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Business · Making the business effective
Business plans
A business plan brings together everything an entrepreneur has worked out - the idea, the aims, the market, the finances, the location and the marketing mix. Writing one reduces risk, and it is what banks and investors ask to see before lending.
Teacher resources
The teacher copies: slides with the questions built in, the answers, and anything else attached to this lesson for whoever is teaching it.
- Business plans - Teacher Slides.pptx Teacher The lesson slides with the teacher's notes on each slide, and every question and mark scheme built in. Built from the lesson script on 25 September 2026. View
- Business plans - Teacher Notes.docx Teacher The complete notes with the teacher's notes and every model answer in full. Built from the lesson script on 25 September 2026. View
Student handouts
The same files the students see, to print or hand out.
- Business plans.pptx Built from the lesson script on 25 September 2026. View
- Business plans - Completed Notes.docx The full notes for the lesson, to revise from. Built from the lesson script on 25 September 2026. View
- Business plans - Exam Questions.docx Built from the lesson script on 25 September 2026. View
Last Lesson
Answer from memory before the answers appear.
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Name the four Ps.
Product, price, promotion and place.
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What is an integrated marketing mix?
One where the four Ps fit together for the target market.
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Give one way technology has changed promotion.
Social media, email or websites - cheap and targeted.
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How might a business change its mix if a competitor opens nearby?
Make the product different, keep prices competitive, promote what is different, or be easier to buy from.
Learning Objectives
- 1Explain what a business plan is.
- 2Explain the main sections of a business plan.
- 3Explain how a business plan helps to minimise risk.
- 4Explain how a business plan helps an entrepreneur to obtain finance.
What Is a Business Plan?
A business plan is a written document that sets out what a new business will do and how it will do it.
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When it is written
Before the business starts, or before a big change such as opening a second site.
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Who it is for
The entrepreneur, and anyone they want money from - a bank, an investor or a crowdfunding audience.
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What it contains
Everything covered in this topic: the idea, the aims, the market research, the finances, the location and the marketing mix.
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Why it matters
It turns an idea into a plan that can be checked, questioned and followed.
Thinking It Through
Writing a business plan takes time, but it forces the entrepreneur to answer hard questions before spending any money. Who will buy this? How much will it cost? When will it make a profit? Where will the money come from?
Writing a business plan forces every part of the idea to be thought through.
The Main Sections of a Business Plan
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The business idea
What the business will sell, and what makes it different from competitors.
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Aims and objectives
What the business wants to achieve, and the targets it will measure itself against.
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Target market
Who the customers are, backed up by market research.
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Forecast revenue, costs and profit
How much the business expects to sell, spend and earn, and its break-even point.
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Cash-flow forecast
The cash expected to come in and go out, month by month.
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Sources of finance
How much money is needed, and where it will come from.
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Location
Where the business will be based, and why.
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Marketing mix
The product, price, promotion and place.
Building a Business Plan
Each section builds on the one before it.
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1
The idea
Describe the product and what makes it different.
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2
The market
Use market research to show who will buy it and how many.
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3
The finances
Forecast revenue, costs, profit, break-even and cash flow.
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4
The money
Show how much is needed and where it will come from.
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5
The operation
Set out the location and the marketing mix.
Minimising Risk
Planning cannot remove risk, but it can reduce it.
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Thinking it through
Writing each section forces the entrepreneur to check every part of the idea before spending money.
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Spotting problems early
A cash-flow forecast might show a shortage in month three, so an overdraft can be arranged in advance.
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Testing the idea
If the forecasts show the business will never break even, the entrepreneur can change the idea - or drop it - before losing money.
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Setting targets
The plan gives targets to measure progress against, so problems are noticed quickly once the business is running.
Obtaining Finance
Banks and investors rarely hand over money without a business plan.
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Evidence
The plan shows lenders that the entrepreneur has researched the market and understands the finances.
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Repayment
The cash-flow forecast shows a bank how and when a loan could be repaid.
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Confidence
A clear, realistic plan convinces investors the business is worth backing.
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Required
Many lenders, including government-backed start-up loan schemes, ask for a business plan and cash-flow forecast before they lend.
Showing the Plan
What a lender looks for
- Research Real evidence that customers want the product.
- Realistic numbers Forecasts that are believable, not wishful.
- Repayment A cash-flow forecast that shows the loan can be repaid.
A lender or adviser will test every number in the plan.
Business Plans: For and Against
Benefits
- Makes the entrepreneur think through every part of the idea.
- Reduces the risk of failure by spotting problems early.
- Needed to obtain finance from banks and investors.
- Sets targets to measure progress against.
Limitations
- Forecasts are only estimates and may be wrong.
- Entrepreneurs can be too optimistic about sales.
- Takes time to research and write.
- Can quickly go out of date as the market changes.
- A good plan does not guarantee success.
Case study
Start Up Loans: No Plan, No Loan
The UK government's Start Up Loans scheme, set up in 2012, lends people between £500 and £25,000 to start a business, at a fixed interest rate. Before anyone receives a loan, they must write a business plan and a cash-flow forecast, and the scheme gives them free guidance and a business mentor to help. The plan is how the lender judges whether the business can succeed and repay the money - and writing it helps the new owner spot problems before they spend a penny.
Plan It
Write a one-page business plan for a small business idea of your own - for example a car-washing service, a cake business or a phone repair stall. Include a short sentence or two for each of the eight sections, and one number for each forecast.
1. The idea and what makes it different.
2. Aims and objectives.
3. Target market and research.
4. Revenue, costs, profit and break-even.
5. Cash flow and sources of finance.
6. Location and marketing mix.
A good answer shows: A plan covering all eight sections, with realistic figures for price, costs, break-even and start-up finance, and a target market backed by at least one piece of research.
Can I...?
- 1Explain what a business plan is.
- 2List the main sections of a business plan.
- 3Explain how a business plan minimises risk.
- 4Explain how a business plan helps obtain finance.
- 5Explain the limitations of a business plan.
Summary & Exam Focus
- A business plan sets out the idea, aims, target market, finances, location and marketing mix.
- It reduces risk by making the entrepreneur think everything through and spot problems early.
- It is usually needed to obtain finance from banks and investors.
- But forecasts may be wrong, and a plan does not guarantee success.
Exam focus
Explain one reason why a bank might ask to see a business plan before lending to a new business. (3 marks) (3 marks)
Link the plan to the lender's worry: will the loan be repaid? The cash-flow forecast and financial forecasts show whether it can be.
Key terms
The vocabulary this lesson expects you to use. Each one is linked from the first place it appears above.
- Business plan
- A written document setting out what a new business will do and how it will do it.
- Forecast
- A prediction of future figures, such as sales, costs or cash flow.
- Risk
- The chance that something will go wrong, such as the business failing.
- Finance
- The money needed to start, run or grow a business.
- Investor
- A person or business that puts money into a business in return for a share of it.
Questions and answers
9 questions set on this lesson, with the mark schemes and model answers open.
Define the term 'business plan'.
Mark scheme — 1 mark available
- A document setting out the business idea / aims / how it will be achieved — 1 mark
Model answer
A written document setting out what a new business will do and how it will achieve its aims.
State one section that would be included in a business plan.
Mark scheme — 1 mark available
- Any one of: the business idea; aims and objectives; target market / market research; forecast revenue, costs and profit; cash-flow forecast; sources of finance; location; marketing mix — 1 mark
Model answer
A cash-flow forecast.
Outline one way a business plan can help to minimise risk for a new business.
Mark scheme — 2 marks available
- A way identified, e.g. thinking it through / spotting problems / testing the idea / setting targets — 1 mark
- Developed: how this reduces risk — 1 mark
Model answer
It forces the entrepreneur to forecast costs and cash flow before starting (1), so a problem such as a cash shortage can be spotted and planned for before any money is spent (1).
Explain one reason why a bank might ask to see a business plan before lending to a new business.
Mark scheme — 3 marks available
- A reason identified, e.g. to judge whether the loan can be repaid / to see the idea is researched — 1 mark
- First linked point of explanation — 1 mark
- Second linked point of explanation — 1 mark
Model answer
To judge whether the loan will be repaid (1). The plan includes a cash-flow forecast and forecasts of revenue, costs and profit (1). These show the bank whether the business is likely to have enough cash to make the repayments, so the bank can decide whether lending is too risky (1).
Source: Marcus wants to open a small bike repair shop and needs a £15,000 bank loan to buy tools and fit out a rented unit. A friend has told him that writing a business plan is a waste of time and that he should just start. Analyse the benefits to Marcus of writing a business plan.
Mark scheme — 6 marks available
- AO2 (Application, 3 marks): uses the context - the bike repair shop, the £15,000 loan, the rented unit — Level 1-3
- AO3a (Analysis, 3 marks): chains of reasoning showing how the plan helps obtain finance and reduce risk — Level 1-3
Model answer
A business plan would help Marcus obtain the £15,000 loan. Banks rarely lend to new businesses without seeing a plan, because the cash-flow forecast shows whether the repayments can be made. Without one, the bank may refuse to lend, and Marcus would not be able to buy his tools or fit out the unit, so the business could not start at all. Writing the plan would also reduce Marcus's risk. Researching his target market would show whether enough cyclists nearby need repairs, and forecasting his costs and break-even would show how many repairs he needs each month to cover the rent and loan repayments. This means he could spot a problem - such as too few customers - before signing a lease and borrowing money he might not be able to repay.
Which one of the following would NOT normally be in a business plan?
Why: A business plan covers the idea, aims, market, finances, location and marketing mix - not a competitor's private accounts.
Why do banks ask to see a cash-flow forecast before lending?
Why: The forecast shows whether the business will have enough cash to make the loan repayments.
How does a business plan help to minimise risk?
Why: Working through every section forces the owner to spot problems before spending money.
What is the main limitation of a business plan?
Why: A plan is built on forecasts, and if the forecasts are wrong or too optimistic, the plan can mislead the owner and the lender.