What you will learn about in this article.
- purpose of business: Businesses aim to make a profit by providing goods and services that customers want
- goods vs. services: Goods are tangible items like food and clothes, while services are intangible actions like hairdressing and internet access
- spotting opportunities: Entrepreneurs identify market gaps and meet customer needs
- developing ideas: Businesses innovate or adapt products to stay relevant
- customer needs: Meeting customer needs is crucial for business success
- entrepreneur skills: Entrepreneurs need a mix of skills like problem-solving, leadership, and communication
- government : The government encourages businesses because they create jobs and boost the economy
What is the purpose of business activity?
Businesses carry out activities such as producing A product that can be touched. or providing Something a business provides that is intangible, ie not able to be touched. with the aim of selling them to customers and making a The amount of money made after all costs are deducted.. As such, the purpose of business activity is to provide goods and services that customers want, at a price that they are willing to pay.
What are goods?
Goods are Something that can be touched and physically held, for example, a book. items that can be used and stored. Businesses make goods and sell them to customers, who then own them. Examples include:
- computers
- food
- clothes
What are services?
Services are Without a physical presence and therefore unable to be touched. actions that cannot be stored. Businesses provide services to customers, who have access to them for a period of time. Examples include:
- hairdressing
- train journeys
- internet access
How do businesses spot an opportunity?
Jaap the carpenter discusses being self-employed and how he manages his business
Hi guys, my name is Jaap.I'm a carpenter. I work mainly in west Wales, and I do all aspects of carpentry work.
An entrepreneur is someone who looks at opportunities and sees a way to do that as a job or employ people and feels ionat about whatever it is that you want to do.
Knowledge of services or products is really important, being able to answer questions that your customer might have, so they know that you know your stuff.
You have to be able to be skilled in your field, but you also have to have interpersonal skills, you have to have financial skills, you have to have planning skills, and if you combine all of them, then I think you can be a successful entrepreneur.
Often it isn't just the case of quitting your job and starting a business the next day, it's a transition period that happens.
I think the business plan was something that was very good because it gives you a very clear indication whether something is viable and you have to be very honest with that, you have to make sure you do your research, listen to the experience of other people and make sure you are trying to be as realistic as possible. There is no point looking at itthrough rose-tinted glasses.
We just went and did online research of what's available in the area. Okay, so are there other people doing similar things? Look at what's available, what's popular. Identify the opportunities and go talk to the potential customers, potential clients, potential suppliers and make sure that you kind of set everything up before you start. Equip yourself with as much knowledge as you can.
My main objective was to be able to myself and my family, to be able to make sure that financially, it would work. I don't employ anybody so I am self-employed. It means that I don't get holiday pay, if I'm sick I don't get paid, so you have to look after yourself. So you do very simple maths and you then compare that to other figures from other providers and if you feel that you can offer a good or even better service in that area, you know that your figures should be the same, if not better.
Goodbye,hope that helped.
Many businesses exist in order to meet a specific need or fill a certain gap in the market. To do this, they sell goods, services or both. An A calculated risk-taker who sets up a business in return for financial gain. might start a business enterprise because there is a A request for something to be sold or supplied. for the goods or services they can provide. This means that they have spotted an opportunity to meet the needs of customers in a way that is not currently being offered.
How do entrepreneurs develop an idea for a business?
Businesses have to adapt and develop new ideas, products and services to keep up with technology and new trends. Business ideas can come about through the development of an original idea, or the adaptation of existing products and services.
What could be an original idea?
Thinking of a new product or a new idea can be challenging for anyone. A calculated risk-taker who sets up a business in return for financial gain. need to be creative but also insightful about what customers want. For example, Trunki designed a unique suitcase product for children that many other companies are now trying to copy. Original ideas can be an invention or an innovation:
Invention means creating something that did not previously exist, eg self-tying shoelaces. Entrepreneurs are always trying to think of new products and services to launch, but it can be challenging to come up with a completely new and unique idea
Innovation is the successful The process of making a product or service available for sale in return for money. of an invention, or the In business, the process of modifying an existing product or service so that it is suitable for different customers or markets. of a product over time to improve its features. It involves changing existing processes or creating new, more effective processes, products and ideas. An example of an innovation would be the traditional light source of the candle, which has been replaced several times over the years, most recently with the ultra-efficient, low-energy Light-Emitting Diode. LEDs glow when current es through them. bulb.
What is adaptation?
Adaptation is the process of changing an existing product or service so that it is suitable for different customers. This can often be seen as a less risky business option than launching a brand new product.
One form of adaptation is when a product is changed or altered to appeal to different customers. For example, a restaurant may change its menus and serve a wider range of foods as customers’ tastes change. One example of this is the move by some restaurants to offer a larger range of vegan dishes.
Why do you satisfy the needs of customers?
Businesses exist to provide what their customers need or want. A business is more likely to survive and make a profit if it provides customers with what they want, whether that is specific product features, low prices, fast delivery, an easy-to-use website or a pleasant shopping experience. Knowing what customers need and want is an important part of running a business.
What are needs?
Needs are things required in order to survive. These life-essential things include:
- clothing
- food
- shelter
- warmth
- water
What are wants?
Wants are things that people would like to have but can survive without. Wants are unlimited, and might include:
- event tickets
- designer accessories
- holidays
- laptops and mobile phones
- cars
What is an entrepreneur?
An entrepreneur is a person who starts their own business. They have the idea that is required to combine the factors of production in such a way as to make a profit.
What are entrepreneurial skills?
A skill is an ability that has been developed through training or experience. Some of the skills required by an entrepreneur are:
risk taking – being prepared to take calculated risks to ensure business success
innovation – coming up with unique ideas which will give the business a competitive edge
decision making – to have confidence to make effective business which will ensures the business fulfils its objectives
determination – having the will power and commitment to succeed, despite setbacks.
leadership – being able to inspire and motivate others and delegate tasks appropriately with effective communication
planning – effectively planning for the future, eg enough supplies, workers and finance
persuasiveness – being able to inspire and motivate a range of stakeholders
One young entrepreneur discusses setting up his own jam business
NARRATOR: This is Fraser Doherty. He's a successful entrepreneur.
He started as a sole trader, making jam in his mum and dad's kitchen.
But today, his limited company is selling jam all over the world.
So, how did he start out in business?
FRASER: I always loved my gran's jam, and one afternoon, she shared her secret jam recipe with me, and I thought, maybe I could try selling this for some extra pocket money.
When I first started, it was a bit of a risk to start my own business, but I believed in my idea and I was soon making 1000 jars of jam a week, selling them at farmers' markets and to little shops all over Scotland.
In the very beginning, I was making a really small profit, but it was a profit nonetheless, and that helped me to fund my business so it could grow even further.
So, the number one thing that people told me was that they didn't like jam because it had so much sugar in it.
So I thought, maybe I can make jam without adding sugar at all.
I guess you could say that I had a unique idea. There wasn't really anything like it on the market at the time, so I decided to take the plunge and give it a shot.
I made a simple business plan and then I got going.
NARRATOR: Before he could sell his new product to supermarkets, he developed some essential business skills.
FRASER: I borrowed my dad's suit, it was probably two sizes too big for me, and I presented my ideas. It was scary in the beginning, but over time, I got used to it and I learned how to communicate with people and pitch my ideas. See what you think.
NARRATOR: Selling your idea isn't easy, so entrepreneurs need determination.
FRASER: The first time I pitched my products, I got a 'no', and often, when you try and sell your products, you don't get a 'yes' the first time around. And, although it hurts, it's all part of the process.
NARRATOR: Entrepreneurs also need good marketing skills.
FRASER: It's really important how your product looks when it's sitting on the shelf. And in the case of my product, that has been a big part of its success.
NARRATOR: But entrepreneurs can't do everything on their own.
FRASER: Being a good leader is a really important part of being an entrepreneur. It's one thing to be motivated about your idea yourself, but you've also got to motivate other people to help you make it a reality.
NARRATOR: It's by using a varied mix of business skills that entrepreneurs are able to take an idea and turn it into a successful reality.
Guess the entrepreneur quiz?
Why does the government encourage enterprise?
The key reason why the government encourages enterprise is that it creates JOBS.
Think about the following steps:
- you start your own business
- you have created a job for yourself
- you no longer claim unemployment benefit, as you are providing an income for yourself
- this allows the government to spend slightly less on unemployment benefit payments, which frees up money to be spent in other areas such as health or education
You also now pay tax:
- You pay income tax on your wages
- You pay national insurance contributions on your wages
- When you spend your income you pay VAT (Value Added Tax: charged on most things) when you buy groceries or clothes, or book a holiday
- You pay Duty (high rate VAT) when you fuel up your car
So; by starting your own business:
- You are taking less money AWAY from the government (as you no longer need benefit payments)
- You are paying more money TO the government (in the form of income tax, national insurance contributions and VAT / Duty)
Also:
- You are creating demand for other entrepreneurs to do the same: you may be ordering goods from a local supplier, or hiring the services of a local ancy firm to help with your finances.
- If your business continues and grows, you may hire more employees to help you run the business. This takes more people off benefits and paying more tax into the system.
All of this adds up to give the government more money to spend on public services, such as the health service, education and maybe public housing or infrastructure (roads and bridges).
Try this true or false enterprise quiz
What is risk and reward?
What are risks?
Every businesses decision has an element of An estimate of the probability of an unwanted outcome. It depends upon the chance of it happening and the consequences if it did happen.. A successful entrepreneur must be willing to take risks. However, they should also be able to recognise when the level of risk is too high, by using information, such as Market research is the process of collecting information about the market or what customers want that might help a business to be more successful and spot gaps in the market. data, that is available to them.
Business activity can expose an entrepreneur to different types of risk:
financial loss
lack of security
business failure
What is financial loss?
An entrepreneur needs money to set up a business. This may be their own money or borrowed money, perhaps from a bank or an investor. The business will then need to ensure that The amount of money made after all costs are deducted. are sufficient to pay this money back.
If the business is not profitable then the entrepreneur, and any lenders, risk losing the money.
What does a lack of security mean for an entrepreneur?
Setting up and running a business takes time and energy. Entrepreneurs often have to give up their existing job to pursue their business idea, along with the security of a regular Money received from employment or investments.. In addition, they may have to work long, irregular hours, and may find it difficult to take holidays in the early days of running a business.
What causes business failure?
A major cause of business failure is a lack of The movement of money into and out of a business' bank s.. A business can face serious problems if they don’t have enough money coming in to cover costs. A customer paying late may mean a business is unable to buy supplies or pay its employees.
Another big risk that a business faces is the failure to make enough money to survive and being forced to close. This usually happens due to poor The income earned by a business over a period of time from selling its goods or services., which can be caused by:
- a lack of market research to find out what customers want
- running out of raw materials
- poor management, with not enough thought given to the consequences of decisions on how to manage the business
How to minimising the risks as an entrepreneur?
Risk is unavoidable. However, with careful planning, an entrepreneur can minimise the amount of risk they face by:
- carrying out market research to find out what customers want
- writing a A document that sets out the future intentions of the business. to identify potential problems
- ensuring that there is sufficient money available
What are the rewards for an entrepreneur?
Starting a business always involves risk, as success is never guaranteed. Some entrepreneurs will make the decision to start a business based on their The ability to understand something instinctively, without the need for conscious reasoning., because they have an idea that they really believe in. Most entrepreneurs will calculate the risks involved in starting a business, and weigh them against the potential rewards that they might receive.
The rewards of starting a business might include:
- profit
- business success
- independence
What is profit?
Making money is the driving force behind many business start-ups. This is because profits can be put back into the business, to help it survive and grow.
Profit also provides an An encouragement or reason to do something. for an entrepreneur to start a business, if they believe they can earn more money than they would if they worked for someone else.
What does business success look like?
Success in business can mean various things. For many entrepreneurs, seeing their ideas become popular is sufficient reward. Other entrepreneurs may see success in the form of:
a growing business
a positive reputation
winning business awards
becoming a well-known business person
Why does a entrepreneur was independence?
Some entrepreneurs choose to set up their own business because they want to do something that interests them. Other entrepreneurs may not want to work for someone else – having the independence to make their own decisions and control their own working hours can be sufficient reward for some entrepreneurs.
Try the entrepreneur quiz
What is an entrepreneur?
An entrepreneur is a person who starts their own business.
They have the idea that is required to combine the business resources in such a way as to make a profit.
What are some of the seven characteristics of a successful entrepreneur?
- risk taking
- innovation
- decision making
- determination
- leadership
- planning
- persuasiveness
Why does the government encourage enterprise?
Enterprise helps create jobs.
More people in employment means:
Less benefits payments (so more to spend on other public services such as health services, education and housing); and
More tax funding for the government (more income tax, more national insurance, more VAT and more corporation tax).