AO11 Business Planning

- Someone with an IDEA & is willing to take the RISK to set up a business

- They show ENTERPRISE (taking the risk of setting up, running and investing in the business)

POTENTIAL RISKS: Losing money invested, Responsible for yourself and your income, Extra      Stress, Could be personally liable for debts 

WAYS TO REDUCE RISKS: Not taking a big bank loan, Loaning equipment vs buying it

POTENTIAL REWARDS: Doing a job you enjoy, Flexiability, Potentially a higher income 

WHAT IS A BUSINESS PLAN?

A written document describing the nature of the business, the sales and marketing strategy, and the financial background, and containing a projected profit and loss statement

WHY SHOULD YOU CREATE A BUSINESS PLAN?

- Helps ensure return from inital risk (profit, capital gain [made from selling the company] & self esteem / personal development)

- Allows the owners to review actual porgress against the plan & make changes if applicable

- Banks and Investors will want to see a business plan before investing / giving a loan

- The Idea (a simple description, where the idea came from & why it is a good one)

- Objectives (sales, profit & growth ideally for next 3-4 years to give a sense of direction)

- Finance (how much inital investment and loan details if applicable)

- Market Research (results from surveys, size of market, market growth & market share of main competitors)

- Operation (location, premesis, staff & distrubiton models)

- Marketing (target market, marketing mix)

- Cash Flow Forecast (plan how the business will spend, identify if it will run out of cash)

- Forecasted Revenue, Costs & Profits (to see if the business is porfitable)

- Start Up Costs (one off costs to begin trading) & Running Costs (day-to-day expenses)

- Profit (surplus of revenue)

PROFIT = REVENUE FROM SALES - TOTAL COSTS

FINANCIAL OBJECTIVES:

- Making a return for the owners 

RETURN ON INVESTMENT = (OPERATING PROFIT ÷ INVESTMENT) X 100

- Setting profit targets 

- Ensuring sufficent cash resources 

- Long term finance (how will the company pay for assets that will be owned for a long time)

GEARING: % of Company Funded by Debt 

GEARING = (DEBT ÷ TOTAL LONG TERM FUNDING) X 100

Def: Anyone with an interest in the actions of a business e.g. Employees, Owners, Customers, Investors, Banks, Government, Suppliers, Managers 

REASONS OF INTEREST:

- High wages, High profit

- Performance of business reflects their performance

- Value for money 

- To ensure profucts are sold

- Loans to be repaid

THEIR BUSINESS OBJECTIVES:

- Job security, Bonuses for good performance, High profit means more tax paid

- Providing a good product/service

OWNERS/STAKEHOLDERS

- forecasted return on investment 

- How expansion will be funded

- Potential cash flow issues 

POTENTIAL FUNDERS

- Weighing up different investment opportuinties 

- Degree of risk for them

- How profit will be made

SUPPLIERS

- Whether to offer credit