Business theme 1

• Why new business ideas come about

  changes in technology

  changes in what consumers want

  products and services becoming obsolete.
• How new business ideas come about

  original ideas

  adapting existing products/services
• risks of business activity

  business failure

  financial loss

  lack of security
• rewards of business activity


  business success

  profit

  independence
• role of business enterprise/ purpose of business activity

  produce goods or services

  meet customer needs

  add value
• ways of adding value

  convenience

  branding

  quality

  design

  USP
• role of entrepreneur


  organize resources

  making business decisions

  take risks
• what are customer needs

  price

  quality

  choice

  convenience
• importance of identifying and understanding customer needs

  generating sales

  business survival
• purpose of market research

  identify and understand customer needs

  identify gaps in the market

  reduce risk

  inform business decisions
• methods of primary research

  survey

  questionnaire

  focus group

  observation
• methods of secondary research

  internet

  market reports

  government reports
• types of data


  qualitative and quantitative
• social media


  helps collect market research data e.g instagram polls
• importance of the reliability of market research

  so business owner makes correct decisions as reliable market research represents the people that the business is interested in accurately so is more useful
• market segments


  location

  demographics

  lifestyle

  income

  age
• market map helps identify

  a gap in the market
• strengths and weaknesses of competitors based on

  price

  quality

  location

  product range

  customer service
• impact of competition on business decision making example

  having to lower prices if competitor's prices are much higher
• financial aims and objectives

  survival

  profit

  sales

  market share

  financial security
• non-financial aims and objectives

  social objectives

  personal satisfaction

  challenge

  independence

  control
• revenue equation


  Price x Quantity sold
• variable cost equation


  VC per unit x number of units sold
• Total costs equation


  fixed costs + variable costs
• profit equation


  total revenue - total cost
• interest equation


  (total repayment - borrowed amount / borrowed amount) x 100
• break even level of output equation


  fixed cost/ selling price - variable cost
• margin of safety equation

  actual sales - break even sales
• importance of cash to a business

  pay suppliers, overheads and employees

  prevent business failure (insolvency)
• difference between cash and profit

  cash is the money a business can spend immediately for day-to-day expenses

  profit is the amount of money a business earns after costs have been taken into account
• cash inflow


  total receipts
• cash outflow


  total payments
• net cash flow


  Inflows - outflows
• opening balance


  Closing balance from previous month
• closing balance


  Opening balance + net cash flow
• short-term sources of finance

  overdraft

  trade credit
• long-term sources of finance


  personal savings

  venture capital

  share capital

  loan

  retained profit

  crowd funding
• limited liability


  owners not personally liable for the business's debts
• unlimited liability


  owners personally liable for the business's debts so can have personal assets taken if debts aren't payed
• types of business ownership for start-ups

  sole trader

  partnership

  private limited company