1.4 business Flashcards
What are some traders
Businesses that have just one owner (although they may employ other people to work for them). For example, plumbers, hairdressers.
+/- of sole traders
Get to be your own boss
You get to decide what happens to any profit
-
Might have to work long hours and might not get any holidays
Your unincorporated which means the business doesn’t have its own legal identity. So if anyone uses the business they’ll personally sue you.
You have unlimited liability which means you are liable (legally responsible) for paying back all the businesses debts if it goes bust.
It may be hard to raise money. Banks see sole traders as risky , so it may be hard to get a loan.
If the owner takes holiday they won’t be earning money.
What are partnerships
Businesses that generally have between 2 and 20 partners.
+/- of partnerships
+ More owners means more ideas, and a greater range of skills and expertise.
Shared workload
More owners means more capital can be put into the business so it can grow faster.
-
Each partner is legally responsible for what all the other partners do.
Unlimited liability
More owners means more disagreements
The profits are shared between the partners.
+/- of Ltd.s
+
Limited liability
Easier for a ltd to get a loan or a mortgage than a sole trader or partnership
-
More expensive to set up than partnerships
The company is legally obliged to publish its accounts every year (although the don’t have to be made public
What is an incorporated business
It has separate legal identity from the owners. Do any tax bills, property etc in the company’s name belongs to the company not the owners.
Who are limited companies owned by
shareholders
Who are limited companies owned by
rivate’ means that the shares can only be sold if all shareholders agree. The shareholders are often all members of the same family. Private limited companies have Ltd. after their name.
What should a business plan include ?
- the business idea.
-aims and objectives
-target market
-marketing mix
-location
-finance
What is the purpose of business plans ?
business plans ?
- it forces the owner to think carefully about what the business is going to do, how it will be organised and what resources it needs. This allows the owner to calculate how much money is needed.
- to convince financial backers (e.g. banks) that the idea is a sound investment. The business owner can show the financial backer information about how the business will operate, which should help the backer decide how likely it is that they’ll get their money back.
-help reduce the risks of a new business idea failing.
- help entrepreneurs make decisions.
The marketing mix for small businesses (PROMOTION)
Methods of promotion such as TV advertising are unlikely to be used by small firms since they’re ver expensive. A small firm is likely to use cheaper methods such as flyers or free samples.
Promoting the right brand is really important— especially for a new business as it will be trying to establish an image with its customers.
Small businesses are more likely to promote to local customers, which is likely to affect the way in which they promote themselves.
The marketing mix for small businesses (PLACE)
Small businesses are unlikely to produce products in a large enough quantities to sell through very large retailers. And large retailers may also not want to sell products from a new, unrecognised brand in case no one wants to buy the products.
So small businesses tend to sell directly to customers or through small retailers.
