Entrepreneurship and Business Planning
Entrepreneurship and Business Planning tests the entrepreneur's role, opportunity recognition, feasibility, the business plan and risk management.
Core rules
- An entrepreneur identifies an opportunity, takes risk, organises resources and innovates.
- An idea becomes an opportunity only when there is a market, capability and profit potential.
- Feasibility covers market, technical, financial and legal tests.
- A business plan contains an executive summary, business description, market analysis, marketing plan, operations plan, management team, financial plan (cash flow, income statement, balance sheet) and risk assessment.
- Objectives should be SMART.
- Finance can come from savings, family, bank loans, grants or equity investors.
Worked example
A mobile car wash needs buckets, soap, a vacuum and transport: E3,500. Market test: 40 cars a week at E60 = E2,400 revenue. Variable cost E20 a car = E800; fixed costs E300; profit = E1,300 a week before the owner's pay. If the owner draws E500, profit is E800. Start-up cash needed: equipment E3,500 plus marketing E200 plus a buffer E1,000 = E4,700. Break-even = 300 ÷ (60 − 20) = 7.5 cars a week, so demand is sufficient. The plan must still show a cash-flow forecast, because profit does not guarantee cash.
Traps
- Confusing profit with cash.
- Unrealistic sales forecasts with no evidence.
- Forgetting working capital and a cash buffer.
- Presenting a plan with no risk section or exit strategy.