Pearson Edexcel Business IAS Complete Revision Notes Unit 2: Managing Business Activities (Paper/Unit code: WBS12 CHAPTER 23: PLANNING I. Business plan A plan for the development of a business, giving details such as the products to be made, resources nee

Pearson Edexcel Business IAS Complete Revision Notes Unit 2: Managing Business Activities (Paper/Unit code: WBS12 CHAPTER 23: PLANNING I. Business plan A plan for the development of a business, giving details such as the products to be made, resources needed & forecasts such as costs, revenues & cash flow. Initially, new businesses will create a plan to follow but changes in external factors will lead to changes in business plans. Business plan is a written document by the business regarding its operations. II. Relevance of a Business Plan A business plan is needed to support applications for finance, both at the start- up stage & in the future. Lenders & other investors are not likely to put money into a business unless the owners can provide a clear, concise vision of future progress & profitability. In particular, investors will want to know how their money is going to be spent & when & how they are going to benefit from their investment. III. Uses of a business plan 1. To show a clear direction for the development of a business. 2. Help show lenders & investors that the owner is cautious, responsible, serious & credible. 3. To flag up potential problems in advance so that investors are aware & solutions can be found. When the business creates a business plan, they can see the potential problem in advance & find solution. e.g., If the business decided to expand in the future, then they will have to increase their production. The problem is the source of finance. As a result, they can think of in advance where they will get the finance. IV. Contents of a Business Plan 1. An executive summary-usually business plan is very lengthy. So, there should be a summary of the whole business plan included on the business plan itself. 2. The business opportunity-a description of the product/ range of products to be made, the quantity to be sold & the estimated price. 3. Financial forecasts-It must be written in the business plan the cash outflows & inflows. e.g., sales forecast, cash flow forecast 4. The business & its objectives-the name of the business, its address, its legal structure & its aims & objectives. 5. Personnel-who will run the business, how many employees. 6. Finance-where the finance to start up & run the business will come from. 7. Premises & equipment-premises to be used, equipment which needs to be obtained & financed. Business plan is: o Mainly created by the owner o For future use 2