Starting a Business tutor2u ™ GCSE Business Studies Revision Presentations 2004

tutor2u ™ GCSE Business Studies Things a New Business Needs FinanceTo fund other elements listed below: finance is usually hardest thing to obtain in a start-up business EmployeesDevelop a product or service and then to produce/deliver it CustomersWithout them, business will fail. Obtaining customers means business must undertake marketing SuppliersProvide many of “inputs”, such as raw materials Premises and Equipment Maybe a simple office, or possibly a large, modern factory; depending on what business activity is Organisation and structure Often very simple at start-up stage Designed, researched and tested product or service Successful business is about more than just having a good idea

tutor2u ™ GCSE Business Studies Why a Business Needs Finance Purchase plant & machinery, office equipment etc Pay for premises and offices (e.g. first 3 months’ rent may need to be paid in advance) Pay for essential business services such as insurance Purchase stocks of raw materials and components to allow production to start Pay wages and salaries of first employees to join business Provide financial cover whilst business waits for customers to pay

tutor2u ™ GCSE Business Studies Importance of Cash Flow Forecasting for a Start-up In early days of setting up a business, finance is hardest to manage Uncertain how easy it will be to find customers Business will be incurring significant start-up costs Cash flow forecasting helps guide the business through the early stages of growth  Focus the business on controlling costs  Identify when cash flow is expected to be weakest  Spot when additional funds might be required

tutor2u ™ GCSE Business Studies How Entrepreneurs Finance a New Business Own money – the most important and popular source of funds Money from friends Bank loans Bank overdraft Credit from suppliers (although this can be hard to obtain in the early days) Grant assistance from government bodies

tutor2u ™ GCSE Business Studies Contents of a Start-up Business Plan Start-up costs Statement of aims and objectives Description of market business is selling to Main competitors Production and sales forecasts Equipment needed Distribution plan for how to get product to customers

tutor2u ™ GCSE Business Studies Importance of Repeat Customers Regular (or “repeat customers”) are often most profitable kind of customers Provide a regular, predictable stream of income that might be important for sole trader May also recommend product or service of sole trader to their family and friends Reduces amount sole trader will need to spend on marketing

tutor2u ™ GCSE Business Studies External Finance Available to a New Business Short term  Bank overdraft Medium term  Bank loan  Leasing  Hire purchase  Government grants Long term  Bank loan / mortgage  Share issue (for limited companies)  Debenture

tutor2u ™ GCSE Business Studies Protecting Business Ideas and Products Copyright and patents make it illegal for other firms to copy directly business idea or invention Keep new products and services secret until they are ready for launch Focus on retaining key staff would be otherwise be valuable for competitors to poach!

tutor2u ™ GCSE Business Studies Qualities of Successful Entrepreneurs Have ideas Ability to take risks Ability to persuade others to join business or lend business money Energy to keep business going under tough circumstances