Starting A Business Flashcards
Businesses are organisationd that provide goods or services to customers .most businesses start when somebody will be willing to pay for
Reasons:
- Finanicial reasons
- personal reasons
- to help others
Businesses can have different aims
- make profit-most important aim
- be the biggest in their market
- highest quality product possible
- expand business
- satisfying customers/limit environmental damage caused
Some businesses wont try to make a profit
-‘non for profit’
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Enterprise
~business/organisation/personal qualities that mean you can see and take advantage of new business oppurtunities
Entrepreneurs take advantage of business oppurtunities:
- identifying new business oppurtunities and taking advantage of them.risk of failure, reward for successful enterprise activity-profit
- starting new business/or helping one to expand by coming up with new ideas
- good business idea is usually a product/service that no other business is already providing but which customera will be willing to pay for
- market niche
Enterprise means taking risks:
enterprise always involve balancing risks against possibke rewards
-key resource-money
-use their own money/raise from banks/investors
–make enough profit
-calculated risk
Entrepeneurs need particukar qualities
Successful business is likely to have most of the following qualities:
- ability to think ahead
- initative
- drive and determination
- decisiveness
- networking skills
- leadership skills/powers of persuasion
- a willingness to take calculated risks
- ability to plan carefully
- ability to learn from mistakes
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Business ownership structures
every business needs an appropraite legal structure-different types to choose from:
Sole trader-most businesses are ST/dont need anything except start trading
Examples: hairdressers/newsagents/fishmongers
Advantages:
- easy to set up
- be your own boss
- decide alone what happens with profit
Disadvantages:
- work for long hours
- not many holidays
- unlimited liability
partnerships:
Like two/more soletraders
-not that common , examples:actounting,soliciter,doctors
-partners have equal say in making decisions -and equal profit unless agreenent on deed of partnership
Advantages:
- morr ideas
- more people to share work
- more capital
Disadvantages:
- each partner is legally responsible for what all other partners do
- unlimite liability-like soletraders
- more disagreements
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Business ownership structures-
Private limited companies(LTD)-owmership is restricted
Differences o other companies:
-limited liability
-must have a memorandrum of association
-must have article of association
-owned by shareholders-more shares-more control you get
Advantages:
-Limited liability
- disadvantages
- more expensive to set up because lots of paperwork
- legally obliged to publish its acounts every year
Limited liability companies have their own identity
- seperate legal identity
- people can do various things-own money/property/make contracts/take legal action against people/pay tax
- limited liability
- have to pay tax/publish acounts
- form relationships
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Franchises
~the right to sell another firm’s products
-franchising-giving other firms right to sell their products/use trademark in return for fee
~franchisor-manufactures
~franchisee-trade under this name /but advertisr that they sell a particular manufacturer
advantages:
-buying right to an established product/less risk of business failing/ and more likely to get a bank loan to help start up
- wider marketing as franchisor may help promote brand
- franchisor might provide training/staff managenment/acounting
Disadvantages:
- only be able to sell franchise products/not create your own
- have to run business according to franchisor’s rule-freedom limited (for example no decorating/opening hours/particulat furniture)
Advantages of expanding business by franchising:
-increase market share
Disadvantages:
-if franchisee had poor standards -franchisor brand could get a bad reputation
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Aims,objectives and business success
Businesses need to have aims-overall goals they want to achieve
Success for a business can mean different things:
- survival
- profit
- growth
- market share
- environmental sustainability
- ethical considerations
- customer satisfaction
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Aims,objectives and business success
Objecties-like ains but more short-term
Objectives help businesses achieve their aims
- more specific than aims
- measurable
- act as clear targets
- can be used to measure whether a firm has been successful or not
Example: ‘to increase usage of recycled materials in the production process from 20% to 50% within the next six months’
Businesses use their objectives to measure success
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The influence of stakeholders
- Stakeholder-anyone affected by a business
- Even small business have lots of -stakeholders
Different types of stakeholders:
-internal(inside the firm)-like owners
(Or shareholders in a limited company) an the employees
external (outside the firm) -including customers , suppliers ,local community, the government.
Different stakeholdershave different ideas of success
- employees-interested in job security
- suppliers-want their income
-local community-suffer if firm causes noise/pollution. But benefit-when objectives are based on environmental sustainability/ethical considerations
/profitability/growth
- customers- customer satisfaction / high quality products at low prices
- government-will recieve taxes if firm makes a profit/ will benefit most when objectives are based on profitability/growth/job creation
Stakeholders influence objectives to varying degrees:
Owners=most important stakeholders
- no business can ignore its customers
- unhaopy workers?-unproductive business
- company may not mind being unpopulat in the local community -if it sells most of its products somewhere else
-owners need to consider interests of other stakeholders when setting objects-may need to ignore needs of some/but need to take others into acount if theu want to survive as a firm
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The business plan
Vital that business has a clear idea of what its going to do if it wants to be successful -where the business plan comes in
The plab is for the owner and financial backers
- business plan=outline if what a new business will do and how it aims to do it
- creating BP forces owner to think carefully about what business is going to do and resources needed
- plan can be used to convince financial bankers(banks)that the business is a sound investment
- if business is a bad idea -planning shoukd help owner/financial bankers realisr this at an early stage-before wasting time and money on a business that was never going to work
Most plans have atleast seven sections
- personal details
- mission statement
- objectives
- product description
- product details
- staffing requirements
- finance
A good business plan is no guarrantee of success:
Startkng a business involves many risks and uncertainity .some of which cant be controlled .these include:
- the health of economy
- the action of competitors
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Lean of production
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Location of production
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Location of production
All firms when they produce goods/services have to decide where to locate
Location is influenced by nine main factors:
1.location of raw materials
2.labour supply
3.transport
4.economies of concentration
5.communication links
6.location of the market
7.goverment policy
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9.
Modern technology-means that many businesses can trade over the internet.this means they can be more flexible about their location-they can maybe eveb locate abroad
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