Business Plans & Government Support (Cambridge International IGCSE Business)

Contents of a Business Plan

Spec point — "• Contents of a business plan and how business plans assist entrepreneurs • Why and how governments support business start-ups, e.g. grants, training schemes"

Contents of a business plan

• A business plan is a document produced by the owner at start-up, which provides forecasts of items such as sales, costs and cash flow

The main elements included in a business plan, although some differ slightly depending on the nature of the business

• 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

Elements of a business plan

• The business idea

  • A clear explanation of the goods or services provided by the business, helping to attract investors
  • May also include the history of the business idea

• Business aims and objectives

  • What the business wants to achieve in the medium and long term
  • Aims can be both financial and non-financial depending on the business

• Target market

  • Explains who the business aims to serve, including age, gender, and income
  • Forms part of the firm's marketing strategy

• Forecast revenue

  • Projects the business’s anticipated income from sales
  • Calculated as: Sales Revenue = Price x Quantity Sold
  • Helps plan for break-even levels of output

• Forecast costs

  • Predicts fixed, variable, and total costs to manage spending effectively
  • New businesses often have high startup costs, such as initial stock

• Profit forecasts

  • Investors review profit forecasts to assess the business’s ability to repay borrowed funds, such as bank loans

• Marketing mix

  • Outlines the marketing strategy for attracting customers
  • Includes Product, Place, Price, and Promotion

• Cash-flow forecast

  • Explains management of cash inflows and outflows monthly to prevent liquidity issues

• Sources of finance

  • Details funding sources for the new business, such as loans, owner’s funds, or venture capital

• Business location

  • Describes the proposed business location, including a map and advantages like good transport links or customer proximity

How Business Plans help Entrepreneurs

How do business plans help entrepreneurs?

• 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

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

• 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

• A clear action plan provides direction for the business and helps lenders and investors have confidence in the future success of the business

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

Government Support of Business Start-ups

• Governments often provide support to entrepreneurs

  • This encourages them to set up new businesses or take steps to grow their business

• Reasons for providing government support include:

  • Increase the country's level of output to achieve economic growth
  • Reduce the level of unemployment as new or growing businesses create jobs
  • Improve choice for consumers by providing competition for existing businesses
  • Encourage entrepreneurs to set up social enterprises which may support disadvantaged groups or improve communities

How governments support business start-ups

1. Training and support sessions

• Advice regarding finance, operations and marketing can often be accessed through local authorities
• Support sessions offered by business mentors allow entrepreneurs to ask specific questions related to their business

1. Enterprise zones

• Enterprise zones are geographic areas which provide tax breaks and Government support to help businesses grow

  • Enterprise Zones can provide access to low-cost premises and incentives such as reduced business rates
  • They are often linked with universities that share expertise and facilities, especially in less economically-developed regions

1. Finance

• Some governments provide low-interest start-up loans and grants for new or growing businesses that create jobs or invest in training workers