The Business Plan (SQA National 5 Business Management): Revision Note

The purpose of a business plan

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

1. It reduces the risk at start-up

• Producing a business plan helps reduce the risk associated with starting a new business

  • It forces the owner to think about every aspect of the business and organise business activities before they start, which should increase its chance of success

  • It helps a business focus on its chosen target market, as it includes market and competitor research, which provides clear direction

2. It helps the business raise funds

• A business plan can help the owners raise funds

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

    • 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 business, having carried out research to support the plan, will be well-informed about the potential problems and chance of success and can select the most appropriate source of finance based on this information

3. It helps identify the operational resources required

• The business plan can help identify the key resources required to operate

  • Equipment, premises and vehicles that may be required should be included in the plan

  • Staffing needs, particularly if employees with specialist skills are required, should be considered

  • Infrastructure, such as power and communications networks, should be included in the plan

Evaluating 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

The contents of a business plan

• Although there is no single way to structure business plans, they usually contain some common elements

Key elements in a business plan

• Most high street banks can provide a detailed template for business owners to complete when applying for finance

• 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

Elements in a business plan

Executive summary

• Provides a summary of the business idea, highlighting the unique selling proposition (USP), financial projections, and target market

• Should be concise but compelling enough to grab the reader’s attention and generate interest in the business plan

Company description

• Outlines the business’s mission, vision, and core values

• Includes information on the legal structure, business location, and any unique advantages or intellectual property the company holds

Market analysis

• Offers a detailed analysis of the target market, including size, growth potential, and key trends

• Identifies target customers and outlines their specific needs

• Provides a competitor analysis to understand rival strengths and weaknesses

Products or services

• Explains in detail the products or services the business will offer

• Highlights their features, benefits, and any competitive advantages they provide

Marketing and sales strategy

• Describes how the business plans to market and sell its offerings, including marketing channels and pricing strategies

• Explains how the business will attract customers and foster loyalty over time

Organisation, operations and management

• Details the organisational structure and introduces key team members, including their roles, qualifications, and experience

• Explains daily business operations, including production processes, stock management, and partnerships or suppliers

Financial projections

• Presents detailed financial statements, such as projected income statements and cash flow forecasts

• Outlines any funding requirements and includes current or potential sources of finance

Risk analysis

• Considers potential risks and challenges that could impact the business

• Explains how the business plans to address and manage these risks