1. Unit (8) Setting up in business Why set up?
Why do people set up in business?
Independence, people prefer to make their own decisions rather than being told what to do.
To increase rewards, people setting up their own business to earn more than if they were working for an employees.
As a result of redundancy, Redundancy can be used to fund the business.
Commitment to a product, a business may be set up to sell a new invention, or because of commitment to a product no-one else wants to produce.
Sometimes people extend their hobbies into a business.

2. To satisfy creative needs, A worker on a production line packing biscuits may be artistic, setting up a business to paint portraits may allow the individual to satisfy these needs.
A person may want to work in a particular job, but can’t find employment, so he may find that setting up their own business is the only alternative to being unemployed.
An employee may be dissatisfied with their job.

3. Implications :
What faces a person setting up their own business?
He or she will come up against many problems and challenges.
They way in which the entrepreneur works will be different to that of an employee.
The responsibility for the business would fall on to the owner.
They must be able to come up with new ideas tasks in order of priority.
He must also decide if the task can be done by someone.
People who set up in business talk a bout the lack of time to get things done.

4. This puts great stress on their personal and social life and their family and friends.
The entrepreneur must also consider the skills they have and whether they are enough.
As workers are hired, the entrepreneur must develop personal skills to control, motivate and organize the workforce.
The owner will also need to sell himself and the company a skill that is unlikely to be part of his role as an employee.

5. - If a skill is needed which the entrepreneur does not have he can.
( 1 ) Retrain, the owner does not have enough time to attend a course, and available coursed one not always designed for specific needs.
( 2 ) Hire full time employees with the necessary skills.
( 3 ) Employing a specialist.
( 4 ) Find a partner or take over another business this is dealt with later.

6. Setting up :
People who want to set up in a business must follow some steps :
( 1 ) They must have a business idea before they can begin.
Ideas can come from many places.
( 2 ) To consider whether the business is likely to be a success
- If the entrepreneur is sure that the business will be a success, then the can go a head.
( 3 ) Planning setting up the business without care feel planning can lead to problems.
It is a devisable to plan the business and take a device before setting up.
( 4 ) The entrepreneur must make the final decision of how to set up the company.
- Set up it on his own, with a partner or by buying an existing business.

7. The chances of success :
If a business is going to be a success, the entrepreneur must consider a number of factors.
( 1 ) The basic a business idea, what business is the person entering, and what will be sold?
It may be better to sell high quality product.
It may be possible to target an audience such as years old in a certain income bracket.
( 2 ) The market, how many products exist already?
What are the strengths and weaknesses of the competition.
what price can be charged ?
Can the business compete in some other way such as advertising.

8. ( 3 ) People :
What are the main skills needed to run the business?
What skills are needed to manufacture the products?
How workers can be attracted and retained?
How much do you know about the legislation regarding employment?

9. ( 4 ) Finance :
How much money is needed to start up?
How much is available to invest?
How much more will be required before cash flows into the business?
( 5 ) The product or service offered.
Is the product ready for sale?
If not how far has it been developed?
If the idea has not get been developed, is the product ideas safe.

10. ( 6 ) The cost of production :
Is a production cost effective?
The way that the good is produced, location of production organizing the production process and the materials used.
Each of the previous items will affect the cost and speed of production.
( 7 ) Risk, time scale and cost :
What are the main risks involved in the venture?
How can they be reduced ?
Who can help and how?

11. Planning :
Most firms must plan carefully, what they aim to achieve, and how to do it?
Answering the questions in the last section will help the business to produce a business plan.
Business plan is a statement that outlines the way that the business will achieve it’s objectives.
The business plan is vital and can used to :
( 1 ) Gives a clear idea of it’s direction and operation.
( 2 ) show a bank or other institution it’s likely position and it’s ability to pay back a loan.
( 3 ) Identify problems and deal with them before occur.
( 4 ) Highlight it’s strengths and weaknesses.

12. Who can help and in what way?
There are a variety of organizations that provide help and advice for new businesses.
Advice may take many forms as follows :
( 1 ) A specialist.
( 2 ) A detailed discussion.
( 3 ) Organizations that provide funds.
( 4 ) Specialist information an markets.

13. Where can an entrepreneur obtain help?
( 1 ) Individuals :
It may be possible to get advice from people, who have started their own business.
They may be able to point out what they did right and wrong.
Advice about specific skills needed might come from, an accountant, a solicitor, and an insurance adviser.
( 2 ) Banks :
Commercial banks provide advice for potential business people.
This ranges from information about sources of finance to helping to draw up a business plan.
( 3 ) Training and enterprise councils (TECs):
There are government agencies.
TECs run a special enterprise allowance scheme aimed at those unemployed who want to set up in a business.

14. ( 4 ) Enterprise agencies :
These were created specially by the government to help small businesses.
Most offer free advice on how to start up and run a business.
( 5 ) Other organizations :
The department of trade and industry.
Trade associations.
The federating for small business.
The princes youth trust .
Live sine.

15. Getting finance :
Where do new businesses find the finance that is needed to buy materials, pay wages ect?
Funds can come from a number of sources.
( 1 ) Personal savings or past earnings.
( 2 ) Funds from partners or investors.
A partnership can obtain finance from all partners.
Limited companies can raise large a mount of finance.
Investors buy a share of the company by purchasing share.

16. ( 3 ) Credit :
It is possible to buy machinery and equipment and pay for it at a later date or over a period of time.
( 4 ) leasing :
A business may decide to lease or hire equipment from a hire company.
( 5 ) Banks or other financial institutions.
Banks offer loan and overdraft facilities and charge interest.
Banks often ask for security against a loan, this can be any assets owned by the business.
Banks may ask for a business plan.

17. ( 6 ) Government funds :
There are a variety of grants available from government and local authorities.
This allows firms that do not have security to borrow.
The government guarantees part of a loan.
( 7 ) EC Grants :
Are available from both the EC and the government for businesses in certain area.
( 8 ) The department of trade and industry.
( 9 ) Certain industries can sometimes offer funds for businesses.

18. How to set up?
- Business person must decide, what form of new business will take? And what alternatives are available?
( 1 ) Setting up a new business a lone.
The simplest way of starting a business, is to set up a lone.
Sole trader is one form of this type of business.
The owner will have to take all the responsibility and bear all costs.
( 2 ) Setting up with others.
One way of avoiding the problems of a sole trader is to set up with others.
Allow the business person to share the load of running and to raise more finance.
It is possible to start a business as a limited company.

19. ( 3 ) Buying a business :
Buying an existing business.
Managers, shareholders or directors may wish to leave one company and sell it to others.
In some cases the business from the shareholders, because they feel the company can be run better.
( 4 ) Buying a franchise :
It include a contract between the franchisor and franchisee.
Franchising might be the ideal solution to give a business person more independence.

20. Types of franchising :
( 1 ) Dealer Franchises :
The company (the franchisors) agree that other businesses (the franchisees) can sell their product.
A written agreement between the two will cover areas such as, the back up service of the franchisor, maintaining the image of the franchisor.
( 2 ) Brand Franchising :
This is designed to allow an inexperienced franchisee to sell up from scratch.
The franchisor already have a reputation for a product.
It sells the rights of these branded products to the franchisee.
The franchisees are monitored to make sure that the standard is maintained.

21. The benefits to the franchisor might be :
Using the specialist skills of a franchisee.
The market will be increased without expanding the firm.
Profit or money is guaranteed even if a loss is made by the franchises.
Risks are shared.
The advantages to franchisee might be :
The franchisor might advertise and promote the product nationally.
They are selling recognized product, so the chance of failure is reduced.
Services such as training, and administration may be carried out by the franchisor.

22. Running a business :
There are many legal and operational tasks must be carried when running a business.
( 1 ) Keeping records :
All transactions must be recorded.
This includes all sales of goods or services, the purchase of all materials, and the payment of all bills.
There are certain records that some businesses must keep by law.

23. ( 2 ) The use of documents :
All transactions should be documented.
When goods and services are bought and sold, a number of documents are used.
An invoice – a document with goods sold on trade credit informing the purchaser that payment is due on a certain date.
A cash receipt – a proof of purchase given when something is paid for in cash.
A reedit note – a document issued to purchaser when these over paid, allowing credit on future payment.
Proof of delivery, proof that items have been delivered and received at a certain destination.

24. ( 3 ) Tax and insurance :
Part of any revenue earned by a business must be paid to the government.
Taxation, profits made by a business are liable for tax.
Value added tax (vat). Business must pay (vat) on any goods they sell, and they add this on to the price of a good.
National insurance contributions. Employees must make national insurance contributions to the government and must also remove these contributions from the employees.