1.3 Business Planning 1 S TARTING A B USINESS 1.3 B USINESS P LANNING Do you write a plan before starting an essay? What are the advantages of writing a plan? Are there any disadvantages?

1.3 B USINESS P LANNING  In this topic you will learn about  The purpose of business planning  The main sections within a business start-up plan  Uncertainty and risk for start-up businesses 1.3 B USINESS P LANNING Proverb: Code word - - / - - o / / - - / , / p / - - / / / / 10 4 / / / 10 4 /

1.3 B USINESS P LANNING T HE PURPOSE OF BUSINESS PLANNING What is a Business Plan? ’A business plan is a written document that describes a business, its objectives, its strategies, the market it is in and its financial forecasts.’ A Business Plan is used both internally, for use by the company management, and externally, by banks and external investors.

1.3 B USINESS P LANNING T HE PURPOSE OF BUSINESS PLANNING In the same way a firm will use a business plan to help them meet its objectives. These include:  How to finance the business e.g. banks, friends/family, grants  Estimating costs and revenues  What problems might arise  What can the firm realistically achieve (SMART) Do you know where you’re going to? What are your objectives in studying Business Studies Write down a list of skills, qualifications & experience that you will need to go to university or get a career What is the purpose of a Business Plan?

T HE PURPOSE OF BUSINESS PLANS  Would you start to build a house without a drawing?  Would you set off on a day trip without a route, destination and cash?  Would you borrow £10,000 without any idea why you wanted it?  Would you have a party without a venue, reason, guest list and refreshments?  Would you start a business without a plan? 1.3 B USINESS P LANNING WHY NOT?

T HE PURPOSE OF BUSINESS PLANS  Provide a sense of direction  Help secure investment  Predict outcomes  Measure performance  Outline actions  Define responsibilities 1.3 B USINESS P LANNING Proverb : Code word / o - - / / / / /

P URPOSE OF BUSINESS PLANS 1.3 B USINESS P LANNING 22 year old Mustapha wants to run his own market stall selling Turkish pastries and sweets at food markets around the UK. Mustapha has £2000 of his own savings but needs an additional £3000 to buy sufficient stock and reserve stalls at forthcoming events before he can start trading. Mustapha has asked family and friends for help but nobody has any spare funds so they have suggested he approaches a bank. His mother warns him that before going to the bank he must have a business plan. Question time 1.What is meant by the term “business plan”? (2 marks) 2.Explain one reason why Mustapha should draw up a business plan before visiting the bank. (4 marks)

1.3 B USINESS P LANNING T HE MAIN SECTIONS WITHIN A BUSINESS START - UP PLAN Section titleWhat is it? Aims/missionThe goal of the firm PeopleSkills of the management and workforce Product or serviceWhat the firm sells The MarketSize of the market; growth CompetitionHow many other firms MarketingPrice, Product, Promotion, Place FinanceWhere sources of funding come from OperationsLocation and the resources required ForecastsCosts, revenues and profits

T HE MAIN SECTIONS WITHIN A BUSINESS PLAN 1.3 B USINESS P LANNING Team Time Is there an empty shop or piece of land near your school, or even a space within school? In small groups think of a small business that you think would be successful here. Prepare a draft business plan for your proposed use of the site. Make a note of any assumptions you have made. Present your business plans to the rest of the class. Select one or two pitches from Online Dragons’ Den and rate them. Look for specific content that you would expect to find in a business plan.

1.3 B USINESS P LANNING U NCERTAINTY AND RISK FOR START - UP BUSINESSES Where would you place yourself on the Risk Taker Scale? Where would you place your colleagues. Place 2 other people in your class on the scale and compare your judgement with theirs? Who do you consider to be risk takers in the world of: Entertainment? Sport? Business? What is a risk taker? “A person who is not fearful of uncertainty and may even enjoy risky, speculative situations. He or she is a person who will take a chance or gamble in the hope of winning.” Is risk taking good or bad? Do you consider entrepreneurs to be risk takers? Low Risk Taker High Risk Taker

1.3 B USINESS P LANNING U NCERTAINTY AND RISK FOR START - UP BUSINESSES The risks The main risk for a start-up business is failure and the loss of assets Why do they fail? Lack of experience Over confidence Lack of finance – poor cash flow Inadequate market research The state of the economy Uncertainty We do not know what will happen in the future. Start-up businesses need to minimise the risks they face

1.3 B USINESS P LANNING U NCERTAINTY AND RISK FOR START - UP BUSINESSES What can be done to minimise risk?  Seek guidance - small business advisers, banks, government agencies  Know your market - there is no substitute for good market research  Plan your finances - cash flow is vital for a business  Recruit the right people - for a small business recruiting and motivating staff can be the difference between success or failure  Have realistic objectives - be SMART Can you remember what it stands for?

U NCERTAINTY AND RISK FOR START - UP B USINESSES 1.3 B USINESS P LANNING Times were sweet, Mustapha had taken his mother’s advice and drawn up a detailed business plan before visiting the bank. He had secured a bank loan, purchased his introductory stock and reserved stalls at 3 big outdoor food markets. “Surely this is the start of something great “ he had thought to himself. Question time 1.State three things Mustapha should have included in his business plan. (3 marks) 2.Explain two advantages to Mustapha of having drawn up a business plan. (6 marks) Recap 1.2 What do you think Mustapha’s business objectives are?

U NCERTAINTY AND RISK FOR START - UP B USINESSES 1.3 B USINESS P LANNING Question Time continued 3. Would completing a business plan make sure that Mustapha was successful? Give reasons for your answer.9 marks Plan your answer! You need to give 2 sides of an argument before reaching a conclusion Can you explain one reason why a business plan would ensure success? Can you explain one reason why a business plan would not ensure success? Overall, what do you think? Does it ensure success or not? Review mark scheme Over to you! Time to show off what you have learnt.