Business_Theme 1

• Business ideas come about due to 1. Advances in Technology 2. Changes in what consumers want 3. Products/Services becoming obselete
• Changes in consumer Lifestyles can include -changes to needs/wants -changes to family structures -changes in consumer trends
• changes in consumer trends are things that come into fashion Eg. sustainability
• obsolete is when a product/service goes out of use
• Business ideas come about due to adaption of an existing product or an original idea
• a business might adapt an existing idea to make it more appealing/successful
• 3 risks of starting a business are -business failure -financial loss -lack of security
• business failure might occur due to cash flow or a drop in sales revenue
• types of risk that may lead to financial loss are competitive risk unstable wages no sick pay and a lack of security
• rewards for starting a business include business success, profit, independence
• the purpose of business activity is to produce products or services, meet customer needs, add value
• meeting customer needs requires quality, price, choice and convenience
• ways for a business to add value include branding, quality/design, USP and convenience
• 3 roles of an entrepreneur are to organise resources, make business decisions and take risks
• 4 key purposes of market research are to make informed business decisions, research your competitors, research your market and gather accurate info
• the 2 types of market research are primary and secondary
• 5 methods of primary research are focus groups, surveys, interviews, observations and questionnaires
• focus groups are easier to measure customers reaction but expensive for a small business
• Sales Revenue = selling price per item x number sold
• Total variable costs = variable cost per item x number sold
• Total costs = fixed costs + total variable costs
• Profit = sales revenue – total costs
• Cost per unit = total costs ÷ number sold
• Percentage change = change (difference) ÷ original amount *100
• Net Cash Flow = Cash inflows - cash outflows
• Opening balance = closing balance of previous month
• Margin of safety = Actual output - Break-even output
• Gross profit = Revenue - cost of sales
• Gross Profit Margin = Gross Profit ÷ Revenue *100
• Net Profit Margin = Net Profit ÷ Revenue *100
• fixed costs are costs that stay the same no matter what the business is doing
• variable costs are costs that change dependent on what the business is doing
• 3 examples of fixed costs are rent, insurance, repayments of loans
• 3 examples of variable costs are postage, raw materials and delivery costs