Chapter 3

Question 1

Name all the characteristics of successful enterpreneurs

Answer 1

RRIISS MLG

• risk taker
• results driven
• innovative
• initiative
• self confident
• self motivated and determined
• multi skilled
• leadership qualities
• good at networking

Question 2

What are the contents of business plan?

Answer 2

• The business - this part includes the details of enterpeneur, the idea for the business and information about the skills and expertise of managers or workers who need to be recruited.
• The business opportunity - here you will find information about the product and why the entrepeneur believes that the customer will buy it; this part includes market research.
• The market - the curent size, potential for growth and the product’s main competitors.
• The objectives of the business - this is what the business hopes to achieve.
• Financial forecasts - this includes cash flow forecast and projected sales, revenue and profit at least for the first year of trading.

Question 3

How business plan assist entrepenuers?

Answer 3

• The information in the business plan can be used to persuade lenders such as bank.
• The plan gives a sense of direction which acts as a checklist to track progress through out a certain period.
• The objectives and financial forecasts to monitor the business’s progress. (provide an estimate of cost which could help set budget.)
• Helps understand and reduce possible risks as have time to think about the possible solutions.
• Help in decision making so will not waste time or money on buying the wrong product.

Question 4

Why government help start-up business?

Answer 4

1. Job creation - although small business might not employ many workers but together they employ a very large percentage of working population.
2. The entrepenuers who start-up the business brings new ideas for goods and services which helps to increase variety products in the market and increase consumer’s choice.
3. Competition - more business, more competition in the market which lower pricess and better quality of goods and services.
4. Small businesses provide specialist goods and services for the consumers and large firms.
5. Some small businesses will eventually grow into large businesses. This will benefit the country’s economy.
6. Some start-up and smaller business often have much lower costs than larger business and can pass this on the consumer through lower prices.

Question 5

What is the benefit for expanding the business?

Answer 5

1. Increase in profits - when business grows, output increases, if the output is sold, then sales and revenue will increase, then this should also increase profits.
2. Increase in market share - its products and brand had become more well known which is result from business growth. Therefore, launching new products onto the market is less risky.
3. Economies of scale - As a business grows it may benefit from reduced average cost as a result of economies of scale.
4. Greater power to control the market - Larger business normally have greater power to control the market activities.
5. Protection from risk of takeover - The larger the companay, the more difficult and expensive it is for this to happen because grater amount of shares need to be bought.

Econimies of scale
- As the business grows larger the total average cost per unit is reduced.

Question 6

Why business wants to remain small?

Answer 6

Owner Choice
- Owner does not want the responsibility or workload of managing a larger business
- Owner wants to keep total control of the business and fears that growth will reduce the level of control they have over decicion-makaing and day-to-day management
- The owner wants to maintain a close relationship with customers and provide a personal service.

Market Size
- Business that serve a local market may not want to offer their services beyond the local neighbourhood.

Access and availability of capital
- Small business have difficulty in obtaining loans which prevents them from expanding.