Summary Chapter 1 - Planning a business and raising finance: AS level edexcel business studies revision summaries
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Course
Business economics
Institution
Bachillerato
These notes/summaries were made by me personally during the Y12 course, referring to the following book: 9781292239170, and UNIT 2 (Managing Business activities). These are spectacular notes, which I complete using the indicated book together with other platforms in order to finish the entire sylla...
PLANNING A BUSINESS AND RAISING FINANCE (1)
UNIT 2
Contents
PLANNING A BUSINESS AND RAISING FINANCE (1)..................................................................1
PLANNING (23)..................................................................................................................... 1
CONTENTS OF A BUSINESS PLAN......................................................................................1
INTERNAL FINANCE (24)....................................................................................................... 2
EXTERNAL FINANCE (25)...................................................................................................... 3
FORMS OF BUSINESSES (26)................................................................................................ 6
SOLE TRADERS.................................................................................................................. 6
PARTNERSHIPS.................................................................................................................. 7
LIMITED COMPANIES......................................................................................................... 7
PRIVATE LIMITED COMPANIES........................................................................................... 8
FRANCHISING.................................................................................................................... 8
SOCIAL ENTERPRISES........................................................................................................ 9
LIFESTYLE BUSINESSES..................................................................................................... 9
ONLINE BUSINESS........................................................................................................... 10
PLCs (27)............................................................................................................................ 10
LIABILITY (28).................................................................................................................... 11
PLANNING (23)
IMPORTANCE OF PLANNING
Planning in business is essential to success. When everyone works together, it’s easier to
manage time and resources, to position the company for growth. A good business plan1
not only helps entrepreneurs focus on the specific steps necessary for them to make
business ideas succeed, but it also helps them to achieve short-term and long-term
objectives, helps with critical decisions, avoiding mistakes, securing finance, reducing risks
and attracting new investors.
A good business plan is likely to:
Force owners to take an objective, critical and unemotional look at the whole
business idea
Provide a strategy for the development of the business
Provide an action plan that identifies key tasks that must be undertaken and goals
which must be met.
Highlights potential problems in advance so that solutions can be found.
CONTENTS OF A BUSINESS PLAN
A business plan is a plan on how the business will develop over a future period of time. It
outlines the strategy and helps to clarify what is needed to achieve its goals.
Executive summary: a brief overview of the whole businesses; a summary of the
whole plan
Elevator pitch: This is a summary/pitch that should be quick, clear, and concise
1
A documented plan for the development of a business
1
, Business AS revision summaries
Borja Jimenez
The business and its objectives: this section states the name of the business, its
trading address, its legal structure, and its objectives. When setting up a business it
is much easier to make plans if the business has something specific to aim for.
The business opportunity: it is an explanation on what the business is planning to
sell.
Owner’s background: details about the owners, such as their motives, level of
commitment, nature of training, work experience, their education and qualifications,
and their hobbies and interest.
The market: entrepreneurs need to show the size of the potential market. They will
also need to identify the customer profile (the characteristics of individuals or other
businesses that will be targeted). In this section they may also explain how the
business plans to communicate with their customers.
The methods of advertisement and promotion that might be used
The role played by social media
The business website
Business literature (leaflets…)
The role played by word-of-mouth advertising
Personnel: people will be needed as the business grows and so, in this section it is
clarified the number of employees needed and the skills, qualification ad experience
that will be important.
Premises and equipment: This is where details about the place in which trading will
operate and physical resources will be stated. In this section all the resources that
will be needed should be outlined.
Costing and finance: it is essential to work out how much money will a new business
cost. Once the set-up costs have been established, owners can work out how much
money they will need to raise from potential investors, as well as identifying possible
sources of finance.
Financial forecasts: such forecast might include sales forecast, cashflow forecast, a
profits and losses forecast and a break-even analysis.
SWOT analysis: this involves looking at the internal strengths (S) and weaknesses (W)
of the business idea and the external opportunities (O) and threats (T).
INTERNAL FINANCE2 (24)
Capital expenditure: spending on items that may be used over and over again;
money spent by a business or organization on acquiring or maintaining fixed assets.
Revenue expenditure: payments for goods and services that have either already
been consumed or will be very soon; short-term expenses used in the current period
ADVANTAGES DISADVANATAGES
Capital is available immediately – there is no time delay Internal finance can be limited – a business may not be
sufficiently profitable to use retained profit or may not
have unwanted assets to sell.
Cheap – no incurred costs and so costs will be lower Inflexible compared to external sources – not a lot of
and profit increases options
Borrowers will not be subject to credit checks – There are no inflationary benefits. Inflation can reduce
external finance often requires investigations into the value of debt if external sources are used instead.
credit history of borrowers
No need to involve third parties. Internal finance may be risky and could cause conflicts
between members of the business
No Dilution of Ownership and Control – by using No External Expertise or Networks - External sources of
internal sources, businesses retain their ownership, as finance may also bring expertise or networking
there is no need to give up equity opportunities to businesses.
Helps to Improve Business Credit Rating - internal
funds used to fund daily operations, helps establish the
business’ credit ratings.
2
money that comes from within a business
2
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