Starting a Business

Starting a Business
GCSE Business Studies
Revision Presentations 2004
Things a New Business Needs
To fund other elements listed below: finance is usually
hardest thing to obtain in a start-up business
Develop a product or service and then to
produce/deliver it
Without them, business will fail. Obtaining customers
means business must undertake marketing
Provide many of “inputs”, such as raw materials
Premises and
Maybe a simple office, or possibly a large, modern
factory; depending on what business activity is
Organisation and
Often very simple at start-up stage
Designed, researched and tested product or
Successful business is about more than just
having a good idea
GCSE Business Studies
Why a Business Needs Finance
Purchase plant & machinery, office equipment etc
Pay for premises and offices (e.g. first 3 months’ rent may
need to be paid in advance)
Pay for essential business services such as insurance
Purchase stocks of raw materials and components to allow
production to start
Pay wages and salaries of first employees to join business
Provide financial cover whilst business waits for customers to
GCSE Business Studies
Importance of Cash Flow Forecasting
for a Start-up
In early days of setting up a business, finance is hardest to
Uncertain how easy it will be to find customers
Business will be incurring significant start-up costs
Cash flow forecasting helps guide the business through the
early stages of growth
 Focus the business on controlling costs
 Identify when cash flow is expected to be weakest
 Spot when additional funds might be required
GCSE Business Studies
How Entrepreneurs Finance a New
Own money – the most important and popular source of funds
Money from friends
Bank loans
Bank overdraft
Credit from suppliers (although this can be hard to obtain in
the early days)
Grant assistance from government bodies
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Contents of a Start-up Business Plan
Start-up costs
Statement of aims and objectives
Description of market business is selling to
Main competitors
Production and sales forecasts
Equipment needed
Distribution plan for how to get product to customers
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Importance of Repeat Customers
Regular (or “repeat customers”) are often most profitable kind
of customers
Provide a regular, predictable stream of income that might be
important for sole trader
May also recommend product or service of sole trader to their
family and friends
Reduces amount sole trader will need to spend on marketing
GCSE Business Studies
External Finance Available to a New
Short term
 Bank overdraft
Medium term
 Bank loan
 Leasing
 Hire purchase
 Government grants
Long term
 Bank loan / mortgage
 Share issue (for limited companies)
 Debenture
GCSE Business Studies
Protecting Business Ideas and
Copyright and patents make it illegal for other firms to copy
directly business idea or invention
Keep new products and services secret until they are ready
for launch
Focus on retaining key staff would be otherwise be valuable
for competitors to poach!
GCSE Business Studies
Qualities of Successful
Have ideas
Ability to take risks
Ability to persuade others to join business or lend business
Energy to keep business going under tough circumstances
GCSE Business Studies