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Assess the likely value of a business plan to Tended Ltd. - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Question 1
Assess the likely value of a business plan to Tended Ltd.
Worked Solution & Example Answer:Assess the likely value of a business plan to Tended Ltd. - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Step 1
The importance of a business plan
Answer
A business plan is essential for guiding a company's growth and development. For Tended Ltd, whose operations involve a high level of risk due to market competition in the wearable technology sector, a solid business plan can help in several ways. It allows for a clearer understanding of financial projections, helping to forecast cash flow and profit, which is critical for making informed decisions.
Moreover, a well-structured business plan can significantly improve the chances of securing funding. For instance, Tended Ltd was able to secure a £50,000 loan from Enterprise Loans, indicating that a detailed business plan could facilitate similar opportunities in the future.
Step 2
Mitigating risks and enhancing credibility
Answer
By detailing potential risks and strategies to handle them, a business plan serves as a risk mitigation tool. Tended Ltd operates in a volatile market that faces fierce competition; hence, it's crucial for the entrepreneur, Leo Scott Smith, to consider all factors affecting the viability of the business. A business plan can also enhance credibility with potential investors, assuring them that the company is serious and has thoroughly considered its market strategy.
Step 3
Limitations and challenges
Answer
However, creating a comprehensive business plan can be time-consuming, which might incur costs, especially for a startup like Tended Ltd. Also, Leo Scott Smith, being a young entrepreneur, may not yet possess the experience necessary to create an effective business plan. Given the dynamic nature of the wearable technology market, there’s a risk that the business plan may quickly become outdated.
Additionally, it’s worth noting that Tended Ltd is still a relatively new venture and might attract funding from personal networks, which might not require a formal business plan.
Step 4
Conclusion
Answer
In conclusion, while a business plan can provide substantial value to Tended Ltd by guiding its financial forecasts and strategies, mitigating risks, and enhancing credibility, there are inherent limitations. Considering that the company is in a rapidly evolving industry, Tended Ltd must balance the benefits of a detailed business plan with the practical constraints it faces.