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Study Notes

Planning a New Business (GCSE)

AQA, Edexcel, OCR, IB

Last updated 22 Mar 2021

What is a business plan?

A business plan is a written document that describes a business, its objectives, its strategies, the market it is in and its financial forecasts.

The business plan has many functions, from securing external funding to measuring success within the business.

Benefits of business planning to a start-up

The main reasons why a start-up should produce a business plan are:

  • Provides a focus on the business idea - is it really a good one, and why?
  • Producing a document helps clarify thoughts and identify gaps in information
  • The plan provides a logical structure to thinking about the business
  • It encourages the entrepreneur to focus on what the business is really about and how customers and finance-providers can be convinced
  • It helps test the financial viability of the idea - can the business achieve the required level of profitability and not run out of cash?
  • The plan provides something which can be used to measure actual performance
  • A business plan is essential to raising finance from outside providers - particular investors and banks

Questions a start-up business plan should answer

A business plan needs to address the issues of interest to the reader and user.

Assuming that the plan is meant to be read by potential finance providers (e.g. a bank, business angel or venture capitalist) then it ought to provide convincing and realistic answers to questions such as:

  • What is the business idea or opportunity?
  • What is the product and how is it different or unique?
  • What is the target market segment and who are the potential competitors?
  • How large is the target market and is it growing?
  • Who are the customers; how much will they buy and at what price?
  • What will it cost to produce and sell the product?
  • Can the product be made and/or sold profitably?
  • At what stage will the business break-even and what are the likely profits?
  • What investment is required to launch and establish the business?
  • Where will the money come from and what type of finance is required?
  • What are the main risks facing the business and how to handle them?

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