1.3 Putting a business idea into practice

• Aims - the strategic goal of the business; to grow and expand
• Objectives - specific steps to reach the aim
• financial objectives for a start up business:

  Survive - keep the business running

  Person satisfaction - see the growth of your own business

  Independence - gain the ability to operate with out dependance on others.
• non-financial objects for a start up business:

  • Personal Satisfaction - a business owner might simply gain satisfaction running their own business.
  • Challenge - entrepreneurs might start a business for the challenge of it
• Private sector businesses are run by non governmental organisations.
• Public Sector businesses are run by the government
• revenue - the money which is coming into the business through sales
• Fixed Costs - the costs which dont vary based on sales or output.
• Variable costs - the costs that change based on the output of a business.
• Gross profit is the amount made based on the selling price and the cost of production
• Gross profit = revenue - cost of goods sold (variable cost)
• Net profit is profit made including all exepenses
• Net profit = Gross profit - expenses
• Interest % =

  Total Repayment - borrowed amount * 100 /

  Borrowed amount
• Interest is the expense of taking out a loan.
• break-even is when the total costs are equal to the total revenue
• Break-Even (units sold) = Fixed Costs / Selling price- variable costs
• Margin of Safety (MoS) the difference between the actual sales and the break-even point.
• Margin of Safety = Actual sales - break even sales
• on a break even diagram the point where the revenue line and the units sold line intersect is the break even point.

  
• Paying Overheads - The cost of running the business, including wages, rent, interest, suppliers and other expenses.
• Insolvency - The inability of a business to pay its debts as they fall due.
• Cash Flow Forecast - An estimate of how much money will come in and go out over a period of time.
• cashflow - the amount of money coming into the business and the amount of money going out
• shortfall - a shortage of something, especially money, goods, or services