A Level Business 1.5 - Entrepreneurs and Leaders

What is an entrepreneur

A person who sets up, runs and expands the business by taking risks

setting up a business

Learn about field of work, gain capital, choose suitable location, draw business plan, grow the business

Lack of finance

Can’t gain enough capital, can’t pay suppliers

Lack of entrepreneurial skills

Could prevent them from negotiating, planning, logistics and marketing

Becoming an employer

Difficult to find good workers, hard to stand out to employees

Legal barriers

Have to make sure paperwork is in order.

Lack of ideas

Could mean that there isn’t a justifiable reason to open a business

Fear of failure

May deter owners from taking risks

Aversion to risk

When a business owner prefers the outcome with less uncertainty, even if there are less returns

Competition

Larger businesses may take customers away, meaning no customers go to the smaller businesses, so they have no income, therefore they can’t survive and must shut down

Risk

When outcomes are known and measurable, and can be estimated

Uncertainty

When outcomes are unknown and can’t be predicted with confidence

Judgement

Weighing opportunities and making a decision

Hard-working

Includes time working on business

Creativity

Products need to add value and stand out

Resilient

Not giving up when facing challenges

Initiative

Inventiveness, enterprise, ingenuity, resourcefulness

Self-confidence

How an entrepreneur feels about their own abilities

Calculated Risks

Leaving secure job, financial risk

Profit Maximization

Generating as much wealth as possible

Profit Satisficing

Generate enough income to live a comfortable life

Business objectives

Aim that business wants to achieve

Sales Maximization

Target to how many sales need to be made

Market share

% of a market that a business has in revenue

Unlimited Liability

Owners personal possessions can be taken away to pay any debts

Limited liability

Only the money put into the business is lost

Sole Trader

Small business owned by one person, unlimited liability

Sole Trader Pros & Cons

Pros: Easy to set up, cheap, full control, keep all profits, easy to run

Cons: Unlimited liability, hard to raise capital, burden of decision making, lack of continuity,

Partnership

2 - 20 partners, joint owners, unlimited liability, shared profitsPa

Partnership Pros & Cons

Pros: More financial resources, shared management, longer survival, less taxes

Cons: Unlimited liability, Division of profits, disagreements, difficulty of termination

Private Limited Company

A company owned by its shareholders, manages by a director. Not sold on stock exchange. Shares sold to friends and families

Private Limited Company Pros & Cons

Pros: Limited liability, Can raise capital by selling shares, Can continue trading if shareholder dies, Has legal status.

Cons: No access to stock exchange, Legal requirement to publish accounts.

Public Limited Company

Company requiring only 2 people to set up. Shares bought and sold via stock exchange. Limited liability

Public Limited Company Pros & Cons

Pros: Limited liability, Easy to raise capital, Banks more willing to loan money

Cons: Expensive, Has to prepare annual accounts, Accounts made available for the public to see

Franchising

A small business owner buys rights to sell the goods and services of a large, well-established company

Franchising Pros & Cons

Pros: Effective way to grow business, Franchisor gets setup fee and royalty payments, Franchisee receives a set-up business, Training is provided.

Cons: Risk of damaging brand, A share of sales has to be given, Expensive setup fees, Little freedom.

Franchisor

Large business that is selling the rights

Franchisee

Business owner buying the rights

Opportunity Cost

Cost of foregoing the next best alternative when making a choice

Trade-off

When less of one thing is accepted for more of another. Also known as a compromise

Delegation

Giving authority to others to carry out tasks

Trusting others

Trusting employees with tasks

Listening to others

Discussing decisions with stakeholders, taking in the opinions of others to help businesses

Reaction

Setting trends, seeing the gap in the market, moving forward with a business idea.

Emotional intelligence

Managing emotions to reduce stress, communicate effectively, empathize, overcome challenges, reduce conflict.