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Entrepreneurs are people who: Take a calculated risk Passionate and has belief in enterprise Good planning and leadership skills. Can identify good opportunities Responds to market conditions Understands that the early days can be tough Bad entrepreneurs: Lazy Take uncalculated risk No trust or investment Ignore risk Rush to make big changes Nave of all business start-ups fail. Motives of an entrepreneur: 1. Control over working life 2. Spotted an opportunity 3. Building on experience 4. Made redundant 5. To make lots of money 6. Couldnt find a job Why make a business in the UK? Long term; low interest loans Government assistance Stable government Wealthier people in the UK Increased affluence Attitudes towards enterprise: Risk is the chance of loss or damage. Business could fail and lose investment Unlimited companies are liable for debt Harder to find work or start again if the business were to fail. Many entrepreneurs are over optimistic Many competitors can be aggressive Start ups fail because of inefficient customer demand; poor execution of idea and economic change. Government support Boosts a countries economy and productivity Reduces taxes Uncomplicated the tax system Reduces he barriers to investment for small businesses Improves support for small business such as business link

Promotes a change in the UKs enterprise culture.

As business productivity and demand increase and therefore the costs decreases proportionally, the extra money is spent on: Expanding the business Lowering price Increase the range of goods. This increases competition and makes for a happy government. External finance: Bank loans/overdraft/mortgage Friends and family Joint venture/partnership External investor (business angel, capital investment, venture capitalist) Venture capitalist: high risk; high reward investment. Internal finance: Personal savings Retained profit Selling shares Selling assets Sell and lease back Financial advisors: Advice on where to invest savings (e.g. stocks, property, in business or wine and art) Analyse situation and give advice: Cut back or increase income Financial planning Profit=revenue costs Revenue=selling price x volume Costs=Variable costs + fixed costs Unit contribution=price costs per unit Contribution=revenue variable costs BEP=Fixed Cots/Unit contribution

Demand for a product depends on: Price Income Fashion and trend Competitor action Social and demographic influences Seasonal changes Changes in technology Government policy Factors that affect how much a business can charge for a product or service: Price of competitor

Customer loyalty Quality Product availability Economic climate Other purchases from the customer

These prevent other companies stealing an idea and making a profit from it. It allows the inventor to regain the initial investment costs.

A business can forecast cost and revenue by: Looking at previous sales data Market research Loyalty programmes Forecast cost and revenue (cash flow forecast) Break even chart Business success: Profit Customer loyalty Reputation Business growth Why are budgets set? To gain financial support To avoid overspending Establish priorities To motivate staff To assign responsibility To improve efficiency To measure success Profit budget=income budget-expenditure budget Methods of generating business ideas: Spotting trends and anticipating their impact. Identifying a market niche (niche market is a smaller part of a large market e.g. fishing magazines; low demand but high price). Copying ideas from other companies/countries. Inventing a product and taking it to the market. Ways of spotting an opportunity: Thinking about changes to the society and the economy. Small budget research such as market mapping. Intellectual Property: Intellectual property is the term given to assets that have been made by human creativity. Governments encourage this as otherwise there is no financial incentive to create a product in their country. Copyright (song, book, movie) Trademark (logo or slogan) Patent (engineering/invention)

Primary Businesses: Farming/Mining Factories and food producers will by their product. Limited contact with the final customer. Low importance of brand image but product quality. Almost impossible to identify brands in this industry e.g. carrots. Industry has to be where the raw materials can grow/be found. Secondary Businesses: Manufacture Car dealerships, supermarkets and retail outlets would by their produce. More contact with the consumer than the primary but less than the tertiary. They must create a high brand image so that retail outlets stock their product. Can differentiate between brand e.g. cars. Chose location based on a skilled work force and location to ports. Locate near the primary provider. Tertiary Sector Supermarket chain, retail outlet Customers are the general public. High contact with the final customers. Advertising campaigns, staff in the stores. High brand image in order to attract customers. This is usually done in the retail industry by lowering the prices. Can easily differentiate between the brands: staff uniform, store logo and colours. Chose location based on the demand from the consumer. An unlimited company means that the owner is liable for its debts. A limited company means that the owner is not liable for the companys debts. If the business is unincorporated, the owner is seen as part of the business and is therefore unlimited. An incorporated business means that the owner is not seen as part of the business and is therefore limited. A sole trader: Owned and managed by one person. Unlimited and unincorporated. All profits go to the owner. They are their own boss and therefore decisions are quick. Quick to fill a market niche.

Will be difficult. Will have to work many hours. Unlimited liability so they are responsible for their debts. Partnership: Owned and managed by 2-20 people. Unlimited and unincorporated. Profits are shared by pre-agreed terms. The company can benefit from everyones strengths. There can be a conflict of interest and thus decisions can be slow. There is unlimited liability. Private Limited Company (LTD.): Managed by a board of directors and owned by share holders. These are often friends and family. Limited and incorporated. Profits shared to the board of directors and the investors. Not vulnerable to hostile take over. Protected as it is limited. Maybe unwilling to do business as it may be unlikely for you to pay debt. Public Limited Company (PLC): Owned by shareholders and managed by a board of directors. Must have a board of directors. Limited and incorporated. Shares are sold publicly when 50,000 has already been sold in shares. They make lots of money by selling shares. The business is not owned by the management therefore they are not in complete control. At risk from hostile takeover. Interdependence is the relationship between the 3 sectors and understanding that they all need each other to operate. Companies add value to a product so that they can sell it for more than it cost them to buy it. This can be done by: Transformation processes e.g. manufacture. Factors of production e.g. quality of staff and equipment. Marketing Customer service Packaging Improve technology Location e.g. Singapore more expensive Franchise: A franchisor allows another business (franchisee) to use its idea/name. 2 fees: basic/initial buying fee and % of revenue.

There is instant brand recognition. Advertisements are already paid for. Lower chance of failure Product is cheaper due to purchase in economies of scale. Support from franchisor. Training for your staff. Disadvantages: Lack of responsibility therefore not self fulfilling. The actions of other branches might affect your reputation. No individuality Always risk of franchisors cancelling the agreement.

Business Plans: Crucial attempt to raise finance from external sources. Defines aims and objectives. To encourage investment. To identify weaknesses. To set targets. To identify strengths, opportunities and threats. To calculate business projections. Benefits: It creates a plan of action and therefore the start up is organised. Creates a positive reputation. Find out if the business is feasible. Reasonable financial predictions. Sets a time frame and targets. Negatives: Things can change e.g. economic downturn. Lack of expertise and experience can result in a false plan. Can be difficult to account for competition. Cannot account for demand. A company plans for: Marketing Objectives Organisation Finance Non-Profit Organisation (NPO): Run as a business but all of the profit is reinvested into the business. NGOs: act away from the government to benefit those of society. Charity: set up to support a cause that is beneficial to society. Pressure group: established by individuals to address the interest of the group e.g. animal rights protestors.

Factors that affect the location of a business: TECHNOLOGY: this would allow the owner to work from home using ICT. High technology means that the location is of low importance. COSTS: land costs and labour costs e.g. India and china are preferable as labour costs are much cheaper. INFRASUCTURE: the network of the country e.g. roads, bridges, ports and rivers. THE MARKET: convenience and access for customers i.e. footfall (the number of potential customers that walk past the shop), proximity to complimentary business; desirability of the area. QUALITATIVE FACTORS: preference to the owner themselves e.g. home town. Random Sampling: Randomly choosing people to take a survey. Quota Sampling: Choosing your questioners is proportion to the market. Stratified sample: Only interviewing people who are relevant to your product. A business to business (B2B) is where one business sells a product to another business: In these businesses they often have experienced sales staff as the customer is often knowledgeable in the area. Business to consumer (B2C) markets is where the business sells directly to the consumer. Types of markets: Local National Physical (can go in an look at stuff) Electronic

Factors that affect demand are: INCOME: higher income means higher disposable income and therefore higher demand. TASTE AND FASHION: changes in fashion will affect the demand of certain clothes. PRICE OF OTHER GOODS: if the price of substitute goods falls then customers may switch. MARKETING: Endorsements, sponsorship and promotions. SEASON: no demand for hats, gloves and scarves in the summer. GOVERNMENT INTERENTION: They may influence the demand through taxes and legislation e.g. the smoking ban lowered the demand for pub alcohol.