Business Studies Preparations/organizations
A writing about Business preparation and organization.
Introduction.
In this assignment I will be setting up my own business that can be run within the local area of New Mills in Derbyshire and in the area of the school. The business I will be setting up will provide a service rather than a product. In this assignment I will be outlining the legal requirements that must be followed in order for your business to be legitimate and legal. Competition in the local area must be identified in order to compete in the local community and to ensure that the business can be as successful as possible. The legal format of the business needs to be decided upon, for example should we be a sole trader, a partnership or a limited company? I think that the legal format of my business should be a partnership, as I am practicing business in a group. This will be explained further on in my assignment. I will need to highlight why I have chosen this legal format and whether it is justified, for the business.
I will be identifying the sources of finance and help and advice that may be accessible to the business owner. I will outline how to financially manage your money successfully so that we are not missing a penny. I will be defining start up costs and running costs and what they are and what the start up costs and running costs of my business will be.
To make a profit is the reason why people set up in business so I will identify why it is important that my business must make a profit. I will be providing examples of cash flow forecasts and how they may be a weakness and showing what break-even charts are, as I will produce this information from the business that I create and run in order to write this assignment.
My business idea
Before you start a business it takes months of careful planning and negotiations before you can actually set out to do your aims and objectives. First of all I must brainstorm business ideas of what service our business may include. I must identify the aims and objectives of the business and the mission statement in order to clearly define the business plan. Below is a diagram showing the ideas that I had for my business activity:
Garden maintenance Service.
Dog walking service
Valentines day messaging service
Child minding service
Brain storm
Cleaning service
Escorting service
Home work service
Car washing service
Having considered all of my ideas and deciding that I will undertake a lot of research both primary and secondary and remembering that what I am doing must sell a product and/ or a service, I have chosen to do a Valentine Day Messaging Service. I have chosen to run my business in the couple of weeks leading up to the time of the 14th of February (Valentines Day) 2007, this gives me five months to gather myself and establish as a business.
I am going to do a valentines card messaging service where students/ pupils can pay a certain amount of money to have a card delivered to another member of the school. I will be making the cards with specific designs that make them attractive to my target market. I have chosen this plan for my business because it’s a popular attraction to the youth of today, valentines for some is an important time, people feel the need to splash out on gift and cards for their loved one. I plan to also diversify to suit the needs of my customers. What I will diversify into will depend on the market research that I will conduct, in order to identify other gaps in the market and increase profitability.
I have also chosen this business because of the time scale. I don’t want to be too restricted in my time, as this type of business plan needs to be planned carefully for it to be a success, also the time I have, has given me sufficient time to conduct a fully flourished market survey and to analyse the opinions of my target audience and identify the gaps in the market.
The other business ideas that I had were not as realistic they would have had to have been operated outside of the school in a market that hard to gain access to and I could have potentially lost out on certain aspects and the needs of the market. As there are approximately 700 pupils in the lower school and an estimate of 180 students in the sixth form who come every day, you have a better chance of successfully advertising your service or product because they will see it repeatedly as they walk the next scheduled lesson. The School is a good place to do business as it would be easier to conduct market research and easier for your target market to get hold of your product or use your service.
In market research, companies have two types of data in research and they are primary and secondary data. How you obtain the data on your market research depends on what type of information you use. I have used primary research, which involves a lot of interaction with the target market. Secondary research, which is also known as “desk research” involves using data that has already been created or provided by one of the following:
Government statistics
Market research companies, e.g. Gallop
Newspapers
The Internet
The advantages of this market research are that the information is already available and it is cheap and also you can find out what other competitors are doing, but this information may be out of date and difficult to make sense of. And the information may not be relevant. To avoid this, primary research is done also known as field research and this information that is newly created and can be collected either by research firms, i.e. Gallup and Mori, or can be collected by the firm itself. There are lots of ways that you can conduct field research and they are as follows.
- Test marketing
- Surveys
- Observation
- Consumer panels
- Questionnaires
- Interviews
- Electronic (EPOS)
- Postal
- Face to face
- Telephone
- Open ended
- Group interviews
The advantages of this kind of research are that you obtain the information you want; the information is up to date and the competitors will not have this information but this information is expensive, is difficult to obtain and takes longer to obtain.
In order that I can decide whether my idea will be feasible I have decided that I need to conduct some market research. The market research that I will conduct will be primary. This consisted of a questionnaire made up of specially selected questions that may draw the answer we want from the pupil. I have decided that this is the most appropriate due to the nature of the business I am intending to set up. Also because the target audience that I want to attract to buy my service are within our school community, therefore it is important that I gain the views and opinions of the younger students within school. We put together a questionnaire for our market research, which consisted of the questions that you see below.
Questionnaire
How much would you pay for a Valentines Day card?
£1.00 £1.25 £1.50 £ 1.75
How much extra would you expect to pay for the valentine card to be delivered
25p 50p 75p £1.00
What year group are you in? (Please circle)
Yr7 yr8 yr 9 yr10 yr11 6th form
What would you buy them for Valentines Day?
Cards jewellery
Chocolate teddy’s
Roses other
Perfume
If you have picked other, please will you state your answer______________
Our target market is the year nines in our school. I found that I naturally aimed this questionnaire at the year nines as they may be experiencing a first love and are new to the giving of presents to loved ones. We are selling valentines cards aimed at both male and female and also year nines are our target market as they hang around in one big group in the library. We asked about 60 pupils 30/male 30/female, questions from our questionnaire, forty-one pupils said they would pay a pound for a valentines card, four said they would pay one-pound twenty-five, eight said they would pay one pound fifty and seven said they would pay one pound seventy five. We then asked them how much extra they would pay for a delivery service and sixty pupils said that they would only pay twenty-five pence for the charge of the delivery service of the cards given the choice, they also said given the choice they wouldn’t pay anything for the delivery they would have it all included in the price. So I took this onboard and decided to include delivery in the price.
Tally Chart.
In order that we could analyse our results it was necessary for me to construct a tally chart as this clearly displays the responses that I have gained form the students who completed our questionnaire.
Question
Answer
Tally out of 60
How much would you pay for a Valentines Day card?
£1.00
£1.25
£1.50
£ 1.75
41
4
8
7
How much extra would you expect to pay for the valentine card to be delivered
25p
50p
75p
£1.00
50 pupils said 25p
2
5
3
What year group are you in?
Yr7
Yr8
Yr 9
Yr10
Yr11
6th form
11
6
28
3
8
4
What would you buy them for Valentines Day?
Cards jewellery
Chocolate teddy’s
Roses
Perfume
Other
32
0
0
6
18
1
3
3 people said that they would cook a meal for their “loved one”
Graphs
In this Graph I have comprised the results into a pie chart above, it tells you that majority of people would pay a pound for a valentines card
In this Graph I have comprised the results into a pie chart above, it tells you that majority of people would pay a pound for a valentines card
How much would you pay for the delivery of a valentine’s card?
This graph above consists of how much the paying customer would pay for the delivery of the valentine’s card. Most people would only pay 25p for the delivery but it came out in conversation in my one to one market research that they would rather have the delivery of the card in with the price of the card.
This graph above shows how many people from different year groups have an interest
in the service I am providing. This means that the majority of my customers are in year nine (3rd year)
This graph shows what kinds of things the customers would buy for their valentine bearing in mind that most of the customers will more likely be in year nine (3rd year)
In the Key, people who said other said they would cook a meal.
Analysis
I have analysed through the graphs that my target market is year nines and the products they would be more likely to buy will be valentine’s cards and roses and they would only pay one pound for the card and the delivery service of the valentine’s cards. So I have determined what the market in the school want and identified that there is a gap. And I also came to an initial decision on the place where I will sell my product, which will be in the library. I think that selling both valentines cards and roses would be a little too much to handle so we have decided that we will only sell the valentines cards
The Name of my Business.
The next stage in my business once I have chosen our service is to choose an appropriate name for my business. I have decided to do a brainstorm on the different types of names for my business this information is below,
Valentines
Messaging service
Be my valentine
Card delivery service
Secret valentine
Service
Valentine spy
Brainstorming
Ideas for business name.
Valentines anonymous
I spy a valentine
Kings cards valentine delivery service
Crowns cards valentine delivery service
I have decided to use the name Crowns Cards Valentine Delivery Service. The reasons for me choosing this particular title is that its catchy, and using words that are strongly linked with royalty make you feel like this will be a royal service. The language used in the title is alliterated using the sibilance of the C at the beginning of the first and second word and the S at the end of both of them. Having these carefully chosen words allows me to colour code my product or service. I can select a number of colours that relate to royalty for example purple’s and blues and reds. The title, because of alliteration, will stick in my target audiences mind and that is a good advantage to the supplier, as they will get recognition. The word crowns makes you think of bright, colourful and wealthy prospects and associates the service with good living an a rela-a-a-xing life. Associating this service with such things as royalty will create recognition. The recognition will come through advertising, which is why the name is important because it could influence the colour co-ordination of the logo’s, poster’s and the Valentines cards and could be a crucial point of your sale of the service or product. The name must stand out and put the message across of what my business is about in abbreviated terms.
The reasons that I did not choose the other business names were because of the reasons that follow.
Valentines messaging service- this name was in my opinion too plain and would not be remembered by its onlookers.
Be my valentine delivery service- was too poetic and may be too girly and I want a good mix of male and female customers.
Valentines anonymous- I then looked at the more secretive side of Valentines Day and decided that this title was too closely related to the title of classes, in which people who have problems go to, for example, smokers anonymous. I didn’t want my target market to feel like they have a problem
Secret valentine service- I then got back to the idea of the experience being a service that is publicly used and secret if you want.
Valentine spy- then I created this title, which makes the customer feel like it’s a more personal service and mischievous and all kids like mischief. This title could possibly create suspicion between people and provoke action to use the service.
I spy a valentine- I then realised that the target market consists of mainly Kids, I then began to wonder about children’s nursery rhyme’s and the game called, I spy. And thought that if I incorporate this theme it is almost as if the person who reads it is saying it and it puts the idea of looking for a special valentine into the young ones head. But this title felt too young for my target market.
King’s cards valentine delivery service- I then started thinking about reputation of the service and of certain qualities about the service that make it quite respectable and honourable. I wanted people to feel like people who use the service will be treated royally and have fun using the service.
There are many people who get into business every day and start up in business and there can be many reasons for this. To identify them in motion is circumstantial so here is a list of the different reasons for people setting up in business.
To have more control over your working life.
To make a profit
Dissatisfaction of current employment
Belief that they have a potentially successful idea
Recognition that there is a gap in the market
The need to have work of some kind (Self-satisfaction)
Incentives from government or other organisations
Or following the route of family or friends
There are a number of reasons why I chose to run my business inline with Valentines Day. I chose to set up the business on the theme of Valentines day because the market for the types of product or service that I had to build/ create, already existed and I didn’t need to invent the market and build a reputation from nothing, but as Valentines day is a special day in which people buy gifts for their loved ones, I thought that I would exploit the needs of the customers for the certain day of valentines day. Another reason for just setting up the business is because there is a gap in the market of the school for Valentines Day and the belief that I have potentially a good idea that I can make a profit from.
One of the first things that I must do is make my mission statement. A mission statement is a statement that outlines the aims and objectives of the business and the business activities that involve the day to day running of the business and the overall targets of the business. Here is an example of a mission statement from a confectionary company called Swizzels Mattlow;
Swizzels Matlow Limited has a commitment to provide QUALITY sugar confectionery at VALUE FOR MONEY prices and will continually introduce INNOVATIVE NEW PRODUCTS and contribute significantly to the development of the children’s sugar confectionery marketplace.
The Guarantee:
Swizzels Matlow Limited will continue to respond to the ever-changing needs of our customers and provide the products necessary to maintain our heritage and position as market leader.
Using the same ideas as this mission statement above I have written my mission statement. In this mission statement above they try to draw you in to their aims as a business, for example they say they will continue to introduce innovative new products in order to maintain their heritage as market leader.
Aims and objectives are important in the running of a business; aims are where you aim to be, or where you are aiming to go with the direction of the business. Objectives quantify your aims giving them restrictions for example time restrictions. Saying as a business we aim in two years to be supplying Derbyshire with their valentines gifts. This is an example of quantifying your aims and making them happen in a time restriction or any kind of restriction.
This is my aim as a business
The aims of Crown Cards Valentine Delivery Service are:
- To provide a smooth and quality service to the younger kid’s that is unproblematic and fun.
- To promise to listen to the consumer and ensure that this service is as personal as it is public.
- We are also setting out to make this business profitable and we want this service to be very interactive with the customers making sure they get what they want out of the service at a price that is GREAT VALUE FOR MONEY.
We believe that these aims will help us to achieve some kind of direction in the business. We will be monitoring them on a regular basis in order to ensure that they are being achieved, once they have been achieved we will then set some new ones so that our busness is regularly being driven forward. And kept on track so we don’t lose our way.
These are our objective as a business
We, for one day want to provide a fun service for the customer, we aim to make a profit and hope we sell at least fifty cards.
Sources of Help and Advice
There are many sources of help and advice available to small businesses. There is even help and assistance for businesses before they set up. The first source that I have researched is HSBC Bank. This was done through the Internet and looking at their website.
HSBC inform and give advice on writing a business plan. A business plan can be defined as:
“A written document that describes a business, its objectives, strategies, market and financial forecast.”
The website tells you how to write a business plan and how it should be set out. The next stage, according to HSBC, is the forming of a business. Once you have made up your mind to go ahead, you need to get to grips with the legal requirements for forming a business. Setting up your business in the right way keeps costs down. It can also help prevent your working relationships turning sour, one of the major causes of business failure.
Ownership of the Business
There are four main choices for the legal form of your business.
If you are a sole trader, you are self-employed, with no special legal structure.
In a partnership, two or more self-employed people work together as partners and share the profits (or losses).
A limited company is a separate legal entity, distinct from its shareholders, directors and employees.
Unlike a sole trader or partnership, it is not the same as the individuals who own or run the business.
A limited liability partnership has some of the advantages (and disadvantages) of both a company and a partnership.
For example, it is a separate legal entity and can continue despite the resignation or death of some members. We as a group decided that we shall write up a business plan and think everything through before hand so we don’t make any mistakes and waste any resouces. The idea of this section is to keep you in control of the business so it doesn’t go spiraling into debt. We shall conduct market research and join together to make our business.
My group and I have decided to choose a partnership for our type of business ownership, as a sole trader was not suitable for this type of business activity. The advantages of choosing this type of business ownership meant that we could share the responsibilities of the tasks ahead to make a quick, fast and efficient launch of our advertising and our product as we only had a time scale of two weeks. Here is a list of the advantages of a partnership:
Easy to set up, but a deed of partnership is advisable.
These businesses are usually small so less capital is needed.
Responsibilities can be shared.
Decisions can be shared.
And can be run as a family business.
Accounts can be kept private.
And money comes from the partners.
A partnership is more suitable for our business type as our time scale is small, we can operate effectively sharing out tasks, decisions and paper work.
Legal Requirements
There are certain legal agreements that must be followed before a business can start trading. A partnership is a business run by two or more people together. There should be a written agreement detailing this arrangement. Profits are usually shared between partners according to the agreement. Although profits may be shared unequally, liabilities, which may arise, are shared jointly. This is something that everyone involved should be very clear about. Even if you only own 1% of the business you will still be responsible for 100% of the liability.
A partnership is a very risky type of business to get involved in, just because of all the potential for conflict, and the financial effect, conflict between partners would be likely to have on the business. However, now the Limited Liability Partnerships Act has received Royal Approval and will become Law by the end of the year. There are a number of advantages to LLP including limited liability (as with a Limited Company) and the tax advantages of a Partnership. Your obligations are the same as for a Sole Trader. Your liabilities are the same as for a Sole Trader. The good side choosing a partnership is that often more money can be raised to start the business if more than one person is involved. You will need to keep records for Inland Revenue (and also for VAT if you are VAT registered), but there are no other legal requirements. Each partner should submit a P/SE/1 and you are taxed as an individual. If you leave the partnership your tax liability will follow you (unlike in the past when the remaining partner had to pay it)
The workload can be shared. Fair trading regulations exist to protect the consumer from exploitation.
The consumer has basic legal rights if the product is:
- Given a misleading description
- Of an unsatisfactory quality
- Not fit for its intended purpose
There are two types of limited company that define the way money can be raised through shares. Private limited company’s can sell shares only to designated people and there is a limit to how much capital can be raised through this method. Public limited companies can issue shares to the public so this means that any one can have a share in the business. In companies such as Sainsbury’s shares are sold to gather capital, this is very different to a loan, as the money does not have to be paid back over a fixed period of time. When one shareholder sells his or her share(s) the company does not raise any additional funds. There are also preference shares and ordinary shares; ordinary shares are the most common form of share capital and these shareholders can vote at business meetings but the amount of dividends they receive will vary due to the share price. Preference shares do not have a say at meetings so they cannot vote. The dividends of these shares are usually fixed at a rate of five percent of the share price and are given out once a year. Preference shareholders receive their dividends before ordinary shareholders.
Stakeholders.
I am now going to investigate the stakeholders of a business. Stakeholders are anybody who has an interest or “stake” in the activities of a business. Stakeholders may be able to influence what a business does, but some may have more influence than others. For example the government can influence the location of a business and various other things like employees. For example the stakeholders of Sainsbury’s are.
- Share holders
- Employees
- Local community
- Government
- Suppliers
- Management
- Banks
- Customers
- Pressure groups. .
All of the above have an interest in the activities of business, below shows how their interests and influences have changed over time. In business it is important that your business complies with the stakeholders needs to remain inline as a competitor with the competition. Below is an example of Sainsbury’s stakeholders and how they influence or change over time. The following stakeholders of Sainsbury’s in the chart below are shareholders, employees, local community and Government.
Stakeholder of Sainsbury’s
Shareholders
Employees
What is their main interest in the business
High dividends and the business to expand and do well they also want the share prices to go up
Employees want Job security, good pay and good working conditions
What influence do they have over the business?
The share holders own the business
As a group, a union they may have a lot of influence in the business
What expectations do they have of the business?
High profit which leads to high dividends
Want pension schemes, good training, good rates of pay, social events and discounts
How have interests changed over time?
Looking to expand the business using the latest technology available. This may produce higher profits
Interested in the business doing well. They may have shares in the business themselves given as a staff bonus.
How has influence changed over time?
Employ more senior managers from other chains -Tesco manager- new ideas from outside the business.
More influential as there is a staff shortage in the area. Low level of unemployment. It costs 3000 pounds to train one person.
How expectations have changed over time?
Want greater profits and expansion to gain a greater share of the market.
Now expect better training, wages and conditions.
How is the business responding to any of the above changes?
They have tried to target other markets- electrical, insurance, petrol etc.
Always pay above minimum wage. Provide benefits so they don’t leave to go to another store. Childcare flexibility maternity/paternity leave. Staff socials
Stakeholder of Sainsbury’s
Local community
Government
What is their main interest in the business
They want the business to provide the public with good quality service and products
For the business to be successful and expand because the more money they make the more tax they pay.
What influence do they have over the business?
They have a say in the running of the business with regards to opening times and other things an example of this corresponding with Sainsbury’s is the local community stopped the building of a petrol station.
They have an influence over employment, the selling of alcohol, and the location of the business.
What expectations do they have of the business?
They expect the area to be kept clean and tidy and they expect them to employ some of the local community
They expect them to abide by the laws and pay taxes on the goods they sell.
How have interests changed over time?
Sainsbury’s stores have got bigger so there may be more disruption
Because they have got bigger they expect them to employ, comply to laws and sanctions put in place and create a good image.
How has influence changed over time?
Local community groups have more power through forming groups
They can influence employment, location and make them give to the local community for example putting money into the hospital near by.
How expectations have changed over time?
They expect a certain number of the unemployed population to be employed and the are to be kept clean and tidy
They expect Sainsbury’s to be economic, provide good products and fair service at reasonable prices to pay tax
How is the business responding to any of the above changes?
Employing local people, keeping in touch with the community and being ethical.
Employing the local community and abide legislations
Stakeholder of crowns cards valentine delivery service
Local community
Government
What is their main interest in the business
That the business sell good quality products at a good quality price
That the business do well and create lots of jobs
What influence do they have over the business?
They influence what the business sell
They can influence employment, location of the business and in some cases their product line for example, the government want their product line to educate younger children in some way.
What expectations do they have of the business?
That the business is ethical, honest and conform to legal requirements
They expect them to abide by regulations and pay taxes of goods they sell
How have interests changed over time?
They expect the business to listen more to customers
Their interest in the business
How has influence changed over time?
The influence of customers has not changed over time
More recently they can influence the size of a business for example how many stores Tesco have nation wide.
How expectations have changed over time?
They expect the business to keep the community clean, employ local people and give something back to the community
They expect them to recycle waste, be ethical (charitable) and conform to legal requirements. Also they expect them to pay tax.
How is the business responding to any of the above changes?
The business has employed people from the local area; keeps the area of selling clean and keeps in line with regulations for example VAT registration.
Also the business will organise charitable events that benefit the community.
The business is responding to the government by recycling waste, generating local economy by employing local people and complying with legislation.
Stakeholders of Crowns Cards valentine delivery service
Share holders
Employees
What is their main interest in the business
Shareholders main interests are the profits of the business and the long-term direction; in a small partnership business shareholders are usually family members.
Employees want Job security, good pay and good working conditions
What influence do they have over the business?
They have little influence as a minority but with other share holders they become majority and have say over such things as diversification, dividends
As a group, a union they may have a lot of influence in the business
What expectations do they have of the business?
They expect the business to make a profit and set targets to be achieved and also be legitimate
Want pension schemes, good training, good rates of pay, social events and discounts
How have interests changed over time?
Their interest may have changed to, the direction or the product range of the business. Or the market share that they own and Growth.
Interested in the business doing well. They may have shares in the business themselves given as a staff bonus.
How has influence changed over time?
The influence of share holders can change the direction of a business and what products are being sold
More influential as there is a staff shortage in the area. Low level of employment. It costs 3000 pounds to train one person.
How expectations have changed over time?
Shareholders expect the business to be innovative, modern and competitive. Certain expectations do not change. Like profitability.
Now expect better training, wages and conditions.
How is the business responding to any of the above changes?
My business is responding by increasing dividends from profitability and setting the long-term direction of the business. Also allowing room for more specialised ideas.
Always pay above minimum wage. Provide benefits so they don’t leave to go to another store. Childcare flexibility maternity/paternity leave. Staff socials
Every business has competition and that is what in most cases puts businesses out of a sale. Losing sales can be because of the price of your product. You have to identify your competition and put your prices inline or below your competitions price line. This creates desire for the cheaper product and helps achieve to create a custom for your business. Having a cheaper product creates word of mouth and can be very reputable and profitable to your business. The competition in the new mills area is Pricilla’s, which is Gift shop in the town centre. Church road Stores, the co-op and the flower shop also I am in competition with shops that sell crafts materials for example card and decorative sequins. This is why I must promote my product as being bigger and better than making your own valentines card and really make people believe that the product is worth the price. The usual price of a valentine card at each of my competitor’s stores is one pound fifty at the least. This puts me at an advantage as my business is promoting a sort of after sales service. This is the delivery of the card to the valentine. The local shops advertise valentine’s cards with an envelope and nothing else for one pound fifty where as my business is offering free delivery service with the valentine’s card for one pound. I have decided this would be my unique selling point and would be the deterrent of the other customers to guide them to the additional cheaper price.
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