3. business planning - influences in establishing a small to medium enterprise Flashcards
personal qualities (GEMS - QC)
Q qualifications
S skills
M Motivation
E entrepreneurship
C cultural background
G gender
what is ‘ a business idea’
- The business idea can be:
- An original idea that is quite different from anything already on the market
- A distinct improvement on something already available
- A new product or service that is not available.
- The source of a business idea may come from a person’s own experiences, interests, abilities or imagination.
how to identify business opportunities
(GAD)
- FIND A GAP IN THE MARKET
- ANALYSE AND REVIEW THE MARKET
- IDENTIFY A DEMAND
how to consider the competitors
To become more competitive a business can:
- LOWERING COSTS AND PRICE
* A business that can produce a good or service at the lowest possible cost and thus sell at the lowest price has the greatest ability to attract market share. - DIFFERENTIATING A PRODUCT
* Differentiation is about making a product or service different, unique or better than its rivals.
sources of imformation
what are the 3 types of establishment options?
(SEF)
- setting up/starting a business from scratch
- purchasing an existing business
- purchasing a franchise
what is ‘business from scratch’
- In setting up a new business, business owners need to consider the legal structure and costs of complying with legal requirements.
- Other considerations includes location, staff, branding, marketing strategies etc.
advantages of starting up a business from scratch
- the business owner has opportunity and freedom to start up business exactly has they wish
- there is no goodwill which the owner must pay for
- the owner is able to determain he pace and growth
what is ‘purchasing an existing business’
- When purchasing a business you need to know why the business is for sale.
For example, if the business has been struggling, it may not be a very good purchase
When purchasing an existing business, you will be purchasing:
1. Stock and Equipment
2. Premises
3. Existing Customer Base
4. Staff
5. Location
6. Reputation and/or goodwill
disadvantages of starting up a business from scratch
- high risk and uncertainty especially without a business reputation
- time is needed to set up business, create procedures, develop consumer bases, employ and train staff
- if start-up time is slow, the business may not generate profit for time
advantages of ‘purchasing an existing business’
- sales to existing customers will generate instant income
- a good business history will increase the likelihood of business
- equipment is available to immediate use
disadvantages of ‘purchasing an existing business’
- The preexisting image of a business is hard to change, especially if they have a poor reputation
- the success of the business may have been built directly due to the previous owner’s personality and contacts, so may be lost when business is sold
- There may be hidden problems
what is ‘Purchasing A franchise’
- The franchiser sell the another business (the franchisee) their proven brand and business systems via a franchise agreement.
- This allows the franchisee to sell the franchiser’s product in return for an ongoing % of profits.
-When buying a Franchise, owners must review the:
1. Contract
2. Fees
3. Territory
4. Marketing
5. Long term profit to cover
ongoing fee payments
disadvantages of ‘Purchasing A franchise’
- the franchisor controls the operations with little scope for franchise individuality
-profits must be shared with the franchisor through ongoing franchise fees
- the franchisor often charges additional service fees for advice
advantages of ‘Purchasing A franchise’
- immediate benefit is derived from the franchisors goodwill because of the name is established
- a franchisee can succeed with little experience
- business plan and proven business methods already exist
what are the 3 market considerations?
- goods and services
- price
- location
what are some cost-based market considerations?
Cost-based:
a pricing method derived from calculating the total cost of producing or purchasing a product and then adding a mark-up for profit.
Market-based:a method of setting prices according to the interaction between the levels of supply and demand — whatever the market is prepared to pay.
Competition-based:choosing a price that is either below, equal to or above that of the competitors.
what are location market considerations?
The physical location of a business can determine whether or not it will ultimately succeed
They must consider all the factors that will be affected by the location of the business
Local governmentzoningdetermines where some types of businesses can operate
The business may choose a location such as:
Shopping centre complex
Retail shopping strips
Online
what are the 2 types of sources of finance
debt finance
equity finance
what is debt finance
Refers to money obtained through loans.
advantages of debt finance
Doesn’t take away ownership.
disadvantages of debt finance
Must pay interest
Have to pay back
what is equity finance
funds contributed by business owners e.g. shareholders
advantages of equity finance
doesn’t have to be paid back
No interest is to be paid
disadvantages of equity finance
Takes away ownership
