Business plans flashcards

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Purpose of business plan?

Guide owner; secure finance from bank/investors; clarify strategy.

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Key sections?

Summary, mission, market, marketing, ops, management, finances.

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Why cash-flow forecast?

Shows when cash shortfalls occur — survival issue (5.3.1).

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Market research role?

Validates demand before committing capital (3.2).

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Limitation?

Forecasts based on assumptions — market may change.

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For bank loan?

Emphasise repayment ability, collateral, realistic cash flow.

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For investor?

Emphasise growth potential, return on investment, exit strategy.

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Link to 5.1.1?

Plan quantifies start-up and working capital needs.

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What is a business plan?

A formal document that sets out a business's objectives and the strategies and financial forecasts required to achieve them. It is used for internal planning and to attract external finance.

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What is the purpose of an executive summary in a business plan?

To provide a concise, compelling overview of the entire business plan, designed to capture the reader's interest and persuade them to read the rest of the document. It summarises the key points.

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What is the primary focus of a lender when reviewing a business plan?

A lender's primary focus is on risk mitigation and the certainty of repayment. They scrutinise cash flow forecasts, profitability, and the availability of collateral to secure the loan.

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What is the primary focus of an investor when reviewing a business plan?

An investor's primary focus is on the potential for high growth and a significant return on their investment. They look for scalability, a strong management team, and a clear exit strategy.

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Identify a key limitation of a business plan.

A key limitation is that it is a static document based on forecasts, which can quickly become outdated in a dynamic market, potentially leading to inflexibility and poor decision-making if followed too rigidly.