Business Plan: Purpose and Content

• A business plan details a business's future plans.
• Business owners use a business plan to explain how they plan to turn their idea into a successful business.
• Business plans can be shown to banks or investors when asking them for finance.

Why Write a Business Plan?

• To persuade lenders that the business will generate enough profit to pay back any finance taken out.
• A business plan is meant to attract potential investors
• Business plans give owners a direction to follow.
• Well-written business plans act as guides.
• Business plans help set SMART targets and objectives to follow.
• Business plans identify any potential problem areas early on.
• Business plans monitor effectiveness; compare aims with year-end results.

What's Included in a Business Plan?

• A cash flow forecast shows expected income and expenditure over the coming year.
• The cash flow forecast demonstrates that interest rates can be afforded on any borrowing.
• A cash flow forecast shows the business's ability to raise cash quickly and pay bills.
• A business plan does not improve cash flow, because that depends how well a business trades.
• Business plans also include:
• Name of the business.
• The products or services offered and target market.
• Marketing's 4 Ps: product, price, place, and promotion.
• Human resources, including who is working there, managers, and owners.
• Estimates production costs and potential material suppliers.
• Provides details of the premises and how it will be financed (rent, mortgage, bought outright, or leased).
• Financial information, including projected revenue, costs, and profits.

Purpose of a Business Plan Introduction

• Business plans:
• Help to set up a new business.
• Help the business raise finance.
• Help the business to set objectives.
• Outlines how functions of the business will be organised

Setting up a New Business

• A business plan helps entrepreneurs decide resource needs:
• Human resources, e.g. staff for a clothes shop.
• Equipment, e.g. scissors or sewing machine.
• Raw materials, e.g. cloth or lace.
• Technology, e.g. till or business computer.
• Vehicles, e.g, like a company van.

Raising Finance

• A business plan may persuade lenders that the business will be able to pay back with interest and loan capital on any finance taken out.
• A business plan should include a cash flow forecast and sales forecasts.
• A business plan may obtain finance from venture capitalists, banks, angel investors, or even family members.
• Lenders need to see numbers that show the business will grow and profit.
• Better financial information makes lenders more confident, reducing risk for investors.
• Business plans can help the business negotiate a lower interest rate on a bank loan.
• Business plans help the owner to negotiate a lower percentage of equity to the venture capitalists or angel investors.

Setting Objectives

• Business plans clarify how a business aims to achieve goals.
• As an example, business plans detail planned activities such as a new restaurant launch night.
• Business plans highlight projected sales and profits for potential investors

SMART Objectives

• SMART targets and objectives should be followed.
• Business owners monitor whether they are meeting business objectives.
• Growth and future development can be included in the business plan.

Organisation of Business Functions

• A business plan shows how many staff are in which location for various departments:
• Production
• Marketing
• Human Resources
• Accounting and finance