Running a Business Flashcards
Advantages of setting up a business
Has the freedom to set up businesses as they desired
Able to determine the pace of growth and change
Cheaper to establish
Flexible location, target market, range of products
Disadvantages of setting up a business
High risk of uncertainty
Costumers are harder to attract
Profits may be slower to generate
Advantages of purchasing an existing business
Sales to existing costumers will generate instant income.
A good business history
Need to determine the value of the business
Disadvantages of purchasing an existing business
Staff are resistent to change
Possible negative word of mouth
Succsess of business may be due to owners personality and contacts
Franchising advantages
Franchisee doesn’t have to have previous business experience
The invesent risk may be lower
There is immediate benefit from the franchisor’s good will
What is an entrepreneur?
An individula who starts, operates and assumes the risk of a new business.
Motivation to make proift
What are the advantages of being self employed
Being your own boss (mkaing your own hours)
possibiity of making a profit
Challenge and reward
Develop of your own ideas
Disadvantages of being self employed
Hard work and long hours at the start (less employees, more efofrt to make profit)
Dealing with suppliers and customers
Unstable income (flucuation)
Failure
Mental and emotional stress
Three qualities of an entrepreneur
Seeking and taking advantaged of an oppurtunity
Establishing a shared vision
Demonstrating innovation resilience and initiative
What is Seeking and taking advantage of an opportunity
Finding a gap in the market where your idea would thrive in due to lack of competitors. Try to select a business that suits your strengths or personality.
An example of this is selling shows for women with big feet. Why?
becuase it is unlikely that popular shoe brands sell shoes for women with large feet.
WHat is establishing a shared vision
The ability to set objectives and have a vision for the future. Vision refers to a clear sense of direction that allows people to achieve a common goal.
Example is when two friends built a business and set a goal to make 49,500 over year and create an authentic business.
Demonstrating initiative, innovation and resilience
Initiative - resourceful and make smart quick decisions
Resilience - cope with ups and downs, adapt to change
Innovation - creating a new or significantly improves product
What investigations need to take place when a business opp has been identified?
Market Research
Demogrpahics
Competiton
Target Market
Location
What does market research include? Example
Collecting and analysing information about customers and business opportunities available
Helps to make better decisions based on consumer behaviour
Failure risk is reduced
EXAMPLE : Flybuys and loyalty cards help collect consumer behaviour making it easier to target them with certain products
Three steps of the market research process?
Problem is clearly stated to determine what needs to be measuerd
Primary info (facts, stats) Secondary (census data)
^This info needs to be analysed and interpreted
Why is location important?
When choosing a location you need to choose the place that will maximise revenue and minimise costs.
For example locating a store that products target teenagers will be in large popular shopping areas (Bondi Junction) this is reasonably close to suppliers which minimises delivery costs.
What are demographics?
Demo factors are population, characteristics that affect a consumers spending this includes age, gender, ethnicity, family size and income.
Examining a regions demographics pattern will provide a clear picture of possible costumers
What is competition?
The rivalry amongst businesses that try t supply needs and wants of a market.
Be mindful of the actions and strategies implemented by their competitors ad well as newcomers
What is a target Market?
A specific group of consumers that your business intends to sell its products or services. Businesses concentrate its marketing activities (ads) on that group.
What are the five types of legal ownership structures?
Sole trader, Partnership, Private company, public company, incorporated association
What are the two categories that the 5 entities can be seperated into.
Incorporated business entities
unincorporated business entities
What is a Incorporated business entities? what ownerships does it include.
The process that companies go through to be a separate legal entity. Meaning is the business exists in it own own rights. Whatever happens to the individual owners the business will still exist.
Private company
Public company
Incorporated association
What is an unincorporated business entities. What ownerships does it include.
Has no separate legal existence. The owner and business are one.
Sole trader
Partnership
What is a sole trader? Example
Is operated and owned by one person. Simplest and cheapest to establish (no employees)
Receives all profits and losses.
Unlimited liability, meaning they can be forced to sell personal assets to pay for business debts.
Tradesmen, Florists, Bakers
What is a partnership? example
Owned and operated by 2-20 partners. Share all profits and losses. Unlimited liability, meaning the owner are responsible for business debts. Lawyers, Doctors
What is a private company? Example
2-50 shareholders. Small - medium in size and tend to be family owned.
A private company must have Pty Ltd (proprietary limited
Limited liability, cannot pay its debts, shareholders only loose money that they invested into the business. Example Retail, Food, Hospitality
What is a public company? Example
A public company can have unlimited number of shareholders and they are listed in the ASX (aus security exchange). Limited liability (Ltd) after its name. Example Netflix, Apple, Woolies
What is an incorporated association?
5 or more people that form an association. Small non-profit that can only conduct in the state it registered in. Simple and affordable type of structure. Youth Groups, Sports Clubs (Randwick Rugby)
One Advantage and Disadvanteged of each business category
Sole trader - keep profits Pay more tax
Partnership - Shared control Split income
IA - No personal liabilities Increase costs
PC - Freedom and control, Personal liability
Public company - Good publicity, Expensive
What is a loan (debt)
Loans come from external sources like Banks or Trade suppliers.
Advantages
Funds can be accessed easily
Increased funds increase earning
Interest payments are tax deductible
adv of loans
Advantages
Funds can be accessed easily
Increased funds increase earning
Interest payments are tax deductible
dis of loans
Increased risk becuase of bank charges or intrest. Regular payments have to be made (starting a business has flucuating income)