Business Plans
Business: Cambridge International GCSE (2027 Exams), topic 1.3.12
Business Plans
It is important for any new or existing business to create a plan in order to have an understanding of how it plans to achieve its aims and objectives. There are 4 key reasons why businesses create plans:
Important for new businesses
- It is important for a new business to have a plan for the owner to clarify their thoughts and plans and for a potential investor like a venture capitalist or bank manager. A detailed plan lets the owner and financial backers think about the business idea in depth.
- When Peter Jones and Theo Paphitis invested in Levi Roots Reggae Reggae Sauce, they asked to see Levi’s business plan before they committed to providing their expertise and investment.
Raising finance
- To decide whether to give finance to a business, investors and banks need in-depth financial information.
- A business plan can provide detailed info about the costs and expected revenue for a company and this can be used to convince financial backers that they should invest.
- When Facebook raised finance from venture capitalists to grow and when Snap Inc listed on the New York Stock Exchange they had to provide business plans.
Setting objectives
- A plan lets a business clearly set out what the business’ objectives are and how they are going to go about achieving them.
- These specific business objectives help firms to achieve their aims as they are measurable targets for the firm to work towards.
- It also allows a business to see which areas (growth, sales, profits etc.) they need to improve and which they are doing well on. If they fail to meet an objective then it can be easier to understand why it was not met.
Business organisation
- By detailing how functions of the business will be organised, a business plan can help improve the way that a business is run.
- It helps businesses, particularly smaller ones, to think logically about the most efficient way to run a business.
- A local cafe can plan its purchasing, pricing and staffing in a business plan that can help it manage its operations.
Test yourself on Business Plans
What are the 4 key reasons why businesses create plans?
Who would not be particularly interested in a new business' plan?