Limited liability

The level of risk is limited to the amount of money that has been invested in the business or promised as investment

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Property, such as a house or car

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A business that is registered as a company, so the business and the owners are separate in the eyes of the law

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Unlimited liability

The level of risk goes beyond the amount invested, so the personal assets of the business owner can be used to pay off the business’s debts

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A business that is not registered as a company, so the owners and the business are the same body in the eyes of the law

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Sole trader

A type of unincorporated business that is owned by just one person

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A business that is owned by a group of two or more people who share the financial risk, the decision-making and the profits

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Deed of partnership

A legal document that defines the terms of a partnership

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Private limited company

An incorporated business that is owned by shareholders

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Investors who are the part-owners of a company. They invest in the business in return for a share of the profits and voting rights at the AGM

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When one business gives another business permission to trade using its name and products in return for a fee and share of its profits

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An established business that gives permission to an entrepreneur to trade using its name and products

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An entrepreneur who pays a fee to trade using the named and products of an established business

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Workers or the workforce

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The number of people passing a particular location within a given time period

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The characteristics of the population, such as gender, age, religion and wealth

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National Living Wage

The minimum amount that a business is legally allowed to pay its employees

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Bulk-gaining product

A product that is bigger than the raw materials used to make it, such as a bicycle

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Bulk-reducing product

A product that is smaller than the raw materials it uses, such as paper

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Convenience good

A product that a customer buys frequently or routinely

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Shopping good

A product that a customer takes time to consider before purchasing, by looking at or weighing up a number of options before choosing one

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The physical characteristics of a landscape, such as being flor or hilly

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A tendency to keep things as they are rather than change

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Using the internet to carry out business transactions

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Using mobile technologies, such as smartphones and tablets, to carry out business transactions

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Using a number of methods to reach a customer, including physical stores and e-commerce

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Sell the same product for a lower price than competitors

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Price war

When competing businesses try to undercut each other by lowering prices. This leads to an ongoing battle where only the customer benefits, not the businesses

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Product differentiation

Designing a product with some unique features that distinguish it from similar products sold by competitors

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Brand loyalty

A customer’s willingness to buy a product from a particular business rather than from its competitors

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Market share

The percentage of the total sales of a product in a market that is taken by one business in that market

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A period of economic decline characterised by the fact the economy has failed to grow for 6 consecutive months

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Promotional mix

The combination of promotional activities that a business uses to make customers aware of a product, with the aim of increasing sales

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Business plan

A document that outlines how an entrepreneur is going to set up a new business

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SMART objectives

Objectives that are Specific, Measurable, Achievable, Realistic, and Time-bound

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Market research

The process of gathering information about the market and customers’ needs and wants in order to help inform business decisions, including product design and marketing

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Target market

That group of people that a business has identified as potential customers

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The money that will come into a business from sales

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The amount of revenue left over once costs have been deducted

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Cash flow

The amount of money coming in and going out of the business and the timing of its movement

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Pre-set financial targets for a  business to achieve, like a sales budget, or abide by, such as an expenditure budget, in a given period of time

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Negative cash balance

Occurs if the business’s opening balance results in the negative amount at the end of the period, leading to a cash shortage

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A facility provided by a bank allowing a current account holder to withdraw more money than there is in the account

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Bank loan

A fixed sum of money lent by a bank to an individual or a business for a specific purpose, which must be repaid with interest in set payments over an agreed period of time

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Pricing strategy

Any strategy adopted when deciding on a price for a product or service. There are many different pricing strategies available; skimming, cost-plus, competitor based for example.

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Price skimming

A pricing strategy where the product is sold at a very high (premium) price. Used where there is a clear USP or strong brand to support the high price.

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Penetration pricing

A pricing strategy that starts lower than the market average to attract new purchasers and product trial. Often used for new products on the market.

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Any method employed to increase awareness of a product or service. This can include advertising, social media, offers and discounts as well as PR and product placement.

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Closeness to something.

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Proximity to competition

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Proximity to labour

How close a business is to people it will need to employ. For some businesses where they require a certain skill, a business would be best placed to locate near to these skilled staff. Computer programmers in the M25 (London)

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Proximity to market

How close a business is to its customers. Depending on the product some customers will be willing to travel, for example if it is unique or expensive. For everyday items customer will want convenience.

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Proximity to suppliers/material

How close a business is to its raw materials. If a bulk reducing business it will want to be close to suppliers to reduce costs. If it is a bulk increasing business, it will save money by locating close to the market.

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Public Limited Company (plc.)

A public limited company sells shared on the stock market, and they are available to the general public to buy, making anyone able to buy shares in your company and become an owner.

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Marketing mix

The name given to the four elements that need to complement each other when creating a successful selling proposition. Product, place, price, promotion. Also known as the 4 P’s

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Cost plus pricing

Where the selling price is determined by finding out the variable costs to make it and then adding on a percentage (%)

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