Business notes

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WHAT IS A BUSINESS?

A business is any organisation that uses resources to meet the needs of customers by providing a product or service that they demand.

Not for profit organisations are classified as businesses.

WHAT DO BUSINESSES DO?

Businesses identify the needs of consumers or other firms. They then purchase resources, which are the inputs of the business or factors of production, in order to produce output. The 'outputs' of a business are the goods and services that satisfy consumers' needs, usually with the aim of making a profit.

Sectors of economy

Primary

Secondary

Tertiary

Quaternary

STARTING A BUSINESS: ROLE OF THE ENTREPRENEUR

An entrepreneur is someone who takes the financial risk (and reaps the rewards!) of starting and managing a new venture. These people have:

Had an idea for a new business

Invested some of their own savings and capital

Accepted the responsibility of managing the business

Accepted the possible risks of failure

QUALITIES OF THE ENTREPRENEUR:

Innovative

Commitment and self-motivation

Multi-skilled

Leadership skills

Belief in oneself

Risk taker

GROSS DOMESTIC PRODUCT GDP (producto interno bruto)

Business functions

Marketing: product, price, place, promotion

Finance: banking and investments

Operations: procedure, supervising, designing, controlling,

Human resources: managing personal, hire, fire, evaluate, compensating

Profits: the remain

Capital goods

Opportunity costs

Nonprofit organizations; charity

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WHY START A BUSINESS? REASONS FOR STARTING A BUSINESS MAY INCLUDE:

Losing a job may provide the needed push

Desire for independence

Financial security

Identification of a market opportunity

Social connections may encourage and facilitate the move

Having a risk-taking or challenge-seeking personality

PROBLEMS FACED BY START-UPS

Even if an entrepreneur has all of the right qualities, success with a new business can never be guaranteed. Many businesses fail during the first year of operation, because of:

Competition

Building a customer base

Lack of record keeping

Lack of working capital

Poor management skills

Changes in the business environment

THE BUSINESS PLAN

The business plan is a written document that describes a business, its objectives and its strategies, the market it is in and its financial forecasts

The contents of a typical business plan include:

The executive summary - an overview of the new business and its strategies.

Description of the business opportunity - what is going to be sold, why and to whom?

Marketing and sales strategies - details of why the entrepreneur thinks customers will buy what the business plans to sell and how the business plans to sell to them.

Management team and personnel - the skills and experience of the entrepreneur and the staff he/she tends to recruit.

Operations - premises to be used, production facilities, It systems.

Financial forecasts - the future projection of sales, profit and cash flow.

The main advantage of preparing a business plan is that it allows you to fully investigate your own business idea and clarify your thoughts and ideas. It will also enable others to examine your idea and provide you with feedback. Investors will probably only look at the Executive Summary.