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Business plans
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A business plan sets out what a business will do and how. It helps the owner think things through and convinces lenders to invest.
What goes in a business plan
The business idea, aims and objectives, the target market (from market research), forecast revenue, costs and profit, a cash-flow forecast, sources of finance, location and the marketing mix.
Why plan?
Planning reduces risk: the owner spots problems before spending money.
It helps to obtain finance: banks and investors want to see a plan before lending.
It gives targets to check progress against.
It helps to obtain finance: banks and investors want to see a plan before lending.
It gives targets to check progress against.
Limitations
A plan is based on forecasts, which may be wrong.
Things change: new competitors, new costs, a change in the economy.
A plan does not guarantee success.
Things change: new competitors, new costs, a change in the economy.
A plan does not guarantee success.
Why would a bank ask to see a business plan before giving a loan?
- The bank wants to know the business can repay.
- The plan shows forecasts of revenue, costs and cash flow.
Answer: To judge whether the business is likely to repay the loan.
A business plan covers the idea, objectives, target market, financial forecasts, cash flow, finance, location and marketing mix. It reduces risk and helps get finance, but forecasts can be wrong.
Check you have got it
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