Thursday 26 September 2013

7 Planning a business enterprise

Did you know that many businesses fail before they reach their first anniversary?

The exam board expects you to know:

  1. How business planning assist in the setting up a business and the raising of finance.
  2. What the main sections of a business plan are
  3. It does not expect you to write one

Having a great idea on ts own is not enough to make an entrepreneur successful.

Putting the idea into practice requires some careful consideration and planning.  The entrepreneur will need to check that the business will work, what staff and equipment will be required, what the market is like, where the raw materials can be bought. Unless the entrepreneur is able to finance the idea out of his own pocket the FINANCE will need to be BORROWED.  If the finance is borrowed by someone younger than 18 years then that person would need someone to guarantee the debt and they would be known as a GUARANTOR. Before banks will approve loans they need to know that there is a great chance of it's SURVIVAL.  The best way to convince the bank is to submit a BUSINESS PLAN. Planned businesses have a much better chance of survival. This PowerPoint may help you understand better

Business plans can be written in different ways and are made up of different sections:

  • The Business Idea - This will describe what exactly the PRODUCT or SERVICE is.It should also explain how it will be different from whats already available on the market.
  • The Management - Banks will want to know that the business is in  good hands.  If they have doubts about the management they may be reluctant to lend.  The details of the managers should include their business experience, how does their track record look on previous projects, how well have they managed employees, do they have experience of managing finance and marketing activities.
  • The Market - This section should include a description of the typical customer who is likely to buy the product or service.  Details of the competition and what makes this product different.  It should also detail the UNIQUE SELLING POINT.  Market research could include questionnaire feedback, surveys or interviews of potential customers.
  • Selling the product - How will the product be sold, will it be sold through a retail outlet like a shop, a market stall or direct through the internet.
  • Finances - Will the business be profitable and when will this start. The cash-flow forecast will be very important as this will determine how quickly the money is coming in and going out and how much the entrepreneur / owner is taking for living expenses.
Questions you need to be able to answer in the exam!
  1. What is a business plan?
  2. Who is likely to be interested in reading the business plan?
  3. What are the main sections of a business plan?
  4. Why do banks need 'guarantors'?
  5. Why might it be difficult for a new business to produce a cashflow forecast for the next three years?
  6. Why do banks want to know about the previous management experience of the entrepreneur before giving him or her a loan?
  7. What is meant by a 'credit risk'?
  8. Give three sections that a business plan is likely to have.
  9. Is a well written business plan better than a good business idea
  10. Why does a business plan help you reduce the risk of failing in the first year?

9 mark question click here

Homework 10/10 key terms associated with business planning
  1. Business Plan - a statement showing how a business sets out to achieve its aims and objectives today and in the future
  2. Distribution - How a business plans to get its products to the customer.
  3. Marketing - the decisions around getting the right product , in the right place at the right time and at the right price
  4. Production - The process of combining the raw materials or components to create the product. 
  5. Competition - the other businesses in the market providing a similar product using price or quality and service to win customers
  6. Mission statement  - a strapline the company uses to summarise the business aims and objectives in the mind of its customers and employees.
  7. Forecast - a technique where the business attempts to estimate future sales
  8. Risk - the possibility of something going wrong
  9. Funding - the capital (cash) provided for the various stages of business growth using long term or short term sources of finance 
  10. Credit risk - the risk of people who have been allowed to receive goods without paying for them or borrowed cash and the likelihood of them not being able to eventually pay for them or pay back the cash.

To be tested week commencing 30th September 2013

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