section 5 - entrepreneurs and leaders

What is an entrepreneur

an entrepreneur is someone who spots an opportunity and shows initiative and a willingness to take risks to benefit from any potential risks

what does an entrepreneur need to do before creating a setting up a business

An entrepreneur needs to identify a gap in the market or a need for a product. Therefore they may do some market research.

what is a business plan

a document that describes the main aims and objectives of the business and says how they would be achieved

what are the benefits of a business plan

• allows you to research your business thoroughly and make sure you have considered everything

• allows you to have a complete overview of your company

• allow you to spot any potential flaws in your business

why do entrapreneurs need to be innovative

• they need to think of new products and ways of doing things and be prepared to take on the risks and making these new ideas a reality

what is intrapreneurship

• when entrepreneurs employ staff, they can encourage their workers to be innovative

• they allow their employees to take risks and experiment with different ideas

• they produce characteristics of an entrepreneur

what are some overcoming barriers to entrapreneurship

• lack of money ( this often happens when a business have a very high start-up cost such as needing heavy equipment) and needs to raise capital but sometimes if they request a bank loan they may be rejected as it is deemed as too risky

• when entrepreneurs lack confidence, the fear of failure and the risk of loosing their investments

• even if an entrepreneur might have a good business idea they may not have the skills or training

difference between a risk and uncertanty

• a risk is more of a probability where the entrepreneur can decide if it will have a negative effect on the business ( such as increasing the price)

• a uncertainty differs from a risk as they are often predictable and beyond the entrepreneurs control , they tend to be associated with external factors

what are the skills of an entrepreneur

• good communications

• risk taker

• open minded

• numerical skills

• responsible

• problem solving

• it skills

• organised

• determined

• confident

why does a business need to set out its aims and objectives

an aim is a broad target or goal set by the business in the longterm and the objective is a specific target or goal set which is more short or mid-term

an objective is more of a particular target or goal set by the business

why is surivival a business objective

• to continue to exist as a business

• this may be the most important objective in the short term and also the primary objective of a start-up business

• for a business to have a positive outcome, it should have a positive cashflow objective to make sure sufficient cash is available to meet day-to-day needs

what is the definition of cash flow

cash flow is the flow of cash into and out of a business over a period of time

why is sales maximisation part of a business objective

• to achieve the highest achievable amount of sales either by volume ( the amount of products sold) or by sales ( how much money made)

why is market share considered as a business objective

• a proportion of total market sales that a firm has , this can be calculated

• allows a business to gain a foothold and become more established in the market and will allow them to become more well known

why is improving cost efficiency a business objective

• allows you to control costs so that the maximisation value of outputs is achievable with the lowest value of inputs

• this focuses on saving money for the business by reducing unit costs

• if unit costs are reduced the business will generate more profit on each unit cost

• normally they could also buy units in bulk and pay a lower unit price

why is improving employee welfare a business objective

• to look after the economic and psychical wellbeing of the work force

• a motivated workforce will increase productivity

• helps maintain positive employer relations

why is customer satisfaction a business objective

• a satisfied customer may become a loyal customer and they are more likely to make repeated purchases

• to ensure that goods and services meet the needs and expectation of the customer

why are social reasons a form of a business objective

Social reasons are considered a form of business objective because they align a company's goals with societal values and community needs. By addressing social issues, businesses can enhance their reputation, build customer loyalty, and contribute to sustainable development. This can lead to increased profitability and long-term success while fulfilling corporate social responsibility.

what are the financial business objetives

• survival

• profit maximisation

• sale maximisation

• market share

what are the non financial business objectives

• cost efficiency

• employee welfare

• customer satisfaction

• social

what are the SMART objectives

specific , measurable , achievable , realistic , time

what is a mission statement

a mission statement is a breif statement of the purpose of a company or organisation , ideally a mission statement guides the actuons of the organisation and provides it overal goal and provdes a sense fo direction.

what is a sole trader

• an idividual who owns and runs their own vbusiness and registed as self-employed via HMRC

• Legally required to keep a record of all income and expenses at the end of the tax year to fill in a self assessment tax return for HMRC

• profits made by the sole trader are classes as income and are therefore taxable through income tax

advantages of a sole trader

• cheap and easy to set up

• all profits go to the sole trader

• autonomy in businessmaking

• financial record remain private

• motivation is high as the success of the individual and the business are one and the same

disadvantages of a sole trader

• unlimited liability

• limited caputal for investment

• little speiciallised skills as the owner is ‘kacled of all trader’ or will have to buy speicialists

• difficult to find cover when ill

what is a partneship

• where two or more pople share the costs , risks and responsibilites of being in busiess togehter

• as with a sole trader , each partner has to register as being self-employed with HMRC and has unlimited liability

• they are equally responsible for debts incurred

• will take a share of the profits made by the business

• has a share in descision making

• normally contributes to the managment of the business

benefits of a partnership

• risks , cost and responsiblity to share

• more scope for specialist skills

• simple and flexible

• financial records remain private

• more capital can be raised

disadvantages of parternships

• unlimited liability

• arguments can occur with descision making

• if parter dies , designs or goes bankruupt the partnership is dissolved

• trust becomes a significant element between partners

what is a limited company

• exists in their own rights

• the owner and the company are seperate legal entities

• therfore a companies finances are seperate from the owners personal finacne

• shareholders are owners of limited companies

• they have limited libaility and not responsible for the companies debts

• they can only loose the money that they have invested in the business in the forms of shares

what is a public limited company PLC

• most have a minumum of two shareholders and have issued atleast £50,000 of shares to the public before they can trade

• have a greater access to far greater amount of capital that can be used for rapid expansion

• the shareholder owns the company but the managment ( chair person , board director ) runs the company

advantages of a PLC ( public limited company

• limited liability

• seperate legal identity

• more campital can be raised through sales of shares

• raises profile of company

• anyone can buy shares

disadvantages of a plc ( public limited company)

• lack of privacy as financial performance is available to all to view

• more complex to set up due to increased legal requirements and ongoing administrative costs

• some loss of controll as shareholders have voting rights

• risks of hostile takeovers

what are private limited companies (LTD)

• owned by sharehoders who are known to the company , often family or friend

• can only sell shares to other shareholders (eg) cannot sell openly on a stock exchange

• this means that shares are often sold at a discount to the real value of shares because the shareholders are ‘ locked in ‘ and either sell at the price that they are offered or not at all

advantages of a LTD (private limited company)

• limited liability

• seperate legal identity

• more flexible than a plc

• financial records remain private

• more capital can be raised through sales of shares

disadvantages of a LTD (private limited company)

• more complex to set up due to legal requirements

• some loss of control as shareholders have voting rights

• unable to sell shares

why may some sole traders become private limited companies LTD

• an entrepreneur can set up their business as a LTD but arise as a sole trader

• becoming and LTD allows the business to sell shares which provides more money to use for growth

• a LTD has limited liability which means that the owner has more financial protection

• Ltd companies can also be perceived as being more credible

• however it can be harder to obtain loans from banks as they are not seen as risk taking

why may some private limited companies may grow into public limited companies

• an LTD company that has the potential for growth may opt for stock market flotation and transition into a PLC

• this means that the business can raise more capital by selling shares and it can have thousands of shareholder

• there is a higher prestige if a company can put PLC under their name

• however having more shareholders means that the business has to share its profits which means they have to generate a larger amount of profits

• if a person of another business buys more than 50% of the shares of the compant they become very powerful and they often have control over the outcome of an shareholders votes to take over the firm.

what is a franchise

a franchose is an agreement which allows the entrepreneur to use the business idea , name , model and reputation of an established business and in return the entrepreneur usually has the pay the business an initial fee , plus ongoing royalty payments

• the franchisor is the established business which is willing to sell , or liscees its idea, name , model and reputation

• franchising allows the franchisee to grow quickly as most of the costs and risks are taken on by the franchise

• can be an easy way for the entrepreneur to start up a business as there using an existing business model .

benefits of a franchise

• rapid expansion

• optimum size

• maximum profitability

• cheap investment

• movitvation

• lower risks

• established product

• experienced firm

disadvanatages of a franchise

• loss of controll

• a failed franchise is a court case waiting to happen

• do you hhave tight control ?

• do you have a good system ?

what is a lifestyle business

• are when entrepreneurs run a business to suit and meet the need of their own lifestyles , eg parents working and brining up a family or supporting hobies

• objetives are likely to be paised around profits saticficing , independece and work life balance

what are online businesses

• business that trade through the internet , they are relitavely cheap and easy to set up as overheads and fixed costs are low

• an online business may be a good option for a good work life balance and dont require regular working hours

• however enetrepreneurs may not have goodf it skill to be able to safey set up the business and fraud , spam could become an issue .