setting up a business multiple choice

Unique Selling Point (USP)

A USP differentiates a product from competitors by emphasizing unique features or benefits.
Essential for a business to gain competitive advantage without infringing on patents or copyrights.

Location

The right location is critical for business success; premium locations offer better foot traffic.
High rent costs in prime areas may strain finances for startups, while cheaper locations can lead to lower sales.
Fitting out a new space includes furniture, machinery, and possibly hiring designers, impacting initial costs.

Marketing

Awareness among target markets requires investment in market research, marketing, and advertising.
Essential for new businesses to allocate resources for effective outreach to gain visibility.

Start-Up Decisions

Critical decisions include finance options, ownership structures, and production methods.

Start-Up Finance Options

New businesses must assess finance sources, considering risk, tax implications, control, and purpose.
Important to maintain sufficient working capital (current assets minus current liabilities).
Overtrading occurs when liabilities exceed assets, signaling financial instability.
Equity or debt financing can be employed, but new businesses lack retained earnings for equity.

Production Methods

Start-ups can choose between job production, batch production, and mass production.

Job Production

Produces customized products tailored to individual customer orders.
Features include handmade uniqueness, specialized machinery, and labor-intensive processes, resulting in higher costs and slower output.

Batch Production

Involves producing a limited quantity of identical products in runs.
Goods are made for stock and require careful planning to switch between product batches.
Less expensive and faster than job production, with lower wage costs.

Mass Production

Continuous production of large quantities of standardized goods.
Uses automated processes, leading to lower per unit costs and faster production.
Requires significant initial investment but achieves economies of scale.

Transitioning Production Methods

Moving from job to batch/mass production involves higher investment and can dilute a business’s USP.
Stock management becomes crucial, necessitating storage capabilities and risk assessment of product obsolescence.
Price strategies may need adjustment to maintain market share while potentially lowering profit margins.

Ownership Structures

Key ownership options include sole trader, partnership, private limited company (LTD), and public limited company (PLC).

Sole Trader

Single-owner business with unlimited liability; all financial risks fall on the owner.
Offers full control but limited access to capital and no continuity of existence.

Partnership

Comprises 2 to 20 partners sharing control and profits; liabilities are also unlimited.
Benefits include greater access to capital compared to sole traders.

Private Limited Company (LTD)

Limited liability, protecting personal assets; operates with a defined number of shareholders.
Requires incorporation documents, promoting financial transparency through audits.

Public Limited Company (PLC)

No maximum number of shareholders; also enjoys limited liability.
Ability to raise capital through stock markets but demands higher transparency and governance.

Business Plan

A comprehensive document outlining business goals, strategies, and operational objectives.
Vital for articulating the vision, securing funding, and anticipating market challenges.

Functions of a Business Plan

Clarifies business objectives and goals for growth.
Helps in raising finance by showcasing business viability to lenders.
Aids in foreseeing problems and assists in performance evaluation.
Provides employment security and strategic insights for management and suppliers.

Market Analysis in Business Plan

Details the market size, segmentation, trends, and competitive landscape.
Ensures the business targets the right audience with relevant offerings.

Other Elements in Business Plan

Marketing Plan: Defines product USP, pricing, distribution channels, and promotional strategies.
Production Plan: Covers production location, equipment needed, staffing, and sourcing of raw materials.
Financial Plan: Forecasts cash flow to ensure financial sustainability in the short term.### Sources of Finance
Finance options include negotiated overdrafts and trading terms from suppliers.
Long-term financing includes debt capital (long-term loans) and equity capital (shareholder investments).

Financial Projections

Projections encompass predicted future sales and profit levels.
Break-even analysis determines the sales volume required to avoid losses.

Financial Requirements

Total finance required is essential for business planning.
It's important to clarify the purpose of the finance needed.

Equity and Debt Finance

Equity finance can come from shares, reserves, and grants.
Debt finance is calculated by subtracting equity finance from total finance required.

Collateral

List of assets that can serve as collateral for loans is crucial.
Collateral ensures security for lenders against default.

Shareholding and Investment

Provide details on percentage shareholding available to potential investors.
Essential for assessing investment opportunities and risks.

Financial Statements

Projected statements of accounts, including cash flow forecasts, are integral to financial planning.
Financial control mechanisms should be outlined to manage funds effectively.

Market Considerations

Include analyses of projected sales, profits, market size, and competition.
These factors help investors evaluate potential returns on investment (ROI) against associated risks.