Business 1.4 Making the business Effective

What does liability mean in business?

Responsibility for business debts.

What is limited liability?

When the business is responsible for debts, not the owners. Owners' personal assets are protected.

What is unlimited liability?

When the owner(s) are personally responsible for all business debts, even beyond business assets.

What happens in limited liability if a business can't pay its debts?

The business liquidates; lenders lose remaining money after assets are sold.

What happens in unlimited liability if a business can't pay its debts?

The owner's personal assets can be taken to cover the business debt.

What are the 3 main types of ownership for small businesses?

Sole trader, partnership, private limited company.

What is a sole trader?

A business owned and run by one person, with unlimited liability.

Is a sole trader incorporated or unincorporated?

Unincorporated.

What are the benefits of being a sole trader?

Easy to set up, full control, profits are personal income.

What are the downsides of being a sole trader?

Unlimited liability, full responsibility, must track income for tax.

What is a partnership?

A business owned by 2 to 21 people with unlimited liability.

Is a partnership incorporated or unincorporated?

Unincorporated.

What are the benefits of a partnership?

Shared ideas and workload, shared debt responsibility.

What are the downsides of a partnership?

Shared profits and decision-making, risk of disagreements.

What is a private limited company?

A legally registered business with limited liability and owned by shareholders.

Is a private limited company incorporated or unincorporated?

Incorporated.

What are the benefits of a private limited company?

Limited liability, can raise capital by selling shares.

What are the downsides of a private limited company?

Must publish financial accounts, more complex setup.

Who do you register a private limited company with in the UK?

Companies House.

What is an incorporated business?

A business that is legally registered and separate from its owners.

What is an unincorporated business?

A business that is not legally separate from its owners.

What is the difference between incorporated and unincorporated businesses?

Incorporated businesses have limited liability; unincorporated businesses have unlimited liability.

What is a franchise?

A business model where an entrepreneur runs a branch of an existing brand.

Who is the franchisee?

The person who buys the right to run a franchise branch.

Who is the franchiser?

The established business that sells the rights to use its brand and business model.

What are benefits for the franchisee?

Existing brand, loyal customers, support with advertising and operations.

What are drawbacks for the franchisee?

Expensive to set up, lack of control over products and operations.

What are benefits for the franchiser?

Quick expansion, wider audience, income from franchise fees and sales.

What are drawbacks for the franchiser?

Risk of franchisees damaging brand reputation through poor quality.

Why can't a franchisee make major changes?

They must follow strict franchise agreements to maintain brand consistency.

What are examples of franchise businesses?

McDonald's, Subway, Starbucks, car dealerships.

What are the four main factors affecting business location?

Market, labour, materials, competitors.

How does the market affect location?

Businesses need to be close to customers, especially physical stores.

How does labour affect location?

Businesses may locate near a skilled workforce, e.g., finance firms in London.

How do materials affect location?

Some businesses locate near suppliers to reduce transport costs.

How do competitors affect location?

Some businesses benefit from being near competitors; others prefer no competition.

Give an example of a business that benefits from being near competitors.

Restaurants and clothing shops in city centres.

Give an example of a business that benefits from being away from competitors.

Corner shops or fish and chip shops in small towns.

What is e-commerce?

Buying and selling goods or services online.

What is an e-tailer?

A business that sells multiple brands or products online.

What are benefits of e-commerce for businesses?

Wider customer reach, lower rent and staffing costs.

What are drawbacks of e-commerce for businesses?

Higher warehousing and distribution costs, customer service challenges.

How has e-commerce changed location importance?

Location is less important for online businesses; focus shifts to logistics.

What are the 4 Ps of the marketing mix?

Product, Price, Place, Promotion.

What does 'product' mean in the marketing mix?

The goods or services offered by a business, including features and design.

What is the importance of unique selling points (USPs)?

They help products stand out and give competitive advantage.

What does 'place' mean in the marketing mix?

How the product is delivered to the customer, e.g., in-store or online.

What's the difference between place and business location?

Place refers to selling channels; location refers to where production or services happen.

What does 'price' mean in the marketing mix?

The amount charged for the product or service.

Why is price important?

It affects how customers perceive value and compares with competitors.

What is the difference between price and cost?

Price is what the customer pays; cost is what the business spends to make it.

Why should businesses not confuse price and cost?

It can lead to incorrect decisions about pricing and profitability.

What does 'promotion' mean in the marketing mix?

How the business advertises and raises awareness of its product or service.

What methods are included in promotion?

Advertising, branding, sponsorships, sales promotions.

Why is promotion important?

It helps attract new customers and inform them about the product.

Why is it wrong to say promotion = advertising only?

Promotion includes a wider range of activities beyond just advertising.

How do the 4Ps of marketing mix work together?

They must align to attract the target market and deliver value effectively.

Give an example of product and price working together.

A high-quality product justifies a high price; a low-quality product should be priced lower.

What is a business plan?

A document that outlines a business's goals and how it will achieve them.

What are the components of a business plan?

Business idea, aims and objectives, target market, revenue/cost/profit forecasts, marketing mix, location, sources of finance.

Why is a business idea included in a business plan?

It gives an overview of what the business will do.

Why are aims and objectives included?

To define what the business wants to achieve short- and long-term.

What is the target market in a business plan?

The specific group of customers the business aims to serve.

Why are revenue, cost, and profit forecasts important?

They help predict financial performance and assess viability.

What does the marketing mix section in a business plan show?

How the business will sell and promote its products.

Why include location in a business plan?

To explain why a particular site is chosen and how it suits business needs.

Why is identifying sources of finance important in a business plan?

To show how the business will be funded and ensure it can cover startup costs.

What are the main purposes of a business plan?

To plan strategies, set goals, attract investment, and secure finance.

Why do investors/lenders want a business plan?

It shows understanding, planning, and the potential for success.

Can a good business plan save a bad idea?

No — a good plan can't save a poor idea, but a good idea might still get funding without a perfect plan.

How does a business plan link to other business topics?

It brings together aims, finance, location, marketing mix, and ownership to ensure overall strategy.