Unit 1.2.4 Purchasing vs Establishing a Business

Question 1

Goodwill

Answer 1

• The monetary value
• Attached to the reputation of a business

Question 2

Stock

Answer 2

• The goods store on the business’s premises
• Available for distribution or sale

Question 3

Customer base

Answer 3

• Group of consumers
• Continuously purchase goods or services
• From a business

Question 4

Benefits of purchasing an established business

Answer 4

• Stock already acquired
• Equipment available for immediate use
• Good business history increases likelihood of success

Question 5

Costs of purchasing an established business

Answer 5

• Employees may resent change to the business operations
• Success of business may have been due to previous owner’s personality + connections
• Existing image + policies may be difficult to change (especially if bad rep)

Question 6

Things to consider when establishing a new business

Answer 6

• Location
• Business name registration
• Suppliers
• Staff employment

Question 7

Benefits of establishing a business

Answer 7

• Freedom to make all decisions
• Owner can determine pace of growth + change
• No goodwill for owner to pay

Question 8

Costs of establishing a business

Answer 8

• High risk + uncertainty
• Takes time to develop customer base, employ staff + develop lines of credit from suppliers
• Profits may not be generated for some time due to slow start-up