Starting A Business 2 Flashcards
What is included in a business plan?
- Background information on founders and investors and their previous experience.
- An analysis of the market and the firm’s position within it
- The firm’s objectives
- The firm’s plan on how it will compete
- An explanation of how the business with compete against its rivals - how it will be competitive and what makes it better than the competition
- An analysis of the financial position of the business include nag forecasts of sales, profits and cash flow
What is a business plan?
A business plan is a document setting out
- What the business does at present
- What it intends to achieve in the future
- How it intends to achieve it
- Marketing and financial information
Name two difficulties with business planning.
- Uncertainty - it is hard to accurately predict what is going to happen in a market or to estimate future sales
- Lack of experience - people starting a business may not have the necessary skills to plan ahead efficiently or good financial skills or knowledge of a particular market.
Name 4 things which an entrepreneur can do to reduce the risk of a business plan going wrong?
- Research the market thoroughly
- Talk to experts and consultants (can be expensive)
- Plan for a variety of possible outcomes
- Regularly review and update the plan so it remains relevant
Name the three main types of business structures
- Sole trader
- Partnership
- Private limited company (ltd)
What are the 3 main advantages to setting up as a sole trader?
- Quick and Easy
- You make your own decisions so it is faster and you retain control
- You keep all the profits yourself.
Name between3 and 7 disadvantages of setting up as a sole trader?
- Can be more stressful as you are on your own
- Need to deal with lots of things like finances, marketing, management etc - this is harder
- You have unlimited liability if things go wrong
- Need to put in much more work
- Business relies on just one person so death, illness or holidays present problems
- Can be harder to raise money
- Less influence over suppliers etc as sole traders tend to be small
What is a partnership
A partnership is created when two or more people set up business in pursuit of a common purpose.
What are the advantages of partnership as compared to a sole trader?
More than one person in a partnership so more money may be available.
More owners so more skills available and can discuss and agree best strategy
Each partner can specialise in particular aspect of business
Partners can cover for each other during holidays and illness
What are the disadvantages of partnership?
Disagreements amongst partners
Slower decisions because more than one person making/agreeing with decisions
Need to divide rewards
Liability may be unlimited unless a LLP
What is a Limited Partnership Act 2000?
This allows for general and limited partners. A partnership should have at least one general partner (unlimited liability) and any number of limited partners (can’t take money out or take part in day to day management).
Therefore investors can be offered limited partnership.
What two documents need to be created to form a company?
Articles of Association and Memorandum of Association
What is a certificate of incorporation?
This is received once a company has been set up/created and the Articles of Association and Memorandum of Association are sent to Companies House.
Who owns a company?
The shareholders
Who is a shareholder?
They are the owners owners of a company as they have shares in the company. The shares are normally known as ordinary shares and each share provides 1 vote.
