1.3 - Putting a Business Idea Into Practice

Aims and Objectives

The goals (aims) a business strives to achieve and the specific targets (objectives) it sets to accomplish these aims.

Financial Objectives

Goals related to a business’s financial performance, typically focusing on profitability, revenue growth, and financial security.

Non-Financial Objectives

Goals that do not directly relate to financial performance, such as customer satisfaction, employee satisfaction, or community impact.

Revenue

The total income generated from the sale of goods or services before any costs are deducted.

Costs

The expenses incurred by a business in the process of producing goods or providing services.

Profit

The financial gain obtained when total revenues exceed total costs.

Profit and Loss

A financial statement summarizing revenues and expenses, used to determine net profit or loss over a period.

Break-Even Point

The level of sales at which total revenue equals total costs, resulting in neither profit nor loss.

Margin of Safety

The difference between actual sales and break-even sales, indicating the cushion a business has before incurring losses.

Cash-flow

The movement of money into and out of a business, crucial for day-to-day operations.

Net Cash-flow

The difference between the cash inflows and outflows during a specific period.

Fixed Costs

Costs that remain constant regardless of production levels, such as rent and salaries.

Variable Costs

Costs that change with the level of output, such as raw materials and labor costs.

Total Costs

The sum of fixed costs and variable costs incurred by a business.

Cash Inflows

Payments received by a business from sales, loans, and other sources.

Cash Outflows

Payments made by a business to cover expenses, such as rent, salaries, and raw materials.

Cash-flow Forecast

A plan that predicts the future cash inflows and outflows over a specific period.

Trading Credit

An agreement allowing a business to receive goods or services and pay for them later.

Overdraft

A short-term financial arrangement allowing a business to withdraw more money than it has in its bank account, usually up to an agreed limit.

Retained Profits

Profits not distributed to shareholders but reinvested back into the business.

Venture Capital

Investment made by firms or individuals in small businesses with high growth potential.

Share Capital

The money raised by a business through the sale of shares, where investors receive ownership in return.

Crowdfunding

The collection of funds from individuals via online platforms to finance a business venture.

Financial Security

The ability of a business to maintain and generate stable income, ensuring the entrepreneur's financial stability.

Sales Maximization

An objective where a business aims to increase its sales volume, potentially at the expense of profit.

Business Strategy

A plan outlining how a business intends to achieve its goals and objectives effectively.

Measurement of Success

The assessment of how well a business meets its established objectives.

Entrepreneurial Motivation

The reasons or driving forces behind an individual's decision to start and run a business.

Sustainable Growth

An expansion strategy that aims to increase business size and profitability while maintaining resources and community integrity.

Competitive Environment

The market landscape characterized by various businesses competing for the same customer base.

Implementation of Objectives

The process of executing and achieving set business aims and objectives.

Quality Service

Providing goods and services that meet customer expectations and result in satisfaction.

Target Market

A specific group of consumers identified as the intended audience for a company's products or services.

Competitive Advantage

The favorable position a business has in comparison to its competitors, often due to unique attributes.