A level Business Revision - Business Plans

Summary

This video discusses the importance of business planning for entrepreneurs. It covers key sections of a business plan, including business concept, objectives, financial details, market analysis, and resource requirements. The video highlights the benefits of planning, such as identifying potential issues and securing investment, but also acknowledges the limitations like opportunity cost and the challenge of forecasting for inexperienced entrepreneurs.

Takeaways

• 📝 A business plan is a document created at the start of a new business venture outlining the business idea and strategy.
• 🎯 It includes objectives for the first 12-36 months, such as survival, market share, growth, and profit levels.
• 💼 The financial section details the funding needed and potential sources of finance for the business.
• 📈 Market analysis and competitor breakdown are common, highlighting the business's competitive landscape.
• 📊 Forecasting is crucial, including profit, costs, and cash flow predictions for the initial months of operation.
• 🛠️ The plan also covers required resources, whether they will be owned, leased, or rented.
• 🤔 Business plans help entrepreneurs think through their business idea and anticipate potential challenges.
• 💡 They serve as a strategic tool to preemptively address issues that may arise in the business operation.
• 💸 A well-crafted business plan is essential for securing investment and loans, as it provides a clear framework for use of funds.
• ⏱️ There's an opportunity cost to business planning as it can delay the start of the business and earning revenue.
• 🌐 Business plans may be limited by the unpredictability of external factors such as economic changes and competitor responses.
• 📉 Inexperienced entrepreneurs may struggle to make accurate forecasts, which can reduce the plan's usefulness.

Q & A

What is the primary purpose of a business plan?

A business plan is a document created by entrepreneurs at the beginning of a new business venture. It outlines the business idea, objectives, financial requirements, market analysis, forecasts, and resources needed to start and run the business.

What does the business concept section typically include?

The business concept section provides an overview of the new venture, including what it will sell, what it will offer, and who it will target. It essentially serves as an elevator pitch for the business idea.

Why are objectives important in a business plan?

Objectives in a business plan are important as they set out the goals for the first 12-24 months, or potentially 36 months, of the organization. They may relate to survival, market share, growth, or profit levels.

What financial details might be included in a business plan?

Financial details in a business plan might include the funds needed to start the business, where this finance can be obtained from, and a cash flow forecast that outlines the business's liquidity during its initial months.

Why is market analysis a common section in a business plan?

Market analysis is included to understand the markets the business will compete in, which may include a breakdown of different market segments served by the business.

What is the significance of the forecasting section in a business plan?

The forecasting section is crucial as it includes predictions about the business's profits, costs, and cash flow, which are essential for planning and securing investment or loans.

Why are resources important in a business plan?

The resources section outlines all the physical, human, and financial resources required for the business, and whether they will be secured permanently or leased or rented.

How does a business plan help entrepreneurs?

A business plan helps entrepreneurs by forcing them to think carefully about their business idea, prioritize tasks, and consider potential difficulties and strategies to overcome them.

What are the benefits of a business plan when seeking investment or loans?

A business plan is crucial for securing investment or loans as it provides a clear framework of how funds will be used, how they will be paid back, and why they are needed.

What are the limitations of business planning?

Limitations include the opportunity cost of time spent planning versus earning, the uncertainty of forecasting external events, and the lack of experience entrepreneurs might have in accurately predicting market share, sales, costs, and breakeven levels.

Why might first-time entrepreneurs bypass the business planning process?

First-time entrepreneurs might bypass the business planning process to quickly start earning revenue, as they may have left a job to pursue the business venture and want to minimize the delay in starting their business.

Outlines

00:00

📈 Introduction to Business Planning

This paragraph introduces the concept of business planning and its significance for entrepreneurs. It discusses the business plan as a foundational document that outlines the business idea, objectives, financial requirements, market analysis, and resource allocation. The paragraph emphasizes the importance of a business plan in helping entrepreneurs to think strategically about their business venture, anticipate potential challenges, and plan for them. It also highlights the role of business plans in securing investment and loans by providing a clear framework of how funds will be used and repaid.

05:02

💼 Benefits and Limitations of Business Planning

This paragraph delves into the benefits of business planning, such as aiding in the strategic thinking process for new entrepreneurs, helping to identify potential issues before they arise, and serving as a crucial document for securing funding from investors or financial institutions. However, it also points out the limitations, including the opportunity cost of time spent planning versus earning revenue, the difficulty for first-time entrepreneurs to accurately forecast future events, and the inherent uncertainty in predicting external environmental changes. The paragraph acknowledges that while business plans are valuable, they can also be hindered by inexperience and the dynamic nature of business environments.

10:03

🎓 Conclusion and Encouragement for Students

The final paragraph serves as a conclusion to the video script, reminding viewers of the importance of business planning and encouraging students to continue their studies. It suggests that the video's content is intended to aid in their revision and learning, wishing them luck and encouraging them to keep up their efforts.

Keywords

💡Business Plan

A business plan is a comprehensive document that outlines the objectives, strategies, and tactics of a business. It is a crucial tool for entrepreneurs to articulate their business concept and strategy. In the video, the business plan is described as starting point for new ventures, detailing what the business will sell, its target market, and its financial needs.

💡Elevator Pitch

An elevator pitch is a short, persuasive speech that outlines the business concept and value proposition. It is named after the idea that it should be possible to deliver in the time span of an elevator ride. The script mentions that the concept section of a business plan provides an overview, sometimes known as an elevator pitch, of what the new organization will involve.

💡Objectives

In the context of a business plan, objectives are specific goals set for the business to achieve within a certain time frame. The script refers to these as targets related to survival, market share, growth, or profit level for the initial phase of the business.

💡Finance

Finance in a business plan refers to the capital required to start and operate the business, including details of funding sources. The script mentions that a section of the business plan would detail the finances associated with the venture and where the finance might be obtained from.

💡Market Analysis

Market analysis involves studying the market to understand the competition and market segments. The script suggests that a business plan might include a section reviewing the markets the business will compete in, possibly including competitor analysis.

💡Forecasting

Forecasting in a business plan refers to predicting future performance, such as profits, costs, and cash flow. The script highlights the forecasting section as crucial, detailing expectations for the business's financial performance.

💡Resources

Resources in a business plan include all the assets, both tangible and intangible, required for the business to operate. The script discusses how a business plan will detail the resources needed, whether they will be leased, rented, or owned.

💡Investment

Investment in the context of a business plan refers to the capital provided by external parties, such as shareholders or investors, to fund business operations. The script explains that a business plan is often required by potential investors to understand the business concept and its potential for growth.

💡Lenders

Lenders are entities, such as banks, that provide loans to businesses. The script mentions that lenders typically require a business plan to understand how the borrowed funds will be used and repaid.

💡Opportunity Cost

Opportunity cost refers to the potential benefit an individual, investor, or business misses out on when choosing one alternative over another. The script discusses the opportunity cost of spending time on business planning versus earning revenue from the business.

💡Uncertainty

Uncertainty in business planning refers to the unpredictability of future events that could affect the business. The script points out that first-time entrepreneurs may not accurately foresee external events, which introduces uncertainty into the business plan's forecasts and predictions.

Highlights

A business plan is a document created at the start of a new business venture.

It provides an overview of the business idea and what the business will offer.

Objectives for the first 12-36 months are typically outlined in a business plan.

Financial details, including funding needs, are a key part of the business plan.

Market competition and competitor analysis may be included.

Forecasts for profit, costs, and cash flow are crucial elements of a business plan.

Resources required for the business are detailed, including physical and human resources.

Business plans help entrepreneurs think through stages of starting a business.

They can identify potential problems and strategies to overcome them.

Business plans are essential for securing investment and borrowing.

Investors and lenders want to see a clear plan for how funds will be used and repaid.

There is an opportunity cost to spending time on business planning rather than earning revenue.

Business plans may be hindered by the inability to foresee external events.

Uncertainty and changing external environments can limit the value of business plans.

Lack of experience can make it difficult for first-time entrepreneurs to accurately forecast.

Despite limitations, business plans force entrepreneurs to consider their business concept carefully.

Transcripts

[Music]

helloyou it's taking them is time again

this is the channel dedicated to a level

business students and their revision and

this video is going to examine the

rather jaunty topic of business planning

so a business plan is essentially a

document to the entrepreneurs create or

draw up at the onset of a new business

adventure now if we start by having a

look at some of the key sections of a

business plan sections that might

typically be prepared by entrepreneurs

as they're planning out a new business

venture the first of those is an outline

or an overview of their business idea or

concept instructing what this new

business venture is going to sell what

this new business venture is going to

offer who this new business venture is

going to try and target so the concept

really provides an overview sometimes

known as an elevator pitch of what is

going to be involved in this new

organization next in a business plan is

common to find some objectives that have

been set for the first 1224 potentially

36 months of the organization those

could be objectives to do with survival

or achieving a certain market share

achieving a certain amount of growth or

a certain profit level but then we might

also see in a business plan some more

detailed evidence of the finances that

will be associated with this new

business venture and in particular what

finance might be needed in order to fund

this new business and where this finance

might be obtained from we might also see

a section in a business plan over

viewing the markets that the business

will be competing in might be common to

see some competitor analysis as part of

this may be a breakdown of different

market segments that are served by this

market will then see a forecasting

section which is one of the most crucial

elements of a business plan now this

might have forecasts in to do with the

profit

it's that the business might have to

achieve all the costs that the business

might be looking to spend might also

include what's known as a cash flow

forecast which will plot out the

liquidity of the business for its first

formative months another section is very

common to see in a business plan is a

breakdown of all of the resources that

are going to be required for this

business and whether those resources are

going to be secured permanently or

whether they're going to be leased or

rented for the organization and they'll

go through all of the physical resources

or the human resources all of the

financial resources that are going to be

essential in getting this business off

the ground now business plans aren't

generally perceived as being essential

when you are starting a new organization

and there's some very distinct benefits

to crafting a business plan before you

start your organization the first of

those is it helps the owner of this new

business particularly if there are

first-time entrepreneur to plot out

exactly what their business idea is to

think very carefully about the stages

they're going to have to work through in

order to successfully start this new

venture together to really consider

exactly what tasks will be the priority

in order to establish this new

organization so one of the main benefits

of business plans is that it serves as

an aid to the entrepreneur starting the

organization in helping them to think

about from different kind of

perspectives what they will need to try

and do in order to establish this

business in the process of doing that it

might highlight to the entrepreneurs

difficulties or problems that they might

face in the running of their new

organization that they hadn't previously

considered and by thinking about

problems by identifying difficulties it

allows them to plot strategies to

circumnavigate those difficulties or

solutions to those problems that they

might envisage arising but without the

business planning Pro

yes those problems would have

materialized but may have taken

entrepreneurs by surprise so that they

would have had to react to them rather

than being able to plan how they will

deal with those problems in advance and

of course the classic benefit of the

business planning process is that

business plans aren't generally seen as

a prerequisite when you're seeking

investment from potential shareholders

or partners in your organization or when

you are seeking borrowing from lenders

such as banks and other financial

institutions very few organizations

would be willing to lend another

business money without a clear framework

or a plan of what that money is going to

be used for how it's going to be paid

back and why that finance is needed

similarly with investors very few people

are likely to invest their hard-earned

capital into an organization purely

based on a whim they are likely to want

to see more detailed coverage of what

this business concept is that they're

investing it where this business sees

itself going during the first few years

how this business is going to compete

and sustain itself so in order to secure

borrowing and in order to entice

investment a business plan document can

be a crucial stepping stone in finding

potential investors and lenders for your

organization but there are some

limitations to business planning as well

not at least the opportunity cost that's

involved many first-time entrepreneurs

are very eager to get their new business

venture underway often they have left a

job in order to pursue this business and

they want to try and start earning

revenue as quickly as possible and the

business planning process takes time it

takes research and it might be that they

might have to delay the starting of

their business maybe for a few weeks

from

or detailed business plan maybe even for

a couple of months and there might be an

earning gap for the entrepreneur in that

timeframe so they might decide to bypass

the business planning process and just

run straight into their new business

venture and rather than planning out

their organization they try and run it

ad hoc and make decisions as they go now

it might be that they get away with that

and they experience success regardless

but there is an opportunity cost to

spending time planning rather than

spending time earning we've also got the

idea that business plans and usefulness

might just be hindered by the fact that

entrepreneurs might not be able to

foresee events that might unravel in the

external environment and that

particularly for first-time

entrepreneurs that may not have run

businesses before and may not have had

experience of crafting a business plan

before there is a certain amount of

uncertainty involved in creating a

business plan it's unlikely that

first-time entrepreneurs will accurately

be able to forecast events that might

materialize in the economic environment

for example or that they may not be able

to accurately predict how competitors

might respond to the start of their

business or how changes in technology

might evolve or how changes in society

might take place once their business has

started and this uncertainty this

changing external environment can mean

that the business plan that

entrepreneurs have produced becomes of

limited value once the business is up

and running because they haven't been

able to accurately forecast how the

external environment might change and

evolve once their business starts and so

there's a lack of experience that

entrepreneurs might have in business

planning it's really the final

limitation that we might want to

highlight business plans will include a

wealth of forecasts or predictions

predictions to do with profit

predictions to do with liquidity and

cash flow predictions to do with costs

as well as marketing predictions a

what level of output the business might

need to break-even what level of sales

the business might be able to achieve in

its first year the degree of market

share the business might be able to

establish and for first-time

entrepreneurs that in experience is

going to make it pretty difficult to

accurately predict any of these

forecasts with confidence if you've

never run a business before and you've

never operated in this market before

how are you accurately going to forecast

the market share that you might achieve

how are you going to know exactly how

many units you will be able to sell in

your first year how are you going to be

able to accurately forecast your cost so

that you can accurately calculate your

breakeven level of output and this lack

of experience can limit the usefulness

of business plans making them full of

less accurate data and forecasts that

obviously impinges on how useful they

turn out to be for entrepreneurs but we

shouldn't neglect the fact that business

plans have some pretty tasty benefits

and if nothing else it forces new

entrepreneurs to sit down and carefully

consider what their business concept is

going to be and what tasks they need to

perform in order to deploy their new

business venture hopefully that video

will help you revise that topic as

always we will see you very soon good

luck with your revision and keep on

taking the beers

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