1.3 Enterprise, business growth and size

Peter wants to start up a small business as a photographer who takes photographs at weddings.
He has been told that there is government support available for new businesses. Peter will operate his business as a sole trader. He is considering using crowdfunding as a source of finance. Peter knows that many businesses fail.

a) Identify two ways the size of a business can be measured. [2]

b) Identify two reasons why governments support new businesses. [2]

c) Identify four reasons why a business might fail. [4]

Jonathon is a sole trader. He owns a shop selling office equipment including printers. To encourage sales Jonathon allows customers 4 weeks to pay for the office equipment. Jonathon thinks his business is likely to remain small. He knows managing cash flow is important for his business and he has prepared a cash flow forecast. An extract is shown in Table 2.1.

a) Identify two ways to measure the size of a business. [2]

c) Outline two reasons, other than finance, why Jonathon’s business is likely to remain small. [4]

Hal wants to be a successful entrepreneur. He plans to leave his job to start up a bakery. The bakery will operate in the private sector. The business will have many stakeholder groups. Hal has been told it is important for a new business to select an appropriate source of start-up capital. He also knows new businesses are at a greater risk of failure.

d) Explain two characteristics Hal will need to become a successful entrepreneur. [6]

Brendan wants to be a successful entrepreneur. He plans to start up a flower shop using government support. Brendan’s brother has offered to form a business partnership with him. Brendan knows it is important for a new business to use a suitable pricing method. He has already identified ways the business can increase added value. Brendan wants to know how an economic boom might affect his business.

b) Identify two ways a government can support business start-ups. [2]

PKN manufactures glass. Contributing to sustainable development is important to the business. PKN has factories in 30 countries. It has 27 000 employees. The Managing Director knows PKN has benefited from globalisation. She plans to expand the business using external growth. Retained profit is one source of finance a business could use to fund expansion. Some of PKN’s directors are concerned about possible diseconomies of scale as the business grows.

a) Identify two methods of external growth a business might use. [2]

Rachel’s business produces and sells chocolate bars. Quality is important. Rachel is a sole trader who received government support when she started up her business. The business operates in a competitive market. Rachel is considering ways to increase sales of her best-selling product. She is also planning to introduce a new chocolate bar. Rachel knows deciding which pricing method to use for a new product is important.

b) Identify two ways a government can support business start-ups. [2]

Ramon is an entrepreneur. He plans to start up a home tutoring service to provide students with extra help to learn maths. Ramon is considering buying a franchise. He has prepared a business plan but is concerned about how an increase in the rate of inflation might affect his business. Ramon wants to know whether crowdfunding is the best source of finance for a start-up business to use.

b) Identify two characteristics of a successful entrepreneur. [2]

c) Outline two ways a business plan might help Ramon. [4]

Avtar owns a car repair business which operates in the private sector. It is a small business with 2 full-time employees. Avtar wants to find out the best way for a business to increase added value. Avtar’s business needs finance for many reasons. Avtar wants to know how an economic recession might affect his business.

a) Identify two features of a private sector business. [2]

Mitchell is an entrepreneur. He wants to start up a business selling books. As part of his business plan Mitchell has carried out some market research. Mitchell will use microfinance as a source of finance. He wants to know whether the opportunities of using ecommerce for a new business are greater than the threats.

a) Define ‘entrepreneur’. [2]

b) Define ‘business plan’. [2]

AH is an insurance business. It operates in a competitive market. AH has 1000 employees including 50 supervisors. The supervisors use an autocratic leadership style. AH currently has a 5% market share and is planning to take over a competitor. The Managing Director is considering how to communicate with AH’s employees about the takeover. There are many sources of finance available to fund business growth.

c) Outline two benefits to AH of taking over a competitor. [4]

Nicky wants to be a successful entrepreneur. She plans to start up a travel business specialising in walking holidays. Nicky will be operating in a niche market. She is preparing a business plan to help with her decision-making. Nicky has been told government support is available for business start-ups. She knows building customer relationships will be important.

a) Identify two reasons why a government might support business start-ups. [2]

e) Explain two characteristics of a successful entrepreneur. Which characteristic is likely to be the most important? Justify your answer. [6]

ADN is a food retailer. It has 5 shops and 300 full-time employees. All ADN’s employees receive off-the-job training. ADN has a tall hierarchical structure. Managers have a narrow span of control and all use an autocratic leadership style. ADN’s directors are planning to expand the business and cannot decide whether it is better for a business to use internal growth or external growth.

e) Do you think it is better for a business to use internal growth or external growth when planning to expand? Justify your answer. [6]

WFH produces hats and sells them to a mass market. It holds a high level of inventory. The Managing Director is concerned about the liquidity of the business and has been analysing WFH’s financial statements. An extract is shown in Table 2.1. The Managing Director thinks that the business might fail. Other stakeholder groups might also be interested in WFH’s financial statements.

a) Identify two possible causes of business failure. [2]

Desmond wants to be a successful entrepreneur. He has decided to leave his office job to start up a gardening business cutting grass and planting flowers. It will be an unincorporated business. Desmond is aware that a new business is at greater risk of failure than an established business. He has identified his business objectives for the first year. Desmond has calculated he will need $750 for his start-up capital.

a) Define ‘unincorporated business’. [2]

d) Explain two reasons, other than lack of finance, why Desmond’s new business might be at greater risk of failure than an established business. [6]

Meena wants to leave her job as a teacher to become a successful entrepreneur. Her business will produce handmade jewellery. Meena knows that there is government support for business start-ups. She plans to use market research to help identify a market segment for her jewellery. Meena’s brother has offered to become her business partner but she cannot decide whether it would be better to operate as a sole trader.

a) Identify two ways a government might support business start-ups. [2]

c) Outline two characteristics Meena will need to become a successful entrepreneur. [4]

Pamela is a successful entrepreneur. She is the owner of a gift shop selling celebration cards, toys and candy (sweets). When Pamela started her business 30 years ago she had no help to manage the shop. She now has 5 employees. Pamela knows maintaining customer loyalty is important. She uses competitive pricing. Most of her marketing budget is spent on sales promotion. Pamela does not use e-commerce.

e) Do you think being a risk-taker is a more important characteristic of a successful entrepreneur than being creative? Justify your answer. [6]