Topic 1.4 - Making the business effective

Bankrupt

When an individual is unable to pay their debts, even after all personal assets have been sold for cash

Limited liability

Restricting the losses suffered by owners/shareholders to the sum they invested in the business

Private limited company

A small family business in which shareholders enjoy limited liability

Sole trader

A business run by one person; that person has unlimited liability for any business debts

Unlimited liability

Treating the business and the individual owner as inseparable, therefore making the individual responsible for all the debts of a failed business

Franchising

Paying a franchise owner for the right to use an established business name, branding and business methods

Royalties

Percentage of the sales revenue to be paid to the overall franchise owner

Entrepreneur

A person who sets up a business and takes on financial risks in the hope of profit

Fixed premises

Buildings that have to be where they are (for example, the high street); e-commerce buildings can be located anywhere

Proximity

Nearness; whether or not a business wants to be close to a factor such as 'materials'

Place

How and where the supplier is going to get the product or service to the consumer; it includes selling products to retailers and getting the products displayed in prominent positions

Price

Setting the price that retailers must pay, which in turn affects the consumer price

Product

Targeting customers with a product that has the right blend of functional and aesthetic benefits without being too expensive to produce

Promotion

Within the 4Ps promotion means all the methods that a business uses to persuade customers to buy, for example branding, packaging, advertising to boost the long-term image of the product and short-term offers

Business plan

A detailed document setting out the marketing and financial thinking behind a proposed new business