BUSS1.15 Assessing Business Start-ups Financial Planning Assessing Business Start-ups Failure is only postponed success as long as courage "coaches" ambition. The habit of persistence is the habit of victory." Herbert Kaufman When you reach an obstacle turn it into an opportunity. You have the choice. You can overcome and be a winner, or you can allow it to overcome you and be a loser. Mary Kay Ash

BUSS1.15 Assessing Business Start-ups In this topic you will learn about Objectives of business start-ups Strengths and weaknesses of a business idea and/or plan Why start-ups can be risky Why start-up businesses may fail

BUSS1.15 Assessing Business Start-ups Objectives of business start-ups Business objectives look at the ambitions of the start-up firm. Most firms will base their objectives on the SMART acronym: Specific – exactly what does the firm wish to achieve? Measurable – can the firm measure whether the objective is being met? Achievable – are the objectives set attainable? Realistic – given the resources available are they a realistic target? Time-based – by when should the objectives be met?

BUSS1.15 Assessing Business Start-ups Objectives of business start-ups Perhaps the first objective of a start-up business is to prepare the business so that it can start trading. This can often take longer then the entrepreneur expects – finding premises, suppliers, specialist help, finance etc. will take up a lot of time and resources. Once the business is up and running the firm will look to at least survive the first few months – a sound cash flow will be essential. Once established the business might look to increase its market share. This is likely to lead to increased profit for the business. Profit can be reinvested in the business and growth over the medium term might be the new objective.

BUSS1.15 Assessing Business Start-ups Objectives of business start-ups The objectives of start-ups will vary depending upon the people involved and the circumstances: Is the business crucial as an income for the entrepreneur? Here, failure may mean bankruptcy and loss of assets such as a house. Is the business something that the entrepreneur wants to undertake due to personal satisfaction? Some people have already been successful and are not starting a new business with the sole aim of making a profit. People set up their own businesses for a variety of reasons and it should be recognised that profit is not always the most important factor. In the exam the circumstances of the specific individual should always be taken into account when answering questions. Top tips for start-ups Run video clip from internet

BUSS1.15 Assessing Business Start-ups Strengths and weaknesses of a business idea and/or plan Many people have good business ideas and plans that never go beyond the thinking stage. So what makes a good idea? A SWOT analysis will enable a firm to look into the Strengths, Weaknesses, Opportunities and Threats. If you have a business idea you should set out your SWOT in quadrant form. Top left will look at the strengths of your idea and whether you have the appropriate personal skills and characteristics to proceed with the idea. Top right should be an honest appraisal of the weaknesses of your idea and of you as a person. Bottom left will look at the opportunities that exist in the market for your idea and whether the environment e.g. The economy will help it to be successful. Bottom right will look at those factors that will threaten the success of your idea.

BUSS1.15 Assessing Business Start-ups Strengths and weaknesses of a business idea and/or plan Strengths These are the positive internal attributes of the business - they are within the firm’s control. They might include: What are you best at as an individual? Do you have a Unique Selling Point for your idea? Do you have good person skills? Have you any business experience? Have you any transferable skills that will help e.g. IT skills Why does your idea stand out in the market?

BUSS1.15 Assessing Business Start-ups Strengths and weaknesses of a business idea and/or plan Weaknesses Weaknesses are factors that are within your control but that might hinder the success of the business. This will clearly depend on the individual and their circumstances but areas to look at might include: The financial resources available to the entrepreneur Other resources available to the entrepreneur The management and leadership skills of the entrepreneur Other skills that the entrepreneur may lack The location of the business Of course, many of these may turn out to be strengths!

BUSS1.15 Assessing Business Start-ups Strengths and weaknesses of a business idea and/or plan Opportunities Opportunities are external to the firm – factors that might exist in the market or the environment. Is their a gap in the market that other firms have failed to spot or simply wish to ignore? Is the product in a growing market that will provide greater opportunities in the future? Does the state of the economy look healthy and will this improve the chances of success for your product? Is the competition in the market weak enough for your product to exploit these opportunities?

BUSS1.15 Assessing Business Start-ups Strengths and weaknesses of a business idea and/or plan Threats Threats are external to the business so that they are beyond the firm’s control. The main threats might include: The competition Government regulation The state of the economy Changes in consumer tastes Rising interest rates Why it pays to be a Business SWOT: Role Play Link to the Dragon’s Den web site to access the ROSS role play Run video clip from internet Watch all seven pitches and make your own decision before watching the judges decision.

BUSS1.15 Assessing Business Start-ups Why start-ups can be risky There are a number of reasons why start-ups might be risky. Many of these have been covered in the different sections of Unit 1. Candidates should look at the area of start-up risks in an integrated way. There are numerous areas that affect the new business and these can be looked at from the different sections of business theory:  Finance – investment and cash flow are vital for a business. Without an adequate supply of cash the business will fail  Marketing – it is important to look at elements of the Marketing Mix  Human Resource Management – who are the people involved in the business?  Operations Management – are resources turned into output by adding value?  External Influences – what is the state of the economy? Credit Crunch Britain may not be the best time to start a new business! Top 10 Sins an entrepreneur should not commit

BUSS1.15 Assessing Business Start-ups Why start-up businesses may fail Bearing in mind the risks, there are a number of common reasons why start-up businesses fail:  Market Research - Inadequate market research to understand the market  Marketing – not keeping a close eye on the competition in the market or promoting the product in the right manner  Finance - Poor financial planning  Human Resource Management – Hiring the wrong people with the wrong skills  Operations Management – Poor control of stock, assets and supplier relationships  Finally, many start-up businesses` are not realistic with their ideas and objectives 65 common reasons for failure Why not look at the 65 reasons and see if you can categorise them under the above bullet points? Which category scores the highest?

Activity The Fruit Van Man Assessing Business Start Up Identify the Strengths and Weaknesses of this business idea for your local area before reaching a conclusion on the chances of success or failure.