Business planning and growth

Question 1

What is a business plan?

Answer 1

a document which sets out future plans for a business

Question 2

What is a business plan usually made from?

Answer 2

the busniess idea
aims and objectives
target market
location
profits

Question 3

What is profit?

Answer 3

Revenue - total costs
the money you have left after paying for business expenses

Question 4

What is revenue?

Answer 4

the total amount of money brought in over time before deducting anything

Question 5

What are the total costs of a business made from?

Answer 5

fixed cost and variable costs

Question 6

What are fixed costs?

Answer 6

costs that do not change with rate of output eg rent over a certain amount of time , rent may change but DOES NOT affected by output

Question 7

What are variable costs?

Answer 7

costs that change with level of output eg the more sandwiches made by a cafe in the more bread will be used therefore bread is a variable cost

Question 8

What is gross profit?

Answer 8

the profit a business makes after variable costs have been deducted

Question 9

What is net profit?

Answer 9

the amount of money a business makes after all costs and expenses have been deducted

Question 10

Benefits of business planning

Answer 10

help plan for future
help show if idea is realistic

Question 11

Drawbacks of business planning

Answer 11

can make you become funnel visioned
may not be accurate

Question 12

What is growth?

Answer 12

increase in a company’s size, revenue, market share and profitability over time

Question 13

What are the two main types of growth?

Answer 13

organic and inorganic

Question 14

What is organic growth (internal growth)?

Answer 14

occurs when expansion happens from within the company

Question 15

When does organic growth occur?

Answer 15

franchising
opening new stores
e-commerce
outsourcing

Question 16

What is inorganic growth (external growth)?

Answer 16

happens when firms join together through a merger or takeover

Question 17

What is a franchise?

Answer 17

when a business sells the right to another business to use its name and sell its products

Question 18

Advantages of selling a franchise

Answer 18

can grow quickly and less money
franchisee provides some of the finance

Question 19

Disadvantages of selling a franchise

Answer 19

lose some control
danger of problems with one franchisee affecting the whole brand
have to share profits

Question 20

What is a franchisee?

Answer 20

the person buying the finance

Question 21

What is a franchisor?

Answer 21

the person selling the franchise

Question 22

Advantages of buying a franchise

Answer 22

established brand
share marketing costs
learn from other franchises

Question 23

Disadvantages of buying a franchise

Answer 23

have to share profits
sales may suffer if another franchisee gets a bad rep

Question 24

What is outsourcing?

Answer 24

when a company gets other organisations to produce its products for it, if demand is growing but the business does not have time or does not want to take the risk of expanding its own production facilities it can outsource its products to another organisation.
- enables a business to grow quicker
- need to be carful controlling quality and it may cost more than producing the items itself

Question 25

What is a merger?

Answer 25

two business merge to become a new entity

Question 26

Advantages of a merger

Answer 26

international expansion
increased revenue and market as company has more power as it’s twice as big

Question 27

Disadvantages of a merger

Answer 27

clash of cultures
possible communication problems eg now too many employees
unreliable merger partners

Question 28

What is business takeover?

Answer 28

one business will take over another (buying more than 50% of the shares)

Question 29

Benefits of business takeovers

Answer 29

buying a competitor eliminates threat
less expensive to buy than opening new site

Question 30

Drawbacks of business takeover

Answer 30

may be additional legal costs
retrain staff

Question 31

What is inflation?

Answer 31

measures how quickly the price of goods and services are rising

Question 32

What does inflation do to people?

Answer 32

reduces consumer spending power when wages don’t increase

Question 33

Example of inflation

Answer 33

if a soda costs £1 and that rises by 5 cents compared with a year earlier then soda inflation would be 5%