business: topic 1.3- putting a business idea into practice

aims&objectives

aims

objectives

broad targets an entrepreneur has at the back of their mind

SMART

financial

non-financial

specific

measurable

achievable

realistic

time-bound

profit

sales

marlet share

financial security

control

challenge

independence

personal satisfaction

revenue, costs & profits

profit=revenue-total costs

revenue=quantity*price

fixed costs

variable costs

dont change with output

do change with output

break even

break even=fixed costs/contribution

contribution=selling price-variable costs per unit

margin of safety=output-break even point

sources of small business finance

short term

long term

internal

external

personal savings

share capital

loans

venture capital

retained profit

crowdfunding

external

bank overdraft

trade credit

+flexible

+well matched to ups and downs of small company cash flows

-bank can cancel at any time, leaving the business with a negative balance

+good way of boosting day to day finance

-other businesses may be reluctant to trade with the business if they dot get paid in good time

+pays

-loss of own money

+no need to repay

+flexibility (dividens not guaranteed each year)

+brings wise heads into boardroom

-big risk of takeover

-may fail

-ownership may get spread thinly among shareholders

+payed back in installments

+you can choose if interest is fixed/variable

+can be long/mid/short term

-bank demands collateral to provide security if loan isnt payed

+get finance

-want to contribute to running of business

-want big % of business

+the more profit they get, the more likely theyll be to finance from within

-less profit goes towards reinvesting

+most effective when the sponsors use social media

+no interest

-theyll get something in return for their investment