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Getting Started CH16

Leaving certificate Business

Reasons to start a business include Money/Profit, Own boss/Control, To succeed with your idea, To achieve something/Ambition, Creativity/Spot an Opportunity in the market, For employment if made redundant
Key issues that a new business must address Source of Finance , Suitable legal structure (4 ownership options), Production Options (3 types), Premises (Suitable Location), Marketing Mix (4 P’s) Market Positioning/Segmentation, Managing cash flow, Suitable Staff & Competition
Short term Sources of Finance Trade Credit, Bank overdraft, Accrued expenses
Medium term Sources of Finance Leasing, Hire Purchase, Term Loan
Long term Sources of Finance Equity Capital, Grants, Debentures, Long term Loan
Ownership Structures Sole Trader, Partnership , Private Limited Company (Ltd), Co-operatives
Sole Trader Own and manage their own business. No continuity of existence if sole trader dies, Owned and controlled by sole trader. Can only raise equity finance by investing personal savings. The sole trader keeps all the profit, Unlimited Liability
Partnership 2 (maximum 20) or more people are in business together. No continuity of existence if partner dies, Owned & controlled by partners. Can raise finance by brining in more partners. Profits shared among partners. Unlimited Liability
Limited Company (LTD) Registered with the companies registration office, owned by investors called shareholders. Controlled and run by an elected board of directors. Shareholderes receive dividends. Limited Liability for shareholders.
Co-operatives that are democratically owned and controlled by their members who may be the firms workers, suppliers or customers. Controlled by members. Raises equity finance by bringing in new members. Members receive dividends. Limited liaibility.
Factors to consider when choosing a finance option Purpose, amount, cost, control, security, Risk, Tax implications, Economic Climate (interest rates).
Production options Job Production, Batch Production , Mass Production
Subcontracting/Outsourcing This is when some businesses subcontract production to outside producers. Manufactures part or the entire product. Price, quality standards & delivery dates are agreed in advance. Offers owner more time to concentrate on other areas E.g. marketing
Business plan This is a document setting out who is setting up the business, what the product/service is, how it will be produced and promoted, where it will be sold, where finance will be sourced, and expected profit.
Benefits of a business plan Forces entrepreneurs to think about what they will do/Helps anticipate problems & devise solutions/ Provides business with something to measure against/Encourages investors/Convinces banks to give loans or government give grants/suppliers to give credit.
Information contained within business plan A description of the entrepreneur/owners , Market description & analysis, A description of the product or service Production process , Marketing Strategy (usp, 4 P’s) Management Team, Finance,
What banks will look for before agreeing a loan Purpose of loan/ Your ability to repay /Credit worthiness in any previous dealing with bank /security you can place against the loan in case its no repayed/Business plan that has a detailed description of business model /Feasibility study on the product
Created by: mcurran



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