1.3 - enterprise, business growth and size Flashcards
enterprise, business growth and size
what are characteristics of a successful entrepreneur?
- hard working
- risk taker
- creative
- optimistic
- self confident
- innovative
- effective communicator
what is a business plan?
a document containing the business objectives and details about finance, operations and owners of the business
what is the importance of a business plan to business entrepreneurs?
- to show the bank if they want to apply for a bank loan
- it will force entrepreneurs to think ahead to try and solve any potential problems
what are the contents of a business plan?
- description of the business
- products and services they provide
- their target market
- the location of the business
- financial information- CFF, Income statement, SOFP
why does the government support start-up firms?
- new firms will create jobs which will reduce unemployment in the country
- increased output- the economy benefits from increase output of goods and services
- new firms will give consumers in the country more choice of goods and services
how do governments support start-up firms?
- offer training to entrepreneurs who want to develop their skills for running a business
- may offer grants to businesses so they can afford to open up the business
how to measure the size of a business and the limitations
- number of employees - some firms may use machinery for most of production and not many employees
- value of output - some firms may produce very few products that are very valuable to the unit
- value of sales revenue - unfair to compare some different stores against each other e.g. sweets store and luxury store
- capital employed (amount of money invested) - business may be labour intensive and not require machinery.
why would owners want to expand the business?
- increase profits
- benefit from economies of scale
- more status and prestige for owners
how can a business grow?
- internal growth - expanding existing operations e.g. opening a new branch
- external growth - taking over or merging with another business. there are three ways to do this: horizontal, vertical or conglomerate
why do businesses fail?
- lack of management skills- managers may not make good decisions for innovating their products or where to locate their premises
- changes in the business environment- recessions, covid 19, inflation, new competitors
- liquidity problems- having a current ratio below 1.5 or a acid test ratio below 1- and so not being able to pay day to day expenses.
what is unlimited liability?
when the owners of a business can be held responsible for the debts of the business so their personal possessions are at risk if they cant pay off debts. Sole traders and partnerships have unlimited liability.
why are small businesses at greater risk of failing?
- lack of capital
- lack of experience
- difficult to recruit employees
