Starting a Business: Enterprise and Resources

Somebody has to go first

A business does not start itself. Somebody has to spot a gap, gather what is needed to fill it, and accept that it might not work. That person is the **entrepreneur**. Everything else in this topic hangs off that: the **resources** they have to gather, the **risk** they carry, the **aims** they set, the **people** affected by what they do, and the **legal status** they choose, which decides how much they can lose if it fails.

The four business resources

Every business needs all four. Miss one and there is no business.

Match each resource to an example

Which one is the person?

Three of the four resources are things a business uses. Which one is the entrepreneur themselves, and what makes it different from the others?

• Enterprise, because it is the resource that decides how the other three are combined and carries the loss if that decision is wrong
• Labour, because the entrepreneur works in the business too
• Capital, because the entrepreneur puts the money in
• Land, because the entrepreneur owns the premises

What an entrepreneur is like

The specification names seven enterprising characteristics, and an exam answer is stronger when it uses the right one rather than saying somebody is "hard-working". **Risk taking** and **innovation** get the business started. **Decision making**, **planning** and **leadership** keep it running. **Determination** carries it through the bad months, and **persuasiveness** is how the owner gets a bank, a supplier or a customer to say yes. When a question describes somebody, look for what they actually DID and name the characteristic that fits it.

What risk buys you

Select the TWO statements that describe risk and reward in a new business accurately.

• The reward for taking the risk is profit, plus the independence of running your own business
• A sole trader who fails can lose more than the money they put in, because their liability is unlimited
• The government guarantees a new business against loss, so the risk is mainly about reputation
• Once a business is trading profitably, the entrepreneur is no longer taking any risk

An aim is not an objective

These two words are not interchangeable, and a question asking for one will not accept the other.

Turn an aim into an objective

A cafe owner's aim is to grow the business. Build an objective that would actually work as one.

Why government encourages enterprise

**"Explain why the government supports people starting new businesses. (6 marks)"** "New businesses create jobs, which reduces unemployment and the benefits the government has to pay. They also generate tax revenue once they trade profitably, and their competition and new ideas push existing firms to improve. Support is given through advice, grants and access to finance, and in Northern Ireland Invest NI is the main agency doing this. The government is not being generous: a successful start-up returns more to the economy than the support cost." Notice it gives reasons and then says how the support is delivered. Naming the agency is worth a mark; listing "it helps the economy" three different ways is not.

Match each stakeholder to what they want

Who can actually stop this?

A bakery plans to run its ovens through the night to meet demand. Which stakeholder group is most likely to be able to prevent it, and how?

• The local community, by objecting to the noise and raising it with the council
• Suppliers, because they would have to deliver flour at night
• Customers, because they would have to shop at night
• None, because the owner owns the business and can do as they like

How much can you lose?

A _____ trades alone and has _____ liability, which means personal possessions can be taken to pay business debts. A _____ shares the work and the risk between two or more owners, and ordinarily carries the same liability. Setting up a limited company changes that: the owners have _____ liability, so they can lose what they _____ but not more.

Which decisions were risky?

Risk means staking something you could actually lose. Tap the TWO decisions where Orla did that.

• Orla had been baking at home for a year when she decided to sell. She
• asked three cafes what they would pay for a dozen loaves
• , and she
• worked out the cost of every ingredient before she set a price
• . Then she
• put her own savings into a second-hand oven
• and
• turned down a permanent job so her weekends stayed free

Which status suits her?

Orla now wants to take on two staff and buy a delivery van on finance. She is worried about losing her house if the business fails. What should she be advised, and why?

• Form a private limited company, because limited liability means she risks only what she has invested
• Stay a sole trader, because it is the simplest to run
• Take a partner, because the risk would then be shared between them
• Form a public limited company so she can sell shares on the stock exchange

Your turn: advise a new owner

A friend is leaving their job to start a small business. Advise them on what they will need, what they are risking, and how they should set the business up.

• Name the four resources they will have to gather, with an example of each
• Explain what they stand to gain by taking the risk
• Explain what unlimited liability would mean for them personally
• Recommend a legal status and justify it against their situation