advantages of a business plan gcse

Business Plans

Why do businesses create plans.

It is important for any new or existing business to create a plan in order to have an understanding of how it plans to achieve its aims and objectives. There are 4 key reasons why businesses create plans:

Important for new businesses

• When Peter Jones and Theo Paphitis invested in Levi Roots Reggae Reggae Sauce, they asked to see Levi’s business plan before they committed to providing their expertise and investment.

Raising finance

• To decide whether to give finance to a business, investors and banks need in-depth financial information.
• When Facebook raised finance from venture capitalists to grow and when Snap Inc listed on the New York Stock Exchange they had to provide business plans.

Setting objectives

• A plan lets a business clearly set out what the business’ objectives are and how they are going to go about achieving them.
• These specific business objectives help firms to achieve their aims as they are measurable targets for the firm to work towards.
• It also allows a business to see which areas (growth, sales, profits etc.) they need to improve and which they are doing well on. If they fail to meet an objective then it can be easier to understand why it was not met.

Business organisation

• By detailing how functions of the business will be organised, a business plan can help improve the way that a business is run.
• A local cafe can plan its purchasing, pricing and staffing in a business plan that can help it manage its operations.

The Main Parts of a Business Plan

There are lots of different ways to structure a business plan. However, some sections are very important and are almost always included.

Executive summary

• The executive summary should be a concise overview of the entire business plan.

Mission statement

• A mission statement says what a company wants to achieve.

Products or services

• This section should clearly describe which products or services the company sells and why customers will benefit from this.
• This also may include what a product’s unique selling point (USP) is. The USP of a product or service is how this product or service is different (or unique) from the products or services offered by the competition.

Market analysis

• Analysis of competitors – Who the main competition are and where they are positioned in the market.
• Analysis of customers – The different customer segments and which of these will be the ‘target market’.

Organisation and management team

• This will outline the company’s organisation structure and provide personal details of the owners and other important personnel.

Production details

• This will outline how a firm will produce its products or provide its services.
• This includes things like the location of factories, who the suppliers will be, what materials will be needed and how much they will cost.

• Cost and profit - This includes detailed outlines of the forecasts for cost, revenue and profit.
• This section usually includes a cash-flow forecast and projected profit and loss account for the first 12 months of trading.
• Sources of finance - This section often includes details of how a company will fund investment if it is required.

Advantages and Disadvantages of a Business Plan

There are advantages and disadvantages of creating business plans.

• Business plans provide parameters for setting targets.
• Management can check staffing, incomes, product ranges and lots of other things against previous business plans and expansion plans.
• A business plan can be used as a benchmark against outcomes like cashflow, production outcomes or service delivery. The plan can also be compared to the behaviour of competitors and the business’ own performance in past years.

Disadvantages

• Businesses need to be flexible and able to adapt to a changing environment. A business plan may stop a company changing.
• Business plans can be costly and time consuming to make. If an entrepreneur has less time to spend designing a good product and selling to customers, then the time spent making a business plan may be negative for the business.
• Also, forecasts of revenue and profit may be misleading and lead to bad decisions.

1 Enterprise & Entrepreneurship

1.1 The Dynamic Nature of Businesses

1.1.1 The Dynamic Nature of Businesses

1.1.2 Risk & Reward

1.1.3 The Role of Business Enterprise

1.1.4 The Role of Business Enterprise 2

1.1.5 The Role of the Entrepreneur

1.1.6 End of Topic Test - Dynamic Nature of Business

1.1.7 Grade 9 - Dynamic Nature of Business

1.2 Spotting a Business Opportunity

1.2.1 Customer Needs

1.2.2 Market Research

1.2.3 Market Segmentation

1.2.4 The Competitive Environment

1.2.5 Primary & Secondary Market Research

1.2.6 End of Topic Test - Business Opportunities

1.2.7 Application Questions - Business Opportunities

1.2.8 Exam-Style Questions - Market Segmentation

1.3 Putting a Business Idea into Practice

1.3.1 Business Aims

1.3.2 Business Objectives

1.3.3 Business Revenues & Costs

1.3.4 Costs - Calculations

1.3.5 Revenue - Calculations

1.3.6 Business Profits & Break-Even Analysis

1.3.7 Profits & Losses - Calculations

1.3.8 Interest - Calculations

1.3.9 Cash & Cash Flow

1.3.10 Cash & Cash Flow 2

1.3.11 Cash Flow - Calculations

1.3.12 Sources of Business Finance

1.3.13 End of Topic Test - Business in Practice

1.3.14 Grade 9 - Business in Practice

1.3.15 Exam-Style Questions - Business in Practice

1.4 Making the Business Effective

1.4.1 The Options for Start-Up & Small Businesses

1.4.2 Limited Liability

1.4.3 Franchising & Not-For-Profits

1.4.4 Business Location

1.4.5 The Marketing Mix

1.4.6 Business Plans

1.4.7 End of Topic Test - Effective Business

1.4.8 Application Questions - Effective Business

1.4.9 Exam-Style Questions - Business Plans

1.5 Business Stakeholders

1.5.1 Business Stakeholders

1.5.2 Technology & Business

1.5.3 Legislation & Business

1.5.4 Legislation & Business 2

1.5.5 The Economy & Business

1.5.6 External Influences

1.5.7 End of Topic Test - Business Stakeholders

1.5.8 Grade 9 - Business Stakeholders

2 Building a Business

2.1 Growing the Business

2.1.1 Business Growth

2.1.2 Finance

2.1.3 Changes in Business Aims & Globalisation

2.1.4 Ethics & Business

2.1.5 The Environment & Business

2.1.6 End of Topic Test - Growing a Business

2.1.7 Application Questions - Growing a Business

2.1.8 Exam-Style Questions - Business Growth

2.2 Making Marketing Decisions

2.2.1 Product

2.2.2 Product Life Cycle

2.2.3 Price

2.2.4 Pricing Methods

2.2.5 End of Topic Test - Product & Price

2.2.6 Grade 9 - Product & Price

2.2.7 Promotion & Advertising

2.2.8 PR & Sales Promotions

2.2.9 Sponsorship & Product Placement

2.2.10 Promotional Mix

2.2.11 End of Topic Test - Promotion

2.2.12 Application Questions - Promotion

2.2.13 Exam-Style Questions - Promotional Mix

2.2.14 Place & Wholesalers

2.2.15 Direct to Consumer

2.2.16 E-commerce & M-commerce

2.3 Making Operational Decisions

2.3.1 Job Production

2.3.2 Batch & Flow Production

2.3.3 Working with Suppliers

2.3.4 Effective Supply Chains

2.3.5 Just In Time & Just In Case

2.3.6 Managing Quality

2.3.7 Total Quality Management

2.3.8 The Sales Process

2.3.9 End of Topic Test - Operational Decisions

2.3.10 Grade 9 - Operational Decisions

2.3.11 Exam-Style Questions - Managing Stock

2.4 Making Financial Decisions

2.4.1 Gross Profit & Net Profit - Definitions

2.4.2 Gross Profit - Calculations

2.4.3 Net Profit - Calculations

2.4.4 Rate of Return

2.4.5 Rate of Return - Calculations

2.4.6 Research & Financial Data

2.4.7 Marketing Data

2.4.8 Percentage Change - Calculations

2.5 Making Human Resource Decisions

2.5.1 Organisational Structures

2.5.2 Organisational Structures 2

2.5.3 Recruitment

2.5.4 Effective Recruitment

2.5.5 Training a Workforce

2.5.6 Motivating a Workforce

2.5.7 End of Topic Tests - Human Resources

2.5.8 Application Questions - Human Resources

2.5.9 Exam-Style Questions - Human Resources

Jump to other topics

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The Marketing Mix

End of Topic Test - Effective Business

Business Plans

In this post

Business plans are used to outline the industry in which a business is working in as well as the economic structure of a company to give an idea of the financial prospects of a business. They are used primarily to organise the routes to market that a company will take and give projections on earnings and target dates for when the company expects to have a certain income.

Writing a strong business plan is important for any business, whether large or small, and is the perfect way to map out your route to success. Not only will the plan contain your aims and plans to attract new customers but it can also act as a strong tool for financial projections and help you to set out goals for your company. Throughout the units that we have already covered on this course we have seen a lot of aspects that could be included in a business plan, and including as much information as possible is key.

A lot of entrepreneurs fail to produce a clear business plan when they set up a new company and this can be a big issue further down the line. By not outlining your company and its operations you may affect the business in a negative way and be unable to keep track on the progress and route the business is taking. If you are seeking finance to launch your company it is more than likely that you will need to create a business plan to secure a loan, but this should not be thrown away once you have started the business. Your plan can be updated and adapted at any time and you must try to keep things relevant and up to date so you know the long-term aims of your company.

Why create a business plan?

Some entrepreneurs fail to create a business plan before starting a company because they feel it is a waste of time. They know what they want to do, how they want to do it and everything that is needed has been formulated in their heads. This is a very good skill to have, but without your thoughts and projections down on paper it can be very easy for them to become misinterpreted, forgotten or skewed. Simply having things thought out in your mind is not enough to convince others or explain your strategies to those you are working with. Business plans are used to organise your approach and produce a strategy that allows you the best possible chance of success. They should include:

• Information about your company so that you can plan the structure and objectives which you have
• Your relationships with others and how these can be used (e.g. banks, lenders and accountants)
• To find weaknesses in your plans and areas where you must improve
• Areas for discussion so that you can find out other people’s opinions and include them in the planning process

Some people start a business and want everything to be done immediately. With great confidence that they can do it all alone and have no input from experts, they may not stop and think about forming a clear plan that includes facts and figures to help them along the way. Doing this can be of massive detriment to any business and you need to gather as many opinions, facts and ideas as possible from those around you.

What to avoid

A business plan should include lots of information but there are a few things that should be avoided. You should put some restrictions on the long-term (over 1 year) predictions of your finances. A long-range prediction on the amount of money you will have coming into the business can be completely meaningless because it is very hard to predict how a business will perform far into the future.

Very few business plans get the figures projected spot on, so remember to give a good indication of what you expect to earn but try to be conservative with this. By exaggerating the earning potential of the company you will not be impressing anyone and this will make it difficult for you to plan your spending. Outline clear time frames and indicate your aims during these periods. Try to show what you will be working on at any time, for example if your business will take quite a lot of setting up then the first 6 months may be devoted solely to this and you should outline this in your plans and projections. Try to correctly anticipate the money and time that will be required for processes to be completed and always factor in a margin of error. By slightly exaggerating the money that will be required when completing a stage of expansion or setting more time than is needed, you will be well prepared if some unforeseen issue crops up.

Don’t just use the business plan to explain how great your product or service is. This alone will not turn your business into a big success (although it is very important). Identifying areas to improve and how you will market your company is much more important than simply relying on the uniqueness of your product.

The purpose of a business plan

Business plans are used for a variety of different reasons and the importance of these should not be underestimated. Creating a plan that is precise and includes information that is relevant to the new or existing business will ensure that ideas are implemented quickly. Without a solid business plan it will be much more difficult to judge the success of the new venture and the direction of the company will be hard for everyone to see.

Minimising risk

The risks when starting a new business can be huge. Money is invested into new businesses and time will also be spent on getting a company off the ground. Without a business plan in place, owners and employees could end up wasting their time in certain areas. Using resources inefficiently and having no clear direction for a business can lead to disaster very quickly. The best way to avoid this is with a clear outline of what the business needs to work on and what resources will be needed in order to make the venture work. A business plan will be used to set goals and objectives while losing no time in areas that do not see a large enough return on the investment.

Securing finance

Many people use business plans to secure finance for a new venture. This finance can come from several different sources such as banks, investors and start-up funds. Having a business plan that shows exactly how the business will operate and where money will be made will act as a way to convince potential investors to finance the company. With clear profits to be made and a route to market mapped clearly, investing in a business will be a much more desirable prospect for a potential investor.

Formats of business plans

There are many different formats which a business plan can be created in but the main areas to cover are:

Executive summary

Company summary, products and services, market analysis, strategy and implementation, management and personnel, financial plan.

Any business plan should include an executive summary which gives an outline of the business and the vision of the owners. Here you should briefly explain the business and its activities as well as the key areas that will help the company to succeed. A mission statement can be included to explain why your company will be unique in the market and what will give you the edge over your competitors.

You should also include some information about the financial aspirations of the company here to show the economic aims over the first few years in operation. Remember, these do not need to be hugely accurate and taking a realistic look at what can be earned is essential. It is usually best to complete the executive summary of the company last as you can include information from other sections in this part of the plan to give a good overview and concise insight into the business and your plans.

The company summary will explain key aspects of the operation of the company. This includes the owners of the business as well as where the business is located. Information about all directors must be included in this area of the plan and you should summarise their roles within the organisation. If you have any other personnel that will be involved at a senior level then they should be included also. In this part of the business plan you need to outline the funds required to set up and maintain the business also. By including information about the company’s location and operations you will be able to forecast the money required to get the company started and any investment that will be needed. Try to include a spreadsheet showing where the initial funding will come from and how much is being put into the business to start with. Remember, most new businesses make a loss in their first year due to the expenses involved in starting a new company, so be realistic. Plan the initial outlays and costs carefully and make sure you know the limits to how much you can put into the company to get started.

The location of the business can also be included here and any rent that you will be required to pay can be outlined and the costs per square foot for the company premises. Then you can go on to make projections about the sales required to cover all of your fixed costs such as office and equipment rentals.

Next we move on to explaining the things which will earn your business money – the goods and services that you have to offer. In this section you must include descriptions of what you can offer your customers and the prices you will be charging. Outline what makes your goods and services special and the key aspects that will influence potential clients and convert them into paying customers. It is also a good idea to compare your pricing structure to your competitors. It may be that you offer the same products but cheaper, or with any additional features to make your products more appealing. You should explore the need for your products and services to be better than any of the competition. As a new business you may struggle to compete unless you have something that nobody else has. By bringing to the market something which is already selling well with another company that has established its brand in the marketplace, you might struggle to take a large enough section of the market to warrant starting a whole new company. If this is the case then you must compare your pricing to your biggest competitors and ensure that you are competitive.

In this section you can also include any products and services that you may offer in the future. Explain your product development processes and how you will be able to innovate and bring new products or services to the marketplace.

Next you need to carry out some market analysis to identify your potential customers . In this section of the business plan you need to include information about your ideal customers and what sort of people they will be. Think about the earnings of your potential clients, the type of lifestyles they will live and the products and services they expect from a business. This part of your plan is great for you to use figures about your market and show any growth projections for the sector in the future.

Explain market trends and analyse the need for your goods/services in this sector. Attempt to find some facts about the disposable income of your potential customers and target certain people who will be interested in what your company offers. Think about how you will be attracting your customers and the potential for growth over the first 3 years in operation. Make estimations about the number of people in the area where you will be offering your products and services to get a good idea of how many different potential clients you can attract. Having a good understanding of your target market will give you the tools to design marketing strategies and techniques to attract the maximum number of customers to your business.

Having outlined your market and explained who your products/services will attract, it is time to explain your techniques when doing this and show how you are going to market your company. Explain the key aspects of what you offer and the main selling points that should be tailored to suit the target clients that you have in mind. Products designed for the more affluent will need to be luxurious and have an exclusivity about them, whereas items that are for people with limited incomes will need to offer greater value for money. Try to understand a clear link between the market in which you will be operating, your potential clients and the main aspects of your business which you should focus on.

Ensuring that your business suits the needs of customers is essential to getting the most customers. For example, opening up a luxury spa in an area where there is high unemployment and typically lower incomes will encounter lots of issues as the potential customers (those within a 15-mile radius) will have no need for this service and may not be able to afford what you have to offer. You will need to come up with at least five ways of promoting your business that will appeal to your target market and attract clients. Remember all of the techniques and skills we discussed on marketing and try to link what you know about your potential clients to the advertising methods you will use.

Here you can also outline the potential sales forecasts and investments which you will make when promoting your goods and services. Come up with some realistic projections about the money to be spent on advertising and increasing awareness of your brand as well as any sales targets you may wish to set. Be conservative with your sales projections as it takes time for any business to get a good level of customers and building brand awareness does not happen overnight. Your sales in year 1 will normally be fairly low and you need to take this into account when projecting your income and the amount it will cost to set up your company.

The next thing to plan is the personnel involved in your business. This will include the owners and directors as well as any senior managers that are to be involved in the company. Explain the team structure and hierarchy of your new company and the number of employees you will be hiring. Knowing the team behind the company and their individual duties will let you outline the various skills that your team possesses and establish each person’s duties within the organisation.

Outlining the duties of each person and giving a brief job description is a good way for you to understand the team dynamic and responsibilities of each member. Most new companies make the mistake of hiring too soon, but with a clear plan of the business personnel that will be involved in your company you will be able to ensure each person is needed for the business to operate. Establishing a business will require you to be frugal in your approach and employing staff that are not needed can have a terrible impact on your profits and end up costing you tens of thousands of pounds a year.

Outline the wages of your employees and then come up with some totals for staffing costs that can be used when writing your executive summary.

Your financial plan will provide a clear breakdown of all the income and outgoings of the business that you expect. These will only be projected figures so will be likely to change in reality, but you should be able to predict fairly accurately using your knowledge of costs incurred and the pricing and potential customer base for your products/services.

Make projected figures for your fixed and variable costs as well as the profits you expect to earn from sales. This will then help you to create a break-even analysis for your company that will show the amount of money required to cover all of your outgoings. Remember that your first year will have fixed and variable costs as well as additional outgoings which come from setting up your company. You will also have a limited number of sales during the first 12 months as you build up your customer base, so the projected net profit for year 1 will be lower than any other year. Try to think about the most popular goods/services you offer and come up with an average sale price for your customers. This will then help you to identify the number of customers you need in your first year to break even.

Come up with some cash flow and profit and loss charts (look over our work in Unit 1.3 to help) to project how much money you can expect to see in the business each year. This will help you to come up with clear and concise predictions for how much money you will be making in your first three years.

Reformulating a business plan

If you do ever happen to make a slight error in judgement on your initial business plan this can always be altered and the plan changed as required. The chances of figures being completely correct in your first projections are very slim and there will be certain things that you miss or random payments to be made when setting up your business which you did not account for. This is the main reason why being conservative with your income projections and adding in a ‘safety net’ figure to your costings will help you to deal with these circumstances. Business plans should be flexible and are a working document, so chopping and changing them is fine. When doing this try to use what you already have to create a new plan for the next few years rather than just altering figures to make it look like you got the initial plan correct.

Business plans are working documents, so they should be altered and added to as time goes by to determine where your company is heading and how it will get there. Being understanding of the nature of business and the fact that you will not be able to predict certain outcomes will give you an edge and allow you to put in place certain measures to help if you ever do come up against any problems.

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INTERACTIVE VIDEO

It’s time to follow the journey of Finley Thomas, an aspiring entrepreneur who dreams of opening a small local shop. Throughout the interactive video, we will follow Finley through the process of creating a well-thought-out business plan, which is essential for the success of any business venture.

• DETAILED EXPLAINER VIDEO
• 10 QUESTION MULTIPLE-CHOICE QUIZ
• 6 INTERACTIVE ACTIVITIES
• INTERACTIVE CASE STUDY
• SUPPORTING STUDENT WORKSHEETS

CASE STUDY ANALYSIS MP MECHANICS

The real-life case study explores the journey of Molly Pratt, who started her own mechanics workshop in a small town in Lincolnshire, specialising in luxury vehicles. Despite approaching a bank for a loan of £20,000 to cover the costs of specialist equipment, she was unable to afford to employ any additional staff, resulting in high levels of stress. Unfortunately, MP Mechanics closed down in January 2019 due to a lack of interest in luxury vehicle repair and Molly's difficulties in managing the workload alone.

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Starting a Business: Sources of Business Ideas (GCSE)

Last updated 22 Mar 2021

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Where does an entrepreneur come up with the idea for his/her business? In practice there are many ways in which the business opportunity and idea is first spotted. As we shall see, sometimes luck plays a big part; at other times there is a role for approaches which encourage deliberate creativity .

Here are some of the main sources of business ideas for start-ups:

Business experience

Many ideas for successful businesses come from people who have experience of working in a particular market or industry. For the start-up, there are several advantages of applying this experience to a new business:

• Better and more detailed understanding of what customers want
• Knowledge of competitors, pricing, suppliers etc
• Less need for start-up market research
• Entrepreneur is able to make more realistic assumptions in the business plan about sales, costs etc
• Industry contacts, who might then become the first customers of the start-up!

All of the above help the business planning process and you could argue that they reduce the risks of a start-up. On the other hand, you might argue that "familiarity breeds contempt". In other words, detailed experience of an industry means that the budding entrepreneur doesn't have a fresh perspective. Someone who is new to a market may be able to exploit approaches that have worked in other industries to make an impact with the start-up.

Personal experience

Many ideas come to entrepreneurs from their day-to-day dealings in life, or from their hobbies and interests. For some of us, frustrating or bad experiences are a source of irritation. For the entrepreneur they might suggest a business opportunity.

It is often said that one of the best ways to spot a business opportunity is to look for examples of poor customer service (complaints, product returns, persistent queues etc). Such examples suggest that there is an opportunity to do something better, quicker or cheaper than the existing products.

Hobbies and interests are also a rich source of business ideas, although you have to be careful to avoid assuming that, just because you have a passion for collecting rare tin openers, there is a ready market from people with similar interests! Many people have tried to turn their hobby into a business and found that generates only a small contribution to household income.

Observation

Simply observing what goes on around you can be a good way of spotting an idea. Often an idea will be launched in another country and has not yet been tried in other, similar economies. When Stephen Waring was in the USA attending a wedding, by luck he sat next to someone who ran a household service business (treating lawns). After some brief market research, Stephen found out that there was no similar business in the UK, so he launched one. It has since become a hugely successful franchise business – Green Thumb.

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10 Business Plan Benefits You Might Be Forgetting If you think creating a business plan is not for you, think again. Here are ten ways your business plan can help you be a better entrepreneur.

By Tim Berry Edited by Dan Bova Sep 6, 2013

Opinions expressed by Entrepreneur contributors are their own.

Too many people don't bother to write a business plan because they think it's too hard or unnecessary unless you're looking for funding . That's a shame. These myths keep a lot of people from the benefits of planning.

If you're still skeptical, here are 10 benefits to business planning you shouldn't be overlooking:

• You'll stay on strategy. It's hard to stick to strategy through the daily routine and interruptions. Use a business plan to summarize the main points of your strategy and as a reminder of what it both includes and rules out.
• Business objectives will be clear. Use your plan to define and manage specific measurable objectives like web visitors, sales, margins or new product launches. Define success in objective terms.
• Your educated guesses will be better. Use your plan to refine your educated guesses about things like potential market, sales, costs of sales, sales drivers, lead processing and business processes.
• Priorities will make more sense. Aside from the strategy, there are also priorities for other factors of your business like growth, management and financial health. Use your plan to set a foundation for these, then to revise as the business evolves.
• You'll understand interdependencies. Use a plan to keep track of what needs to happen and in what order. For example, if you have to time a product release to match a testing schedule or marketing to match a release, your business plan can be invaluable in keeping you organized and on track.
• Milestones will keep you on track. Use a business plan to keep track of dates and deadlines in one place. This is valuable even for the one-person business and vital for teams.
• You'll be better at delegating. The business plan is an ideal place to clarify who is responsible for what. Every important task should have one person in charge. Your plan keeps track.
• Managing team members and tracking results will be easy. So many people acknowledge the need for regular team member reviews and just as many admit they hate the reviews. The plan is a great format for getting things in writing and following up on the difference between expectations and results with course corrections.
• You can better plan and manage cash flow. No business can afford to mismanage cash. And simple profits are rarely the same as cash. A cash flow plan is a great way to tie together educated guesses on sales, costs, expenses, assets you need to buy and debts you have to pay.
• Course corrections will keep your business from flopping. Having a business plan gives you a way to be proactive -- not reactive -- about business. Don't wait for things to happen. Plan them. Follow up by tracking the results and making course corrections. It's a myth that a business plan is supposed to predict the future. Instead, it sets expectations and establishes assumptions so you can manage the future with course corrections.

You don't need a big formal business plan to reap these benefits. Instead, think of your business plan as a collection of lists, bullet points and tables. Think of it as something that lives on the computer, not on paper. It's just big enough to do its job.

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5. Business Plans - Topic 1.4 - Edexcel GCSE Business - Theme 1

Subject: Business and finance

Age range: 14-16

Resource type: Lesson (complete)

Last updated

10 September 2023

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This sequence of lessons (roughly two) focuses upon business plans and includes an evaluate exam question.

Resource includes one Dragons’ Den video activity, application activities and worksheet activities.

Plenty of videos and activities for you to choose from - allowing you to select the best ones for your students!

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All resources are methodically and carefully planned. Every resources includes a set of colourful, engaging and accurate slides that clearly outline the specification section at the beginning and are editable.

Activities include real-life articles and videos which bring the theory to life, using contemporary and interesting examples that students can engage with.

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Topic 1.4 - GCSE Edexcel Business - Theme 1

Complete set of slides and worksheets. The worksheets all correspond with the slides and include real-life examples to apply the theory in an engaging way. Lots of videos, including Dragons Den activities. In addition, each sub-topic has a worksheet that links to the Ian Marcouse 1-9 textbook. Also included is a revision check list for 1.4 that links directly to the specification.

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Business Plan

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• Pros and cons

Is it a good time to buy a house?

Can i afford to buy a house, renting vs. buying: making the jump to homeownership.

Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate mortgages to write unbiased product reviews.

• While buying a house can set you up for financial success, renting comes with its own benefits, like flexibility.
• Think about whether it's the right time in your life to buy, especially considering mortgage rates and home prices.
• If you can't afford a down payment or monthly payments, you may want to continue renting for now.

Buying a home can be a great way to build long-term wealth. But the idea that renting is a waste of money is a myth. In fact, sometimes it can be the better choice.

There's no clear right or wrong answer about whether you should buy or rent. The best fit depends on your finances, lifestyle, and several other factors.

What are the pros and cons of buying vs. renting?

The pros and cons of renting are often the inverse of those for buying. On the plus side, a landlord takes care of repairs, and you have the flexibility to move more easily. However, you have to abide by the landlord's prices and rules, and you don't get the financial benefits of building equity or deducting taxes.

Here are the pros and cons of buying a house instead of continuing to rent:

Pros of buying

• Build equity. As you pay down your mortgage and the home value increases, you'll gain equity in the house. You can borrow against the equity to finance other big goals. You could also sell the house later, then keep the money or use the profit for a down payment on your next home.
• Tax benefits. As a homeowner, you're eligible for tax deductions on paid interest, property taxes, and home improvements when you file taxes each year.
• Customize your home. Your landlord won't always approve changes when you rent. But you have the power to update the home when you're the owner. (Just make sure any big changes are approved by your homeowner's association , if necessary.)

Cons of buying

• Monthly payments could change. "Property taxes can change depending on the market and a lot of other factors that are out of your control," says Robert Heck, vice president of mortgage at Morty . While your principal and interest payments should stay the same if you have a fixed-rate mortgage , other costs will probably rise.
• Maintenance. Your landlord takes care of home repairs when you rent. Once you buy a home, you're responsible for the time and money that go into maintenance.
• Less flexibility. It's harder to pick up and move when you own a home than when you rent. You have to list and sell the home, hire a real estate agent, and pay closing costs if you buy a new place.
• Home value could decrease. "There are situations in which we do see a downturn or a softening of home prices," says Heck. By the time you move, there's no guarantee that your home value would increase as much as you expect, which could affect your finances later.

Read Insider's guide to the best mortgage lenders for first-time buyers>>

It's crucial to consider if the timing is right to buy. This doesn't just refer to whether it's a good time in the real estate market. You should also ask yourself whether it's the right time in your life to buy.

Inventory 

Low inventory is a chronic problem in the real estate market. According to recent research from Realtor.com , in 2022 there was a 6.5 million home gap between the number of single-family homes being constructed and household formations.

"It's not going to be a quick fix," says Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors. 

It can be especially difficult to find homes at an accessible price for new buyers. A 2021 analysis by Freddie Mac found that the lack of entry level homes, or starter homes, is even more severe than the overall inventory shortage.

The lack of housing drives a competitive landscape. While competition has calmed down somewhat this year, buyers often still have to make multiple offers on homes before they get one accepted.

Additionally, a lack of housing may force compromise for prospective buyers. Mark Stapp, a real estate professor at Arizona State University, warns against having "unrealistic expectations." He says buyers need to understand the limits of their budget and "be willing to make trade-offs in size, price, location, or amenities."

Low inventory can make it more difficult to buy a home, but it doesn't necessarily mean you shouldn't buy. Just know that wish lists might have to be negotiated when there aren't enough properties to begin with. 

Housing prices continue to rise at a faster pace than income. At the start of 2023, the median sales price in the US was $436,800, according to data from the US Census Bureau and the US Department of Housing and Urban Development .

New York real estate agent Lauren Hurwitz advises clients to think about how long they plan to stay in a home. If buyers are looking during an especially robust time, the length of their investment matters. 

"If you're buying for 30 years, it doesn't really matter as much," Hurwitz, a broker with Compass, says. "If you're buying for five to seven years … I cannot guarantee you that you're going to get all that money back."

When creating a budget, Stapp says not to set an upper limit that's too high. Buyers might want to stretch to reach their highest possible price, he cautions, but an unexpected jump in costs, like gas or food prices, might put stress on their monthly budgets. 

"You've got to make sure you have enough buffer to absorb some of these shocks," he says.  

Interest rates

The interest rate you lock in for a mortgage will greatly determine your monthly payments. Mortgage rates are affected by a wide range of factors, including the overall economy and the short-term interest rates set by the Federal Reserve.

Buyers can't control macroeconomic forces, but can still tip the scales in their favor.

"It feels trite to say 'shop around,' but most people don't do it," says Benjamin Keys, professor of real estate at the University of Pennsylvania. 

A 30-year fixed mortgage isn't just some "plain vanilla contract," Keys says. Instead, there are variations across mortgage lenders in the rate and origination fees they'll offer you. 

"It sounds like really lame advice but can actually save thousands of dollars over the life of the loan," Keys says. 

It can even help to treat it just like a salary negotiation, informing banks what rates you were able to find elsewhere. 

"Make the banks compete with one another. They'll be very clear when they can't," says Keys. 

Market factors can fluctuate, but experts stress that the decision of when to buy is ultimately personal. The most important question any individual should consider is: "How long do I plan to live here?"

"Renting provides some of that flexibility in life," says Stapp. Living in a rental allows people to make quicker changes to their lifestyle or to move for better job opportunities.

Such rapid changes can make the costs of homeownership burdensome in the short term. Selling a house is a longer process and includes many more costs such as transfer taxes, realtor fees, title insurance, and origination fees on a mortgage. 

A family's size and its potential to grow is another factor to consider. "If you're going to have very different needs as the family grows, then owning for a really short period of time can be very costly," Keys says.

Homeownership also costs more than just the monthly mortgage payment. Repairs and upgrades can dig into an individual's savings.

Keys says buyers need to be prepared for maintenance issues that are "potentially very costly, and are going to vary quite a bit, depending on the age of the house and how well the house has been maintained."

Fixing a roof, for example, might be a steep cost if you're selling a home in the short term. 

When deciding whether you can afford to buy a house, you should look at two aspects: the upfront costs and monthly payments.

Upfront costs

The most obvious upfront expense is the down payment . You can often get a conventional mortgage with as little as 3% down.

You should also factor closing costs into your upfront expenses. This could include an appraisal, an underwriting fee, a mortgage origination fee, and even a certain amount of property taxes paid at closing.

Finally, ask yourself how much you want to have left in savings after closing. By completely draining your savings to buy a house, you put yourself at risk in case of an emergency.

Monthly payments

To determine how much you can afford to pay monthly, a good strategy is to follow the 28/36 rule .

The 28/36 rule refers to how much debt you can take on to still qualify for a conforming mortgage. According to the rule, you should spend 28% or less of your gross monthly income (which is the amount you earn before paying taxes) on housing. This includes your mortgage, property taxes, mortgage insurance, homeowners insurance, and HOA fees, but not costs like utility bills.

The rule also states that you should spend a maximum of 36% of your gross monthly income on all debts, such as your mortgage, car loan payments, and student loan debt.

Many mortgage lenders follow the 28/36 rule when deciding how much to approve you to borrow. Every lender is different, though, so you may qualify even if you have more debt. Regardless, it's important to consider how much you can pay each month and still live comfortably.

If monthly mortgage payments would be a financial strain, it could be better to keep renting for now.

Renting vs. buying frequently asked questions

There's no one-size-fits-all answer to this question; for some, buying is better than renting because the benefits of owning a home — the equity-building, the predictability, having a place to call their own — makes sense for their lifestyle and finances. But it's not the right choice for everyone.

Renting can make more sense than buying depending on where you live. If you live in an area where mortgage payments are significantly more expensive than the average rent, or if your lifestyle is better-suited to renting, it might make more sense to rent than to buy.

Owning a home has many advantages. When you own your home, you'll be building equity with every mortgage payment, and you may get certain tax benefits as well. Owning a home can also provide more predictability, since you don't have to worry about a landlord deciding not to renew your lease or hiking your rent. 

Renting can come with a lot of advantages as well. Renting comes with far fewer responsibilities and extra costs than owning does. You'll also have the flexibility of being able to more easily move when your lease is up if you decide to.

It's absolutely ok to never buy a house; plenty of people are lifelong renters for a variety of reasons. When weighing buying vs. renting, it's important that you consider what works best for you. There's no right or wrong answer.

• Mortgages and mortgage lenders
• Home equity
• The housing market
• The economy and the forces that impact mortgage rates
• Budgeting and saving
• Retirement savings

Watch: Why rents are still setting record highs in some US cities

• Main content

State Street 401(k) Settlement Judge Questions Lawyer Fee Bid

By Jacklyn Wille

The lawyers who negotiated a $4.3 million class settlement with State Street Corp. over the in-house funds in its employees’ 401(k) plan must explain why they’re entitled to one-third of the settlement value as attorneys’ fees, a federal judge said.

The lawyers said their proposed fee award of more than $1.4 million was less than what they’d be entitled to under their normal hourly rate for services, but they provided no evidence that they actually charge clients the rates they profess to charge, Judge Mark L. Wolf said Tuesday. He chastised the lawyers for failing to address his 2021 opinion ...

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Public Limited Companies (plc) ( Edexcel GCSE Business )

Revision note.

Economics & Business Subject Lead

Becoming a Public Limited Company (PLC)

• When a business is growing rapidly it may require a significant amount of capital to fund its expansion
• To secure this funding, it may choose to transition from a private limited company (LTD) to a public limited company (PLC)
• This is a complex process with many legal requirements and involves undergoing a stock market flotation  

The Advantages of Becoming a Public Limited Company (PLC)

• The Saudi Arabian oil company, Saudi Aramco, raised $29.4 billion in its IPO in December 2019
• The Chinese e-commerce company, Alibaba Group , raised $25 billion in its IPO in 2014
•  The Japanese telecommunications company, SoftBank Corp ., raised $23.5 billion in its IPO in 2018

The Disadvantages of Becoming a Public Limited Company (PLC)

When justifying the best type of business ownership to be used in a particular situation (or if a business should change its ownership structure), the decision needs to consider any evidence provided about the business owner, the product, the nature and size of the market, the funds required, and the level of profitability.

For example, a business which is generating sales of £30k a year is unlikely to be ready to become a public limited company, but it may well benefit from transitioning from a sole trader to a private limited company.

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Author: Steve Vorster

Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.

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The 3 Biggest Mistakes You Can Make With Your 401(k)

Here is what experts say are the costliest stumbles people make with their retirement savings accounts — and how to get back on course.

By Diane Harris

In a surprising turn, given the usual grim reports about how little most Americans have saved for retirement, there’s been a spate of good news lately about 401(k) investors. Plan participation, contributions and account balances all were at or near record highs in 2023, according to a study last month from Vanguard. And new research from BlackRock shows that, buoyed by a surging stock market, nearly 70 percent of workplace savers now feel they’re on track for retirement — a 12 point jump from last year.

So, have we finally solved what experts routinely refer to as the country’s looming retirement crisis — at least, for the roughly half of Americans with access to an employer-sponsored savings plan?

That lofty 401(k) balance? Yes, the median shot up an impressive 29 percent in 2023, but the typical account was still worth just over $35,000 by year end, Vanguard reports. Other signs of stress: A record number of savers withdrew money early, and the percentage taking out loans rose too. All told, despite the surface optimism about retirement savings, six in 10 investors told BlackRock they still worry they’ll outlive their money.

“The rising tide for retirement savers has not lifted all boats,” said Christine Benz, director of personal finance and retirement planning at Morningstar.

How to be among those who stay afloat? Avoid the common mistakes that can undermine savings efforts. Here is a look at what experts say are the three costliest stumbles — and how to get back on course.

Saving Too Little, Too Late — by Default

The increasingly widespread adoption of automatic enrollment in 401(k) plans is the main reason more Americans than ever are saving in these accounts. Participation in 401(k)s at companies that automatically enroll their employees hit 94 percent last year, compared to just 67 percent at places where sign-up is voluntary, Vanguard reports.

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