IB Business Management SLTopic 6 — The Business Management ToolkitPaper 1 & 2Decision-making tool~10 min read
Writing a Business Plan
A business plan is not a document a bank asks for out of politeness. It is the thing that forces an owner to answer questions they have been avoiding — who exactly buys this, what happens in month four when cash runs low, and what if the main supplier lets them down. Writing it down is uncomfortable, which is exactly why it reduces risk.
📚 What you need to know
A business plan sets out the key aspects of a business and how the owners intend it to develop.
Its two main purposes are to reduce risk and to help raise finance.
Writing it forces the owner to think about every part of the business before money is spent.
Lenders and investors use it to judge whether the idea is credible and worth the financial risk.
It should be a working document that is updated, not written once and filed away.
Its usefulness depends on the quality of the research behind it, and on whether a small firm has the time and skill to write one properly.
Who reads it, and what they want from it
One document has to satisfy several different readers, and each of them is looking for a different thing. That is worth remembering, because exam questions often ask about the plan from a particular reader’s point of view.
The bank cares about repayment; the investor cares about growth. The same plan has to answer both questions.
What goes in it
Section
What it has to say
Executive summary
The whole idea in one page — the product, the market and the headline numbers. Written last, read first.
Company description
Mission, values, legal structure, location, and anything the business owns that rivals do not.
Market analysis
Market size, growth, key trends, who the target customers are, and who the competitors are.
Products or services
What is being sold, what makes it different, and what advantage that gives.
Marketing and sales
Pricing, promotion, distribution, and how customers will be won and kept.
Organisation and management
The structure and the key people, including what they have done before.
Operations
How the business will run day to day: production, stock, suppliers and partnerships.
Financial projections
Forecast revenue, costs, profit and cash flow, plus how much finance is needed and from where.
Risk analysis
What could go wrong, and what the business would do about it.
The section students forget is risk analysis, and it is the one lenders read most carefully. An owner who has written down what happens if their main supplier fails looks far more credible than one who claims nothing can go wrong.
Why it reduces risk
The plan itself does not make the business safer. The process of writing it does, because it turns vague optimism into numbers that either work or do not.
🧩 What the writing process forces you to do
Research the market rather than assume there is one.
Put numbers on the forecast, so you find out early if the maths never works.
Name the competitors, which usually reveals the idea is less original than it felt.
Work out how much finance is needed, and therefore which source of finance suits.
Write down the risks, which is the first step to planning for them.
Update it. A plan written at start-up and never touched again describes a business that no longer exists. Examiners reward students who say a plan should be a regularly updated working document.
Worked examples
WE 1
Define the term “business plan”
Define the term “business plan”. [2]
Answer
A business plan is a document setting out the key aspects of a business, ✓
including its objectives, market, operations and financial forecasts, and how the owners intend it to develop. ✓what it contains plus what it is for. Two clear halves.
WE 2
Explain one advantage and one disadvantage of producing a plan
Case study: Marrow & Vine is a two-person catering business wanting to borrow $95,000 for a delivery van and a larger kitchen. Neither owner has written a business plan before and both work full time in the kitchen. They have three years of steady sales figures but have done no research on the corporate catering market they want to enter.
Explain one advantage and one disadvantage to Marrow & Vine of producing a business plan. [4]
Advantage
A plan would let the bank see three years of steady sales alongside a forecast, helping it judge whether $95,000 can be repaid, which makes the loan far more likely to be approved. ✓✓
Disadvantage
Writing an effective plan takes time and expertise, and with only two owners both working full time in the kitchen, the hours spent researching the corporate catering market are hours not spent earning. ✓✓
the loan figure and the two-person team are what turn generic points into applied ones.
WE 3
Discuss the implications of producing a business plan (10 marks) — outline
Discuss the implications for Marrow & Vine of producing a business plan. [10]
Paragraph 1 — define and link
A business plan sets out a firm’s objectives, market, operations and finances. Marrow & Vine needs one mainly to support a $95,000 loan application.
Paragraph 2 — first implication, balanced
It would strengthen the loan case, since the lender can see three years of steady sales and judge whether repayments are realistic. However, the plan is only part of the decision — credit history and how convincingly the owners present it will also weigh heavily.
Paragraph 3 — second implication, balanced
It also forces research into corporate catering, a market they currently know nothing about, which could stop an expensive mistake. But that research takes time two full-time cooks may not have, and a rushed plan built on guesswork is worse than none.
Paragraph 4 — conclusion with limitations
On balance it is worth doing, because the cost is time while the benefit is a $95,000 decision. The case study does not say whether the owners could pay someone to help write it, or how competitive the corporate catering market already is, and either would change how large the risk really is.
both points argued two ways, and the conclusion names what the case study leaves out.
💡 Exam tip
Say who the plan is for. A plan written for a bank emphasises repayment; one for an investor emphasises growth.
Link it to the amount of finance needed. The figure in the case study is your easiest application mark.
Mention the time and skill cost for small businesses. That is the standard counter-argument.
Say a plan should be updated. One sentence, and it shows real understanding.
Do not list all nine sections. Pick the two or three that matter for this business and explain why.
Remember the plan is not the decision. Lenders weigh other things too.
⚠ Common mix-up
Thinking the plan guarantees finance. It supports the case; the lender still decides.
Treating it as a start-up document only. Established firms write plans for expansions too.
Listing sections instead of explaining them. Nine headings copied out is not analysis.
Ignoring the cost of writing it. Time and expertise are real costs for a small firm.
Confusing forecasts with facts. Financial projections are estimates and can be wrong.
Forgetting the risk section. It is the part that shows the owner has thought properly.
Up next: Using Decision Trees — putting actual numbers on two options so they can be compared fairly.
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