The Purpose of a Business Plan
Why a business writes a plan, from raising finance to setting objectives, the main sections a plan contains, and the benefits and drawbacks of planning.
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Free interactive practice at using the material, which is what the marks are for.
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A map before the journey
Starting a business is a risky step, and a plan is the map that guides it. A business plan sets out what the business will do, who it will sell to, and how it will be run, so the owner can think it through before spending any money. This module looks at why a plan is written, what it contains, and where planning helps and where it falls short.
Planning words to know
Learn these before you sort the purposes.
With a plan against without one
A plan changes how ready a new business is.
Name the purpose, show the value
In the exam, take each purpose of a plan and say what it does for the business. A plan helps set up the business, it persuades a lender to provide finance, it sets clear objectives, and it shows how the parts of the business fit together. You do not have to write a plan yourself, only explain why one is useful.
Match the purpose
- to help set up
- to raise finance
- to set objectives
- to organise the functions
- think the new business through first
- show a lender the business is sound
- set clear goals to aim for
- show how the parts fit together
Match the section
- the business idea
- the market research
- the marketing plan
- the people section
- what the business will sell and its aims
- what customers want and who rivals are
- how the product will be promoted and priced
- who will run and staff the business
Why show a plan to a bank?
Why might the owner of a new business show a business plan to a bank?
- To persuade the bank to provide the finance the business needs.
- Because banks enjoy reading long documents.
- Because the law forces every shopper to read it.
- To sell the plan itself for a profit.
Benefits of planning
Select the TWO genuine benefits of writing a business plan.
- Problems can be spotted before they cost money
- It makes raising finance easier
- It guarantees the business will succeed
- It removes the need to do any work
Count the sections left
A business plan is to have 6 sections in total. The owner has finished writing 4 of them. Subtract to find how many sections are still to write. What is the answer?
Order the planning
Put the steps of planning a new business in order, earliest first.
- Set out the business idea and aims
- Research the market
- Write the plan and its sections
- Use it to seek finance
Complete the summary
A business plan helps an owner think a new business through and set clear _____. A strong plan also makes it easier to raise _____ from a lender. A drawback is that a plan takes _____ to write and can quickly go out of _____ as things change.
Spot the purposes
Tap the TWO items that are real purposes of a business plan.
- to help raise finance
- to set clear objectives
- to decorate the office wall
- to boast to friends
Advise the owner
Read each case and choose the best answer.
- A new owner wants a bank loan to open a cafe. What will help persuade the bank?
- An owner asks which part of the plan says who the customers are and who the rivals are. Which section is it?
- An owner complains the plan written a year ago no longer matches the market. What drawback is this?
Explain the value of a plan
Explain why a new business writes a plan, what a plan contains, and one drawback of planning.
- Give two purposes of a business plan
- Name two sections a plan would contain
- Explain one drawback of writing a plan