pros

• Will encourage more potential investors and banks.• Can monitor progress. If things are not going to

plan then this will be highlighted and it might be easier to identify the source of the problem.

• Clear objectives motivate the owners and employees.

Business plans

Cons

• A business plan can be time consuming to A business plan can be time consuming to complete and this could be difficult for new complete and this could be difficult for new entrepreneurs who have many other things to do, entrepreneurs who have many other things to do, such as plan their primary research and maybe such as plan their primary research and maybe even design their new shop.even design their new shop.

• They are only forecasts, which could be way off. They are only forecasts, which could be way off. Costs can be unpredictable and the process of Costs can be unpredictable and the process of predicting them could be considered a waste of predicting them could be considered a waste of time.time.

• A plan doesnA plan doesn’’t consider volatile market conditions t consider volatile market conditions e.g. predicting things like energy bills is difficult.e.g. predicting things like energy bills is difficult.