Business Studies (Unit 1)

Entrepreneurs

Entrepreneurs are people who bring new businesses and products/services into the market. They are usually
creative, patient, determined, resilient and passionate about their ideas. They often receive Government
grants to help and encourage them set up a business.

Entrepreneurs are important in the business world because they…

- Create jobs and opportunities

- Are able to spot gaps in a market

There are a lot of motives or reasons for becoming an entrepreneur, including the following…

- Were made redundant or retired

- Spotted an opportunity
- Wanted control over their working life

There are several issues that young people may experience when becoming an entrepreneur…

- Difficult to get funding due to a lack of experience

- Age discrimination – not being taken seriously

Franchises

A franchisee is a person or company who has paid to become part of an established franchise like McDonalds.
A franchise enables you to run your own business whilst using a successful formula created by the franchisor.

The Government suggests that 70% of new businesses fail before three years compared with 7% of franchises.
This is usually because the idea for the business was not viable or because stronger competitors emerged.

The franchisor usually controls the rules concerning the following…

- Décor
- Product range
- Staff uniforms

However the franchisee is usually able to make their own decisions about the following…

- Staff recruitment and training

- Stock management
 Advantages Disadvantages

It is a good way of starting a business without having There is not much freedom in decision-making
to do it from scratch

Customers will recognise the brand easily The franchisor takes a cut of the business income
which can make it hard to make large profits

Due to the success of the franchise, banks can Franchises may not be as good as they sound. It can
approve more loans and with less interest be expensive to buy into with bad support

Protecting Ideas

An idea cannot be fully protected, but patents and copyrights are methods of preventing others from copying
and distributing an invention or creative piece of work. This is called Intellectual Property.

A Patent provides a certain amount of time for which an invention or product cannot be copied by anybody
else. Patents can cost from £1,000 to £500,000+ and breaking a patent is not a criminal offence. Owners of
patents can only claim damages through the civil courts.

A Trademark is a sign that can distinguish one product, service or brand from another another. These can be…

- Logos and Pictures

- Smells
- Sounds

A Copyright applies to written work (for example: books and song lyrics). Unlike a patent, a copyright occurs
automatically and there is no need to pay for it.

Adding Value

The process of adding value involves doing something to a product to higher its price. For example: ready-
grated cheese is more expensive than a block of cheese. Products that are protected by patents can be used to
add value.

Primary Sector Secondary Sector Tertiary Sector

It is hard to add value to products This sector is manufacturing and Effective marketing can make
here as they are often the same adds the most value (eg: Walkers v products stand out here (eg: M&S)
(oil, coal, gas, etc) Tesco Value)
Business Plans

A business plan sets out how a business idea will be financed, marketed and put into practice. It is likely to be
essential in getting funding from a bank because they will need to see how well a business idea is thought
through and how financially viable it is.

It is a great idea to create a business plan because of the following…

- It gives directions
- It helps make decisions about resources that are needed
- It helps to measure success

A good business plan should contain…

- How you are going to develop your business

- How you will manage your finance

Any business plan is only as good as the information on which it is based. It is a good guide, but is only a plan.

Benefits Problems

It makes the entrepreneur consider every aspect of The BP is only a plan and does not guarantee success.
the start-up so they can try to eliminate failures For example: sales may be lower than predicted

It makes the entrepreneur aware of what skills they If the plan is too rigid some problems may arise. It
are missing so that they can hire an expert must be flexible to adapt to market changes

Venture capital may be available to the business if High sales expectations may cause overspending in
investors like the business plan other areas such as stock and staffing

Legal Structures

The legal structure of a business is crucial in determining how seriously the owners will be financially impacted
if things go wrong. It also has an effect on the taxation levels that the business and owners need to pay.

In Unlimited Liability the owners of a business are fully responsible for any debts incurred, even if this requires
them to sell their personal assets or possessions. There are two types of businesses that have unlimited
liability…

- Sole traders
- Partnership
A Sole Trader is someone who owns and operates their own business. A sole trader can have employees, but
they must take all the final decisions about running the business.

Advantages of Sole Traders Disadvantages of Sole Traders

They make all the decisions and keep all the profit The owner is the only one responsible if it fails

There are no administrative costs to pay There are long hours of work involved

They are confidential as accounts aren’t published Becoming ill causes problems running the business

A Partnership is where 2-20 people start their own business with the goal of making profit. Trust is vital.

Advantages of Partnerships Disadvantages of Partnerships

There is additional skills and a shared workload There is UL even when it is your partners fault

There is more capital available to invest into There is a loss of control and profits are shared

There are no administrative costs to pay There may be business disagreements

With Limited Liability, debts incurred by the business must stay within the business. The owner doesn’t have
any personal liability and doesn’t need to sell personal possessions if the business fails.
A business must go through a legal process to gain limited liability. This process is called incorporation.

A small business can be started up as a sole trader, partnership or Private Limited Company (LTD). The start-
up for an LTD can be as little as £100 and the company can be fully owned by the entrepreneur.
Shares cannot be floated on the Stock Market – this allows the owner to have full control over the business.

Putting LTD after a company name is a legal requirement and says that a business is small with limited liability.

Advantages of Limited liability Disadvantages of Limited liability

It gives confidence to shareholders to invest More annual costs (eg: audited accounts)

There is wider access to finance opportunities Businesses must publish financial information
An LTD can become a Public Limited Company (PLC) when it has £50,000+ in share capital. The business may
then be floated on the stock market where the public can buy shares. This provides finance for the business to
expand. However, too much cash in a short amount of time can make a business grow too fast.

There may also be some other problems with PLCs…

- It is hard to have any objectives other than profit

- A small group of control can be unlikely due to the availability of shares on the market
- There may be a lack of concern for the future of the business if the only goal is profit

Some other forms of businesses include non-profit organisations which focus on the interests of the members
and not shareholders, and Co-operatives which are worker-owned.

Market Research

Market research gathers information about consumers and competitors. A target market is the chunk of the
whole market that the product or service is aimed at.
It aims to identify consumers buying habits and attitudes to products and services. It can be numerical (how
many people buy the Daily Mail?) or qualitative (why do these people buy the Daily Mail?)

Secondary Research is data that already exists. Secondary research can be found through the internet,
newspapers and Government produced data.

Advantages Disadvantages

It is easy to access It may not be to the specific needs of your business

It is usually cheap or even free It may not be accurate

It saves a lot of time The reliability and quality may be questioned

Primary Research is the process of gathering information directly from people within your target market. This
can be very expensive when carried out by specialist market research companies and there must be a lot of
care taken to eliminate bias from your research! Types of Primary Research may include the following…

- Observation/Experimentation
- Questionnaires
- Phone calls

Advantages Disadvantages

The research will be specific to your business It can be time-consuming

 You can guarantee reliability and quality It can be very expensive

It is confidential to you and your business

Quantitative research asks questions which usually provide simple, numerical answers. For example, ‘which
pack do you prefer?’ or ‘how many newspapers did you buy last week?’ However it can be hard to find valid
data when using quantitative methods in small-scale research.

Qualitative research is in-depth research into the motivations behind buying habits. It does not produce
statistics like ‘53% liked the chocolate’ but asks why they liked it instead. One form of this research could be
interviews. However, it is hard to collect qualitative research in small-scale samples and bias may creep in.

Sampling

A Random sample is where everybody in the population has an equal chance of being chosen. Achieving a truly
random sample requires careful thought because people may often be missing.

A Quota sample is where interviewees are selected in proportion to the consumer profile of the target market.
For example: if the total amount of people at college was 1,000 with 40% males and 60% females, the male
number would be 400 and the female number would be 600. These people can then be broken down into age
groups, directorates, etc.
This method allows interviewers to interview anybody as long as they achieve the correct quota in the end. It
can work out relatively cheap and effective and is used most often by market research companies.

A Stratified sample is when you interview people with specific characteristics (eg: 30-45 year olds). So within
this section of the population individuals can be found at random or by setting a quota.

There are many factors which can potentially influence the choice of sampling methods

- Cost
- Time

Sample Size

After deciding which method to use the next consideration is how many interviews should be conducted.
Some companies interview between 100 and 1,500 people and consider it large enough to reflect the views of
45 million people. This can be heavily argued.

A sample with at least 1,000 responses usually produces a high confidence level compared with 10 or 100.
However, it can be extremely expensive to conduct large amounts of research and sampling 1,000 people can
cost £30,000. Surveys of 4 or 5 new products may cost £120,000+ on research alone.
When answering a question on market research or quantitative figures I MUST question the following…

- Who produced the information?

- How was it produced?
- What was the sample size?
- What is the confidence level of the research?

Types of Markets

A market can be anything from the amount of people that buy a specific product, the amount of products in a
category or how much is spent on one specific thing. They key elements to any market are…

- Size (how much is spent every year)

- The extent to which it can be divided (eg: TV magazines, health magazines, clothing magazines, etc.)
- Market share (eg: the food market can be divided into breakfast cereals and Kellogg’s are the leader)

Local markets are small firms which don’t really care about the size of the national market. They are more
concerned with the state of the local market (eg: local hairdressers and plumbers).
However, some small businesses may still be focused on the national market (eg: selling their products through
large supermarkets or by operating on the internet)

National markets cater for the nation but are also concerned about local competition (eg: H&M, New Look).
Therefore, these businesses are located everywhere and use national media to advertise.

Electronic markets are markets that used to be physical. The stock exchange and exchange currency markets
are now all on-screen and eBay and other auction markets are transforming how we make transactions.
Electronic markets often have key characteristics…

- They are very price competitive so the costs are kept down
- They can operate from anywhere
- The market is cheap to enter so new competitors can arrive anytime

Market Size, Growth and Share

Market Size is the amount of goods purchased or the amount spent on those goods.
By establishing Market Growth you can determine whether a market is growing or declining. The formula for
calculating market growth is below…

New figure – old figure = Market Change

Market Change / the old figure * 100 = % in Market Change

Market share is the proportion of the total market that is owned by one company. It is essential for evaluating
the success of a firm’s marketing activities. The formula for calculating market share is below…

Company revenue / whole market revenue * 100 = % of Market Share

There are many advantages of being a market leader…

 - High distribution without much effort
- Able to charge higher prices
- Able to get new products onto shelves as their name is widely recognised

Market Segmentation

Markets can be subdivided into several different ways. The magazine market is a good example and can be
split up into gender, age and lifestyle. Businesses must know their target markets’ needs and wants.

Advantages Disadvantages

Segmentation is acknowledgement that customers Segmentation only works if the business can provide
are not all the same and will not respond the same products and services that the market needs

With small adjustments, products can appeal to The size of the segmented market needs to be
different target markets (eg: a club at night and day) sufficient to be profitable for the business in question

The business can target their marketing efforts, Providing different products and services to different
therefore making more efficient use of the resources segments can cost more (lose economies of scale)

Demand

Demand is the desire to buy a product backed by the ability to do so. It is also known as effective demand.

Price can affect demand in the following ways…

- The higher the price of the product the less of the product people can afford to buy
- The price of other competitors products
- The value that the consumers place on the brand can affect its demand

Income has grown in the last century. The demand for most products and services grows with the economy.

- Normal goods
the demand for these grows broadly in line with economic growth (eg: petrol and food)

- Luxury goods
the demand for these grows faster than the growth of the economy

- Inferior goods
the demand for these falls as the economy grows. As we get wealthier we prefer to buy branded
products instead of home-brand ones
Of course, if the economy is struggling luxury goods quickly vanish and inferior goods become more popular.

The Actions of competitors plays a big influence on demand. For example, the demand for a Ryanair flight to
Dublin doesn’t just depend on the price of the flight or customers incomes but the prices of rival flights too.

A firm’s own Marketing objectives may also play a part in the demand for a product or service.

Seasonal factors are the biggest influence on demand for some businesses. For example: Ice cream sales will
boom in the summer whereas the coat market will be more successful in the winter.

Location

One of the most important factors influencing the success of a business is its location. This makes good
locations with good infrastructure very expensive, and small businesses often struggle to compete.

Factors affecting the choice of location…

- The cost of land

a business who’s products are price sensitive need to keep costs down so a cheap location may help

- Space
is there room for expansion? This should be a consideration in case the business does well

- Government grants
financial incentives that are offered by the government may influence the decision on location

- Accessibility to the market

businesses that operate on the internet may not need to worry about this factor but hairdressers and
such will benefit from being close to their target market

- Accessibility of suppliers
businesses that use JIT will benefit from being close to suppliers due to shorter deliveries

- Cost of labour in the location

locating in a high area of unemployment may help to keep costs down, but will the workforce have the
required skills?

- Infrastructure
the provisions available in a certain area, for example transport links and telecommunications. Online
businesses such as Amazon and Play will need to be in areas with sufficient transport links.

Sources of Finance

A source of finance is the term used to describe where a business gets its money from. Almost all new
businesses will need money to invest before it can start operating, including the following…

- Capital investments such as machinery, equipment and property

 - Money for running the business (bills, wages, etc.)

Businesses will also need to be able to raise money for other reasons such as expansion of premises,
machinery and employees, to buy more produce for large orders, or for more external reasons such as a dip in
the economy. The amount of finance available to a business will depend on:

- The type of business

a sole trader is somewhat restricted to the amount they can put into a business from their own
resources. A limited company will be able to raise share capital in addition to being able to borrow. A
balance between equity (own money) and debt (loans) should be around 50:50
- The stage of development of the business
new businesses will have a harder time raising finances than a business that is already established

- The state of the economy

if the economy is booming there will be higher business confidence and therefore more money

Having sufficient funding will ensure that a business can meet its current and future needs. A distinction
between short, medium and long-term objectives should be made and the appropriate type of funding used.
Short-term finance (less than a year) should not be used to finance long-term projects.

Internal finance External finance

Stretching existing capital further (eg: cutting stock) Bank loans and overdrafts

Retained profits (not suitable for start-ups) Trade credit (extending time to pay suppliers)

Selling some of the businesses assets (eg: buildings) Share capital and Venture capital
 Description Advantages Disadvantages

Retained Profit Keeping previous profits to invest in the future It is free because it is an internal source! Not available to start-up businesses

Sale of assets Selling off items with value (eg: buildings and shares) It can reduce or eliminate debt You may have to pay TAX

Loans Borrowing money (usually from a bank) with interest May not have to pay interest if the You may have to pay large interest fees
financer is family or friends

Debentures A loan or share paid back with interest Interest is usually lower than bank loans You still have to pay interest

Venture capital When someone invests in a high-risk business It can be very successful (Dragons Den) It is very risky with a high failure rate

Share capital Selling shares on the stock market (PLC only!) You can make money to invest Giving away ownership of the business

Overdrafts Agreement with the bank to have a negative balance They are usually easy to access Interests are usually higher than loans

Leasing Renting something you cannot afford to buy It is yours to use whenever you want it You do not own it and it isn’t an asset

Trade credit You don’t have to pay for something immediately It can be easier to pay for things Money may not be available when due
Employees

An employee is somebody who works for an organisation; usually under a contract of employment in return
for a salary or a wage.
At the start of a new business it is common for an entrepreneur to work on their own, taking on all jobs
associated with running the business. However, as the business expands they may need help.

Types of employees include

- Temporary and permanent part-time (less than 30 hours per week)

- Temporary and permanent full-time

Advantages of part-time staff Disadvantages of part-time staff

Flexible and able to respond to fluctuations Recruitment costs

They’re cheaper because they aren’t in everyday Training costs

They may improve the quality of the workforce (more

motivation and higher productivity and a decrease in May miss out on vital information as they’re not 24/7
absenteeism and labour turnover

Advantages of temporary staff Disadvantages of temporary staff

Flexible and able to respond to fluctuations Recruitment costs

They are able to cover for permanent employees Training costs

Specialists can be employed for short periods May have a lack of commitment (as with PT staff)

An alternative to hiring staff on a temporary basis is to use an employment agency. Although the workers carry
out work in your business, they are paid by the agency. This means that the business owner has a contract with
the agency and not the employee.
The main benefit to using an employment agency is that all recruitment/administration is done by the agency.

Businesses may choose to recruit an advisor/consultant for a specific period of time. These individuals provide
services such as accountancy, business strategy, IT, etc. They are paid a fee for their services.

Advantages of advisors/consultants Disadvantages of advisors/consultants

Able to stand back and ask questions staff cannot see Their ideas may not be trusted
 They bring ideas from outside the business They may not be ideal for the needs of the business

They can raise sensitive issues that staff may ignore They can often cost a lot of money to hire

Budgets

A budget is a detailed plan of the income and expenses expected over a certain period of time. Businesses will
be required to produce a Budget for Revenue and Profits in order to persuade banks to lend finance.

Advantages of budgets…

- They can help ensure that a business does not spend more than expected
- They can help measure manager’s performance
- They can motivate all the staff in the section (delegating budget-power can be motivating)

An Income budget is the expected Revenue over a certain period of time.

An Expenditure budget is the expected Expenses over a certain period of time.

In a Profit budget is the expected difference between Revenue and Expenses (Income & Expenditure Budgets)

Setting budgets is not an easy job. How do you decide on the level of sales next month or next year? This is
especially hard for new businesses with no previous trading experience. Here’s how start-ups do it…

- They produce an estimate of sales in the first few months based on secondary and primary market
research conducted for their business plan
- The entrepreneur relies on their own instinct and experience in the industry

Most established firms will use last year’s figures as a guide to the next years with an adjustment for any
known changes or objectives.

Zero Based Budgeting is an alternative approach to Expenditure budgets. This starts each budget at zero
instead of last year’s figures. This helps to stop budgets from rising every year.
However, there may be some problems with this type of budgeting because managers may lack the experience
of knowing what things really cost.

The best way to set budgets is to…

- Relate the budget directly with the businesses objectives (what it is trying to achieve)
- To involve as many as possible during the process; budgets should then be agreed and realistic
- Make budgets realistic and meaningful to the staff who have to work with them
Cash Flows

A cash flow is the flow of money in and out of a business over a given period of time. Cash flow forecasting is
estimating the flow of money in and out of the business. Remember that cash does not always mean profit!
Managing cash flow is one of the most important aspects of financial management. Without the cash to pay
bills, all businesses will fall.

Cash flow problems are the most common reason for business failures. Cash flow forecasts are vital in business
start-ups because they help get finance and will also show the finance provider when they will be paid back.

All businesses need to manage their cash position carefully and will need to predict their cash position in the
forecast for at least the next six months. This will help enable them to take action if cash becomes short.

To prepare a cash flow forecast, businesses need to try and estimate all the money coming into and out of the
business. These flows are then set in a grid showing the cash movements each month. Cash Flow example…

In order to prepare cash flow forecasts, businesses need to make estimations, just like in budgets, so the
estimations are only as good as the research used to carry it out. It is much easier for an established business
to create a forecast but all companies must build their forecast in contingencies.

When conducting a forecast businesses must anticipate disasters like cash shortages. By creating a worst-case
forecast, companies will be able to arrange financial cover for these events before they happen.

Calculating Revenue, Costs and Profit

The revenue received by a business can be a crucial factor of its success. When a business starts up they should
expect low revenues because…

- Their company or product is unknown

- They are unable to buy large amounts of stock to supply big orders
 - It’s difficult to charge premium prices as they aren’t yet established

Entrepreneurs start their financial planning by assessing what revenue they might receive in their first financial
year. Revenue is calculated by using the following formula…

Quantity of goods sold * Selling Price = Sales Revenue

A business that plans to increase its revenue may benefit more from selling a high amount of products at a low
price rather than a low amount of products at a high price.

The Cost of Production is important for a manager to know because it will…

- Assess whether it is possible to trade

- Find out how actual costs and predicted costs match
- Makes judgements on cost efficiency

Fixed Costs are those that do not vary with the level of output (eg: salaries, rent, utilities, interest charges).
Variable Costs are those that do vary with the level of output (eg: materials, piece-rate labour).

The formula for calculating Total Costs is:

Fixed costs + Variable costs = Total costs

Profit is the difference between revenue and expenditure and is main motive for many businesses. However,
some businesses are not established with the aim of making a profit. Profit can be calculated by using the
following formula:

Total revenue – Total costs = Profit (Remember that revenue does not always mean profit!!)

Managers usually refer to Net/Operating Profit as the amount left once all fixed and variable costs have been
deducted from revenue. However, this is before TAX has been paid.

After working out the total profit after TAX, it can be used to…

- Pay shareholders
- Reinvest in the company (retained profits)

Profits are important for most businesses because…

- They provide a measure for business success

- They are the best source of new finance for a business (retained profits)

Forecasting costs and revenues can be difficult new businesses as they don’t have any past figures give them
ideas. It is possible that entrepreneurs will underestimate fixed and variable costs and overestimate revenues.

A business will want to compare its profitability over time. This is called the Net Profit margin and the higher
the margin the better! The Net Profit Margin can be calculated with the following formula…
 Net Profit x 100 / Total revenue = Net profit margin

Calculating Break-Even

The breakeven analysis compares a company’s total revenue with its total costs to find out the minimum level
of sales required to cover its costs. This is usually shown on a graph called a breakeven chart. In order to
calculate the breakeven point a business will need to know the following:

- The selling price of the product/unit

- Their fixed costs
- The variable costs per unit

The breakeven point can be calculated by using the following formula…

Fixed costs / (Selling price per unit – Variable costs per unit) = Breakeven Output

Contribution is the difference between sales revenue and variable costs. It pays for a business’s fixed costs and
the remaining money is then counted as profit. Contribution can be calculated by using the following formula…

Selling price per unit – Variable costs per unit = Contribution PER UNIT

Total revenue – Total variable costs = Contribution

(Contribution PER UNIT is effectively just the second part of the breakeven formula)

Contribution can be reduced by lowering variable costs and increasing selling prices. Lowering fixed costs can
then also produce more profit as they are paid for by contribution.

If sales revenues exceed the variable costs, the product

will be making a positive contribution. Contribution
should rise as output increases, covering fixed costs
and then increasing profits.

Once you have calculated the breakeven point on a graph you can then work out the Safety Margin. This is the
amount of sales a business can lose before it starts to lose profits (the difference in units between the
breakeven point and the quantity of units sold)

You can work out the Margin of Safety using this formula…

Number of units sold – Breakeven point = MOS

You can also work out the Margin of Safety in £ by:

MOS in units * Selling price per unit = MOS in £

Key Terms

Term Definition

Adding Value Doing something to a product in order to increase its price

Advisor/consultant Somebody who provides businesses with help and advice

Bank Loan Borrowing a fixed amount from a bank with interest

Bank Overdraft An agreement with a bank to go into a negative balance – high interest

Breakeven Point The point at where a business’s revenue covers its total costs

Budget A plan of income and expenses expected over a period of time

Business Angel Someone who invests in a high-risk business and provides help/support

Business Plan Sets out how a business idea will be financed, marketed and put into practice

Business Objective A goal that a business wishes to achieve

Cash Flow The incomings and outgoings of a business

Cash Flow Forecast A forecast predicting the incomings and outgoings of a business

Contribution The difference between total revenue and total variable costs

Contribution Per Unit The difference between the selling price per unit and variable costs per unit

Costs Amounts incurred by a business during trading operations

Demand The amount or price of a product that customers are willing to pay

Demographic Defining a market in terms of segmentation (eg: age, income)

Elasticity of Demand The responsiveness of demand to a change in price or customers incomes

 Electronic Market A market where sellers and customers do not meet (eg: Play, Amazon)

Enterprise Where new businesses are formed to offer products or services

Entrepreneur Somebody who takes calculated risks to start up a business

Expenditure Budget The budget that sets out the total costs (usually split into categories)

Fixed Costs Costs that do not change with output (eg: rent, salaries, utilities)

Franchisor Someone/a business who rents their business to other people/businesses

Full-time Employee Somebody who works 30+ hours a week under a contract

Income Budget The budget which sets out estimates of revenue

Input The resources that go into producing goods and services

Limited Liability Business owners/shareholders that are not fully responsible for a business fail

Location The place where a company is located or does business

Margin of Safety The difference between the output sold and the breakeven point

Market The place where buyers and sellers come together to do business

Market Growth The percentage of growth of a market over a time-period

Market Research The process of collecting and analysing data to help make marketing decisions

Market Segmentation Segmenting a market into difference sections (eg: age, gender)

Market Share The percentage of an market that particular business or product owns

Market Size The total demand or value in a specific market

Niche Market A small part of a large market where customers have specific needs
 Opportunity Cost The cost of missing out on the next-best alternative

Patent The right to be the only producer of a specific product or service

Permanent Employee Someone who works for a business with no set-out ending period

Primary Research Research which is carried out by a company for its own needs

Profit The difference between total sales and total costs

Qualitative Research Detailed research like beliefs, values and opinions

Quantitative Research Non-detailed numerical research like sales figures

Returns The rewards to a business (eg: profit, customer satisfaction)

Revenue The income of sales (selling price per unit * total units sold)

Risk The probability or change that wanted outcomes will not occur

Sample A subset of a population usually chosen for market research

Share Capital Finance invested into a business by shareholders

Social Enterprise A business that has objectives other than making profits (eg: charities)

Sole Trader A one-person business with unlimited liability

Supplier A business that provides goods or services to other firms

Total Costs A businesses total variable and fixed costs added together

Trade Credit When a business does not have to pay for something immediately

Trademark A sign that can distinguish the goods or services from one trader to another

Unlimited Liability Owners of a company that are completely liable if a business fails
 USP A unique selling point of a product or service that makes it stand out

Variable Costs Costs that change with the level of output

Venture Capital Someone who invests in a new start-up business

Working Capital The amount of money that a business has available for day-to-day activities