Update an existing idea and finding a gap in the market
What is an Entrepreneur?
Somebody who takes a risk in order to set up their own business
identify 3 reasons why an entrepreneur would start their own business?
1 Be own boss 2 Keep all profit 3 Work own hours
What is a market?
Where buyers and sellers meet and partake in transactions
Identify how a business would find a gap in a market?
Using market research and Looking at problems/opportunities with existing products/services
What is a Social Enterprise?
A business set up to help the local community. The aims of the business are aimed to benefit stakeholders and profits are reinvested back into the business
What do we mean by a social entrepreneur?
An entrepreneur who sets up his business to help the local community i.e. a social enterprise
What is a Franchise?
Buying into an existing business and using their brand
Explain two advantages of starting a franchise?
Help with marketing costs and have Existing customer base
Explain two disadvantages of starting a franchise?
Have to pay a royalties and there's a lack of flexibility over what you can do/change
What is meant by an aim?
The long term goals of the business
What is meant by an objective?
The shorter-term targets of a business which are set to help the business achieve its aims
Explain three different types of business aims and objectives?
1 To survive 2 To break even 3 To build a good reputation 4 To establish a customer base
Explain how objectives are used to measure success?
You can only know whether a business is being successful if you know what they are trying to achieve. Business objectives provide a point of focus, helping entrepreneurs to make decisions and review how things are going
What is meant by a Stakeholder?
Somebody or a group of people with an interest in the business
Identify the needs of three stakeholder groups?
1 Employees paid and needs met (laws) 2 Shareholders - profits and dividends 3 Local community - little disruption and pollution 4 Government - taxes paid
Explain how three stakeholders can influence the objectives of a business?
1 Competitors - business's pricing decisions and therefore profits 2 Suppliers - costs for resources 3 Customers - ensure needs are met and kept happy
What is meant by a Business Plan?
A business plan is a document setting out what the business does at present, plus what it intends to do in the future and how this will be accomplished. The plan will include marketing and financial plans
Explain the purpose of a business plan?
1 To show potential investors, e.g. venture capitalists (Dragons) and to persuade potential lenders, e.g. the bank manager 2 To focus on the aims/objectives 3 To appear organised and professional
Identify four sections of a business plan?
1 Company information 2 Aims and objectives 3 Competitor information 4 Prices and financial information (cash flow)
Explain how a business plan can reduce business risk and uncertainty?
1 Research the market thoroughly 2 Talk to experts and consultants (if affordable) 3 Plan for a variety of possible outcomes 4 Regularly review and update the plan so that it remains relevant and any problems are spotted quickly
What is meant by a Sole trader?
A sole trader is a form of business that is owned and managed by one person
Explain two benefits of being a sole trader?
Keep all profits and Work own hours
Explain two drawbacks of being a sole trader?
Unlimited liability and No one to share the workload
What is meant by a Partnership?
A partnership is formed when two or more people set up in business together.
Explain two benefits of being a partnership?
Share costs, workload and different skills
Explain two drawbacks of being a partnership?
Unlimited liability and have to Share profits
What is meant by a Private Limited Company?
A business in which the owners and the business have a separate legal identity. The business exists as its own entity
What is meant by Limited Liability?
The owners are only liable for the money that they have put into the business, not their own personal assets
Explain two benefits of being a private limited company?
1 Limited liability 2 Better status 3 Can bring in investors
Explain two drawbacks of being a private limited company?
Have to disclose company information and accounts have to be checked (cost)
Explain four factors that will influence where a business sets up?
1 Transport links 2 Competitors 3 Level of employment 4 Cost of area/premises
Define primary market research
gathering information for the first time that does not exist e.g. survey
Define secondary market research
using data that already exists, e.g. newspaper or website
Identify 5 research methods used for a business with a limited budget
1Telephone surveys 2Questionnaires 3Customer/Supplier feedback 4Focus groups 5Internet research
Explain two advantages of completing market research
1Gain information on customer tastes and trends 2Reduce your risk
Explain two disadvantages of completing market research
1 Costs involved 2 Information might not be completely accurate
Identify the Marketing Mix
Product, price, place, promotion
How will price affect demand
A small business can't charge too much as it doesn't have a well-established brand.
factors relating to your design, specifications and features of your product
USP stands for
unique selling point
The way in which products are distributed
Why is the Internet a useful channel of distribution
Small businesses don't usually have much money and a website can be mate very cheaply and be used to advertise to customers
Communicating something about your product i.e it exists or special offer
Explain suitable methods of promotion for a small business with a limited budget
1 Local newspaper and radio, 2 Website 3 Leaflet
What is E-Commerce
Offering your products for sale online via the internet/webpage
Identify 2 advantages of e-commerce for a start-up business
No rent costs for a shop and Wider target market/audience
Identify 5 different source of finance for a small business
1Owner's funds 2 Loans/mortgages 3 Overdraft 4 Family and friends 5 Government grants
Owner's funds Advantages
Bank loan Advantages
Can obtain large amounts and receive business advice
Only pay interest at times you have to and quick access if arranged
Friends and family Advantages
Government grants Advantages
No interest and don't have to be repaid
Owner's funds Disadvantages
Might not have much money saved up / limited by what you have
Bank loan Disadvantages
Interest, collateral required which could be taken
Bank may not agree, high interest, bank can withdraw it at short notice
Friends and family Disadvantages
May not have large funds, may need it back quickly, less likely to scrutinize business plan
Government grants Disadvantages
Difficult to obtain, have to meet criteria, lots of forms and an interview
Identify where a start-up business can find financial advice
Business Link Private websites Banks Accountants and solicitors
How do you calculate revenue(Turnover/Income)
Selling price x sales
Identify the relationship between price and sales
Generally, the lower your price, the more sales you will make and vice versa
Costs do not alter when a business changes its output i.e. rent
Costs vary directly with the business's level of output and sales i.e. raw materials
How do you calculate Profit
revenue - total costs
How do you calculate total cost
Fixed costs + (variable cost x output/sales)
What is Cash Flow Statement
Is a table showing all the inflows and outflows of cash that have happened within a business.
Advantage of a cash flow statement
It can help you identify where the business could save money.
Cash Flow Forecast
Prediction written as a table showing all the inflows and outflows of cash that are expected by a business.
Advantage of a cash flow forecast
It can help you plan for the future.
What are the implications of cash problems
1 Can not pay stakeholders like suppliers 2Will need an external source finance 3 may have to close the business down and sell their assets
How can a business improve its cash flow
1Delay payments 2Speed up cash inflows 3Find new sources of inflows 4Reduce cash outflows 5Overdraft 6Owners invest more money
Works a number of hours equal to a normal working week; usually between 35-40
Work for a limited number of hours (less than normal working week e.g. 20)
Explain 2 advantages of using full time contracts
Available for a lot of hours, can carry out lots of tasks, become experienced and can suggest improvements
Explain 2 disadvantages of using part time contracts
Not always available, not as loyal to the business, higher labour turnover, less motivated
The process of hiring staff for your business
Internal recruitment is
promoting people from within the business to fill vacant roles
External recruitment is
hiring people from outside of the business
Identify 3 different methods of recruitment for a small business
1Internal newsletter 2Local newspaper 3Job centre 4Recruitment agents
Wages are paid either each week, or can be paid by the hour.
They are usually paid once a month. They are usually stated as a figure that a person earns over a year.
Identify 3 factors that determine wages of employees
1Skills 2Experience 3Industry levels of wages/salaries
Explain why skills impact wages
If an employee holds a higher skillset, they should be paid more to reflect this and this will prevent them looking elsewhere at other businesses
Why experience impact wages
As an employee gains more experience of a job role, they will become better at their job and therefore their pay should increase
Why industry level impact wages
If you don't pay in line with what other businesses offer, potential employees will go to your competitors instead
Compensation or money received in return for work or service