2.1.4 Business planning Flashcards

1
Q

What is a business plan?

A

a written document that sets out the businesses objectives, strategies for achieving them and its financial forecasts

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2
Q

Benefits of a business plan

A

-access to source of finance
-measuring performance
motivational/directional
-creating it forces a business to consider the direction of the business

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3
Q

How does producing one help to reduce risk?

A
  • forces a business to conduct market research
  • creates plans and contingency plans
  • consider funding and cash flow planning
  • consider the external environment and SWOT/PESTLE
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4
Q

Which groups of people might be interested in seeing a business plan?

A
  • banks
  • venture capitalist
  • business angels
  • potential partners
  • suppliers
  • senior leaders
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5
Q

What are the sections in a business plan, and where does this information come from?

A
  • market information (size, growth, competitors, market share)
  • marketing mix
  • operational plan (location, production methods, staffing, logistics)
  • financial forecasts (cash flow forecast, break-even)
  • aims and strategies
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6
Q

What are the limitations of a business plan?

A
  • can become out of date quickly (unexpected changes in the external environment)
  • time consuming (entrepreneur may not have the skills to complete all sections)
  • the act of planning does not mean the plan will be a success as the business actually has to implement the plan
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7
Q

Why does a business write a business plan?

A
  • to persuade lenders
  • Attract potential investors to the business
  • To give the owners some direction
  • objectives that can be followed
  • To monitor their effectiveness
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8
Q

What is included on a business plan? - Cash flow forecast

A
  • A cash flow forecast on the plan will show the expected income and expenditure of a business over the coming year
  • Cash flow forecast will help to show a bank that the interest rates can be afforded on any finance that they borrow
  • Cash flow forecast will show the liquidity of the business (how quickly it can raise cash) and its ability to pay its bills
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