Characteristics of successful entrepreneurs
- Creative
- Risk taker
- Decisiveness
- Open-mindedness
- Determination/drive
- Optimistic
- Confident
Business plans
Business plan — a document detailing a business' objectives and other necessary information.
Uses:
- To help the business remain close to its objectives
- To spot any potential problems
Contents:
- Objectives
- Strategies
- Sales
- Marketing
- Finances
Measuring business size
Methods of measuring business size (and their limitations):
| Method | Limitation |
|---|---|
| Number of people employed | May not be applicable for capital/machinery intensive businesses |
| Value of output | This depends on the product produced. E.g. a car business produces much less than a clothing business, but could be larger |
| Capital employed | May not be applicable for labour intensive businesses |
Business growth
Why owners of a business may want to expand
- To spread the risk / overtake competitors
- To increase market share %
- To increase profit
Methods of business growth
| Internal growth | External growth |
|---|---|
| Organic growth, or building a business slowly from scratch by selling and creating more products. | Breaking into new markets by taking over and merging with existing businesses. |
| Method: selling and creating more products. | Methods: integration (see below). |
External growth methods (integration):
- Vertical integration — integrating with a business of the same industry, but a different level of production.
- Horizontal integration — integrating with a business from the same industry and same stage of production.
- Conglomerate — the merging with, or take over of, a business that is of a different industry (AKA diversification).
Problems and solutions linked to business growth
| Problems | Solutions |
|---|---|
| The business becomes hard to control | Operate the business in small units |
| Poor communication occurs | Use an appropriate communication medium |
| The business becomes short of finance | Expand slower to ensure proper finance |
| Different management styles from business integration lead to conflict | Introduce a new management style for the workforce |
Governments supporting start-ups
| Why? | How? |
|---|---|
| To increase employment | Providing grants |
| To increase competition in markets so technology is developed | Giving out loans with low interest |
| To increase exports in a country | Providing free training and advice |
| To bring in new ideas into the market | Simplifying paperwork |
Why some businesses remain small
- Owner's personal objectives
- Having a small market
- The type of industry (e.g. hairdressing)
Business failure
Causes of business failure
- Lack of good management
- Not responding to changes in the business environment
- Overexpansion
- Lack of financial planning
Why new businesses are at a greater risk of failing
- Less experience, not understanding market trends
- Lack of finance
- Less exposure to market causing lack of sales