Business paper 1

• Break even


  The point at which sales revenue equals total costs, making neither a profit nor a loss
• Calculating break even


  Fixed cost / (Sales price - Variable cost per unit)
• Margin of safety


  The gap between the current level of sales and the break even level of sales
• Interest


  The cost of borrowing money, also the reward for saving
• Percentage change


  Difference / Original x 100
• Revenue


  Money generated from selling goods or services
• Profit


  The amount of money the business has left over after all costs have been covered
• Types of costs


  • Variable costs (change with output)
  • Fixed costs (don't change with output)
• Unemployment


  The percentage of the population who are not working
• Impacts of unemployment


  • Negative: People have less disposable income, economy declines
  • Positive: Businesses can hire people for cheaper, smaller brands become successful
• Stakeholder


  Anyone involved in or affected by a business
• Different stakeholders have different ideas of success
• Examples of stakeholders


  • Owners
  • Managers
  • Employees
  • Customers
  • Suppliers
  • Government
  • Community
  • Pressure groups
• Venture capitalist


  An investor who provides money in exchange for a percentage of the business
• Share capital


  Selling shares of the business (PLC or LTD)
• Trade credit


  Obtaining materials and paying for them later (up to 90 days)
• Overdraft


  Allowing a business to spend more money than it has in the bank
• Firms need to adapt to changes in technology to stay competitive
• Ways technology can change businesses

  • Automate processes to reduce costs
  • Boost sales by reaching bigger markets and easier purchasing
  • Affect marketing mix
• Social media


  Easy way to share information with customers and update regularly
• Digital payments


  Allowing customers to pay via credit/debit cards, PayPal etc. which is quicker and more secure
• Economic activity grows


  People feel secure in jobs, incomes rise, businesses receive more money to reinvest
• Economic activity declines


  People worry about job security, incomes frozen, businesses can't reinvest
• Economic growth


  Rise in the rate of economic activity, increase in total sales value
• Economic decline


  Fall in the rate of economic activity, decrease in total sales value
• Bank loan


  Receiving money from a bank and having to pay it back with interest
• Crowdfunding


  Asking customers or people to donate to your business
• Personal savings


  Money you have saved yourself
• Retained profit


  Money from last year that you work to reinvest
• Businesses can use improvements in technology to help grow and improve their business
• Ways technology can help businesses

  • Communication (emails, live chats, video calls)
  • E-commerce (selling online, global reach, no physical store)
• Advantages of e-commerce


  • Can sell to global market
  • Don't have to pay rent for a physical store
  • Can show all stock online
• Disadvantages of e-commerce


  • Have to deliver products
  • No face-to-face customer service
  • More online competitors
• Business plan


  Allows owner to be organised to minimise the costs, reduces risk of new mistake, can be used to convince financial backers that the business idea is a sound investment and if they get their money back
• Contents of a business plan

  • Business idea
  • Aims and objectives
  • Target market
  • Marketing mix
  • Location
  • Finance