Source Based Questions - Entrepreneurial Planning | Entrepreneurship Class 12 - Commerce PDF Download

Question.1. “Having a solid strategy is crucial at any phase of your business, whether you’re just starting up or growing an existing venture. Like weather conditions, the needs and challenges of your business change. A business plan will help you understand your challenges better and outline specific goals and courses of action that are needed to improve. In a way, a business plan is like your car’s GPS. It gives you direction and focus and speeds up your journey through all the necessary steps. After writing business plans with my clients, it becomes easy for us to track their progress, review what goals have already been accomplished and what’s still lying on the back burner, identify what changes should be made, and discuss what direction the business should be heading.”
Keeping in mind the above article, explain why business plan is an important document for a business.

The business plan is valuable to the entrepreneur, potential investors, venture capitalists, banks, financial institutions, new personnel’s suppliers, customers, advisors and others who are trying to familiarize themselves with the venture, its goals, and objectives. The business plan:

1. Helps in determining the viability of the venture in a designated market.
2. Helps in providing guidance to the entrepreneur in organizing his/her planning activities as such:
   • Identifying the resources required.
   • Enabling obtaining of licenses, if required.
   • Working out with legal requirements as desired by the government.
3. Helps in satisfying the concerns, queries and issues of each group of people interested in the venture.
4. Provides room for self-assessment and self evaluation, requiring entrepreneur to think through various scenarios and plan ways to avoid obstacles.
5. Though not desirable, at times, business plan helps to realize the obstacles which cannot be avoided or overcome, suggesting to terminate the venture while still on paper without investing further time and money.
6. As the investors/lenders focus on the four Cs of credit: Character, cash flow, collateral and equity contribution, it is the business plan which reflects the entrepreneur’s credit history, the ability to meet debt and interest payments, and the amount of personal equity invested thus serving as an important tool in funds procurement.

Question.2. “It’s a basic tenet of business - before you can make money you have to figure out how to spend it. Drafting a budget is a key way to help you turn your dreams for business success into reality. Using this vital tool, you can track cash on hand, business expenses, and now much revenue you need to keep your business growing -- or at least afloat. By committing these numbers to paper, your chances of succeeding with your business are helped by anticipating future needs, spending, profits and cash flow. It also may let you spot problems before they mushroom, so that you can switch gears. “It’s like a road map for your company,” says Victor Butcher, of Butcher Financial Services in Memphis, Tenn., a former president of the Tennessee Society of Certified Public Accountants’ Memphis Chapter who advises small businesses. “You need the road map to understand where you’re going with your business.

”Identify and explain the type of plan stated in the above article.

Financial Plan is the type of plan stated in the above article.
Financial plan deals with deciding in advance about the future financial requirements, sources of raising funds, assessment of the revenue, cost, profits, etc.