1.3 putting a business idea in2 practice!1!

yuhyuhyuhyuh yo

what’s fixed costs :)))

-the money u spend for the business which do not vary with output

• remain the same usually but might change from year to year

• don’t immediately change despite the amount you sell

eg. rent, salary, insurance

what’s variable costs??

-change with output

• the less a company makes, the less variable costs (vice versa)

• will be different day to day, month to month and year to year

eg. stock, packaging, hiring, wages

break-even meaning

when the revenue and total costs for the business are equal to 0

no profit :((((

equation: fixed costs / (selling price - variable costs)

what’s the margin of safety11!1!

number of sales above break even point (so profit is higher than 0!!111!)

what’s trade credit in business

-a supplier allows a customer to purchase goods or services at a later date

terms of agreement:

• discount

• credit period

• credit limit

advantage: it helps manage cash flow and build relationships with suppliers.

what are overdrafts?

most common form of finance

—> should be used carefully & only in emergencies due to high interest rates charged by banks

Common features:

• variable interest rates

• bank can demand full payment

What’s venture capital?

-individuals buy large share of business, often providing expertise as well as finance

Advantages: no repayments

Disadvantages: lose part of profits & no complete control

What’s crowdfunding?

asking people for money online & those small amounts may lead up to big amounts

advantages: low risk

disadvantage: time consuming

What are focus groups?

a group interview where people are asked questions or asked for their opinions about a product/service

disadvantages: costly as you have to pay people to come

What’s share capital?

An LTD (private limited company) who can share their shares with friends & family

advantage: lower risk of insolvency

disadvantage: don’t have full control