2Contents Needs/Wants & Goods/Services Risks Factors of Production EntrepreneursSectors of IndustrySectors of EconomyBusiness PlanSources of FinanceBusiness AimsPrivate Sector OrgsPublic Sector OrgsThird Sector Orgs
3Write down something that you really really want.
4Needs and Wants Clip Clip2 A need is anything essential we must have to stay alive. We need food, drink, clothing and shelter.A want is anything not so essential but something we would still like to have. We want a television, a foreign holiday or designer clothes.
5Task Show the difference between needs and wants. You can do this using a PowerPoint, poster or a comic strip.Software:Microsoft PowerPointComic LifeMicrosoft WordMicrosoft Publisher
7Businesses exist to satisfy our needs and wants. They provide:
8Goods and ServicesA good (product) is something made by a business that you can touch or see.Examples - a car, a football, a pair of boots.A service is something you cannot hold or touch. Often a service allows one person to use skills they have to help others.Examples - haircut, life insurance, cinema attendant.
9TaskWe will now see slides of various businesses. Do they provide a product or a service or both?PowerPoint
10Opportunity CostWhen something is Scarce and we can’t have everything we want, we have to make CHOICES.For example:which TV programmes will I watch tonight?which pair of jeans will I buy?which courses will I choose to study?When we make a CHOICE, this means that we decide to give up something in order to getsomething else. We choose the option that will give us the most pleasure and satisfaction.The cost of choosing something is the things that we gave up to get it. This is known as OPPORTUNITY COST.
11Why Start A Business? You might start off with very big ideas Only 50% of new businesses starting up survive after 3 years.Given the risk, why would people want to start up a business in the first place?
12Made Redundant – Redundancy Money To Invest Independence –Own BossMade Redundant – Redundancy Money To InvestYou Keep All ProfitsYour Firm = Your DeadlinesYou Have A Good Idea – Can’t Persuade OthersDifficulty Finding Employment
13Innocent DrinksThe story of the Innocent drinks company - the highs and lows for the founders. It shows the motives behind founding the company, the excitement of start-up, and the integrated nature of the process. The financial aspects are also briefly covered.
14Being Your Own BossThe big advantage of starting your own business is that you get to order everyone else around – and decide what to so with all the profits.But there are problems:
15Problem OneThe business may take time to produce a profit – the owner’s income may be small and vary from week to week.
16Problem TwoThere is no-one else to take the blame if anything goes wrong – the owner must be prepared to take responsibility.
17Problem ThreeOwners of new firms generally work very long hours – for example, completing the firm’s accounts in the evening.
18Problem FourAs the business grows the owner needs to learn to delegate responsibility to subordinates – not easy if the owner has built the firm up single-handed.
19Factors of ProductionLand – natural resources eg water, trees, fruit, fishLabour – human workers – mental and physical effortCapital – money, buildings and machineryEnterprise – the development of ideas and drive for implementation
20Job DescriptionDetails about the job including: job title, main duties and responsibilities, working conditionsPerson SpecificationQualities and skills expected of potential candidates – usually split into essential and desirable
22What is an Entrepreneur An entrepreneur is an individual who develops a business idea and takes on the associated risks and responsibilities.
23Qualities of an Entrepreneur Calculated risk takerCompetitiveConfidentCreative/inventiveDeterminedGood communicationHard workingPatientPeople skills (respect)Planning/organisationPositive attitudeSpot problemsWilling to learn
24Entrepreneur Case Study Watch the clip on SuperJamWrite down relevant information about becoming an entrepreneur.Task – From the website below pick one other company of your choice and write down information relevant to becoming an entrepreneur.
26Sectors of IndustryPrimarySecondaryTertiaryOrganisations involved in the extraction of the earth’s natural resourcesOrganisations involved in the manufacturing of raw materials to be turned in to finished goodsOrganisations involved in the selling of goods and providing services.
27Sectors of EconomyPRIVATE SECTOR Owned and run by private individuals/groups Sole Trader, Partnership, Private Limited Company (Ltd), Public Limited Company (Plc), Franchise PUBLIC SECTOR Owned by the taxpayer and run by the Government NHS, Education, Police, local councils services THIRD SECTOR Owned and run by private individuals with the purpose of helping a group or raising awareness for a cause. Charities, Non-profit making organisations
28Types of Business Organisation In the previous slide we have looked at sectors of the economy:PrivatePublicVoluntaryIf you were to start your own business it would be in the private sector and it would be called a Sole Trader
29Sole TraderA sole trader is the most common type of business. It is owned, controlled and financed by one person.Examples of sole traders are:PlumberElectricianMechanicHairdresserHowever, anyone can start up their own business doing whatever they want.
30Sole TraderIn pairs write down as many advantages and disadvantages of being a sole trader that you can think of – 3 minutesAdvantagesMake your own decisionsProfits are not sharedNo special paperwork requiredDisadvantagesLong HoursHard to raise financeUnlimited Liability for debtHard to cover illness/holidays
32Ideas for a New Business You have decided that you would like to start your own business and become a sole trader. In order to begin any business you must make a Business Plan laying out your business aims.First you must decide what business you would like to set up.Decide on 3 businesses you would like to start?Make a list of the pros and cons for each business?Choose a business and briefly detail what this business will do.…some ideas are on the next slide….Task 1
33Possible Ideas? Can you think of some better ones? Refreshment stand at local sports eventsChild careShopping service for seniorsPet sittingDelivery servicesHouse cleaning serviceSelling used clothesJewellery makingTravel servicesMusical groupComputer support: setting up computers/internet connections for othersYou might even… add value to an existing product (packaging, new Marketing local crafts design, new customers, different size)Task 1
34Billy’s Business PlanIt’s great having the ideas… but you must be prepared for the hard-work and dedication taking your business forwards.More than the idea
35Barclays Business Lounge It’s great having the ideas… but you must be prepared for the hard-work and dedication taking your business forwards.Business Lounge Video
36What is a Business Plan?The business plan is a tool designed to help you find and explore opportunities. It also provides you with a way to analyse potential opportunities continuously.A business plan is personal and should never be prepared professionally by others. No one knows you or your ideas better than you do.It is the process of seeking the answers to important questions about your enterprise that are important as you try to realise the dream of owning your own business.
37Time for research Preparation is essential Working within the time available, complete the template document which will get you thinking about your business.You may not have all the answers at the moment, but be as detailed as you can be…Next week you will start to write your business plan, before presenting your idea in Lesson 3/4.Task 2 and 3
38Writing the Business Plan Convince others… Using the Guideline Document, create your business plan.You will submit this business plan for marking by ‘The Bank Manager’Use a fresh document and your IT skills to prepare a professional and informative document.Task 4
39The ‘Elevator’ Pitch Be straight to the point! What are the key factors about your business?What do people need to know?Watch the Video…Prepare Your Pitch – Task 5
40Business Aims and Objectives Why do businesses have aims?What aims might they have?How do they communicate these aims?
41Business Aims and Objectives What is an aim?An aim is where the business wants to go in the future, its goals. It is a statement of purpose, e.g. we want to grow the business into Europe.What is an objective?Business objectives are the stated, measurable targets of how to achieve business aims. For instance, we want to achieve sales of £10 million in European markets in 2014.
42Why have aims?BRIEF Task: Why do you think businesses have aims… discuss with a partner and write down as many reasons as you can in 2 minutes.
43Why have aims? Suggested Answers: Separate your company from others – make it stand outIndicate the direction the company is heading inMight use aims as part of a sloganCustomer serviceQualityCustomer supportWhat employees should believe
44Why have aims? Customers Competition Employees Aims are often directed at:CompetitionAs you work through this unit… think who different companies aims and objectives are directed at…Employees
45Possible AimsBRIEF Task: What aims might a company have… again 2 minutes to discuss and come up with as many ideas as possible
46Possible Aims Suggested Answers: Provide a High Quality Service Growth SurvivalSuggested Answers:Did you have any others?Eliminate CompetitionIncrease Market ShareBe Socially ResponsibleIncrease ProfitabilityValue for Money
47Do Aims and Objectives Change? YES! Over time due to internal and external pressures… more about this later.
48Communication of Aims?BRIEF Task: How do businesses communicate their aims?… discuss with a partner and write down as many reasons as you can in 2 minutes.
49and in its Mission Statement… Communication of Aims?Suggested Answers:Business PlansCompany HandbookCompany WebsiteCompany Letterheads/BrochuresAnnual ReportAdverts (newspapers, TV etc)and in its Mission Statement…
50Mission StatementA mission statement is a statement that defines the purpose of a company – what it stands for i.e. what broad products or services it intends to offer customers.The mission statement also gives readers a window on the raison d’être (the main purpose) of the company.An effective mission statement should be concise enough for you to describe your company’s purpose and ideals in less than 30 seconds.Where would I see a Mission Statement?Mission Statements typically appear in business plans or alternatively will appear in the ‘Corporate Relations’ or ‘About us’ sections of websites.
51Mission Statement Guidelines A mission statement should say who your company is, what you do, what you stand for and why you do it.The best mission statements tend to be 3-4 sentences long.Avoid saying how great you are, what great quality and what great service you provide.Make sure you actually believe in your mission statement, if you don’t, it’s a lie, and your customers will soon realise it.
52Aims/Objectives TaskFind out more about mission statements by carrying out the ‘Mission Statement’ task on the server.Using the template provided research the aims/mission statements of organisations in the private, public and third sector eg Coca-Cola, the BBC, and Haddington Camera ClubHomework: write a mission statement for your business (remember your business idea before Christmas)
53Solutions to Extension Task Coca-ColaOur mission is:To refresh the world - in mind, body and spiritTo inspire moments of optimism - through our brands and actionsTo create value and make a difference everywhere we engageBBCTo enrich people's lives with programmes and services that inform, educate and entertain.Haddington Camera Clubaims to provide a friendly and supportive forum for everybody interested in photography, whether they are beginners, experienced photographers, or somewhere in between.Club
54Sources of FinanceWhat sources of finance are available to businesses?What advantages and disadvantages does each have?
55Short-Term Finance Bank Overdraft Trade Credit Factoring Grant Taking out more money from a bank account than is deposited in itTrade CreditPaying for goods from a supplier at a later date (eg 30 days)FactoringSelling invoices to another company to collect the moneyGrantOne-off payment often from government or the Prince's Trust – does not need to be repaid.Retained ProfitsProfits kept back from previous years
56Medium-Term Finance Bank Loan Leasing Hire Purchase Money lent for a specific time period – paid back with interestLeasingRenting – often vehicles or equipmentHire PurchaseThe purchase price is paid in instalments
57Long-Term Finance Owner’s Savings Share Issue Mortgage Debentures “the owner’s savings”Share IssueA part-ownership in a Ltd or plc (a share)MortgageLoan secured on propertyDebenturesSource of finance used by plcsVenture CapitalThink Dragon’s Den – often used for risky ventures
58Haddington Conservation Area Regeneration HCARS is a grant programme supported by East Lothian Council and Historic Scotland that makes available funds for regenerating and improving Haddington Town Centre through repairing and enhancing the historic fabric. The Haddington CARS is an action point in East Lothian Council’s Haddington Town Centre Strategy The grant is available for good quality, long lasting repair and enhancement work on projects that are located within the CARS Area. The scheme funds enhancements and repairs to shop fronts (repainting, signage), small repairs to buildings (sash and case window refurbishment, gutters and downpipes) as well as comprehensive tenement repairs (masonry repairs, roofing etc.).
59Choosing a Method of Finance If you are asked in a question to give sources of finance for a specific type of business make sure that your answers are relevanteg if asked for a source of finance for a sole trader to expand, debentures would be inappropriate to include in your answer.
60Finance Task No. 1Let’s find out about the advantages and disadvantages of each source of finance.You will be provided with an envelope containing a number of cards. Match each source of finance with its advantage and disadvantage.
61Finance Task No. 2 In groups of 3… Using the completed answer sheet (from Task 1) prepare 3 A4 sheets illustrating the advantages and disadvantages of short, medium and long-term sources of finance.
62Finance Task No. 3 Real life? Using the template provided carry out some research into the difference sources of finance available today.
63Re-cap… There are 3 Sectors of Economy that exist, they are called… PrivatePublicThird (Voluntary)We have looked at one type of Business in the Private Sector already, it is called…Sole Trader
64Types of Business Organisation (PRIVATE SECTOR) We are now going to look at other organisations that exist in the :PRIVATE SECTORPartnershipsPrivate Limited Companies (Ltd)Franchises (small)
65PartnershipsA partnership owned, controlled and financed by – 20 people (partners).Partnerships are usually found in professional practices, for example:DoctorsLawyersVets
66PartnershipIn pairs write down as many advantages and disadvantages of being a partnership that you can think of – 2 minutesAdvantagesCan raise more capital (from partners)Risks and responsibilities are sharedCan keep activities privateDisadvantagesUnlimited liabilityFormal paperwork requiredDisagreements amongst partners
67Liability Unlimited Liability Limited Liability The owner(s) must pay off all debts of the business. This may result in them losing personal possessions.Sole TraderPartnershipThe owner(s) are only liable for the debts of the company up to what they have invested. They can only lose their investment.LtdPLC
68Private Limited Companies (Ltd) A Private Limited Company is owned by shareholders, controlled by a board of directors and financed through selling shares.Shares are bought and sold privately, they cannot be sold on the stock market.Examples of Private Limited Companies are:Eddie Stobart LtdPhones 4U LtdWalkers Snack Foods Ltd
69Private Limited Companies In pairs write down as many advantages and disadvantages of being a Ltd that you can think of – 2 minutesAdvantagesRaise more capital through selling sharesShareholders have limited liabilityLikely to employ specialistsBigger firm?DisadvantagesAccounts are not kept privateMore complex and expensive to set upHave to share profits – DIVIDENDSShares can’t be sold on the Stock Market
70Franchise (small) Video – Festival Franchise This is where a new business trades on an already established successful businesses name.The new business pays for permission to use the existing name.The business is owned and financed by the franchisee. It is controlled by both the franchisee and franchisor.Examples of small franchises are:Baguette ExpressVideo – Festival Franchise
71Franchise (small)In pairs write down as many advantages and disadvantages of being a franchise that you can think of – 2 minutesAdvantagesAlready established recognisable nameGuaranteed customersCost less to set upGiven help setting upLess chance of failureDisadvantagesHave to give a % of profit to the franchisorHas to be run according to the rules set out by the franchisorHard to introduce own ideas and methods
72Private Sector – Summary! The private sector consists of different types of businesses owned by private individuals:Sole TraderPartnershipPrivate Limited Company (LTD)Public Limited Company (PLC)Franchise
73PUBLIC SECTORThe public sector is owned by the taxpayer (the state), it is financed through collection of taxes, and it is controlled by the government.Examples of Public Sector organisations are:NHSSchoolsPoliceLocal CouncilsBBC
74Public SectorWatch the clip on how the public sector is financed and answer the following questions?Name 4 types of tax the government collects?Name 4 services the government spends its money on?How much does the government collect a year?How much does the government spend a year?What does the government have to do with the spending gap?
75Public Sector AimsThe public sector has very different aims compared to the private sector, it does not aim to make a profit.It aims to:Provide a quality service to everyone within a certain area.Make good use of the taxpayers money, by providing relevant services.Stay within a budget.
76TaskYou have been given the job of BBC One Programme Co-ordinator, and must decide on one days programming.You have been given a list of programmes to choose from to fill the day between 0900hrs and 0000hrs.You must:Choose a wide variety of programmes to meet the needs of all viewersEnsure that you stay within your budget of £100,000
77THIRD SECTOR (Voluntary) The third sector looks to benefit communities and help people less fortunate. Organisations in this sector are owned and controlled by private individuals.They are financed through selling goods, providing services and collecting donations.Three types of Third Sector organisations are:Charities (Oxfam)Non-Profit Making Organisations (Sports Clubs)Social Enterprises (The Big Issue) *see later*
78Third Sector Aims Third Sector organisations aim to: Provide support for worthy causes (British Cross)Raise awareness of an issue (WWF)Provide the best service and facilities (Sports Clubs)Re-invest profits to further a cause (Eden Project)
79Social EnterpriseA social enterprise is a business that trades for a social and/or environmental purpose.It will bring in most or all of its income through selling goods or services.It will have clear rules about what it does with its profits, reinvesting these to further the ‘social mission’Examples of Social Enterprises are:The Big IssueThe Eden ProjectJamie Oliver’s ‘Fifteen’
80Social EnterpriseIn pairs write down as many advantages and disadvantages of being a social enterprise that you can think of – 2 minutesAdvantagesUse local skills and life experienceImprove on a ‘social mission’Target specific sectors of the communityDisadvantagesNeed specific skills, knowledge and expertiseMust meet their social aims
81InvestigationChoosing one of the Third Sector organisations prepare a brief report to be fed back to the class that includes:The organisations mission statement. (5mins)How do they achieve their goals (5mins)Facts and figures about the organisation. (5mins)10 mins to collate informationFeedback to class