EDEXCEL GCSE BUSINESS · PAPER 1
Exam Practice: Business Plans
Business plans · Making the business effective · Lesson 4 of 4 · 13 marks · 25 minutes
Name Date
Answer all questions. Use the context of the business in the question where one is given.
Question 1 DEFINE [1 mark]
Define the term 'business plan'.
Question 2 STATE [1 mark]
State one section that would be included in a business plan.
Question 3 OUTLINE [2 marks]
Outline one way a business plan can help to minimise risk for a new business.
Question 4 EXPLAIN [3 marks]
Explain one reason why a bank might ask to see a business plan before lending to a new business.
Question 5 ANALYSE [6 marks]
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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.
Answers
Check your answer only once you have written one.
Question 1 [1 mark]
A written document setting out what a new business will do and how it will achieve its aims.
▸ A document setting out the business idea / aims / how it will be achieved 1 mark
Question 2 [1 mark]
A cash-flow forecast.
▸ 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
Question 3 [2 marks]
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).
▸ A way identified, e.g. thinking it through / spotting problems / testing the idea / setting targets 1 mark
▸ Developed: how this reduces risk 1 mark
Question 4 [3 marks]
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).
▸ 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
Question 5 [6 marks]
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.
▸ 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