1.3 Enterprise, business growth and size

Question 1

What are the characteristics of a successful entrepreneur?

Answer 1

• Innovative
• Self motivated and determined
• Self confident
• Multi-skilled
• Leadership qualities
• Initiative
• Results driven
• Risk taker
• Good communicator
• Hard-working, committed, determined
• Tough

Question 2

What is a business plan? What does it contain? How does it assist entrepreneurs?

Answer 2

• Business plan: a complete description of a business and its plans for the next one to three years; explains what the business does, who will buy the product or service and why; provides financial forecasts demonstrating overall viability; indicates the finance available and explains the financial requirements.

Contents:

• Executive summary - brief summary of the key features of the business and the business plan.
• The owner - educational background and what they have done.
• The business - name and address of the business and detailed description of the product or service being offered; how and where it will be produced, who is likely to buy it, and in what quantities.
• The market - describe the market research that has been carried out, what it has revealed and details of prospective customers and competitors.
• Advertising and promotion - how the business will be publicised to potential customers and details of likely costs.
• Premises and equipment - details of planning regulations, costs of premises and the need for equipment.
• Business organisation - whether the enterprise will take the form of sole trader, partnership, company or cooperative.
• Costings - indication of the cost of producing the product or service, the prices it proposes to charge.
• Finance - how much will come from savings? How much will come from borrowed?
• Cash flow - income and outgoings over the first year.
• Expansion - indication of future plans.

Question 3

Why does the government support business start-ups?

Answer 3

• Employ large numbers of people
• Account for a large component of employment growth in countries
• Account for a substantial component of the production of goods and services in economies
• Enable equitable growth - provide good opportunities often for the poorer members of society
• Exports
• Encourage new ideas and technologies

Question 4

How does the government support start-up enterprises?

Answer 4

• By providing support with the startup process
• By providing direct financial (grants and loans) and other forms of help (research and product development centres)
• Removing obstacles (lower taxes, simplification of laws to increase the ease of doing business)
• Provide free or subsidised training for workers
• Rent free premises for a certain period of time

Question 5

What are the methods of measuring business size? What are the limitations of these methods?

Answer 5

• Number of people employed
• Value of output
• Capital employed
• Market share

Limitations:
Many methods are not as straightforward as it seems, this is because the methods can produce different results so more than one method should be used in measuring the size of the business.

Question 6

Why is business growth beneficial? What are some methods of business growth?

Answer 6

• Business growth: able to cut costs and win a greater share of the market; develop new products or sell to new markets; can be external or internal.
• Internal growth: investing in new products or selling more of existing products.
• External growth: involves the takeover of another business or merger with another business.
• > sell shares
• > merge - when two business combine to form a single company
• > acquisition - when one business gains control of part of another business

Question 7

What are the problems concerned with business growth?

Answer 7

• More difficult to control staff
• Lack of funds
• Lack of expertise
• Diseconomies of scale

Question 8

Why do some businesses remain small?

Answer 8

• Flexibility, quick decisions made
• Greater control
• Direct interface with customers
• Understand the market more fully
• Reduced level of stress

Question 9

Why do some businesses fail?

Answer 9

• Not having enough cash to pay outstanding bills
• Low profit margins
• Failure to meet requirements of customers
• Changes in the external environment
• > The level of competition
• > Changes in laws and regulations
• > Changes in consumer preferences and tastes
• Poor selling of products
• Relying too much on a single customer
• Poor management
• Lack of planning
• Trying to grow too quickly

Question 10

Why are new businesses are at a greater risk of failing?

Answer 10

• Less experience
• New to the market
• Not a lot of sales yet
• Don’t have a lot of money to support the business yet