Theme 1.5 Entrepreneurs and Leaders Flashcards
4 advantages of a partnership?
More capital invested
Can share ideas
More partners add more skills
Financial information is private
4 disadvantages of a partnership?
Unlimited liability
Disagreements
Profit is shared
Slower decision making
Incorporated meaning?
The business shad a seperate legal identity from the owner, which is why they have limited liability
5 advantages of a private limited company?
Can raise capital by selling shares
Limited liability
Incorporated - shareholders can’t be sued
No chance of takeover without shareholder agreement
Continuity
4 disadvantages of an LTD?
Harder to raise capital as can only sell to friends and family
Have to pay dividends
More expensive to set up
Must publish accounts every year
5 advantages of a public limited company?
Limited liability
Easy to raise capital
Benefit from EOS
Easier to raise finance from banks as seen as less risk
Can employ specialist staff
4 disadvantages of a PLC?
Expensive to set up
Anyone can buy shares (untrustworthy)
Harder to deal with customers on a personal level due to the size
Owners do not control the day to day decisions in the business
5 advantages of a sole trader?
Flexible working hours
Keep 100% of profits
Make all decisions
Easy/Cheap to set up
Able to work in an area they have an interest in
5 disadvantages of a sole trader?
Unlimited liability
Stress
Limited investment/capital/skills
Increased workload (long working hours)
Lack of continuity
What is a deed of partnership? (4)
A document/contract setting out:
Name and roles of each partner
Info on the way the business operates
How much 💰 each partner has contributed to the business
How profits and losses will be shared amongst partners
What if there is no deed of partnership?
The profit is equally shared amongst partners no matter how much they have invested
What are social enterprises?
Businesses that trade for a social or environmental purpose (not for profit organisations)
Over 131,000 in the UK
3 things that a business must be to be a social enterprise?
Have a clear mission set out in its documents
Reinvest or donate at least half of its profits towards their mission
Be transparent in the way they operate and the impact they have
What is a franchise?
A way of doing business that involved a franchisor and franchisee
What is a franchisor?
A business with an established brand, property and systems. They grant a license to franchise to use their name, owns the overall brand
What is a franchisee?
A person/business that pays an initial fee and ongoing profits to a franchisor for the right to do business under their names and systems
3 advantages of franchising for franchisee?
Franchisee doesn’t have to establish their own brand and reputation
Buying into an established business which will significantly lower risk
Assistance from franchisor when setting up e.g. training, marketing etc
2 disadvantages of being a franchisee?
Very expensive for franchisee to buy and then also give away the profits (33%) to the franchisor (royalty)
Don’t have full control
4 skills required to be an entrepeneur?
Communication
Problem solving
Teamworking
Numeracy skills
2 financial motives?
Profit maximisation (to make as much profit as possible
Profit satisficing (to make enough profit to be satisfied)
3 non financial motives?
Ethical stance (to be morally correct)
Social entrepreneurship (motivated by supporting a cause rather than making a profit, which will then be used to further support the cause)
Independence (Be your own boss)
What is a leader?
A person that can inspire others and motivate them to meet objectives
3 reasons why entrepreneurs find it difficult to become a leader?
Reluctant to hand over control/delegate e.g. entrepeneurs are emotionally and financially attached to their success of the business
Loss of autonomy in decision-making e.g. learning to listen and accept others opinions
Learning to trust others and not feel a need to constantly oversee everything/micro manage
What is an opportunity cost?
The benefit lost of the next best alternative when making a choice. As all resources are scarce, businesses must make choices in order to allocate these resources
e.g. if i buy a Fanta, i have lost the benefit of the alternative Pepsi
What is a trade off?
giving up one thing to gain another, often due to limited resources or competing priorities, requiring businesses to make choices and prioritize effectively
What is a franchise?
When one business (franchisor) gives another business (franchisee) permission to trade using the franchisors name and selling their goods/services
3 advantages of franchising for the franchisor?
Economies of scale and most supplies are needed
Rapid expansion
Cheap investment
2 drawbacks of franchising for the franchisor?
A failed franchise is a court case waiting to happen
Loss of control e.g. hard to manage from a central point
What is a life-style business?
When entrepreneurs run a business to suit and meet the needs of ther own life styles e.g. parents working, supporting hobbies
What is the process of becoming a PLC called?
floatation
What must a PLC have before they can trade?
A minimum of 2 shareholders and have issued at least £50k of shares to the public
2 financial business objectives?
Survival
Profit maximisation
4 non-financial business objectives?
Sales maximisation
Market share
Customer satisfaction
Social - to behave in a way which benefits society
What is a mission statement of a company?
A brief written statement of the purpose of a company
3 reasons why businesses set objectives?
Motivate employees
Create reward systems
Measure and review performance
4 reasons why people set up their own business?
Be own boss
Work-life balance
Making money
Social responsibility
2 financial motives?
Profit maximisation - to make as much profit as possible
Profit satisficing - To make enough profit to be satisfied, maybe to maintain a work-life balance
2 purposes of a business plan?
To secure external funding e.g. banks, investors
To provide realistic expectations of what can be achieved
To identify problems that they might face
3 things that the entrepreneur needs to do when the business grows?
Use experts e.g. an accountant
Move to bigger premises
Expand product range
3 reasons why people dont want to be an entrepreneur?
Limited skills
Lack confidence
Lack of access to finance
