The Business Plan
Would a bank lend to someone with no plan? A business plan sets out the idea, the customers, the money and the risks in advance. Learn what it contains and why it matters.
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The plan
Would a bank lend money to someone with no idea how their business will work? Probably not. A business plan is a document that sets out the whole business in advance. This module is about what a business plan contains and why it matters.
Business plan words
Four ideas run through a business plan:
What is it for?
What is the main purpose of a business plan?
- To plan the business and help reduce the risk of failing
- To guarantee the business will make money
- To decide the staff holiday dates
- To avoid paying any tax
Plan or no plan?
Starting a business without a plan is risky. Compare the two.
What goes where?
- The business idea
- The target market
- Sources of finance
- The cash-flow forecast
- What the business will sell or do
- Who the customers will be
- Where the money will come from
- The money coming in and going out
Why write one?
A business plan has two big purposes. First, it MINIMISES RISK: thinking everything through in advance helps spot problems before they cost money. Second, it helps the business OBTAIN FINANCE, because a bank or investor wants to see a solid plan before lending.
Parts of a plan
Which THREE are parts of a business plan?
- The business idea
- Financial forecasts
- The target market
- A list of jokes to tell
- The colour of the office walls
Forecast the profit
In a business plan you forecast the profit. Profit = revenue minus costs. A business forecasts revenue of 5000 pounds and costs of 3000 pounds. What is the forecast profit, in pounds?
Write the plan
Put the sections of writing a business plan in a sensible order.
- Describe the business idea
- Research the target market
- Plan the marketing mix
- Forecast the revenue, costs and cash flow
- Set out the sources of finance
Complete the idea
A business _____ sets out the whole business in advance. It names the target _____ the business will sell to, and forecasts the revenue, costs and cash _____. It has two purposes: to reduce the _____ of failing, and to help the business obtain _____.
True or not?
Tap the TWO statements that are TRUE about a business plan.
- A business plan helps a business obtain finance.
- A business plan can help reduce the risk of failing.
- A business plan guarantees the business will succeed.
- A business plan lists the staff holiday dates only.
- Banks never look at a business plan.
Why the bank asks
Why does a bank want to see a business plan before lending money?
- To check the business idea is credible and likely to work
- To read it just for fun
- To copy the idea for itself
- To delay the loan for no reason
Which part helps?
A person is opening a new sandwich shop. Which part of the business plan helps with each problem?
- They are not sure who will buy their sandwiches. Which part helps?
- They need to borrow money to fit out the shop. What will the bank want to see?
- They want to check the shop will not run out of cash. Which part helps?
Plan it
A friend is starting a new cafe. Explain why writing a business plan would help them.
- Say what a business plan is
- Give two things it would contain
- Explain how it helps reduce risk
- Explain how it helps them get a loan