CASE STUDY ANALYSIS 1&2
Part one: A literature review concerning the purpose and content of business plans
Supervisor: Paul Grant
A business plan is so important in the business environment especially for a start-up business that normally needs to persuade third party for more money. Business might not grow according to plan along the way but without a plan, business will never be successful. Business Portal of India [n.d] states that business requires finance to start up its operation, to maintain its operation and for its growth and expansion. A good business plan will help firm achieve a certain amount of money invested by financiers. Not only help you get your money, federation of small business (2012) points out that a good business plan also help you build a stronger base for your business. It can clarify your business purpose to yourself, communicate to your partners as well as your staff, forecast future scenarios and address them before they threaten the success of your business; and set targets and objectives so that you can control your performance well. Alsbury (2001) at the same time suggests that the reasons for business producing a formal plan are to track business performance and viability, to secure finance, to expand and to formalize strategies. Investors will look at business to decide whether they give a firm money or not but what a business plan contains and how to make a good business plan is the objectives of many studies. First, to understand how to make a business plan, firms must know how can they gain their external funds. There are two ways of funding a business, either business owner provide personal self-own money into the business or gather the amount of money needed from outsider known as raising external finance. As stated by Harris (2006, p93) winning of grants, taking on debt and sale of equity are the three basic sources of funds for start-up businesses. Grants are money that does not need to be repaid but with conditions attached while debt is then a form of cash borrowed that need to be repaid with an amount of interest in the future. On the other hand, sale of equity means gathering money from high net worth people (known as “business angels”) that have substantial sums of money at their disposal seeking for investment opportunity expecting high returns in the future. Among these three ways, sale of equity would be the most appropriate way to raise money for a bus company, as it might not have fast enough return to repay interest. According to Manson & Harrison (1996) more than 75% of business angels do call for business plan before they even reflect on investing in a project. Thus, No matters which route of funding sources is chosen, clear information stated in the business plan will more or less impact the willingness of investors wanting to invest in the company. Moreover it provides realistic estimation figures whether it is the potential growth of the business or potential returns of the business to make their decision. Business plan acts like a guideline to provide information that is significantly relevant to an investor. Also business plan will reflect business owner’s entrepreneurial capabilities base on how professional the business plan is prepared or presented. Moreover, investors can evaluate the business model through analyzing the business plans and picks those that suit their investing taste. Lily (2006, p71) states that some business angels will wish to participate in the business operation and have a seat on the board. She also said that business investors are ready to invest the amount up to £50,000 on average. So, they invest not totally depending on the profit they can make in the future only; but also the level of how interested they are towards the business model. This means a good business plan should not only focus on offering investment opportunity to investors but can be used as a tool to measure company performance. Coming back to the...
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