What a business plan is
- A business plan is a document that sets out a business idea and how it will be achieved.
- It usually includes the aims and objectives, a description of the product or service, market research findings, marketing plans, operations (location and production), human resources, and finance (costs, expected revenue, a cash flow forecast, break-even and sources of finance).
Why businesses plan
- Planning helps the owner think the idea through and spot problems early, reducing risk.
- Banks and investors usually want to see a plan before lending or investing.
- The plan sets targets that progress can be measured against.
Limitations
- It is based on forecasts, which may be wrong. Things change, such as new competitors or a change in the economy. It takes time to write, and owners can be over-optimistic.
Key terms
- Business plan
- A document setting out a business idea and how it will be achieved.
- Forecast
- A prediction about the future, such as expected sales.
- Cash flow forecast
- A prediction of the money that will flow into and out of a business.
- Investor
- A person who puts money into a business, hoping for a return.
- Risk
- The chance that something will go wrong.
- Market research
- Gathering information about customers and competitors.