1.5

• Entrepreneur - someone who takes a calculated risk through starting a business.
• Financial motives for being an entrepreneur - building a business for your family,profit maximisation,profit satisficing (creating a business to make enough money for the lifestyle you want).
• Non-financial motives for being an entrepreneur - personal satisfaction,independence,being your own boss,self-actualisation,working from home,social or environmental goals.
• Characteristics of an entrepreneur - Integrity,common sense,resilience,a sense of humour,taking a long term view.
• Barriers to becoming an entrepreneur - fear of getting in debt,not being able to raise funds to start,fearing giving up a secure job.
• Calculated risk - a risk that has been given thoughtful consideration and for which the potential costs and potential benefits have been weighted and considered.
• Entrepreneurs must understand what the risks are,assess the probability of it happening and and estimate what would happen if the risks occur. They can then decide if they think it is worth taking.
• An intrapreneur is an employee of a large business who uses entrepreneurial skills to develop initiatives. (but they don't carry financial risks)
• a limited company is a business that is owned by its shareholders,run by directors and whose liability is limited.
• Limited liability means that the investors can only lose money they have invested and no more.
• Sole trader - a person who is the exclusive owner of a business,entitled to keep all profits after tax has been paid out but liable for all losses.
• advantages of sole trader

  total control of business by owner

  cheap and easy to start up

  keep all the profit

  business affairs are private(competitors can't see what you're earning.)

  sole managerial and financial control

  independence
• disadvantages of sole trader

  owner is personally liable for any debts for which the business can't pay(unlimited liability)

  no partners to consult on decisions or take over at difficult times.

  The owner does not get as much financial support,as institutions see them as more risky,unless they have personal assets to guarantee the loan.

  The owner has to finance it by themselves.
• Partnership

  a business where there are two or more owners of the enterprise. Most partnerships are between two and twenty members although it can be more in exceptional circumstances.

  Normally set up using a deed or partnership,this contains

  ~amount of capitol each partner should provide

  ~how profits/losses should be divided

  ~how many votes each partner has (usually based on capitol provided)

  ~rules on how to take on new partners

  ~how the partnership is brought to an end
• advantages of partnership

  spreads the risk across more people,so if business gets into difficulty more people to share the burden/debts

  partners may bring money or resources to the business

  partners may bring skills/ideas

  increased credibility when dealing with customers/suppliers
• disadvantages of partnership

  share the profits

  less control of business for the individual

  disputed over workload

  problems if they disagree

  unlimited liability
• Limited companies

  are very different from partnerships and sole traders. In these two the owners are the business. In contrast limited companies,are owned by shareholders.

  Run be directors - people appointed by shareholders to control and make strategic decisions. A limited company is therefore set up as a separate body from its owners.

  Protected by limited liability - limited responsibility for business debts.
• advantages of private limited

  limited liability

  chose who they sell shares to

  venture capitalists may be able to offer advice/guidance

  shares sold raise money to expand the business
• disadvantages of private limited

  loss of control if 51% or more of shares are sold

  sharing equity and profits with new shareholders

  cost of setting up

  hard to raise finance from banks (dependent on assets and profitability)
• Franchises

  the franchisor grants a licence,franchise,to another business,franchisee to allow it to to trade using the brand,name and business format.
• advantages to franchisee

  tested and developed format and brand

  more likely to succeed

  easier to raise finance as the brand is recognised

  low risk method
• disadvantages to franchisee

  expensive - high initial fees and ongoing royalties,may also have to buy goods directly from them which will be more expensive.

  restrictions on marketing activities - can't undercut nearby franchises,can't sell

  risk franchisor will go out of business

  franchise needs to earn enough profit to satisfy both franchisee and franchisor
• franchise agreement - legally binding document between a franchisor and franchisee.
• advantages to franchisor

  avoids debt,taken on by franchise

  money can be raised from selling franchise agreements

  quicker expansion at a lower risk

  no need to recruit a senior manager as franchisee will recruit staff
• disadvantages to franchisor

  difficult to keep a consistent brand (poorer franchise) may damage brand image

  significant % of profits go to franchisee

  may be difficult to find people to buy franchise
• A lifestyle business is a business set up and run by its founders primarily with the aim of sustaining a particular level of income and no more; or to provide a foundation from which to enjoy a particular lifestyle.
• advantages and disadvantages of lifestyle

  A lifestyle business gives you the freedom to work on the projects you want to work on.

  lifestyle businesses focus on the individual and usually involve few overhead costs.

  you have the freedom to choose your working hours, and do as little or as much work as you want day-to-day right from the offset

  Location flexibility,You decide where you are based.

  Personal profit,In a lifestyle business, the aim is to make a living for yourself,of the amount you choose,from the very beginning. 

  Can't grow to become a large company
• Advantages of online

  Can trade around the world at any time day or night

  Can process orders immediately

  Reduced cost

  Reach a much bigger customer audience.

  Small business can take advantage of hosting sites such as Amazon.

  Easy ordering process
• Disadvantages of online

  Can be expensive to keep up with new changing technology

  Customers/business may have concerns over fraud or cyber attack

  Can make it difficult to build relationships with customers

  Customers are likely to be very price conscious. They can easily compare, reducing profit margins.

  Customers may never find the website, fierce competition
• Social enterprise

  Not all entrepreneurs start a business for the obvious financial reasons such as making Profit and creating personal wealth.

  A social enterprise is an organisation with a clear goal to help the community,but runs like a business and all profits are reinvested into the organisation.
• advantages of social enterprise

  making a social impact

  chances of receiving grants

  Employment opportunities

  tax deductions

  benefiting communities
• disadvantages of social enterprise

  limit on revenue generation

  competition with coporates

  strict rules and regulations

  constant monitoring
• A share is something someone can buy to own a part in that business. The more shares someone owns the more ownership they have.
• The first time a private limited company (ltd) sells shares on the stock exchange they become a public limited company (PLC), this is a stock market flotation.
• Companies issue shares to raise finance and expand.

  An advantage of expanding through issuing shares is that it is debt-free.

  A disadvantage is the owners don't own as much of the business and have to share the profits with people.
• A public limited company is one that has shares that can be sold to the public. It is owned by shareholders and pays profit out to shareholders based on how many shares they own.

  Advantages - can raise finance without getting in debt, limited liability

  Disadvantage - long process,have to share profits,loss of ownership/less control.
• Opportunity cost is the cost of missing out on the next best alternative. In other words, opportunity cost represents the benefits that could have been gained by taking a different decision.

  In businesses, resources are limited. Decisions are made under circumstances of uncertainty and taking one course of action may affect business ability to take an alternative action.
• Opportunity cost measure the cost of a choice made

  e.g

  Kebab or Beer

  choosing to spend your last £5 on the kebab, you miss out on the enjoyment of the beer

  
  

  e.g business spending money on

  marketing or research and development

  choose marketing,miss out on sales could've made if done more R and D
• A trade-off arises where having more of one thing potentially results in having less of another,trade offs arise in a business as a result of resource scarcity.

  E.g choice trade off

  m&s catering for the losing sales from the older

  younger generation demographic

  who currently shop

  there.
• Entrepreneur to leader

  An entrepreneur is someone who takes a risk and starts their own business, they can do it alone

  However a leader needs to have these skills

  Delegation

  Leadership/motivational skills

  Trusting

  Strategy and vision