Question

If a business plan is to be used to raise capital, then why would the entrepreneur want to advertise the firm’s major risks by detailing them in the business plan?

Answer 1

Introduction:

The business plan is a written document which describes all the internal and external factors relevant to starting the business. It is prepared by an entrepreneur. Business plan is an integration of marketing, finance, manufacturing, and human resources.

The product will be sold or services will be provided after the successful start up of business. The preparation of business plan is the initial step of the starting the business. The business plan is the roadmap of the business. It helps to layout the strategies. The preparation of good business plan is necessary step for business. The business plan is presented to the financiers for the approval of fund necessary for business. It is used as a means to raise capital. The business plan should be prepared in the following manner:

The business plan entails the assessment of risk associated with the business, measurement of risk and technology for the reduction of risks. It also describes the contingency plan. The business plan is presented before the financiers still it describes risks associated with the business due to the following reasons:

(i) The description of risks gives transparency to business plan and it helps the financiers to take decision about the approval of fund.

(ii) The financiers cannot claim that the business risks associated with the business are not presented before them.

(iii) The assessment of risk helps the entrepreneur to decide about the application of approved fund.

(iv) Hence, the risk factors associated with the business are described in the business plan because it makes the business plan transparent.