Enterprise, Business Growth & Size

Enterprise, Business Growth & Size

Enterprise and Entrepreneurship

• What is an Entrepreneur?

  • Someone who takes a risk to set up their own business.
  • Could be full-time or part-time.
  • Instead of working for someone else, they create their own job and business.

• Why start your own business? (Benefits of being an Entrepreneur)

  • Independence: You're your own boss! You choose how to spend your time and money in the business.
  • Ideas into practice: You get to use your own creative ideas.
  • Potential for Fame/Success: If the business does well, you might become well-known and successful.
  • Potential for High Profit/Income: You could earn more than working as an employee for someone else.
  • Use your Skills/Interests: You can build a business around things you are good at or enjoy.

• What are the downsides? (Disadvantages of being an Entrepreneur)

  • Risk: Many new businesses fail, especially if not planned well. You could lose money.
  • Capital Needed: You usually have to put your own savings into the business and find other money too (e.g., loans).
  • Lack of Experience: New entrepreneurs might not know everything about running a business.
  • Opportunity Cost: This is the income you lose by not working for someone else.

• Key Idea: Many famous and wealthy business leaders started out as entrepreneurs with just an idea!

• Study Tip: Think about why successful entrepreneurs are good for a country. Why do governments want more people to start businesses? (We'll look at this later).

Characteristics of Successful Entrepreneurs

Not everyone is suited to being an entrepreneur. Some prefer the security of being an employee. But successful entrepreneurs often have these characteristics:

Characteristic	Why it's Important
Hard working	Starting and running a business often means long hours and short holidays.
Risk taker	You have to make decisions where there's a chance of failure (e.g., making a product people might not buy).
Creative	A new business needs fresh ideas (products, services, getting customers) to stand out.
Optimistic	You need to believe in your business and look to the future. Thinking you'll fail makes you more likely to fail!
Self-confident	Being self-confident is necessary to convince other people of your skills and to convince banks, other lenders and customers that your business is going to be successful
Innovative	Being able to put new ideas into practice in interesting and different ways is also important

The Business Plan

• What is it?

  1. A detailed document written by the entrepreneur before starting the business.
  2. It shows how the entrepreneur has thought about the future and planned carefully.

• Why is it important?

  1. For the Entrepreneur: Forces them to think about everything needed for the business to succeed in the first few years (costs, customers, location, etc.).
  2. For Banks/Investors: Banks will usually ask for a business plan before lending money. It shows them the entrepreneur is serious and has planned well.

• What's usually in a Business Plan? (Typical Contents)

  1. Description of the Business: What is the business? Its history (if any) and what it aims to achieve (objectives).
  2. Products and Services: What are you selling? How will you make/provide it? How will you keep developing products?
  3. The Market: Who are your customers? How big is the market? Who are your competitors? How much do you think you will sell (sales forecast)? (Often includes market research and marketing strategy).
  4. Business Location: Where will the business be based? How will products/services get to customers (e.g., shop, online, delivery)?
  5. Organisation and Management: What is the structure of the business? Who will manage it? What employees are needed and what skills do they need?
  6. Financial Information: This is a big part! Includes expected future financial statements (like income statements), where money will come from (sources of capital), expected costs (fixed and variable), cash flow forecast, and expected profit.
  7. Business Strategy: How will the business meet customer needs and build loyalty? A summary showing why the business will be successful.

• Key Point: A poorly prepared business plan (e.g., bad cash flow forecasts) might mean the bank still says no to a loan.

Why Governments Support Business Start-ups

Governments often help new entrepreneurs start businesses. Why?

• Reduce Unemployment: New businesses create jobs.

• Increase Competition: More businesses mean more choice for customers and competition with existing firms.

• Increase Output: The country produces more goods and services, making the economy stronger.

• Benefit Society: Some entrepreneurs start social enterprises which help the community or specific groups, not just make profit.

• Future Growth: Today's small start-ups could become tomorrow's large, important companies.

How Governments Support Start-ups:

What Business Start-ups Need	How Governments Often Help
Business Idea & Help	Training, advice sessions from experienced business people.
Premises (Place to work)	"Enterprise zones" - areas with low-cost places to rent for new businesses.
Finance (Money)	Loans at low interest rates, Grants (money given that doesn't have to be paid back, often for businesses in areas needing jobs).
Labour (Workers)	Grants to help small businesses train their employees.
Research	Encouraging universities to share their research facilities with entrepreneurs.

Measuring Business Size

Businesses come in all sizes, from one person to huge international companies. Why do people compare business sizes?

• Investors: To decide where to put their money.

• Governments: To set different tax rules for small and large businesses.

• Competitors: To see how they compare to others in the industry.

• Workers: To get an idea of how many colleagues they might have.

• Banks: To judge the size of a loan compared to the business's overall size.

• Common Methods to Measure Business Size:

  1. Number of People Employed:

     • Good points: Easy to calculate and compare.
     • Limitations:
       • Some businesses use a lot of machinery (capital-intensive) and have high output but few workers.
       • How do you count part-time workers? (As one employee or two half-employees?).

  2. Value of Output:

     • Good points: Useful for comparing businesses in the same industry (like manufacturing).
     • Limitations:
       • High output doesn't always mean a large business by other measures (e.g., a firm making a few very expensive items).
       • Value of output might not be the same as value of sales if goods aren't sold.

  3. Value of Sales:

     • Good points: Often used for comparing retailers, especially those selling similar products (like supermarkets).
     • Limitations:
       • Can be misleading when comparing businesses selling very different products (e.g., a sweet stall vs. a luxury car dealer - very different prices!).

  4. Value of Capital Employed:

     • What it means: The total value of all the money and assets invested in the business.
     • Limitations:
       • Similar to 'number of people employed'. A business using lots of workers but little machinery (labour-intensive) might have low capital value but still be quite large in terms of employees or even output of cheap goods.

Key Takeaway: There is no perfect way to measure business size. It's often best to use more than one method and compare the results to get a better picture.