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BUSS 1

Entrepreneurs are people who:

Take a calculated risk

Passionate and has belief in enterprise

Good planning and leadership skills.

Can identify good opportunities

Responds to market conditions

Understands that the early days can be tough

Bad entrepreneurs:

Lazy

Take uncalculated risk

No trust or investment

Ignore risk

Rush to make big changes

Nave

of all business start-ups fail.

Motives of an entrepreneur:

1. Control over working life

2. Spotted an opportunity

3. Building on experience

4. Made redundant

5. To make lots of money

6. Couldnt find a job

Why make a business in the UK?

Long term; low interest loans

Government assistance

Stable government

Wealthier people in the UK

Increased affluence

Attitudes towards enterprise:

Risk is the chance of loss or damage.

Business could fail and lose investment

Unlimited companies are liable for debt

Harder to find work or start again if the

business were to fail.

Many entrepreneurs are over optimistic

Many competitors can be aggressive

Start ups fail because of inefficient customerdemand; poor execution of idea and economic

change.

Government support

Boosts a countries economy and productivity

Reduces taxes

Uncomplicated the tax system

Reduces he barriers to investment for small

businesses

Improves support for small business such as

business link

Promotes a change in the UKs enterprise

culture.

As business productivity and demand increase

and therefore the costs decreases

proportionally, the extra money is spent on:

Expanding the business

Lowering price

Increase the range of goods.

This increases competition and makes for a happygovernment.

External finance:

Bank loans/overdraft/mortgage

Friends and family

Joint venture/partnership

External investor (business angel, capital

investment, venture capitalist)

Venture capitalist: high risk; high reward

investment.

Internal finance:

Personal savings

Retained profit

Selling shares

Selling assets

Sell and lease back

Financial advisors:

Advice on where to invest savings (e.g. stocks,

property, in business or wine and art)

Analyse situation and give advice:

Cut back or increase income

Financial planning

Profit=revenue costs

Revenue=selling price x volume

Costs=Variable costs + fixed costs

Unit contribution=price costs per unit

Contribution=revenue variable costs

BEP=Fixed Cots/Unit contribution

Demand for a product depends on:

Price

Income Fashion and trend

Competitor action

Social and demographic influences

Seasonal changes

Changes in technology

Government policy

Factors that affect how much a business can

charge for a product or service:

Price of competitor

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Customer loyalty

Quality

Product availability

Economic climate

Other purchases from the customer

A business can forecast cost and revenue by:

Looking at previous sales data

Market research

Loyalty programmes

Forecast cost and revenue (cash flow forecast)

Break even chart

Business success:

Profit

Customer loyalty

Reputation

Business growth

Why are budgets set?

To gain financial support

To avoid overspending

Establish priorities

To motivate staff

To assign responsibility

To improve efficiency

To measure success

Profit budget=income budget-expenditure

budget

Methods of generating business ideas:

Spotting trends and anticipating their impact.

Identifying a market niche (niche market is a

smaller part of a large market e.g. fishing

magazines; low demand but high price).

Copying ideas from other companies/countries.

Inventing a product and taking it to the market.

Ways of spotting an opportunity:

Thinking about changes to the society and the

economy.

Small budget research such as market

mapping.

Intellectual Property:

Intellectual property is the term given to assets

that have been made by human creativity.

Governments encourage this as otherwise

there is no financial incentive to create a

product in their country.

Copyright (song, book, movie)

Trademark (logo or slogan)

Patent (engineering/invention)

These prevent other companies stealing an

idea and making a profit from it.

It allows the inventor to regain the initial

investment costs.

Primary Businesses:

Farming/Mining

Factories and food producers will by their

product.

Limited contact with the final customer.

Low importance of brand image but product

quality.

Almost impossible to identify brands in this

industry e.g. carrots.

Industry has to be where the raw materials can

grow/be found.

Secondary Businesses:

Manufacture

Car dealerships, supermarkets and retail

outlets would by their produce.

More contact with the consumer than the

primary but less than the tertiary.

They must create a high brand image so that

retail outlets stock their product.

Can differentiate between brand e.g. cars.

Chose location based on a skilled work force

and location to ports. Locate near the primary

provider.

Tertiary Sector

Supermarket chain, retail outlet

Customers are the general public.

High contact with the final customers.

Advertising campaigns, staff in the stores.

High brand image in order to attract

customers. This is usually done in the retail

industry by lowering the prices.

Can easily differentiate between the brands:

staff uniform, store logo and colours.

Chose location based on the demand from the

consumer.

An unlimited company means that the owner is

liable for its debts. A limited company means

that the owner is not liable for the companys

debts. If the business is unincorporated, the

owner is seen as part of the business and istherefore unlimited. An incorporated business

means that the owner is not seen as part of the

business and is therefore limited.

A sole trader:

Owned and managed by one person.

Unlimited and unincorporated.

All profits go to the owner.

They are their own boss and therefore

decisions are quick. Quick to fill a market

niche.

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Will be difficult. Will have to work many hours.

Unlimited liability so they are responsible for

their debts.

Partnership:

Owned and managed by 2-20 people.

Unlimited and unincorporated.

Profits are shared by pre-agreed terms.

The company can benefit from everyones

strengths.

There can be a conflict of interest and thus

decisions can be slow.There is unlimited

liability.

Private Limited Company (LTD.):

Managed by a board of directors and owned by

share holders. These are often friends and

family.

Limited and incorporated.

Profits shared to the board of directors and the

investors.

Not vulnerable to hostile take over. Protected

as it is limited.

Maybe unwilling to do business as it may be

unlikely for you to pay debt.

Public Limited Company (PLC):

Owned by shareholders and managed by a

board of directors.

Must have a board of directors.

Limited and incorporated.

Shares are sold publicly when 50,000 has

already been sold in shares.

They make lots of money by selling shares.

The business is not owned by the management

therefore they are not in complete control.

At risk from hostile takeover.

Interdependence is the relationship between the

3 sectors and understanding that they all need

each other to operate.

Companies add value to a product so that they

can sell it for more than it cost them to buy it.

This can be done by:

Transformation processes e.g. manufacture.

Factors of production e.g. qualityof staff and

equipment.

Marketing Customer service

Packaging

Improve technology

Location e.g. Singapore more expensive

Franchise:

A franchisor allows another business

(franchisee) to use its idea/name.

2 fees: basic/initial buying fee and % of

revenue.

There is instant brand recognition.

Advertisements are already paid for.

Lower chance of failure

Product is cheaper due to purchase in

economies of scale.

Support from franchisor.

Training for your staff.

Disadvantages: Lack of responsibility therefore

not self fulfilling.

The actions of other branches might affect you

reputation.

No individuality

Always risk of franchisors cancelling the

agreement.

Business Plans:

Crucial attempt to raise finance from external

sources.

Defines aims and objectives.

To encourage investment.

To identify weaknesses. To set targets.

To identify strengths, opportunities and

threats.

To calculate business projections.

Benefits:

It creates a plan of action and therefore the

start up is organised.

Creates a positive reputation.

Find out if the business is feasible.

Reasonable financial predictions.

Sets a time frame and targets.

Negatives: Things can change e.g. economic downturn.

Lack of expertise and experience can result in

a false plan.

Can be difficult to account for competition.

Cannot account for demand.

A company plans for:

Marketing

Objectives

Organisation

Finance

Non-Profit Organisation (NPO):

Run as a business but all of the profit is

reinvested into the business.

NGOs: act away from the government to

benefit those of society.

Charity: set up to support a cause that is

beneficial to society.

Pressure group: established by individuals to

address the interest of the group e.g. animal

rights protestors.

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Factors that affect the location of a business:

TECHNOLOGY: this would allow the owner to

work from home using ICT. High technology

means that the location is of low importance.

COSTS: land costs and labour costs e.g. India

and china are preferable as labour costs are

much cheaper.

INFRASUCTURE: the network of the country e.g.

roads, bridges, ports and rivers.

THE MARKET: convenience and access forcustomers i.e. footfall (the number of potential

customers that walk past the shop), proximity

to complimentary business; desirability of the

area.

QUALITATIVE FACTORS: preference to the

owner themselves e.g. home town.

Random Sampling: Randomly choosing people to

take a survey.

Quota Sampling: Choosing your questioners is

proportion to the market.

Stratified sample: Only interviewing people who are

relevant to your product.

A business to business (B2B) is where one

business sells a product to another business:

In these businesses they often have

experienced sales staff as the customer is

often knowledgeable in the area.

Business to consumer (B2C) markets is where

the business sells directly to the consumer.

Types of markets: Local

National

Physical (can go in an look at stuff)

Electronic

Factors that affect demand are:

INCOME: higher income means higher

disposable income and therefore higher

demand.

TASTE AND FASHION: changes in fashion will

affect the demand of certain clothes.

PRICE OF OTHER GOODS: if the price ofsubstitute goods falls then customers may

switch.

MARKETING: Endorsements, sponsorship and

promotions.

SEASON: no demand for hats, gloves and

scarves in the summer.

GOVERNMENT INTERENTION: They may

influence the demand through taxes and

legislation e.g. the smoking ban lowered the

demand for pub alcohol.