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91 Cards in this Set
- Front
- Back
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What's an entrepreneur |
A person willing to take a risk in starting a new business |
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6 Key qualities of a successful entrepreneur |
-Dreamer -Innovator- demonstrating how the idea applied out preforms products -Passionate -Risk taker -Dogged Committer- Staying with idea's through the ups and downs -Continuous learner- Constantly exploring and evolving to do best practice |
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New business can fail for what reasons? |
-There is insufficient demand for the product -Competitors respond by taking action to force a new enterprise out of business -The costs of setting up and running a business maybe higher than expected -Business run out of cash |
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Opportunity cost? |
The next best alternative forgone. Can be used to justify an entrepreneurs decisions |
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Motives for becoming an entrepreneur? |
-To become wealthy -Because they have an idea -Being one's own boss -The satisfaction that results from creativity |
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Government support for business? |
-Education -Providing a business-friendly environment= Reducing legal barriers to starting a business and the amount of paperwork once the buisness is trading -Financial support= Acting as guarantors, providing venture capital, tax breaks -Advice and information
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Sources of business idea's? |
-Brainstorming -Inventions -Spotting a gap in the market -Market research |
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What's a franchise? |
A franchise is the granting by one business (the franchisor) to another individual or business (the franchisee) the rights to supply its products |
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Pros |
-Quick way to acquire a tested business -Offer support and training -National advertising -Reduces the risk of starting a new business |
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Cons |
-Keep to the business rules on pricing, range of products -Quality of products and the image of products -Large capital fee |
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What's copyright? |
-This is the legal protection offered by the law to authors or recorded materials for a specified period of time. Gives authors and others the sole right to benefit from a work for up to 70 years and to sue an person who breaches that right |
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Patents? |
-They give the patent holder the sole right to make and sell the product they have invented for a period of up to 20 years |
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Trademarks? |
-Distinctive symbols, words or logos or a combination of them, by which is a business known and recognized. Allow a business, a product, or a brand to differentiate itself from competitors |
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How many inputs do business during production? |
5 |
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Human resources? |
Business require a variety of human skills, both physical and mental. |
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Land |
This is the site which the business is based. It is important for all business, but particularly for agriculture, forestry or mining where land is needed to grow specific crops or to yield up certain materials |
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Capital |
Refers to the man made resources used by business, it is a large category of inputs, encompassing machinery and vehicles, computers and furniture |
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Money |
Cash is essential to finance day-to day transactions and to ensure that bills can be paid on times, new business often find themselves short on cash |
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How many transformation process are there? |
3 |
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Adding value? |
The process of increasing the worth or value of some resources by working on them |
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USP? |
Allows a business to differentiate its product from others in the market |
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What's a business plan? |
A document detailing a business future activities, expenditure, revenues and profit or lossess |
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Reasons for drawing up a business plan |
-Negotiate loans- Helps investors asses the risk in lending money and whether the business will be able to repay the loan -To make a judgement- Planning offers the entrepreneur a chance to asses the business idea in detail -Monitoring the business- help the business to manage the business effectively. Plans set out goals and targets which can be achieved. Judge whether the business is successful |
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Contents of a plan- |
- Type of business and activity in which it is to be engaged in -The market in which the product is going to be sold -The resources required -The staff required for the business -Financial forecasts -Capital funding -Details about entrepreneur |
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Sources of information and guidance on business plans |
-Other business- who are not rivals -Professionals and advisers -Market research |
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Primary Research |
-Surveys -Observation -Panels and group discussion -Test Marketing |
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Secondary Research |
-Official Data -Trade associations and trade journals -Internet |
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Qualitative research |
-Research into attitudes and opinions of consumers that influence their purchasing behaviour |
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Quantitative Research |
-The collection of information on consumer views and behaviour that can be analysed statistically |
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Sampling? |
The selection of a representative group of consumers from a larger population |
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Random Sampling? |
-Means that each member of the population has an equal chance of being included. This is appropriate when a firm is researching a product aimed at a large target group. Computers are often used to select people randomly |
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Stratified random sampling |
-Separates the populations into segments of strata. This approach can avoid bias by ensuring that the composition of the sample accurately reflects that of the entire population |
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Quota Sampling |
Splits the population into a number of groups, each sharing common characteristics, This saves money by limiting the number of respondents |
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Factors influencing choice of sampling methods |
-Pricing policies -Product design -Types of promotion -Target customers at whom to aim the product |
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What's a market |
A place where buyers and sellers come together to decide prices and exchange information |
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Different types of markets |
-Local -National -Physical -Electronic -Industrial |
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What's demand |
The quantity of a good or service that consumers wish to buy over a certain time period given at a given price |
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Factors influence a level of demand |
-Actions of competitors= If a new business competitors react to its arrival in the market by reducing prices, it will be more difficult for the new business to attract sufficient demand -Consumer incomes -Seasonal factors |
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Market segmentation? |
-Dividing a market into identifiable sub-markets, each with its own customer characteristics |
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Market segments may be based on difference in? |
-Demographics -Psychographics= Attitudes and tastes of consumers -Geography
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Why do firms engage in market segmentation |
-Increase the profits from each market segments -Dominate certain segments -Reflect differences in customer tastes |
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Types of market segmentation |
-Age -Sex -Family size -Lifestyle segmentation -Social class |
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Inferior goods |
-Products that people turn to when they are less well off |
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Luxury good |
-Products that people buy much more of when they are better off
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Normal goods |
-Products or services for which sales change broadly in line with the economy |
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Market size |
Total demand for a particular product. This can be measured in two ways -By Volume- No of products sold -By value- the amount of spending on the product |
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How to calculate market growth |
Market Growth Rate= Change in market growth/Original market size x 100 |
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Whats Market share |
-The percentage of total sales in a market achieved by one specific firm.
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Calculation |
Market share= The business sales/ Total market sales x 100 |
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Factors influencing |
-The market -Competition -Infrastructure -Suppliers -Costs |
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Private Limited Companies |
-Share capital must no exceed 50,000 -'Ltd' must be included after the companies name -Shares cannot be sold without others being consulted -Cannot be sold in the stock exchange -Small and family business
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Public Limited Companies |
-Shares sold on the stock market and can be brought by any business or individual -Must have 'PLC' in there name -Minimum capital of 50k -Have to publish all finance accounts |
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Corporate Business |
-Private limited companies -Public Limited Companies |
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Non-Corporate business |
-Sole traders -Partnerships |
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Corporate business |
-They have a legal identity that is separate from that of theirs owners |
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Limited liability |
- Restricts the financial responsibility of shareholders for a company's debts to the amount they have individually invested |
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Not for profit organisation |
-An organisation that has business objective other than making a profit |
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Sole Trader |
Pros- All profits -Simple and cheap to establish -Own boss -No financial details have to be established Cons- Short of capital for expansion and investment -Unlimited liability -Few assets to use as collateral -No holiday |
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Partnership |
Pros- Wide range of skills and knowledge -Greater amounts of capital -Less pressure on owners Cons-Control is shared between partners -Arguments and Disagreements -Unlimited Liability |
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Private Limited company |
Pros- Limited liability -Greater access to capital -Don't need to release much information Cons-Cannot sell on stock exchange -Conform to a number of expensive administrative formalities |
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PLC |
Pros- Larger amount of capital -Suppliers more willing to offer credit too PLC's -Positive publicity from trading on the SE Cons- Financial details published -Hefty administrative expenses
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Venture capital |
Finance advanced to business judged to be relatively high risk -Business angels can offer experience, contacts and advice when necessary to new entrepreneurs |
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Personal sources |
Pros= Retain complete control of business -Cheap source of finance, interest free Cons= Unlikely to provide large sums of of finance -May ask for repayments at short notice |
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Loan Capital |
Pros- Loan can be arranged at short notice -Some loans can be very flexible and tailored to business needs Cons- Business are committed to interest payments when they have relatively small earnings -Unexpected rise in payments and increase start up cots |
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Share capital |
Pro's- Relatively flexible source of finance -Dividends only paid if a sufficient amount of profit made Cons- May lose control of business -Private limited companies have to get the approval of shareholders to sell shares |
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Venture capital |
Pros- good means of raising finance for a risky business -offer guidance and advice Cons- Venture capitalist may want a large share of any profits in return -They both my disagree over the future of the new business |
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FT worker |
-Employees who work in the business for a whole working week every week
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PT worker |
-Employees who work fewer hours than full time hours each wek |
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Why's it good to have consultants and advisers |
-Constructing and conducting a programmer of market research -Recruiting the best available employees -Providing high quality service -Preparing business plans in support of loan application |
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Reasons for employing people |
-Employ people to support them and to provide the skills and knowledge thy do not possess -Employing people can reduce workload -Allow time off |
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Drawbacks from employing people |
-Conform to EU employment laws -Illness -Pregnancy -Standard of work |
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Fixed costs |
-Expenses that do not vary with changes in demand or output -Rent -Salaries -Interest charges |
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Variable Costs |
-Those costs incurred by a business that vary directly with the level of output -Materials and components -Power -Shop floor labor costs |
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Total costs calculations |
Total costs= fixed costs+ Variable costs |
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Revenue |
-The total value of sales made by a business over a specified period of time |
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Profit |
-The amount that is left over from revenue after all costs incurred in earning that revenue have been deducted |
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Calculating profits |
Profits= Revenue- (Fixed costs+ Variable costs) |
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Contribution |
-The difference between sales revenue and variable costs Contribution= sales revenue- variable costs |
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How to calculate contribution per unit |
1) Unit selling price - Unit variable costs 2) Total sales rev- total variable costs/ output |
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Breakeven |
-Occurs at the level of output at which a business' total cost exactly equal its revenue or earnings and neither a profit nor loss is incurred |
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The Breakeven point can be calculated;
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Break even in units of output=
fixed costs/ selling price- variable cost per unit or CPU |
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Pros of breakeven analysis |
-Starting a new business -Supporting loan application -Measuring profit and losses -Modelling 'what if' scenarios |
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Cons of breakeven analysis |
-No costs are truly fixed, as fixed costs are likely to increase long term -Sales revenue assumes that all outputs produced is sold and at a uniform price which is unrealistic
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Cash Flow |
The amount of money moving into and out of a business over a period of time |
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Why Business forecast cash flow |
-Allow entrepreneurs to plan -Plan how to finance major items of expenditure -Provide evidence for lenders -help entrepreneurs to assess whether their business idea will generate enough cash to be able to survive
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Budget |
a financial plan
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Income budget |
forecasted earnings from sales, sometimes called sales budget |
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Expenditure budget |
the expected spending of a business |
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Why met you set budgets |
-Essential element of a business -Budgets can help entrepreneurs whether or not to go ahead with a business plan -Help pricing decisions |
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Drawbacks of setting budgets |
-Entrepreneur might have no experience in setting budgets -Nothing to base the budgets on |
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why starts ups might fail |
-Lack of management skills and experience -Insufficient demand -Cash-flow problems -Unexpected events |
