OCR GCSE Business (1-9)

Business 1 (01)

1.2 Business Planning

From the OCR specification

• The purpose of planning business activity

– Reducing risk, helping a business to succeed

• The role, importance and usefulness of a business plan

– Identifying markets, help with obtaining finance, identifying resources a business needs to operate, achieving business aims and objectives

Worksheet

Lesson objectives• To be able to describe the purpose of planning

business activity

• To be able to discuss the role, importance and usefulness of a business plan

Starter• Where do you want to be in 3 years time?

• In 13 years?

• In 30 years?

• How far does your plan go?

• Why do you think a business would need a plan?

What is a business plan?

• A document which sets out the future plans for a business

• It is how an entrepreneur will explain how they will turn their idea into a successful business

• The entrepreneur may then show the plan to a bank to ask for a business loan

TO BE ABLE TO DESCRIBE THE PURPOSE OF PLANNING BUSINESS ACTIVITY

How does a business

plan help a company

to succeed?

• If a business owner has clear plans, aims and objectives for the business then they are more likely to be focussed on achieving those goals

• Making goals official by writing them down in a formal document gives everyone in the business an idea of where the company will grow and develop

Helping a business to succeed

• To give the owners some direction – once a plan is written down it is more likely to be followed

• To identify early on any problem areas that the business might face

Download the Princes Trust Business plan pack PDF HERE

How does a business

plan help to reduce

risk when starting up a

business?

• A business plan can help to reduce the risk of failure when a business first starts up

• If the owner has to write down the future plans and finances of the business – they will be more likely to spot a potential problem

• For example a business owner may prepare a cash flow forecast and find they need finance in certain months

Reducing risk

• A carefully written business plan will reduce the chance of business failure

• An entrepreneur may include in the plan:

– Details about insurance

– Financial forecasts

• The information in the plan will help to reduce the risk of failure.

THE ROLE, IMPORTANCE AND USEFULNESS OF A BUSINESS PLAN

How does a business

plan help a business

owner to identify a

market?

• A business plan can help to identify a market by encouraging the owner to research the potential customers

• These could be in a certain market sector – for example selling resources to schools

• It may also help to profile the customers – for example business teachers who are looking for class resources

Identifying markets

• A business plan can help an entrepreneur to identify different markets where the product or service can be sold

• A market could be a certain group of people that you wish to sell to; for example Harley Davidson motorbikes to bikers

• A market could be a geographical area, for example Derbyshire

How does a business

plan help to obtain

finance for the

business?

• A business plan may help to obtain finance from; venture capitalists, banks, angel investors, or even smart family members

• They are going to want to see numbers that say your business will grow and that they can make a profit

• The better the financial information, the more confident they will be in investing – after all they don’t want to lose their money

Help with obtaining finance

A business plan may help to persuade lenders that the business will make enough profit to be able to pay back interest and loan capital on any finance taken out

A business plan should include a cash flow forecast and sales forecasts (best guess)

How does a business

plan help to identify

resources needed to

start or run a business?

• A business plan can show the input – process – output of creating the product or providing the service

• This may help to flag any critical resources that will be needed by a business

• For example a new restaurant business will need a great chef (human resources), ovens, fresh ingredients, premises, tables, chairs, waiters etc

Identifying resources a business needs to operate

A business plan will help an entrepreneur to decide what resources they need to start their business:Human resources; For example the staff

needed for a clothes shopEquipment; For example scissors and a

sewing machineRaw Materials; for example cloth or laceTechnology: for example the till or

business computerVehicles; for example the company van

How does a business

plan help the business

owner to achieve their

aims and objectives?

• A business plan can show how a business aims to achieve its goals

• For example it may show any planned activities of the business – a launch night for a new restaurant

• It should also show how these aims will be financed

• It should also show any potential investors what amount of sales and profit the business aims to achieve

Achieving business aims and objectives

• A business plan should set targets (SMART) and objectives that can be followed for the business

• The entrepreneur can then monitor if they are meeting their objectives

1) True or false; a business plan sets out the future plans for a business

2) Who would normally write a business plan?

3) A carefully written business plan can reduce the chance of ………….?

4) How can a business plan help to obtain finance?

5) Which of these is not a business resource; a van, staff, equipment, an idea, raw materials

1) True

2) An entrepreneur

3) Business failure

4) If the entrepreneur shows the business plan to a bank it might help them to get a loan

5) An idea is needed for a business but it is not a resource

Sample questions

Sample question 1

Answer question 1

(a) Correct answer: A business plan is often used as way to obtain finance.

(b) A job description contains a list of the tasks and responsibilities of a particular job. It is most commonly used in recruitment.

(c) A person specification lists the skills and quality required for a candidate to be suited to a job vacancy. It is most commonly used in the selection process.

(d) An organisation chart is a human resource tool which is used to map the structure of an organisation. It may be included in a business plan, but it is not a crucial part in the obtaining of finance.

Sample question 2

[1]

Answer question 2

(a)Increased risk is not a benefit.

(b)The legal requirements on a business

remain unchanged irrespective of planning.

(c)Planning should increase rather than

reduce the amount of profit a business can

make.

(d)Correct answer: Careful planning should

reduce the chances of business failure.

Glossary

• Business plan; a formal document which a business prepares to outline their goals and help them to attract some funding for the business idea

• Objectives; what a business states it would like to achieve e.g. a turnover of £50,000

• Target market; a group of customers which the business has decided to sell to

• Vision; the long term goals of a business

Resources written by Sarah Hilton for revisionstation.co.uk