business ventures Flashcards
FACTORS THAT MUST BE CONSIDERED when choosing a form of
ownership.
LEGAL PERSON
CONTINUITY
LIABILITY
OWNERSHIP
TAX IMPLICATIONS
LEGAL
REQUIREMENTS
CAPACITY
qualities of an entrepeneur
QUALITIES DESCRIPTION
-Desire for responsibility
-Good leadership/management skills
-Clear vision
-Willpower to overcome
-Risk takers
-Self-confident
-Organisational skills
-Efficiency in time and resources
-Innovative
-Perseverance
-Strong work ethic
legal person definition
the legal rights of a person/business to own property, enter contracts or sue/be sued
continuity definition
the ability of a business to continue after the owner/s die or retire
liability definition
- the responsibility of the owner to pay the debts of the business
- limited liability = owners will not lose personal assets paying it back
-unlimited liability = may lose personal assets to pay business back fully
ownership definition
- the amount of control the owner wishes to have
TAX IMPLICATIONS
- consider tax laws, some businesses are taxed more than others.
- These fluctuations affect the amount of tax a company
pays to the government.
LEGAL
REQUIREMENTS
- Legislation for the establishment/starting a business.
- The establishment costs and time before a business can
legally do business.
CAPACITY
- Refers to the ability/potential of management to start and
operate a business as planned. - The ability to expand by adding owners / partners /
shareholders.
DIFFERENT FORMS OF OWNERSHIP
Forms of ownership refers to the type of business selected by the business owner
Explain the DIFFERENCE between PROFIT & NON-PROFIT organisations/companies
PROFIT
- Objective is to make profit for the
owner. - Capital contributed by the owners.
- Responsible for paying tax.
NON-PROFIT - Objective is to promote a social cause.
- Funds from donation and government
grants are the main source of capital. - Exempted from paying tax.
ADVANTAGES AND DISADVANTAGES OF A SOLE PROPRIETOR:
ADVANTAGES
* Easy & cheap establish.
* Quick decision-making.
* Owners receive all the profit.
* In contact with customers, suppliers and
employees.
DISADVANTAGES
* Unlimited liability.
* No legal personality
* No continuity.
* Owner accepts all risks.
* Owners are overworked.
* Capital is limited.
* No job security.
ADVANTAGES AND DISADVANTAGES OF A PARTNERSHIP:
ADVANTAGES
* easy & cheap to establish.
* More capital than sole proprietor.
* Easier to get credit.
* Expenses, responsibilities and tasks are
shared.
* All benefit from profit.
DISADVANTAGES
* Unlimited liability.
* No legal personality
* No continuity.
* Partners disagree.
* Decisions take time.
* A partner’s dishonesty affects the rest.
ADVANTAGES AND DISADVANTAGES OF A CC:
ADVANTAGES
- Limited liability.
- Legal personality & continuity.
- Easy & cheap to establish.
- None AGM necessary.
- Financial statements need not be audited.
DISADVANTAGES
- Capital limited to 10 members.
- If a member acts without expertise and care,
the member shall be liable for losses. - Banks require a financial audit for loans.
- Decisions take time.
- Could lead to conflict
ADVANTAGES AND DISADVANTAGES OF PRIVATE COMPANIES:
ADVANTAGES
- Limited liability.
- Legal personality & continuity.
- Number of shareholders allows for more
capital. - No AGM necessary.
DISADVANTAGES
- Complex establishment process.
- Can only rely on capital contributed by
members. (Cannot get money from the
general public for capital.). - Subject to double taxation.
- Annual financial statements must be
reviewed by a qualified person, which is an
extra expense for the company.
ADVANTAGES AND DISADVANTAGES OF A PERSONAL LIABILITY COMPANY:
ADVANTAGES
- Limited liability.
- Legal personality & continuity.
- Number of shareholders allows for more
capital. - No AGM necessary.
DISADVANTAGES
- Complex establishment process.
- Can only rely on capital contributed by
members. (Cannot get money from the
general public for capital.). - Subject to double taxation.
- Annual financial statements must be
reviewed by a qualified person, which is an
extra expense for the company.
ADVANTAGES AND DISADVANTAGES OF A PUBLIC COMPANY:
ADVANTAGES
- Limited liability.
- Legal personality & continuity.
- Can obtain large amounts of capital.
- Can attract skilled personnel because
they can pay them well. - Provides job security.
- Strict regulatory requirements to protect
shareholders.
DISADVANTAGES
- Complex establishment process.
- Certain information must be published under
the law e.g. financial statements. - AGM must be held.
- Failure could lead to large scale
unemployment. - Shareholders may have little or no input in
the affairs of the company.
ADVANTAGES AND DISADVANTAGES OF STATE OWNED COMPANIES:
ADVANTAGES
- Limited liability.
- Legal personality & continuity.
- Supporting of government.
- Greater power in negotiating contracts.
- Profits can be used to finance other
government departments. - Unnecessary duplication of services is
eliminated.
DISADVANTAGES
- Not a true form of ownership because the
government controls all decisions. - Difficult to raise capital because stock is
limited. - May lead to poor management because the
government is not as effective as the private
sector. - Rely on subsidies from the government.
- Losses must be paid by the taxpayer.
ADVANTAGES AND DISADVANTAGES OF NPOs/NPCs:
ADVANTAGES
- Members have limited liability, but
directors can be held liable for loss /
damage. - Legal personality & continuity.
- Donors receive tax deductions.
- Can get funding from national lottery trust
and other agencies. - Exempt from paying tax to SARS.
DISADVANTAGES
- They are not allowed to pay bonuses to
members. - Assets to be transferred to a similar type of
company if company be dissolved. - Must keep financial and accounting records.
- May make a profit, but may not distribute
property or profits to its members. - Must hold an AGM.
ADVANTAGES AND DISADVANTAGES OF CO-OPERATIVES:
ADVANTAGES
- Limited liability.
- Legal personality & continuity.
- Facilities of members are combined to
achieve common goals. - Better production due to loyal and
dedicated members because they work
for themselves. - Decision-making by a group which is
democratic and fair.
DISADVANTAGES
- Unable to pay high salaries.
- Success depends on loyalty, commitment
and support of its members. - Can be difficult to obtain loans, because the
main objective is not always to make profit. - To reach a decision is often difficult and time
consuming. - Auditing of financial statements compulsory.
Explain the meaning of a BUSINESS OPPORTUNITY and give practical EXAMPLES
A business opportunity is an idea for a product or service that will meet needs or desires,
and that can be sold or leased to earn an income.
IMPORTANCE OF ASSESSING NEEDS AND DESIRES
- distinguish betw the needs and wants of target market to take advantage of business opportunities.
- Needs and desires are key to business opportunities.
- Every need/desire are a possible business opportunity.
- a need not met is a guaranteed market.
- easy to find something that people want, bc desires are unlimited.
- Sometimes an entrepreneur will invent a new product w/ no desire/market
- In such a case entrepreneur has to create a desire
through clever advertising
MARKET RESEARCH to assess needs and desires
Market research is the systematic gathering, recording and analysing of data about the
marketing of goods and services.
Discuss/Explain the IMPORTANCE OF MARKET RESEARCH for businesses:
- Conduct market research regularly because people’s taste, habits, behaviours and
desires change constantly. - Gathers facts and opinions in an objective way to find out what goods and services
people want to buy.
Explain/Describe PROTOCOL AND ETHICS for conducting research
Ethical issues and protocols to be adhered to when doing research:
- The research should be conducted with the willing cooperation of participants.
- If research is taking place within an organisation, it must be approved first.
- The person conducting the research should not try to influence the opinions of the
participants.
Explain/Discuss ETHICAL business opportunities
When pursuing a business opportunity, ensure that:
- It does not break any law or infringe on any copyright.
- It does not harm the environment.
- The product or service should be safe.
- The product or service should not be bad for people’s health.
Explain the DIFFERENCE between INTERNAL & EXTERNAL MARKET RESEARCH
INTERNAL MARKET RESEARCH
- factors within your business
-your strengths and
weaknesses.
EXTERNAL MARKET RESEARCH
-the broader business
environment affecting your
business.
Outline/Mention/List the STEPS FOR DATA COLLECTING
- Identify potential MARKET/S.
- Identify WHERE markets are.
- Mail or EMAIL the questionnaire.
- interview will be FACE TO FACE or via telephone?
- HOW MANY people you want responses from.
- TRAIN PEOPLE to interview potential customers without influencing the
answers. - Plan a TIME LIMIT for collecting the data.
whats a SWOT ANALYSIS
- planning tool used to help make decisions
- used to identify possible challenges in all three business environments
SWOT ANALYSIS
STRENGTHS
- Strengths refer to anything that the
business and its resources are good at,
and that can be used to its advantage. - Ask yourself:
What are my advantages?
What do I do well?
WEAKNESSES
- A weakness is something the business
lacks or cannot perform very well. It’s an
internal factor that hampers
development. - Ask yourself:
What do I do badly?
What could I improve?
OPPORTUNITIES
- Opportunities refer to the external
options that can be used to the
advantage of the business. - Ask yourself:
What are the market trends?
How can I exploit them?
THREATS
- Threats are factors outside of the
business that threaten the existence or
success of the business. - Ask yourself:
Which external factors hamper my
success?
How can I overcome these factors?
Use a SWOT analysis to analyse the viability of a business opportunity
- Conduct a SWOT
analysis
- List your strengths, weaknesses, opportunities and threats
- Analyse the impact
of the strengths - Analyse the impact
of the weaknesses - Analyse the impact
of the opportunities - Analyse the impact
of the threats - Compare the positive and negative rankings
- Add up the positive scores
- Add up the negative scores
- Compare the results
- Make a decision
Discuss/Explain the RIGHTS & RESPONSIBILITIES of the LESSEE and the LESSOR
LESSEE/ LESSOR
- Must pay the rent on time.
- Must make sure the goods or property
are available on the agreed date. - Must take care of the goods or property
while on lease. - Must see that goods and services are in
the condition agreed to. - Must leave the goods or property in the
same condition as when taking
possession of it - May not disturb the lessee without good
reason. - May be responsible for the
maintenance of certain aspects of the
goods or property. - May be responsible for the
maintenance of certain aspects of the
goods or property.
Discuss/Explain the concept of a RENTAL CONTRACT
- an agreement between a tenant and a landlord for the renting of property.
.
Discuss/Explain the RIGHTS & RESPONSIBILITIES of LANDLORDS and TENANTS
LANDLORD /TENANT
- give tenant occupation and
control of the property on the agreed
date - Must pay rent on time.
- Must maintain the property.
- Must use the property in a reasonable
manner for the purpose for which it was
let. - Must not disturb the tenant
unreasonably - Must leave the property in the same
condition as when taking possession of
it
Explain the IMPORTANCE of BUSINESS REPORTS
- key to decision making
- Senior management needs business reports to keep track of what is happening in the business to make decisions.
- tells seior management what each dept is doing
- Business reports must be to the point and effective.
Outline/Discuss/Explain the GUIDELINES FOR EFFECTIVE BUSINESS REPORTS
- Prepare an overview.
- Write concisely and to the point.
- Use regular language.
- Use visual summaries, such as tables, graphs, diagrams and drawings.
- Edit your report
- Get someone to look at the report and make suggestions on how to improve it.
VISUAL SUMMARIES
- Visual Summaries create visual pictures that summarise what has been read. It shows
the main idea through a visual representation such as graphs and diagrams.
e.g tables, bar graphs, line graphs, pie charts, flow charts
Explain THE IMPORTANCE OF VISUAL AIDS
- People learn in different ways, utilising their eyes and ears effectively will help to
convey your message. - Visual aids also help maintain the audience’s interest during the presentation as it
engages the audience with the presentation, thus making them remember it
afterwards. - Good visual aids are interesting, relevant and support the presentation, but never
dominate it.
Discuss/Explain the ADVANTAGES & DISADVANTAGES of GRAPHS/DIAGRAMS
ADVANTAGES
- A lot of information can be displayed in
an easy to understand format. - Requires little explanation.
DISADVANTAGES
- Too many diagrams and graphs can be
confusing to the audience. - Information can be manipulated easily,
causing false interpretations.
Outline/Explain/Discuss FACTORS that must be considered when PREPARING FOR A
VERBAL PRESENTATION.
- Write down the purpose and the objectives of presentation.
- Consider the audience.
- Write introduction, body and conclusion.
- Create visual aids
- note how long it takes.
- Practise in front of an honest person
- ensure that your visual aids are appropriate to the venue, and that equipment provided is working and suitable.
TYPES of visual aids
- Hand-outs
- Transparencies
- Slides
- Charts
- Models
- Posters
Explain the concept of AUDIO-VISUAL AIDS
any apparatus using sound or sight to convey
ideas.
EXAMPLES OF AUDIO VISUALS
DATA PROJECTOR
INTERACTIVE WHITEBOARD
VIDEO CONFERENCING
VIDEOS
FLIP CHARTS
The designing of HAND-OUTS
- The key is SIMPLICITY.
- RELATE the hand-out to your presentation.
- Make your hand-out appealing to the eye
- Don’t let the hand-out DISTRACT your audience.
- Know WHEN to distribute your hand-out.
Explain the IMPORTANCE OF A BUSINESS PLAN
- a document outlining all the important facts, processes and procedures of the business.
- The plan maintains business focus.
- used to secure financing from investors.
- evaluates the viability of a business idea;
- evaluates success/weaknesses of a business
Analysis of ENVIRONMENTAL FACTORS IN THE MACRO ENVIRONMENT
- influence the success
- It is essential to look at the factors influencing your business before you start writing the business plan.
- The best way is to do a PESTLE analysis.
- The PESTLE analysis examines each of the external factors that could impact on the business.
- PESTLE analysis assesses whether impact is negative or positive.
- PESTLE analysis examines to what extent the impact will affect the business.
Outline the COMPONENTS OF A BUSINESS PLAN
- COVER PAGE
- INDEX PAGE
- EXECUTIVE SUMMARY
- DESCRIPTION
- SWOT ANALYSIS
- MARKETING PLAN
- OPERATIONAL PLAN
- MANAGEMENT PlAN
- FINANCIAL PLAN
- ADDITIONAL DOCUMENTS
- COVER PAGE
- Name of the entrepreneur, name and logo of the business
- Address and contact details of the business
EXECUTIVE SUMMARY
- Summary of the entire business plan
DESCRIPTION
- Describes the product or service and the unique features of the
business - Outlines the vision, mission, goals and any legal requirements
SWOT ANALYSIS
- Identifies strengths, weaknesses, opportunities and threats
MARKETING PLAN
- Description of the marketing analysis
- Includes the target market, customers and competition
- Explains the marketing mix and provides the marketing strategy
OPERATIONAL PLAN
- Includes the location of the business
- Describes the manufacturing process
- Details of the equipment and suppliers
MANAGEMENT
PLAN
- Outlines the hierarchy and roles of the employees
FINANCIAL
PLAN
- Detailed description of the entrepreneur’s financial contribution
- Funding requirements, projected budgets and cash flow
statement
ADDITIONAL DOCUMENTS
- Annexure contains additional documents
- A contingency plan (when unexpected things happen)
- Time schedule
- Legal registration documents
