Section 1.3 Entreprise, Business Growth, and Size Flashcards
What are entrepreneurs?
An individual who has an idea for a new business and takes the financial risk of starting up and managing it
Examples of famous entrepreneurs.
Richard Branson (Virgin) Jeff Bezos (Amazon) Mark Zuckerberg (Facebook)
What are some characteristics of a successful entrepreneur?
Innovative Self-motivated and determined Self-confident Multi-skilled Strong leadership skills Initiative Results driven Risk-taker Good at networking (learning from others)
What is a business plan?
A detailed written document outlining the purpose and aims of a business which is often used to persuade lenders or investors to finance a business proposal
What key things does a business plan describe?
The business The business opportunity The market The objectives of the business Financial forecasts
What does ‘the business’ part of the business plan describe?
Details of the entrepreneur, the idea for the business and information about the skills and expertise of the managers or employees who need to be recruited
What does ‘the business opportunity’ part of the business plan describe?
Information of the product and why the entrepreneur believes consumers will buy it; this part of the plan includes market research
What does ‘the market’ part of the business plan describe?
The current size, the potential for growth and the product’s main competitors
What does ‘the objectives of the business’ part of the business plan describe?
What the business hopes to achieve
What does ‘financial forecast’ part of the business plan describe?
Predicted revenue and profit, cash-flow and projected sales for at least the first year of trading
What is revenue?
The amount a business earns from the sale of its products
How can a business plan help new and existing business?
- Can be used to persuade lenders to provide finance to the business
- Gives the business a sense of purpose and direction
- Provide businesses with targets to aim at and enable the business to monitor its progress
Are business plans only for start-up businesses?
No, an existing business can make updated business plans to guide their business
What are the benefits the government gets by supporting new and small start-up businesses?
Job creation Entrepreneurs bring innovative ideas More competition Provides consumers with goods and services The businesses will become bigger Low costs
How does ‘job creation’ benefit the government?
New businesses employ a large percentage of the working population in the country therefore there is a low unemployment rate
How do ‘entrepreneurs bringing innovative ideas ‘ benefit the government?
Increases the variety of products available, which leads to greater consumer choice in the market
How does ‘more competition’ benefit the government?
Competition leads to lower prices
How does ‘providing consumers with goods and services’ benefit the government?
Small business often provide specialist goods and services to consumers and they also supply products to much larger firms
How does ‘small businesses becoming bigger’ benefit the government?
The government can benefit from the advantages that larger businesses bring to the economy
How does ‘low costs to small businesses’ benefit the government?
Low costs can pass on to the consumer through lower prices
What kind of support does the government give to new start-up businesses?
- Grants, interests-free or low-interest loans
- Lower taxation rates of profit (in early years)
- Rent-free premises for a certain period of time
- Free or subsidised training schemes for employees
- Information, advice and support from specialist
agencies
What are the ways of measuring and comparing the size of businesses?
- Capital employed
- Market share
- Number of employees
- Value of output
What is capital employed and how can you measure a businesses using it? Is there a problem with using this method?
Capital employed is the value of all long-term finance invested in the business; it is used to buy things the business needs before producing goods or services.
Small businesses tend to invest less capital than larger businesses
There is a problem in comparing the size of a business using this method because some industries may not require much capital. For example, a car manufacturing company need a lot of capital investment whereas a computer software design does not (the computer software business can be bigger than the car manufacturing business )
What is market share and how can you measure a businesses using it? Is there a problem with using this method?
Market share is out of total purchases of a customer of a product or service, what percentage goes to a company in that market.
Smaller businesses tend do have a lower market share than larger businesses
There is a problem when measuring the size of a business using this method as firms from different industries cannot be compared by market share.
