What is a Business?
Definition: An organisation that provides goods and services to customers who want and need them.
Goods: Tangiable Items (televison)
Services: Activities that a business' do (hairdressers)
Defintion: A marketing arrangement that allows a business to trade under the same name and style as an exisiting business.
A franchisor is the owner of the established business that offers the grant.
A franchisee is the is the person who takes the grant.
- No industy expertise required
- Easier to build customer base
- Franchisor provides key equiptment
- Franchisee has to pay substanial inital fees and ongoing royalties
- Restrictions on marketing activities
- There is a risk that the franchisor will go out of business
Business Aims and Objectives
Specific Measurable Achievable Realistic Time-bound
- To survive
- Earn a profit
- Sell nto a large enough market
- Personal Wealth
- More control over working life
- Want to use skills
- Personal satifaction
Defintion: a written document that describes a business, it's objectives, it's strategies, the market it is in and it's financial forecasts.
- Investors can understand how the business is run.
- Focus' on the business idea
- Provides a logical structure to the business
- The market could change
- Doesnt take the unexpected to account.
Main sectors of a business plan: Aims, Objectives, Market Environment, Competition, Product/Service, Marketing, Distribution, Funding, Forecasts.
Defintion: an individual who owns and operates their own business and who has unlimited liablitiy.
Unlimited liablity means that the owner has a legal obligation to pay for losses made by the business.
Oppertunity cost: passing up the next best choice when making a decision.
- Profi 2
Definition: a group of people who come together to share workload and responsibility of running a business. Maximum:20 Minimum:2
The deed of partnership states: equal ownership, equal management, equal share in profits.
-Easy to set up
-Lack of continuity
-Decision making more complex
Private Limited Company (LTD)
Definition: a type of company that offers limited liability to its shareholders but that places certain restrictions on it's ownership.
Only family and friends can be shareholders in a private limited company.
The legal protection to the shareholders under which the financial liability of each shareholder for the company's debts and obligation is limited to how much they invested.
- Unlimited liability
- High administration costs/ corporation tax
- Dilutes ownerships
Definition: the desire to do something.
Monetary techniques: bonus', commission on items they sell,piece-rate-pay.
Non-monetary techniques: job enlargement, job enrichment, empowerment.
Doesn't cost the owners
Might not motivate
Fixed costs: don't vary with output (e.g. rent, wages, insurance, software)
Variable costs: costs which change as the output (e.g. raw materials, stock)
Loss: when total costs are more than total revenue.
Cash flow: movements of cash into and of a business
A cash flow problems arises when a business struggles to pay its debt on time.
To improve cash flow:
-cut costs by identifying savings in in non-essential costs.
-cut stocks by reducing cash tied up buy buying and holding stock.
-delay payments to suppliers
-reduce credit period offered to customers