Enterprise, Business Growth and Size Flashcards
define an entrepreneur
An entrepreneur is a person who organizes, operates and takes risks for a new business venture
characteristics of successful entrepreneurs (6)
- Risk taker
- Creative
- Optimistic
- Self-confident
- Innovative
- Independent
- Effective communicator
- Hard working
Some of the content of a business plan:
- Cash flow: forecast income (revenue) and outgoings (expenditures) over the first year
- Expansion: brief explanation of future plans
- Finance: how much of the capital will come from savings and how much will come from borrowings
- Costs: indication of the cost of producing the product or service, the prices it proposes to charge for the products
- summary: brief summary of the key features of the business and the business plan
- The owner: educational background and what any previous experience in doing previously
- the market: describe the market research that has been carried out, what it has revealed and details of prospective customers and competitors
Advantages of a business plan
Making a business plan before actually starting the business can be very helpful. By documenting the various details about the business, the owners will find it much easier to run it. There is a lesser chance of losing sight of the mission and vision of the business as the objectives have been written down. Moreover, having the objectives of the business set down clearly will help motivate the employees. A new entrepreneur will find it easier to get a loan or overdraft from the bank if they have a business plan.
define business plan
A business plan is a document containing the business objectives and important details about the operations, finance and owners of the new business.
why Government support for business startups?(4)
- They provide employment to a lot of people
- They contribute to the growth of the economy
- They can also, if they grow to be successful, contribute to the exports of the country
- Start-ups often **increase competition **
- to increase output
How do governments support businesses?
- provides business ideas and help :provides training for entrepreneures that gives advices and supports.
- Provide low cost premises: provide land at low cost or low rent for new firms
- Finance: Provide loans at low interest rates
- Give grants for capital: provide financial aid to new firms for investment
Measuring business size
- Number of employees: larger firms have larger workforce employed
- Value of output: larger firms are likely to produce more than smaller ones
- Value of capital employed: larger businesses are likely to employ much more capital than smaller ones
define capital employed
is the total value of capital used in the business
limitations of the measuring methods (3)
number of employees method to compare business size is not accurate as a capital intensive firm (one that employs a large amount of capital equipment) can produce large output by employing very little labour (workers).
value of capital employed is not a reliable measure when comparing a capital-intensive firm with a labour-intensive firm.
Output value is also unreliable because some different types of products are valued differently, and the size of the firm doesn’t depend on this.
why business wants Business growth?
Businesses want to grow because growth helps reduce their average costs in the long-run, help develop increased market share, and helps them produce and sell to them to new markets. which improves the status thus increases there profit
define merger a form of external growth
A merger is when the owner of two businesses agree to** join their firms** together to make one business.
what are the two ways in which a business can grow
Internal growth
business expands its existing operations. This is a slow means of growth but easier to manage than external growth.
External growth
business takes over or merges with another business. It is sometimes called integration as one firm is ‘integrated’ into the other.
define takeover a form of external growth
A takeover occurs when one business buys out the owners of another business, which then becomes a part of the ‘predator’ business.
External growth can be classified into: 3
- Horizontal merger/integration: This is when one firm merges with or takes over another one in the same industry at the same stage of production.
- Vertical merger/integration: This is when one firm merges with or takes over another firm in the same industry but at a different stage of production.
- Conglomerate merger/integration: This is when one firm merges with or takes over a firm in a completely different industry. This is also known as ‘diversification’.
