Business Plans (Cambridge (CIE) A Level Business): Revision Note

The meaning and purpose of business plans

• A business plan sets out key aspects of a business and how the owners intend it to develop

• The main aim of producing a business plan is to reduce the risk associated with starting a new business and help the owners raise finance

  • Producing a business plan forces the owner to think about every aspect of the business before they start, which should reduce the risk of failure 

  • Having carried out research to support the plan, the business will be well-informed about the potential problems and chance of success

  • They can use it to select the most appropriate source of finance based on this information 

• A well-written business plan can help a business obtain finance

  • Lenders (e.g. banks) and other investors will be able to explore the plan and make an informed decision about whether the business is credible and worth the financial risk

  • Investors (e.g., venture capitalists) will use the business plan to explore whether there is an opportunity to increase the value of their investment and make a worthwhile profit

The key elements of business plans

• A business plan should be a regularly-updated working document

  • As the business grows plans are likely to change as it faces new threats and opportunities

Explanation of the business plan

Executive summary

• This section provides an overview of the business idea, its unique selling proposition, target market, and financial projections

  • It should be concise yet compelling enough to grab the reader's attention

Company description

• A description of the business mission, vision, and values
  Information about the legal structure, location and any unique advantages or intellectual property the business may have

Market analysis

• A thorough analysis of the target market, including its size, growth potential and key trends

• Identification of target customers and their needs

• A competitor analysis to understand their strengths and weaknesses

Products or services

• A detailed explanation of the products/services the business will offer, highlighting their features, benefits and any competitive advantages they may have

Marketing and sales strategy

• A description of the intended marketing and sales approach, including marketing channels, pricing strategy and promotional tactics

• A description of how customers will be attracted and their loyalty captured

Organisation and management

• An overview of the organisational structure of the business and the key members of the team, including their qualifications, experience and responsibilities

Operations and implementation

• A description of how the business will operate on a day-to-day basis, including the production process, stock management and any key partnerships or suppliers

Financial projections

• A detailed financial forecast for the business, including cash flow forecasts

• An outline of funding requirements and any existing or potential sources of finance

Risk analysis

• A consideration of the potential risks and challenges the business may face and the intended strategies for mitigating them

The benefits and limitations of business plans

• While business planning has numerous benefits, it should be weighed against a range of drawbacks

  • A business plan is only as good as the research behind it and the individuals who produced it

Advantages and disadvantages of business plans