Key Idea: A business plan sets out what a business will do, how, and how it will pay for it. This topic is why plans are written, what goes in them, and what they cannot do.
Why write one
- For outsiders: a bank or investor judging whether to lend or invest.
- For insiders: a guide to decisions and a yardstick for progress.
- Station Road's $120,000 loan needed one.
What goes in
- Executive summary and business description.
- Market analysis and marketing plan; operations and people.
- Financial plan: forecasts, cash flow, sources of finance; and the risks.
Its limits
- Built on forecasts that may be wrong.
- Dates quickly as the market changes.
- A good plan does not guarantee success.
The words to know
| Word | Means | Do not confuse with |
|---|---|---|
| Business plan | a document setting out a business's aims, strategy and how it will be financed | a budget |
| Executive summary | a short overview of the whole plan, read first | the introduction to one section |
| Financial plan | the forecasts of sales, costs, profit and cash, and the finance needed | the accounts of past years |
| Plan of action | the steps the business will take, in order, with timings | a single decision |
Name the component, say what the reader learns from it, and show it with the case: a figure, a date or a missing piece.
Exam-style question
In January 2026 Lena and Marco asked the bank for a $120,000 five-year loan at 8% to open the Station Road shop. Explain two components of their business plan the bank would study before lending.
Model answer plan
See the mark-by-mark plan — for / against / judgement, with marking guidance — in study mode.
Important: A plan is only as good as its forecasts. Say what could make them wrong, and what the plan leaves out.
Tap each card to check yourself.
Who reads a business plan? Outsiders such as banks and investors, and insiders such as managers checking progress.
Why is the executive summary written last? It sums up every other section, so they must exist first.
One limitation of a business plan? Its forecasts can be wrong, and it dates as the market changes.
What does the operations plan show? How the product will be made and delivered: premises, equipment, suppliers, staff.
Why include the risks? A reader trusts a plan that names what could go wrong and how the business would respond.
What is a plan of action? The steps the business will take, in order, with timings and who does each.
Exam tips
- Name the component, then what the reader learns from it.
- Use the case's figures: loan, repayments, sales forecast.
- Say what the plan leaves out as well as what it has.
- A plan is built on forecasts: judge how reliable they are.
- A plan of action needs steps, order and timing.