Chapter 7 - Business Start Up Flashcards
Entrepreneurial characteristics
Education level
Intellectual capabilities
Ethical and moral standards
Nurturing qualities
Willingness to accept responsibility
Resource needs 4 broad categories
Operating resources - this refers to the facilities that allow people to do their jobs example buildings, office or shop equipment and layout, and vehicles
Human Resources: the human resources of adventure will include all the personal who are directly or in directly involved in rendering the service, manufacturing and selling products.
Identification of both skilled and unskilled workers needs to be incorporated into the planning of the venture
Financial resources; financial resources include re-sources that takes the form of, or it can be readily converted into cash, which will enable the entrepreneur to obtain the necessary operating and Human Resources
Technology resources: technology resources include resources that support the production process, computer technology, the Internet and email, special recipes developed by the entrepreneur, and patents. Is essential to determine the nature of these resources and also assess the timeframe of replacement
Aspects that influence the size of the business
Availability of raw materials, equipment, labour, capital and managerial skills
Current size of the market
Optimum level of production (lowest cost highest output)
Minimum volume required to ensure that costs and income are matched
Location factors of a business
Sources of raw materials
Availability of labour and other Human Resources
The proximity of and access to market
(Durability of product, consumers need for rapid deliveries)
The availability of transport facilities
The availability of power and water at a reasonable price
The availability of a site and buildings
The availability of Capital
The attitudes, regulations and tariffs of local authorities
The existing business environment
The social environment
The climate of the region
Central government policy
6 Steps of choosing an advantageous location
Step 1 - establish location factors for each business
Step 2 - assign weighting to each of the factors to indicate their importance
Step 3 - calculate as accurately as possible the cost per location factor, the factors that cannot be quantified will be assigned a rating from 0-10
Step 4 - list the information from step 1 -3 in a table
Step 5 - calculate disadvantages of each location and determine a ratio
Step 6 - chose best location
Considerations affecting the type of business start up
The legal personality - whether or not the legally independent person can own assets in its own name, can conclude contracts, can also sue or be sued
The liability of the owner - whether of not the owner will be responsible for debts
The extent to which the owner has direct control
Ability to acquire capital
The possibilities of a change in ownership
The legal requirements regarding the establishment, management and dissolution of the business
Sole proprietorship
One individual owner, who is usually the manager.
Has full control of the business and receives all profits.
Advantages: does not have to conform to strict labour regulations
Drawbacks - difficult to obtain capital, owner is liable for all debts, continuity of business is linked to owner
Partnership
Contractual relationship between two or more persons, who practice a lawful business to which every owner contributes, with the objective of making profit
Partners are fully liable in their personal capacities, they enjoy joint control over business which could lead to obvious disagreements therefore they might be less adaptable than sole proprietorship.
Advantages include better access to capital than sole trader, more access to knowledge, expertise and skills to be drawn upon.
Disadvantages, transfer of ownership is more difficult because there are more people to consider.
Partners are recommended to draw up a written partnership agreement that makes provision for matters such as nature and aims of the venture, capital contributions, distributions of profits etc
Anonymous partnership - one or more partners remaining anonymous and sharing the risk but not involved with management
Commanditarian partnership- this partner invests and shares limited liability but the profits and losses are calculated in accordance with their contribution
Companies
A more advanced form of ownership where drawbacks of unlimited liability and acquisition of capital are eliminated
For profit companies
State owned company: must appoint a registered auditor
End with SOC Ltd
Private company:
prohibited to offer any securities or shares to public, must appoint at least one director , shareholders 1-50
Personal liability company: directors and pat directors are jointly and severally liable, together with the company for any debts. Must end in Inc
Public company: must appoint 3 directors are a registered auditor, it can offer its shares to general public and must convene annual meetings with shareholders where certain information such as financial statements and shareholding are made available to the public. Name end in word limited
A non profit company
Incorporated for public benefit where income is not distributable to members. Not required to have members but must have at least 3 directors
A legal personality
Applies to companies where the personal assets of the shareholder consequently do not form part of the claims made against the company
The liability of shareholders are limited to the amount paid by them for their share capital
Control and authority rest with the board of directors and general meeting of members .
Perpetual succession
Business can continue even if the members pass away
Co-operatives
A type of ownership with limited possibilities of utilization. Set up to achieve certain economic advantages for their members through joint action . E.g. Rural farming communities
Trusts
Formed to protect the assets of its beneficiaries and as legal entity under which to conduct business. A trust offers its members limited liability and reduced costs while aiming to make a profit
