1.4 Making The Business Effective Flashcards
What is a sole trader?
A business owned and run by one person
What is a partnership
A type of business that has 2 or more owners
What is an LTD?
Private limited company, a business owned by shareholders who each own a share of the company
What is a franchise?
Permission for a business to sell goods under another business name
What is a franchisee?
A business that sells products under the brand and license of another business
What is a franchisor?
A business that allows another franchisee to sell its products in exchange for fees or royalty payments
What are the advantages and disadvantages of a sole trader business
A: easy to set up
Keep all profits
Make all decisions
D: unlimited liability
Long hours and few holidays
Unincorporated
Limited finance access
Business continuity risk
What is unlimited liability ?
The owner and business share the same legal identity. The owner is fully responsible for business debts meaning personal possessions may be used to cover liabilities
What is limited liability?
The business and its owners have separate legal identities, owners are not personally liable for business debts. They could lose the capital that they invested but personal possessions are safe
What are the advantages and disadvantages of a partnership business
A: more ideas
Can share workload
Shared responsibility
Variety of skills
More capital and resources
Easy set up
D: unlimited liability
Unincorporated
Shared profit
Disagreements
What is a deed of partnership?
A legal document that explains the rules of business partners
What are the advantages and disadvantages of a franchise business
A: already successful / guaranteed sales
Support with training and marketing
Easier to obtain finance
Lower risk
D: rules no freedom
Must pay royalties (a % of profit)
Limited decision making
What are the advantages and disadvantages of an ltd
A: incorporated
Limited liability
Control
Easier to raise capital
Protected ownership
D: expensive set up
Profits shared with shareholders
Time consuming set up
Paperwork
Less privacy
What is the marketing mix?
Product - what the business sells, the business must do market research to meet customer need and have a USP
Price- what will be charged must be appropriate for the quality but also look good quality (not too cheap) helps beat competition
Place- shop, online store etc. direct (manufacturer to customer) wholesaler (manufacturer, wholesaler, consumer) or retailer (manufacturer,wholesaler, retailer , consumer
Promotion- helps people notice a product
What does a business need to consider with its location?
Proximity to labour, consumers, materials and competitors
Where would a small business set up ?
E commerce, no rent, quick, cheap, control ,worldwide, convenience
Where would a retail business set up in comparison to a manufacturing business?
Retail- busy town with footfall
Manufacturing- cheap land area
How has technology affected the marketing mix?
Businesses can use internet to do market research and promote product
E commerce
Digital design of products
Consumers can compare prices online
What is a business plan?
A written document that describes a business, its objectives, its strategies ,the market it’s in and its financial forecasts
Contents of a business plan
Idea
Aims and objectives
Target market
Forecast revenue
Cash flow forecast
Location
Finance sources
Marketing mix
Advantages of a business plan?
It can be shown in a bank to get a loan
Can help persuade investors
Help minimise risk
Help organise day to day operations
Help measure the business progress
Disadvantages of a business plan?
Doesn’t guarantee success
Owner may not have skill to write a plan
Sales may be over estimated
Time consuming and effort
Costs could be underestimated
