Business planning
A business plan is a written document that sets out what a new business intends to do and how, typically covering its aims and objectives, target market, marketing plan, ownership structure and financial forecasts such as start-up costs and cash flow.
Method
- Learn the definition of a business plan and the sections it usually contains: aims or objectives, description of the product or service, market research findings or target market, marketing plan, ownership structure, and financial forecasts.
- Learn the three main purposes of a business plan: helping the entrepreneur clarify and test their own idea, helping judge whether the business is likely to succeed, and persuading external stakeholders such as banks or investors to provide finance.
- Learn what a bank or investor looks for in a plan before lending, such as evidence of market research, realistic financial forecasts, and how any loan would be repaid.
- For state or identify questions, name the section of a plan or its purpose directly, with no explanation.
- For explain questions, link a specific section of the plan, such as a cash-flow forecast, to the specific benefit it gives the entrepreneur or a named external stakeholder.
- Learn that a plan is a forecast, not a guarantee: unexpected changes, such as a new competitor or rising costs, mean real results can differ from the plan.
Worked example
Devon wants to open a food truck selling burritos. He needs to borrow 8,000 pounds from the bank to buy the truck and kitchen equipment. Explain one reason why writing a detailed business plan would help Devon secure this loan.
- Identify what the bank needs before lending: evidence that the loan is likely to be repaid, based on realistic figures rather than Devon's opinion alone.
- Identify what a business plan provides: financial forecasts, such as a cash-flow forecast, showing expected sales, costs and profit month by month.
- Link this to the bank's decision: seeing realistic, researched figures lets the bank judge whether Devon's food truck is likely to generate enough income to repay the loan.
- Write the explained answer: a detailed business plan would help Devon secure the loan because its financial forecasts give the bank evidence, rather than just Devon's word, that the food truck can generate enough income to repay what it borrows.
Practice questions
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Q1State one section usually included in a business plan.Show answer
Answer: For example, financial forecasts, market research findings, aims and objectives, or a marketing plan.
Q2Identify one external stakeholder who might ask to see a business plan before providing finance.Show answer
Answer: A bank, or another lender or investor.
Q3Give one reason a business plan helps the entrepreneur themselves, not just outside lenders.Show answer
Answer: It forces them to research and think through their idea in detail, which can reveal weaknesses before they commit money to the business.
Q4State the type of financial forecast that shows the money expected to flow in and out of a business month by month.Show answer
Answer: A cash-flow forecast.
Q5Explain why a business plan is not a guarantee of success.Show answer
Answer: Because it is based on forecasts and assumptions, and real events, such as a new competitor opening or costs rising unexpectedly, can mean actual results turn out differently.
Q6Give one piece of information a bank would want to see in a business plan before agreeing a loan.Show answer
Answer: For example, how the loan will be repaid, or realistic sales and profit forecasts based on market research.
Exam-style questions
Written in the style of a GCSE Business exam paper, with a full mark scheme.
Explain two purposes of writing a business plan.
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Some people argue that every new business, however small, should write a full, formal business plan before starting. Marcus is planning to offer weekend dog walking to five neighbours he already knows, using no borrowed money and no paid staff. Evaluate whether Marcus needs to write a full, formal business plan before starting.
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See real GCSE Business past-paper questions, with official mark schemes →
Free printable worksheet
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