1.6 Business Planning Flashcards
(17 cards)
What is a business plan
A written document that describes a business, its objectives, its strategies, the market it is in, and its financial forecast
What is business planning
The process of producing a business plan.
What is a loan
An amount of money provided to a business for a stated purpose in return for regular repayments including interest charges
What is uncertainty
Occurs where there is a lack of information about a situation. This means the outcome or consequences are very difficult to predict
What is a risk
The possibility of something going wrong
What is the purpose of business planning
- Provides a focus on the business idea
- Producing a document helps clarify thoughts and identify gaps in information
- It is essential in order to raise finance from outside providers, such as investors and banks
- Provides something which can be used to measure actual performance
What information should be on a business plan
- The idea
- Where the idea came from and why it is good
- Objectives
- Finance required
- Market overview
- How the business will operate
- Cash flow forecast
- Forecast revenue, costs and profits
5 Advantages of business planning
- Allows owners to review ideas and predict profit
- Reduces risk by outlining what needs to be done when
- Allows owners to review business progress
against the plan and make changes if required - Helps secure finance
- Conduct market research to help reduce risk of failue
Disadvantages of business planning
- Plans may be poor quality due to lack of research or experience
- Plans need constant updating which can be time consuming
- Producing and reviewing plans regularly requires time and effort which can be expensive, especially for small businesses
- New opportunities can be missed
What is revenue
The income that a firm receives from selling its goods or services.
It is also referred to as turnover.
It is measured by the number of units sold multiplied by the price.
(Units sold X price)
What is total cost
fixed cost + variable cost
What is fixed cost
a cost that does not change
What is a variable cost
a cost that varies with the level of output
How do you calculate profit
total revenue - total costs
How do you calculate total costs
fixed costs + variable costs
What is profit?
The profit made by a business is the money that is left over once all of the expenses incurred in running the business have been paid. Businesses usually separate their costs into fixed costs and variable costs . This means that a business can calculate two different types of profit: Gross profit and net profit .
What is loss?
If the expenses are more than the money received then it’s considered a loss. A profit is a positive number and a loss is a negative number.
