Some of it has converted wrong into strange spaces and stuff like the font but as far as I can tell all the text is there... BUSS1 A Level Exam Overview. Took me two days -.- make good freaking use of it! Covers EVERYTHING on the spec... GOOD LUCK EVERYONE! xx

1. BUSINESS UNIT 1
14 May 2012
th

2. Candidates should consider the role,
importance and characteristics of an
entrepreneur in establishing a new business.

The role of an entrepreneur when establishing a
new business is to make sure everything is running
smoothly.

The importance of an entrepreneur is vital. Without
one there would be no business.

The characteristics include:

Passionate, driven, determined and
focused.

Very organised, calculated risk-takers.

Natural leader and extremely persuasive.

3. Entrepreneurship can take a number of forms
including spotting a gap in the market or developing a
new or innovative product or process.

There are 3 different motives for starting up a new
business through development of a new product or
process. These are:

The Traditional Motive- all about spotting a gap in the
market and filling it.

The Innovation Motive- all about creating the need for
your product and creating a fan base before it is even
released. (e.g Apple products like the iPad)

The Wrong Motive- all about creating a product or
service and hoping that a market for it arrives.

4. The sources of ideas may include brain-storming, own
personal experience and business experience. The
generation of business ideas must be in relation to a small
business with limited resources.

Business Experience is a common method of sourcing
ideas. They come from people who work in a particular
industry so there is potentially less need for start-up market
research and they probably already have the necessary
knowledge to start-up a business immediately.

Personal Experience is another common method. It's about
peoples interests and hobbies and the challenges people
face everyday. Also, bad experiences with a product or
service can create irritation which leads to a fantastic
business idea!

Brain-storming is a less popular idea where potentially you
sit down and just try to come up with ideas but this is a lot
harder. The need for start-up market research is a lot more
probable and costly.

5. Candidates should be familiar with the formation and operation
of franchises and understand the benefits and pitfalls to
franchisors or franchisees of operating a franchise as opposed
to starting a new business.

A franchise is when a business sells the rights to a business in
order for them to sell their products and use their brand name.
(For example, Subway).

A franchisee is the main person involved with this new business.
This person is the person who has set it all up with the
franchisor. The franchisor is the business who are selling their
rights.

Benefits of a franchise include not having to come up with an
original business idea, taking advantage of having the brand
name when it comes to advertising and promotion and financing
it may be easier as banks are more likely to lend to a well-
established company in order to buy a franchise.

Disadvantages of a franchise include a lot higher costs than you
might expect as there is an initial fixed cost then possibly buying
up supplies and also the franchisor may go out of business.

6. Transforming Resources into Goods and Services
This topic should be considered within the context of
the tertiary, secondary and primary industries.

The Tertiary Industry is the service sector. This is all
about paying for a service rather than a product.
Examples include Beauticians and Lawyers.

The Secondary Industry is all about transforming
resources into commercial products/manufactured
goods. A lot of the time this for leisure purposes such
as board games or clothing.

The Primary Industry is all about natural resources.
These are products such as copper, oil or wheat that
we extract. Raw materials taken from the Earth.

7. Candidates should be aware of the benefits and
BENEFITS:
problems of plans/planning for small businesses.

Producing a document allows people to see gaps in information.

It encourages the entrepreneur to focus on what's important and
how customers/finance-providers can be convinced at how
successful the business will be.

The plan provides information which can be used to measure
actual performance.
PROBLEMS:

It's not a straight forward and easy process.

It's very time-consuming so the plan is sometimes produced with
out-of date information.

Financial aspects of the plan are usually created with optimism
about the business start-up which is often incorrect.

8. Contents of a Business Plan

Executive Summary

Market

Product The planning process

Competition involves decisions based
on the resources to be

Protecting the Idea used and factors

Management Team providing competitive
advantage.

Marketing

Production/Operations

Financial projections

Funding Requirements

Exit Strategy

9. The sources of information should include: small
business advisors, accountants, bank managers and
government agencies.

Small Business Advisors- These are people who are called in to
assess, advise and counsel on a topic(s). They provide
recommendations. Some are free whilst others charge.

Accountants- Help with number crunching, book-keeping, advise
on presentation. Unless they are are friend of the business they
will charge.

Bank Managers- Provide free face to face advice on business
planning. Comprehensive start-up guides including business
planning. They might also employ specialist local business
managers in order for the entrepreneur to have legal contacts.
They also provide free networking opportunities at local business
seminars.

Government Agencies- Such as Business Link (online) and
Regional Enterprise Agencies offer direct information and/or
advice to entrepreneurs.

10. Candidates should be aware of the relative value of
different approaches to market research.

Primary Market Research is basically field
research. It doesn't already exist and someone
goes out of the business place to get new first
hand data.

Secondary Market Research is desk research. It
already exists and is usually completed online, by
visiting libraries and directly contacting sources.

Qualitative Research is all to do with quality. It's
based on opinions and attitudes.

Quantitive Research is all to do with quantity. It's
based on actual data and facts.

11. Methods of Primary and Secondary
Market Research
PRIMARY SECONDARY

Face to Face 
Visiting Libraries
Interview 
Surfing the Internet

Telephone Interview  Contacting sources

Postal/Email direction by phone,
Questionnaire fax or email.

Direct Observation

Consumer Panel

Test Marketing

12. Advantages and Disadvantages of the
Methods of Primary Market Research
ADVANTAGES OF FACE TO DISADVANTAGES OF FACE TO
FACE FACE

Detailed, Accurate Information.

Time consuming and costly

Good Response Rate.

Answers might not be truthful and
the respondent may tell the

Harder to ignore than postal. interviewer what they think they
want to hear.
ADVANTAGES OF
DISADVANTAGES OF
POSTAL/EMAIL POSTAL/EMAIL

Easy to target respondents. 
Low response rate- easy to ignore
and it's a slow process.

Relatively cheap.

Short questions and no opportunity

More likely to be truthful. to clarify.
ADVANTAGES OF DIRECT DISADVANTAGES OF DIRECT
OBSERVATION OBSERVATION

Simple and you can survey large 
Time consuming and no
numbers. clarification.

13. Methods of sampling should include:
random, quota and stratified.
RANDOM STRATIFIED

Individuals are chosen to be 
When the population is
sampled in a completely divided into groups that share
accidental way. Everyone common characteristics such
has equal chance of being as age then a random
picked. sample being taken from
each group.

No bias and a sampling error
can be calculated if the
sampling frame is obtained.
QUOTA

BUT, it's more time
consuming, costly and

When the population is
complex. And, the sampling divided into groups such as
frame is almost impossible to gender. Then the researcher
obtain for large populations. is given a number of people
to research in each group.

14. Candidates should be aware that the available finance, the
nature of the product, the risk involved and the target
market will influence the choice of sampling method and
size of sample.

Sample size depends on:

The variability of characteristics.

Size of population.

Sampling methods

The larger the sampling size the more accurate the
findings.
BUT

The longer the research time, (I.e data collection,
collation and analysis) the greater the research costs.

15. Candidates should be aware that markets take
different forms, eg local, national, physical and
electronic.
LOCAL PHYSICAL

Where customers are only a 
A physical market brings buyers
short distance from suppliers. and sellers together in the same
location.

Common for sale of locally-
sourced and fresh products. 
Prices are often negotiable.

However the market size may 
EXAMPLE: Car-boot sale.
be relatively small.
NATIONAL ELECTRONIC

The same product or service is 
Transactions are completed
spread and sold all around the electronically with the delivery
country. method depending on the nature
of the product.

A business may have several
locations in order to reach 
EXAMPLE: eBay.
different customers.

16. Candidates should know that demand is affected by a range of
factors including the price of the product, competitor actions,
consumer incomes, success of businesses’ marketing and
seasonal factors.
Price of the Product Competitor Actions Consumer Incomes

If the price of a 
This is what the 
Consumer income is
product goes up then competitors do. If they the amount of income
demand will usually have a better left after tax and living
fall. This is all about marketing strategy. costs have been
elasticity of demand For example, a deducted. If the
though. Some supermarket with a consumer income is
products the demand much cheaper price high then the demand
will not change demand will be higher. for luxury products will
according to price. be higher.
Success of Businesses' marketing
Seasonal Factors

This is to do with how well a
business has marketed a 
This is all about the time of year.
product. If a product has been For example, Christmas is
widely promoted then the always very strong for retailers
likelihood is that demand will and Summer is always at peak-
increase. If a product has not demand for overseas holidays.
been marketed well then less
people will demand it.

17. Candidates should be aware of the benefits and
drawbacks of types of segmentation.
DEMOGRAPHIC GEOGRAPHIC
SEGMENTATION SEGMENTATION

This is about dividing the 
This is to do with dividing the
markets into groups such population into geographical
based on variables as age, units such as regions,
gender, family size, income, countries, city size or
occupation, education, population density.
religion, race and nationality.

Limitations include the lack of information and data,
difficulty measuring and predicting and reaching customer
segments once identified.

A start-up that is focused on really understanding it's
market has the best chance of success.

18. Candidates should be able to calculate market size,
growth and share.

Market size- The number of buyers and sellers in a
particular market. It is what your revenue would be if
you had 100% market share in your business.

Market Growth- ALWAYS expressed as a percentage.
FORMULA: New Value-Old Value/Old Value x 100= n%

Market Share- The Percentage of the market owned
by each competitor
FORMULA: Sales of Firm/Total Market Sales x 100 = n
%

19. Candidates should be aware of the benefits and
drawbacks of legal structures and understand
plc’s as a means of comparison.
Social Enterprises Not-for-profit

Trade in goods or 
These are businesses
services for a social that trade in order to
purpose. benefit the community.
Sole Trader

Surplus goes towards 
EXAMPLE: charity.
social aims. 
Most common. A sole
trader is simply an

Social aims include job
Limited Company individual owning the creation and training.
business on their own.

These are separate legal Partnership
entities to the founders. 
A sole trader can employ
A legal entity can own people but don't share in 
A business is started and
things itself (assets), can ownership. owned by more than one
sue and be sued. person.

They are owned by 
The partners between
shareholders and run by them all own the
directors. Shareholders business assets and owe
own a share but not all business liabilities.
assets and aren't liable This means that Partners
for the debts of the also have unlimited
company. liability.

20. Limited vs Unlimited Liability

Unlimited liability means 
Limited liability means that
that the finances of the the legal duty to pay debts
business are treated as run up by a business stays
inseparable from those of with the business itself, not
the business owners. If the the owners (shareholders). If
a company has £1million of
business has debts that debts and has insufficient
the owner cannot pay, they cash to repay them, the
can be made personally courts can force the business
bankrupt. Two types of to sell its assets. If there is
businesses that have still not enough money, the
unlimited liability would be company is closed down, but
Sole-Traders and the owner/shareholders have
Partnerships. no personal liability for the
remaining debts.

21. Sources of finance should include: ordinary share capital,
loan capital (bank loans, overdrafts only), venture capital
and personal sources.
Ordinary Share Capital Loan Capital
Venture capital loans typically are entitled to
Ordinary shares in the equity


interest and are usually, though not
capital of a business entitle the necessarily repayable. Loans may be secured
holders to all distributed of on the company's assets or may be
unsecured. A secured loan will rank ahead of
profits after the holders of unsecured loans and certain other creditors of
debentures and preference the company. A loan may be convertible into
equity shares. Alternatively, it may have a
shares have been paid. This is warrant attached which gives the loan holder
also known as equity funding. the option to subscribe for new equity shares
on terms fixed in the warrant. They typically
carry a higher rate of interest than bank term
Venture Capital loans and rank behind the bank for payment of
interest and repayment of capital.

Venture Capital is a form of "risk
capital". In other words, capital Personal Sources
that is invested in a project (in
this case - a business) where

Things such as cash and
there is a substantial element of investments, redundancy payments,
inheritances, personal credit cards,
risk relating to the future re-mortgaging and working for free.
creation of profits and cash They are important because they
flows. are cheap and they maintain control.

22. LOCATING A BUSINESS: The factors should include:
technology, costs, infrastructure, the market and qualitative
factors. Candidates should understand that their relative
importance may vary according to the type of business.
Technology Costs

Most start-ups can quickly 
Costs and proximity to
establish reliable broadband customers are key factors in
internet connections. choosing an optimal location.
Infrastructure The market and qualitative factors

The basic physical and

A start-up may need to be
organisational structures and located near particular centres
facilities (e.g., buildings, roads, of population.
and power supplies) needed for 
Franchise business often
the operation of a society or analyse the population
enterprise characteristics of a potential new
territory before setting up in a
new location.

23. The types of employees should include: temporary,
permanent, full-time and part-time. Candidates should be
aware of the reasons, drawbacks and difficulties of
employing people and/or using consultants and advisors.
TEMPORARY PERMANENT PART-TIME

They don't have to 
There are 
Often don't have to
have a permanent committed pay national
contract so they are members of staff insurance. Lower
easier to get rid of. employed. Worth costs.
training employees

People want a if on contract.

Lots of different
permanent contract. people, more
Harder to employ FULL-TIME employees, more
people. people to call on.
Businesses know

who their staff are.
CONSULTANTS AND ADVISORS They can train
people on the job.

Self-employed.

Individuals and businesses external to the business which provide specific
services and advice. Eg. Accountants, Lawyers and Marketing Specialists.

24. Candidates should understand the relationships
between cost, price, revenue and profits.
COST PRICE

The total capital, time and resources 
A value that will purchase a
associated with a purchase or activity. definite quantity, weight, or other
measure of a good or service.

Fixed Costs are the costs that don't
change when output changes. Variable
costs are the opposite
PROFITS

The surplus remaining after total
REVENUE
costs are deducted from total
Sales revenue (or turnover) refers to revenue, and the basis on which
the total value of sales achieved tax is computed and dividend is
in a particular period. TOTAL
SALES = VOLUME SOLD X paid.
AVERAGE SELLING PRICE. 
PROFIT = TOTAL SALES –
TOTAL COSTS.

25. Candidates should understand how start-up businesses
may use contribution and break-even to analyse the
impact of different costs and prices, and make decisions
on whether to start the business.

CONTRIBUTION

CONTRIBUTION= TOTAL

BREAK-EVEN
SALES – TOTAL VARIABLE 
BREAK-EVEN OUTPUT=
COSTS FIXED

CONTRIBUTION PER UNIT= COSTS/CONTRIBUTION PER
SELLING PRICE PER UNIT – UNIT
VARIABLE COSTS PER UNIT 
This is all about calculating the

TOTAL CONTRIBUTION production output at which the
COULD ALSO BE business achieves break-even.
CALCULATED AS 
Break even output is always
CONTRIBUTION PER UNIT X expressed in terms of units.
NUMBER OF UNITS SOLD

Contribution is the difference
between sales and variable
costs of production.

26. Candidates should be aware of the strengths
and weaknesses of break-even analysis.

STRENGTHS 
LIMITATIONS

Tells the entrepreneur how long it
will take for the business to become

Unrealistic assumptions are
profitable. sometimes made when products
are not sold at the same price at

Helps entrepreneur and any sources different levels of output which
of finance to understand the viability causes the fixed costs to
of the business proposition.
change.

Margin of Safety calculation shows
how much a sales forecast can

Sales are unlikely to be the
prove-over optimistic before losses same as output.
are incurred. 
Variable costs do not always

Helps in trying to understand the stay the same.
risk involved in a start-up.

Should be seen as a planning

Calculations are quick and easy. aid rather than decision making
tool.

27. Candidates should understand the sources of
information for cash flow forecasts and understand the
significance of the forecasts.

The main sources will be: 
Cash flows are VITAL for a

Entrepreneur experience- some
business. They are used to:
assumptions will be make on 
Identify potential shortfalls in
instinct. A cash flow forecast
cash balances in advance. A bit
produced by and inexperienced
entrepreneur has to rely heavily on
like an early warning system.
other sources. 
Make sure that a business can

Market research into the key afford to pay its suppliers and
aspects of sales and costs- employees.
Example: Seasonal Fluctuations in
Demand, Average Selling Price and

Spot problems with customer
Quantities in the Market, Typical payments.
Gross Profit Margins. 
Give to external stakeholders

Suppliers- mostly about timing and such as banks who may require
costs. a regular forecast.

Advisers- Example: Business Link.

28. Candidates should be able to amend or complete
a cash flow forecast.

Cash inflows (into the bank account)- When customers pay for their sales,
when a loan is received from the bank, interest is received or when assets are
sold. These are movements of cash into the business.

Cash outflows (out of the bank account)- When suppliers are paid, employee
wages and salaries are paid to the bank and so on. These are movements of
cash out of the business.

Net Cash Flow- The difference between the total cash inflows and the total
cash outflows. This will vary by month.

Opening Balance- Simply the balance in the bank at the start of a period. For a
start-up this is often 0. The opening balance in any one month should equal the
closing balance at the end of the previous month.

Closing Balance- The amount in the bank at the end of the month. In the exam
you may be asked to calculate this balance. The formula for closing balance is:
Opening Balance+Net Cash Flow.

29. Limitations of Cash Flow Forecasting.

Sales sometimes prove lower than expected. - Often too easy to make
optimistic assumptions when starting-up. Market research often helps
this.

Customers do not pay up on time. - This is a key issue for business
that allow credit for a certain agreed period before they pay for their
purchases. This is very popular with expensive household items such
as TVs or Sofas.

The cost of raw materials and other inputs prove higher than expected.
- EXAMPLE: A business may underestimate the price that has to be
paid for each supply.

Certain costs are not included. - This is an extremely common problem
in start-ups particularly if there has been no previous experience in the
market before.

30. Candidates should be aware of the reasons for
setting budgets and the problems in so doing.
PROBLEMS 

Putting a sales budget together is

A budget is a financial plan often hard for a start-up because
for the future concerning the there is perhaps no experience in
revenues and costs of a the market and they have to
business. predict sales volume and prices.

Budgets are based on estimates

Businesses use budgets to
and assumptions so the actual
measure whether key results always turn out differently.
objectives and targets are
being achieved, to control

Start-ups have no trading history.
expenditure by allocating who 
Time Consuming.
can spend what, to provide a 
Limited motivational effect,
sense of direction and to especially if the business has no
monitor actual results against employees.
budget.

31. Candidates should be able to amend or complete
a budget.

Income Budget-An 
Expenditure Budget-This is
operational budget based
an expense plan and is a
upon achievement of specific
vital part of a start-up
income levels.
because the business is
likely to incur costs before

Sales Budget-A sales it even starts trading.
budget is a detailed
schedule showing the
expected sales for the 
Profit Budget-A planned
budget period. financial forecast for the

It need to take account of net income of a business.
market research when
being completed.

32. Candidates should be aware that objectives for start-ups may
vary and that determinants of success and failure depend
upon the circumstances.

TO SUCCEED- You need a business

COMMON OBJECTIVES model that can make money, a market
in the gap and a well executed idea.

Financial- Capital gains and You need Entrepreneurial characteristics:
just the fact of making a Passion, commitment, resilience,
living. energy, initiative, risk-taking,
multitasking, hard-work and lots of
luck.

Personal- Proving people
wrong, gaining control and 
WHY START-UPS FAIL- No market in
building something. the gap because of poor market
research, an unrealistic plan and
competitor response.

Social- Because your giving
something back. Good idea, poor execution such as the
wrong people so consequently poor
management, if growth is too quick or
too slow and there is a failure to
manage cash-flow.
Or it could be due to economic shocks
such as the credit crunch.

33. Causes of failure should include: unexpected
changes in demand or costs, unavailability of
supplies and delays.
(pretty self-explanatory)

34. FINALLY FINISHED.
GOOD LUCK EVERYONE!
Jasmine
xx