Principles of Business

Principles of Business

Establishing a business

Reasons for establishing a business

What are the main steps in starting up a business?

Open Ended

What problems can a new business face?

Financial independence

owning a business can lead to independent financial success. There will be no need to be limited to the pay received from working for another individual. The money gained will be based on the entrepreneur’s efforts and skills.

Self-fulfilment and self-actualization

starting a business and ensuring its success through the entrepreneur’s skills and efforts creates a sense of achievement and satisfaction; accomplishing ambitions and desires, which an individual may not get from working for someone else. Using one’s own abilities to its full potential can motivate the individual and provides the drive for further progress and achievement. 

Multiple Select

Which of the following should be done before a business venture is set up?

• Conduct market research to assess the level of demand for the product.

• Visit all the competitors who sell similar products or services.

• Assess how much capital will be needed to finance the business.

• Create a business plan to understand how you intend to put your ideas into action.

Increased income

if the business succeeds, the potential for increased income can be limitless. The business may start off small but with an individual’s drive for perfection and expertise can be profitable in the long-term run. 

Increased control of working life

a drawback of working for an employer is that you will have you to work under their conditions. They will schedule your working hours and have you work using their own policies. By being an entrepreneur, you will have full control in how the job will be completed and you will be able to create your own working schedule.

Multiple Choice

Which of the following are reasons for starting a business?

• The desire for financial independence

• Self-fulfillment

• Self-actualization

• To increase your income

• All of the above

Essential steps in establishing a business

What steps is needed to start a business? 

Conceptualization

this is where an idea is created before the business can be established. With creating this idea, entrepreneurs must identify a need in the market, such as a service or product that is not being provided or does not exist, or an existing service or product that can be improved.

Research

research is needed to identify if there is a definite need for the product or service, and to collect information about the potential market. This can be done through primary and secondary data collection. Primary data collection refers to the hands-on research techniques or collecting information from individuals in that certain field. For examples surveys, feasibility studies focus group and questionnaires. Secondary data collection refers to acquiring information from sources that already been collected through primary data collection. For example internet websites, newspaper articles, journals and magazines.

Multiple Choice

All of the following are part of the conceptualization function EXCEPT:

• Developing a business idea

• Researching all aspects of the business idea

• Understanding how the business will deliver what consumers want

• Evaluating business performance

Identification of resources

this is where the entrepreneur identifies the resources needed to operate the business venture, such as land, labour, capital requirements, and the location of the business.

Creation of a business plan

a business plan is very vital in the establishing of a business as it gives factual information on if the business idea is viable and likely to prove profitable in the long-run. 

Multiple Choice

Evaluating a business performance includes all of the following EXCEPT:

• Conceptualizing the business idea

• Comparing customer numbers and feedback

• Comparing productivity levels

• Comparing average delivery times

Acquisition of funds

funding is needed to start a business and can be acquired from various sources. These sources of funding usually come from the entrepreneur’s resources or someone else’s such as the bank, an investor or relative/friend. However, getting funds from someone else, this will incur a cost of borrowing. This is the interest rate changed over the length of the period of the loan. Even using the entrepreneur’s resources incurs a cost where the funds used could have been used to earn something else (opportunity cost). These costs should be recorded during planning.

Operation of the business

the business must operate efficiently and effectively to ensure that their goods and services are of the highest quality. This is needed for customer satisfaction which should always be the main goal of an entrepreneur as it ensures in the retainment of customers and to attract new potential customers. The entrepreneur should ensure good quality products and services but at an economic cost, which serves to ensure the entrepreneur spends his/her money effectively and creates the product at the cheapest price possible.

Activity

Students will work in groups to construct an interactive chart with the essential steps in establishing a business. 

Evaluation

Students are required to start a business displaying the reasons for starting a business and the essential steps.