Reasons for setting up a Business Plan
- To identify who runs the operations of the business
- To distinguish to potential moneylenders is the business going to be profitable
- To identify how to raise finance
Sections of a Business Plan
2. Ownership: this topic briefly identifies the entrepreneur, their history of education, work experience etc.
3. Management breakdown: How business is run (sole trader, partnership, limited company). It also lists who is production manager, marketing manager, financial manager etc. and any key staff in the business.
4. Operations/production: identifies how the business operates, what premises/equipment raw materials is required. It also details what type of production method is used.
5. Marketing: This section describes the market, its size, its competitors, and its target market. It also highlights the USP that the product has as a key method in promoting product. It also details the marketing strategy in the form of marketing mix (4 p’s) that the business has.
6. Financial: This will include figures of
- Start up costs – premises, equipment
- Sources of finance -grants, loans,savings
- Expected profitability – budgets, a forecasted trading profit and loss account.
This in mainly broken into three strands:
- Sole trader
- Limited company
- Batch production
- Mass production
- Job production
Choosing Financial Options
Factors to consider
- Purpose of the finance needed
- Amount of money the business needed (i.e.) if small amount needed will a short term loan be sufficient, if large sum needed will a long term loan or investors be adequate
- Control – will the business person be comfortable in the knowledge that in order to raise finance he/she may have sacrifice a valuable share of the business
What banks will look for before agreeing a loan
- Purpose of money your looking for
- Your ability to repay
- Credit worthiness in any previous dealing with bank
- The security you can place against the loan in case of any problem arising on repayments
- Business plan that has a detailed description of business model
- Feasibility study on the particular product may be seen as being well researched, Evaluation can now be done where banks can make a well-informed decision
Sources of Finance
- Long Term – (3+) years
- Govt grants
- Equity Investment
- Long term loans
- Term loans
- Hire Purchase
- Bank overdraft
- Accrued expenses