business Flashcards
what is a business aim?
an overall goal/target of the business
what is an objective?
a way of achieving your aims
what does SMART stand for?
Specific, Measurable, Achievable, Realistic and Time-bound
what are 5 main aims of start up businesses?
to survive, to grow by establishing customers, generate revenue and profit, to be able to support the business and their employees, and to find gaps in the markets to provide better services
why do each business have different aims and objectives ?
because different businesses operate in different sectors
what are the two main types of objectives?
financial and non financial objectives
What are the 5 customer needs?
Product, price, convenience, quality and accessibility
how does business segment markets - examples?
age, income, lifestyle, geographical location, gender, profession etc…
What’s an example of quantitative data?
how much customers will pay or how often they buy?
what is added value?
the difference between the price customers are willing to and the cost of producing it
formula of added value
price - cost of producing product = added value
what are 5 ways of adding value to products?
branding, packaging/features, convenience, USP, and quality
what is the marketing mix?
the 4 ps - product, price, place and promotion
products include goods and services - what’s the difference?
goods are tangible - things a customer can physically touch and use
eg: a phone,
whereas services are intangible such as spa day experiences etc
market mapping is where ? plot against ? variables - very often price and ? to see where they are in that marketplace and if there is a gap in the ?
Why do products often become obsolete
Many of them have a limited lifespan at which point it will be replaced by a new updated version
what is this the definition of? the successful commercialization or adaptation of a product to improve its features
innovation
Reasons business ideas come about
Changes in tech,
Products and services become obsolete
Adapting existing products, services and ideas
What are the 3 main cash payments?
Payments to suppliers
Payments to employees
Overheads like rent or electricity
When can businesses suffer from cash flow problems
As start ups, or during rapid growth
3 ways to get out of negative Cashflow?
keep costs under control, keep cash coming into business by arranging trade credit or credit with customers, or take out an overdraft
what does a Cashflow forecast do?
predicts the future flow of cash inflows and outflows for a 12 month period (can also help businesses make decisions about employing more staff, opening a new branch/ opening a new business)
what businesses are cash flow forecasts most important for
new businesses, fast growing businesses or businesses with unpredictable sales
what’s the opening balance
Amount of money the business has at the start of the period (normally first day of month)
What is the closing balance
The amount of money at the end of the reporting period - net Cashflow + opening balance
how to find the opening balance
it’s the closing balance of the previous period
what is trade credit
A credit agreement agreed with a supplier and a business that allows the business to gain stock and raw materials and pay for them later on
what is share capital and 2 pros and cons
when money is raised by selling shares
- no interest has to be paid
- no dividends are paid if the business has had a poor year
- dilutes control
- makes business vulnerable to takeover
bank loan info
when a business applies for a loan/ fixed amount of money, however the cons is that the business may have to secure assets so if they can’t pay it back, banks can claim assets. as well as this, bank has to carry out credit checks beforehand to check financial history and reliability.
what is venture capital and pros and cons
When an individual/group are willing to take the risk of finding a new business
Pros - business is supported, and gets lots of new info and support
Cons - venture capitalists want a return on their investment, and input of running the company
overdraft, when is it used and cons?
normally in an emergency, cons are that it has high interest rates and bank can demand full repayment within 24 hours
what is crowdfunding and pros and cons
when a large no of people invest small amounts of money, using websites like crowdfunder or crowdcube
pros - is a helpful type of market research, allows individuals to start up a business without other sources of finance
cons - has to be an interesting idea and less than 33% of businesses achieve their crowdfunding goal/ target
difference between personal savings and retained profit?
personal savings are saved by an entrepreneur with no interest rate - money that belong to them
retained profit is profit made and saved by the business which is then reinvested to develop the business!!!
difference between limited and unlimited liability?
limited is where the business owners are only responsible for the debts the value of their financial investment, whereas unlimited is where are he owners are responsible for all the debts of the business
sole trader and pros and cons?
owned and run by one person
pros - quick and easy, make decisions and keep profit
cons - unlimited liability, high level of responsibility and stress, long hours!!!
partnership and its pros and cons?
Business with 2-20 owners, deed of partnership is the agreement to a set of rules within the partnership.
Pros - quick and easy, shared decision making and responsibility for debt
Cons - may be disputes between owners, risk of unlimited liability, owners have to pay income tax and long working hours
Private limited company and its pros and cons?
A business whose owners are shareholders, but can only be invited in. They also pay corporation tax (tax on profits of the business)
Pros - limited liability, protected from outside influence, can raise money by selling shares
Cons - lots more paperwork (has to register with companies house etc), has to release their annual financial reports to the public including their competitors, very time consuming
Who is the franchisee?
Business that agrees to manufacture, distribute and sell branded products under the licence of a franchisor
Who is the franchisor?
Business that gives the franchisee the right to manufacture using their name/brand
Franchise and its pros and cons
Gives the right to another business to sell its goods under its brand, the new business has to pay a fee
Pros : franchisees get free access to training and marketing, lower risk for entrepreneur than setting up a new business, easier to make money
Cons : other local franchises can be set up as competition, franchisees have to pay royalties to franchisor, franchisee has to consult franchisor to make decisions! can also be expensive
What are royalties?
A percentage of earnings franchisees have to pay the franchisor?
What is a business plan?
A document that provides details about each element of a specific business!
What is normally included in a business plan?
- the business idea
- business aims and objectives (SMART)
- target market (from market research)
- revenue forecast
- projected costs and profit
- cash-flow forecast
- sources of finance (long and short term)
- location (where business and competitors are located)
- marketing mix (price, product, promotion and place!)
pros of a business plan
- allows a business to understand all the elements that it compiles
- lets the entrepreneur know if the business is likely to succeed it fail
what are good business plans key for?
- for investors (to see if they’ll be successful)
- for banks (to approve - the business needs to have potential for this to happen)
- if the business wants to raise money
pros of Cashflow forecast and conducting market research?
- can see if there are times of the year when the business may lose money and can change the budget in accordance
- minimises risk
What does the consumer rights act of 2015 do?
deals with transactions between sellers and customers in order to protect customers from unfair and dishonest practices
what 4 factors make up the consumer rights act?
- product / service
- returns
- repairs
- delivery
details of product and service from the consumer rights act?
product - has to be described accurately, fit for purpose and good/ adequately quality
service - provided in a reasonable time and for a reasonable price and delivered with care and skill
details of returns from the consumer rights act 2015?
- customer can return a product within 30 months and get a full refund
- if a fault happens in first 6 months, business is responsible unless they can prove otherwise!
details of repairs from the consumer rights act 2015?
- after 30 days, customer can give business one chance to repair or replace any damaged goods - including digital ones. if unsuccessful, they can claim a full refund
details of delivery from the consumer rights act 2015?
- should take place within 30 days (unless otherwise agreed), and if not achieved customer has the right to cancel purchase and receive a FULL refund
What is an employment law?
Any piece of government legislation that protects employees
what are the 4 main factors of the employment law?
- recruitment
- pay
- discrimination
- health and safety
what two laws must a business consider when recruiting? (and why)
- Equality Act 2010 so no discrimination
- Data Protection Act 2018 - as all candidates must give permission for personal data to be collected and used
what two acts do businesses have to adhere to to do with pay? (and description)
National minimum wage age act 1998 - have to pay staff a minimum hourly rate
- 16-24 is national minimum age and national living wage is 23+
Equality act 2010 - can’t pay people different rates who do same or similar jobs
what two acts do businesses have to adhere to to do with pay? (and description)
National minimum wage age act 1998 - have to pay staff a minimum hourly rate
- 16-24 is national minimum age and national living wage is 23+
Equality act 2010 - can’t pay people different rates who do same or similar jobs
what act do businesses have to adhere to to do with discrimination? (and description)
Equality Act 2010 - can’t discriminate due to age, disability, gender, marital status, pregnancy and maternity, race, religion, sex and sexual orientation
what two acts do businesses have to adhere to to do with health and safety? (and description)
- health and safety at work act 1974 to protect employees when working
- working time regulations amended 2003 - to ensure staff have rests and holidays
Heath and safety rules for employers and employees?
Employers have to - provide training, services and sanitation, safety equipment, and first aid
Employees have to - complete training, wear safety clothing, report risks and take responsibility for their own safety!
Working time regulations - when was it amended and rules?
2003, staff can only work 48 hours max a year, 5.6 weeks’ annual holiday, 20 min break between 6 hour shifts
Pros of meeting employment laws, cons of not meeting employment laws?
Pros - staff work harder, increased staff retention, business is more likely to gain a good reputation —> easier to recruit and decreases recruitment costs
Cons - suppliers/stakeholders don’t want to be associated due to damaged reputation, employers have to pay fines and legal fees if they end up in court!!!
4 stages of the product life cycle?
production, growth, maturity and decline
3 elements of the design mix
function, cost and aesthetics
5 main. stages of the sales process
- customer interest
- speed and efficiency of service
- customer engagement
- post sales service
- customer loyalty
