Paper 1

• Why do new business ideas come about?


  Changes in technology

  Changes in customer wants and needs

  Products and services becoming obsolete
• What are original ideas


  Unique ideas that no one has come up with before
• How do business ideas come from existing products


  Take a product / service and adapt it into something new
• What are risks of stating a business


  Business failure

  Financial loss

  Lack of security
• What are rewards of starting a business


  Business success

  Profit

  Independence
• How can you add value to a business

  Convenience

  Design

  USP

  Branding

  Quality
• What's an entrepreneur


  Someone who sets up a business and is willing to take a risk in order to get a reward
• Roles of entrepreneur


  Take risks

  Organise resources

  Make business decisions
• How can you meet customer needs

  Price

  Choice

  Quality

  Convenience
• What does market research allow a business to do


  Identify gaps in market

  Identify and understand customer needs

  Reduce risk

  Inform business decisions
• What's primary research


  Research done by business itself e.g. questionaires, focus groups, obsevartions
• Secondary research


  Research done by someone else e.g. government reports, internet
• Qualitative data


  Descriptive data e.g. opinions
• Quantative data


  Numerical data e.g facts and figure
• How can business segment their market


  Demographics

  Age

  Income

  Location

  Lifestyle
• Why are market maps useful

  Identify gaps in market

  Analyse competition
• Why high competition can benefit consumers

  Competitors will try and get the lowest price on a product to gain more customers but this means customers don't have to pay as much
• Financial aims of business

  Profit

  Market share

  Sales
• Non-financial aims of business

  Social objectives

  Personal satisfaction

  Challenge

  Independence + control
• Why break even analysis is important


  Business can see how many sales needed to make in order to make profit
• How can break even point be reduced

  Reduce variable cost

  Increase price on product
• Cash


  Money a business owns that can be used to pay bills
• Why cash important


  To pay suppliers, overhead and employees

  Prevent business failure
• Short term finance


  Money that is needed to finance activities that are going to last less than a year
• Overdraft adv


  Quick access

  Allow emergency finance
• Overdraft dis


  High interest rates
• Trade credit adv


  Access to supplies without immediate payment

  No interest
• Trade credit dis


  Short term - must be paid off quickly
• Long term finance


  Finance that is needed over a long period of time - a year +
• Personal savings adv


  No debt

  Don't need to pay anyone back

  Don't need to give up equity
• Personal savings dis


  Might not have enough money
• Venture capital adv


  Gain money quickly

  May offer help
• Venture capital ids

  Must give away part of business

  May have different ideas
• Share capital


  Gain money quickly

  No interest
• Share capital dis

  Give away part of business

  Shareholders receive dividends
• Loans adv

  Can get significant amount of money
• Loan dis

  Interest

  Difficult for new business to access
• Retained profit adv

  Quick + easy to access money
• Retained profit dis

  Once it's gone it's not available for future unseen problems
• Crowd funding adv

  Don't get into debt

  Quite easy to do