Business Management

1A – BUMA131
Lecture Unit 3
Establishing A Business
 Learning Outcomes

 Understand and Discuss the key considerations that are

applicable when a form of business has to be chosen
 Distinguish between the different forms of enterprise found in
South Africa
 Explain the objectives , importance and need for a business
plan
 Evaluate a business plan
 Give an overview of a business plan
 Identify the location factors of a business
 Theme Breakdown

 Explain the key aspects to be considered when choosing the Form of

Ownership of a new Business
 Distinguish between the Main forms of Enterprises found in South Africa
 Explain the objectives ; importance and stakeholders of ; and need for a
business plan

 Describe and comment on the aspects to be included in a business plan

 Identify and Discuss the location factors of a business
 Purpose of this chapter
 FOCUS ON THE BUSINESS ENVIRONMENT
 FORMS OF OWNERSHIP
 DEFINE THE FORMS OF OWNERSHIP THAT EXIST IN SA,WHAT ARE THEIR ADVANTAGES AND
DISADVANTAGES
 THE LAYOUT OF THE BUSINESS PLAN (ALL THE COMPONETS THAT FORM PART OF THE BUSINESS PLAN.)
 3.1. Introduction

 The Different Types of Business Structures available to the

entrepreneur
 Factors that should be considered in selecting a form of
enterprise
 Advantages and Disadvantages of each form of Enterprise
 The business structure allows the business owner to make
informed decisions about the structure of his business
 The Business Plan
 The location Factors of a Business are examined
3.1. Introduction

 The principal methods of doing business in South Africa are by using a:

 Public (name ends in “Ltd”) or private (“Pty Ltd”) company.
 Personal Liability Company (“Inc”)
 Partnership.
 Business trust.
 Sole proprietorship.
 External company (branch of a foreign company)
 Choice of company structures - Brand South Africa
 [Link]
structures
 Establishing a Business…Chapter Layout

 3.2. The legal form of ownership (Pg. 70)

 3.2.2. Considerations when choosing a form of enterprise (Pg. 70)
 [Link] Sole proprietorship (Pg. 74)
 3.2.4. Partnership (Pg. 75)
 3.2.5. Close Corporation (Pg.78)
 3.2.6. The Company (Pg. 81)
 3.2.7. The Business Trust(Pg.86)
 3.2.8. Co-operative Trust ( Pg.88)
 [Link] Plan (Pg.91)
 3.4. Location of the Business (Pg.101)
 3.2. The Legal Form of Ownership
 3.2.1 Introduction to the legal form of ownership
 Before you set up a business plan , you need to think about a structure that is appropriate for your
business type
 There are a number of considerations that should be done when deciding on a form of ownership:
 The extent to which the entrepreneur wants to be liable for financial and legal risk
 Who will have controlling interest in the business
 How will the business be financed
 Size of the Business
 Nature of the proposed business activities
 The participation style
 The management structure
 Financing Needs
 Accountability of participants
 Tax and Legal Implications

 As the business grows and changes over time , it is important to know what business structure is
appropriate for the business at each stage of the changes.
3.2. The Legal Form of Ownership

 How to choose the right Form of Ownership?

 Understand the features of each Enterprise
 How will each feature influence the circumstances of the
business

 Characteristics that define each form of Enterprise:

 Independence
 Liability
 Control
 Compliance
 Taxation
 Transferability
 3.2.2. Considerations when choosing a
form of Enterprise
 [Link] the business have a Legal or Juristic personality?

 A legal subject alongside Natural persons

 The legal subject ; has its own rights; assets and obligations
 The existence of the legal subject ; means that the existence of the business will
not be affected by changes in its membership.
 This provides the business with continuity(perpetual existence)
 Members are not usually liable for Debts/Obligations of the juristic person
 Members enjoy a limited liability – they stand to lose only the capital they have
contributed to the business
 Limited Liability: Protection afforded by the juristic person to its members
3.2.2. Considerations when choosing a
form of Enterprise
 Definition : Limited Liability
 Type of investment in which a partner or investor cannot lose more than the
amount invested. Thus, the investor or partner is not personally responsible for the
debts and obligations of the company in the event that these are not fulfilled.

Read more:
[Link]

 Claims are made against the company debts;and not against the business
ownsers personal estates

 There are exceptions to this rule though

 3.2.2. Considerations when choosing a form of
Enterprise

Juristic Persons

Companies Close Corporations Co-operative Societies

Not Juristic Persons

Sole Proprietorships Partnerships

 3.2.2. Considerations when choosing a form of
Enterprise
 Liability of the Business Owner

 Should the business fail ; the personal assets of the business owner will not be taken away

 Not Liable for Debts

 Close corporations co-operative societies business trust

 Liable in their personal capacities for the debts of the business

 Sole proprietors partners

3.2.2. Considerations when choosing a form of
Enterprise
 The Degree of Control/Management Authority

 (The amount of control that the entrepreneur will be able to exercise over the activities of
the business)
 Total Management Autonomy – Sole Proprietor

 Formal division between ownership and control – Companies

 Depending on the structures created , there is a mix between Total Management

Autonomy and Formal divisions between ownership and control. – Partnerships &
 Co-operative societies & close corporations

 Managed by the Trustee(Although the trust deed can share control between the trustee
and the establisher of the business trust. – Business trust
3.2.2. Considerations when choosing a form of
Enterprise
 Capital Acquisition

 Depends on the industry

 Public Companies – raise large sums of capital

 Partnerships/close corporation/co-operative societies – capital is provided by a limited

number of persons

 Legal Formalities/Regulations

 Regulations instituted in the company depend on size-related factors

 Turn-over/size of employees
3.2.2. Considerations when choosing a form of
Enterprise
 Taxation
 Rate of income tax
 capital-gains tax
 transfer duty vary depending on the kind of tax-payer
 VAT (value added tax)
 3.2.3. Sole Proprietorship
 [Link]/.../Registering/Pages/[Link]
 A sole proprietorship is a business that is owned and operated by a natural person
(individual). This is the simplest form of business entity.
 The sole proprietorship is not a legal entity.
 The business has no existence separate from the owner who is called the proprietor. The
owner must include the income from such business in his or her own income tax return and
is responsible for the payment of taxes thereon. A sole proprietorship can operate under
the name of its owner or it can do business under a fictitious name. The fictitious name is
simply a trade name--it does not create a legal entity separate from the sole proprietor
owner. Only the proprietor has the authority to make decisions for the business. The
proprietor assumes the risks of the business to the extent of all of his or her assets whether
used in the business or not.
 3.2.3. Sole Proprietorship
 Characteristics:

 Owned and managed by one individual

 Popular because it is very easy and inexpensive to set up
 Not a separate juristic person (liable for debts)
 Lifespan of business is depends on the legal capacity of the owner
 No legal separation between the owners assets and business assets
 Profits belong to owner
 Direct control and management over business activities
 Capital acquisition-depends on owners financial capabilities
 Tax – income of the business belongs to the owner , therefore income tax is viewed in the
personal capacity of the owner
3.2.3. Sole Proprietorship

Advantages:

Simple to create
Least expensive way to set up a business
Owner has total decision-making authority
No special legal restrictions
Easy to sicontinue
3.2.3. Sole Proprietorship

Disadvantages:

Owner is personally liable without limitation

Limited diversity in skills & capabilities is available
Limited access to capital
Lack of continuity
 3.2.4. Partnership

 [Link]/definition/[Link]

 A type of business organization in which two or more individuals pool money, skills, and
other resources, and share profit and loss in accordance with terms of the partnership
agreement. In absence of such agreement, a partnership is assumed to exit where the
participants in an enterprise agree to share the associated risks and rewards
proportionately .
 3.2.4. Partnership
 Characteristics:

 Contractual relationship between two or more persons

 Operate a lawful business with the object of making a profit
 Partners may be natural or juristic persons
 Greater diversification of skills as a result
 Each partner needs to contribute to the business no legal juristic
persons
 No separate estate from the partners
 No limited liability (debts)
 Jointly enter into all transactions/contracts
 Legal proceedings – name of partners
3.2.4. Partnership

Advantages:

Ease of formation
Diversified skills
Legal juristic and natural person may be
partners
Increased opportunity for accumulation of
capital
Minimal legal formalities and regulation
3.2.4. Partnership

 Disadvantages

 Personal liability of partners

 Difficult to dispose of an interest in partnership (termination will occur if
there is a change in membership)
 Conflict between partners
 Lack of continuity
 3.2.5 Close Corporation
 [Link]
 A Close Corporation or CC is the simplest, easiest and most practical form of ownership that
is a popular choice for many business owners and entrepreneurs.
 Combines the advantages of the sole-proprietor and partnership

 [Link]
 A closed corporation is a company whose shares are held by a select few individuals who
are usually closely associated with the business.

Read more: Closed Corporation [Link]

[Link]#ixzz58sl7SGXW
Follow us: Investopedia on Facebook
 3.2.5 Close Corporation
 Has characteristics of both a partnership and a company
 Juristic person that exists separately from its members
 Closed , the members both own and control the close corporation
 Interest of a member is expressed as a percentage (total interest of all members amounts to 100%)
 A juristic person has its own rights ; assets and liabilities
 Continued existence ; because the close corporation is a legal person ; when a member withdraws the corporation will
continue to exist
 Not liable for debts & liabilities
 Personal liability imposed for carrying the business on recklessly
 Members share management and control
 Regulates internal operations
 Decisions are taken by the majority vote
 Legal prescriptions are not strict
 Required to prepare annual financial statements
 Transparency is optional
 Continue to exist indefinitely-but must comply with the legal requirements
 Can be converted into a company
 The CC is a separate taxpayer – treated as companies & the distributions they make to their members are regarded as
dividends
3.2.5 Close Corporation

Advantages:

Separate legal juristic

Members have limited liability
Increased capital acquisition potential
Management is relatively simple
Enjoys continuity
3.2.5 Close Corporation

Disadvantages:

Membership is limited to 10
Juristic persons may not be members
No new close corporations may be
registered
Certain close corporations are subject to
stricter accountability regulations,2011
 3.2.6. The Company
 [Link]/definition/[Link]
 All corporations are companies, but not all companies are corporations. Company is a much
broader term than corporation, and it encompasses a lot of different types of businesses. These
are a few of the key differences between a company and a corporation. Company
 A company is any entity that engages in business
 Companies can be structured in different ways. For example, your company can be a sole
proprietorship, a partnership, or a corporation. Depending on which different type of company
you're dealing with, it may be owned by one person or a group of people. Liability in most types
of company is assumed by the owners, and can either be limited or unlimited depending on the
type.
 Corporation
 Corporations are different from other types of company in that they exist separately from their
legal owners. That means that liability is separate as well. With corporations, liability is limited to
the holding of shares. In fact, shareholding is a major difference between corporations and
other types of companies. With corporations, the shareholders each own a small piece of the
larger corporate structure. Most companies are typically owned by one or a small handful of
people, while corporations can be owned by thousands of different individuals.
3.2.6. The Company

 Companies enjoy all the benefits attached to a separate legal personality

 Shareholders have a limited liability
 Unlimited capital generating capacity
 Separation of ownership/control
 Formal distinction is made between the members or shareholders of the
company
 Companies Act (No.71 of 2008) two types of companies

 Profit companies Non-profit companies

 Appoint audit committee/social ethics committee
 3.2.6. The Company

 PROFIT COMPANIES:

 1. PUBLIC COMPANIES – minimum of 3 directors/list its shares on the stock exchange

 2. PRIVATE COMPANIES – at least one director

 3. STATE-OWNED COMPANIES - minimum of 3 directors

 4. PERSONAL LIABILITY COMPANIES – at least one director
3.2.6. The Company

 A distinction is made between ownership and control

 1. general meeting of members –
 2. board of directors

 Capital is generated by shares

 Ownership is transferred through private sales
 Unlimited lifespan
3.2.6. The Company

 Advantages:
 Legal/juristic and natural persons may be
shareholders/members of companies
 Shareholders are limitless
 Shareholders/members have a limited liability
 Capital – amount to be raised is limitless as shareholding
is limitless
 Separation of ownership and control
 Continuity
 Transferable shares
3.2.6. The Company

 Disadvantages

 High degree of legal regulations

 High operational costs
3.2.7. Business Trust

 [Link]/[Link]
 A business trust is a legal organization set up for the control and management of
assets and property. This type of trust has trustees who take responsibility for the
management of the assets in the trust. The trustees manage the assets not for
their own gain and benefit, but for the benefit of one or more beneficiaries. In
order to be considered a business trust, this trust must have business activity, such
as investing or buying and selling products. The person or group of people who
create the trust is referred to as the grantor or settlor.
 Also called a common-law trust, a business trust essentially becomes the owner of
the assets within it. Its beneficiaries, however, may receive its profits or income,
and eventually, its beneficiaries may receive disbursements of the assets. In the
meantime, this type of trust provides a way to keep business assets safe from
creditors and lawsuits. Depending on the jurisdiction’s laws and the way the trust
is created, it may provide protection from certain types of taxation as well.
 3.2.7. Business Trust
 A business trust is a trust that has the object of conducting a business in order to generate a profit.
 Established through a trust deed in terms of which the founder of the trust places assets under the control of
the trustee to be administered for the benefit of the beneficiaries.
 Consists either of a written contract or a valid testamentary writing
 Trust assets and the beneficiaries must be clearly identified in the trust deed
 No limit to the number of beneficiaries
 Natural/juristic persons
 Separate entity from its trustees and beneficiaries
 Not owned by anyone
 Does not terminate unless by agreement/inability to pay debts
 Not registered with the commission like companies/co-operative societies
 Trustee is liable out of the trust assets…not out f his personal liability
 Two separate estates: 1. personal estate (his personal debts are paid)
 2,trust estate(trust debts only)
 Perpetual existence
 Trust founders exercise a measure of control over the trustees by their right to amend the trust deed
 Capital is provided by the trust founder/founders
 Limited potential for capital acquisition
 Profit distribution is left to the discretion of the trustees
 Easy and cheap to establish
3.2.7. Business Trust

Advantages

Ease of formation
Natural/juristic persons may be parties to the trust
Parties to the trust enjoy limited liability
Extreme flexibility
Absence of onerous legal regulations
continuity
3.2.7. Business Trust

Disadvantages

Limited access to capital

Potential conflict between parties
 3.2.8. CO-OPERATIVE SOCIETIES

Autonomous association of persons, who

unite to meet common economic , social
and cultural needs by means of a jointly
owned and democratically controlled
enterprise.
 3.2.8. CO-OPERATIVE SOCIETIES

 Distinct form of enterprise that provides services/products to its members

 Profits made are divided between its members , in relation to the amount of business each
member did with the co-op
 Primary co-op – min 5 natural persons
 Secondary – formed by 2 or more primary co-ops to provide sectorial services
 Tertiary – 2 or more secondary whose objective is to advocate & engage organs of
state/stakeholders on behalf of its members
 No limit to the liability of its members
 Decision – making structure is a general meeting of members
 Anyone can be a member
 managed by a board of directors
 Juristic person
 Limited liability – equal to the amount equalto the nominal value of shares
 Continued existence
 3.2.8. CO-OPERATIVE SOCIETIES

 Advantages

 Recognised as juristic persons

 Members have the benefit of a limited liability
 Any person natural/juristic may become a member
 No restriction to the number of members
 Outcomes of the co-op out way those of one person
 Necessary services may be more accessible
 Flexible business form
 Legislation less strict
 Supports previously disadvantaged groups
 3.2.8. CO-OPERATIVE SOCIETIES

 Disadvantages

 Lack management skills

 Decision making structures depend on financial literacy-unfortunately most
members lack financial skills
 Require mentorship and support to remain sustainable
 Money depends on trust between members
 Conflict of interest could arise in terms of roles that should be delegated amongst
members
 Short-term goal orientated
SUMMARY OF THEME 1 :
FORMS OF OWNERSHIP
 The legal form of ownership
• There are various forms of enterprises an entrepreneur can
choose from to conduct his/her business.
• The first fundamental issue an entrepreneur is faced with is to
choose the type of enterprise.
• Understanding the features of each enterprise and how it will
influence the entrepreneur’s circumstances is the key to
choosing the right form of ownership.
 The legal form of ownership
(continued)
• Considerations in choosing a form of enterprise:
- Legal (or juristic) personality
- Continuity or perpetual existence
- Limited liability
- Degree of control or management authority
- Potential for capital acquisition
- Compliance with legal formalities and regulations
- Taxation
- Transferability of interests.
 Sole proprietorship
A business that is owned and managed by one individual.

Advantages Disadvantages
• Simple to create • Owner is personally liable
• Least expensive way to start a • Limited diversity in skills and
business capabilities is available
• Owner has total decision-making • Owner has limited access to capital
authority • Lack of continuity
• No special legal restrictions
• Easy to discontinue
 The partnership

A contractual relationship between two or more persons who

operate a lawful business with the objective of making a profit.
 The partnership
(continued)

Advantages Disadvantages
• Ease of formation • Personal liability of partners
• Diversification of skills and abilities of • Relative difficulty in disposing of an
partners interest in the partnership
• Legal and natural persons may be • Potential for conflict between partners
partners • Lack of continuity
• Increased opportunity for
accumulation of capital
• Minimal legal formalities and
regulations
 The close corporation

May have one or more members (not more than 10) that own
and control the close corporation, that exists as a separate legal
person.
 The close corporation
(continued)
Advantages Disadvantages
• Separate legal personality • Membership is limited to ten
• Limited liability of the members • Juristic persons may not be members
• Increased capital-acquisition potential • No new close corporations may be
• Management is relatively simple registered
• Continuity (perpetual existence) • Could be subject to stricter
accountability under Companies
Regulations, 2011
 The company

A company is developed to obtain more capital than they could

through a sole proprietorship or partnership, and ownership and
control is separated.
 The company (continued)
• Profit companies
– Public companies
– Private companies
– State-owned companies
– Personal liability
• Non-profit companies
 Differences between a public
company and a private company
• Difference in the number of members required and allowed
• Difference in director number requirements
• Difference in transferability of shares
• General public cannot subscribe to the shares of a private company
• (Pty) Ltd versus Ltd
• Private company not as strictly controlled as public company in terms of
legal regulations.
 The company (continued)

Advantages Disadvantages
• Legal/natural persons • High degree of legal regulation
shareholders/members
• High operational costs
• No restrictions on number of
shareholders
• Limited liability
• Ability to raise large amounts of capital
• Separate ownership and control
• Continuity and transferability of shares
 The business trust

• Established out of an ordinary trust

• Has objective of conducting business for profit
• Is not a juristic person
• Regarded as a separate tax payer
• Income tax on income according to the
conduit principle
• Transfer of the interest of a beneficiary done
by a variation of the trust deed.
 The business trust
(continued)

Advantages Disadvantages
• Ease of formation • Limited access to capital
• Natural and legal persons may be • Potential for conflict between parties
parties to a trust
• Limited liability
• Extreme flexibility
• Absence of legal regulation
• Continuity
 Co-operative societies

An autonomous association of persons who unite voluntarily to

meet needs by means of a jointly owned and democratically
controlled enterprise.
 Co-operative societies
(continued)
Advantages Disadvantages
• Co-operatives are juristic persons • Lack the managerial requisites of
• Members benefit from limited liability operating a business
• Any person may become a member • Members need some understanding of
• There is no restriction on the maximum financial management issues
number of members • Require mentorship and support to
• The participatory nature contributes to the become viable and remain sustainable
achievement of outcomes • Tension can develop in participatory
• Necessary services may be more decision-making
accessible • Business efficiency can be influenced
• The business form is reasonably flexible negatively due to conflicts
• Legislation is less stringent in its • The short-term goals of members may
requirements contrast with the longer-term interests of
• Enable legislation facilitates the provision the co-operative
of support
 3.3. Developing a business Plan for the New
Business

 3.3.1. Objectives of a Business Plan

 Business Plan: a written document that accomplishes 3 main objectives

 1. identify and describe the nature of the business

 2. present a written plan of how an entrepreneur plans to exploit the opportunity
BP explains key variables for the success /failure of the business
Guideline for things that must be done to establish and operate the new
venture
View elements that are to be managed( goals,finances,target
markets…)Key Components of a BP
 3. Attract investors/persuade a bank to lend the entrepreneur money
3.3. Developing a business Plan for the New Business

 3.3.1. Objectives of a Business Plan

 BENEFITS OF THE BUSINESS PLAN:

 Systematic/realistic evaluation of a new business in an existing
market
 Identify the key variables that determine the success of the business
 Identify risks that lead to failure
 A plan to manage the business successfully
 Compare actual results against targeted performance projections
 Tool to attract financial resources
 3.3. Developing a business Plan for the New Business
 3.3.2 Importance and Necessity of the business plan

 The BP answers the various questions that potential investors may have.
 8 Reasons for the Entrepreneur to write a Business Plan:
 [Link] sell the business to himself
 entrepreneur should convince himself to start the business right for himself
 2. Obtain Bank financing
 Banks require a BP with a request for a loan
 3. Obtain Investment Funds
 Receive funding from private investors (promote venture to private investors)
 [Link] Strategic Alliances
 Convince a large company that a joint venture may assist the bigger business to grow via a joint effort
 5. To obtain Large Contacts
 When small business receive consistent orders from major co-operations
 [Link] Key Employees
 Convincing people with the best skills to take a risk and work for a new venture
 [Link] Mergers & Acquisition
 Helps the entrepreneur when he wants to sell the business to a large co-operation
 [Link] and Focus the management
3.3. Developing a business Plan for the New Business
 3.3.3. STAKEHOLDERS IN A BUSINESS PLAN

 STAKEHOLDERS

 INTERNAL STAKEHOLDERS EXTERNAL STAKEHOLDERS

 MANAGEMENT CUSTOMERS
 EMPLOYEES INVESTORS
 BANKS – CAPITAL
 - COLLATERAL
 - CHARACTER
 CONDITIONS
3.3. Developing a business Plan for the New
Business
 3.3.3. STAKEHOLDERS IN A BUSINESS PLAN
 [Link]. INTERNAL STAKEHOLDERS

 Management team
 BP assists the entrepreneur and managers to to establish and operate the business
 Important aspects of the BP:
 [Link] the entrepreneur has for the business
 [Link] that defines the business
 [Link] of the key objectives
 [Link] understanding of overall strategy
3.3. Developing a business Plan for the New
Business
 3.3.3. STAKEHOLDERS IN A BUSINESS PLAN
 [Link]. INTERNAL STAKEHOLDERS

 EMPLOYEES:
 Employees need to have a clear understanding of the businesses mission and objectives
 Aim is to work at obtaining these objectives
 Employees can focus on activities
 Improve communication between employees
 Establish a corporate culture
 Employees should be exposed to the BP so they take ownership of their job duties on a
daily basis in order to achieve objectives
 3.3. Developing a business Plan for the
New Business
 [Link] EXTERNAL STAKEHOLDERS
 People who have an influence on the survival of the business

 Customers
 When a customer is prepared to request services from a business over a period of time, they
require assurance the business will run over a long period of time.(perpetual existence)
 The BP proves to the customer that the entrepreneur has thought about the future

 Investors
 Perspective of investor: earn returns/minimising risk
 figure 3.2. pg 94
3.3. Developing a business Plan for the New Business
 [Link] EXTERNAL STAKEHOLDERS

 Banks
 FOUR C’s TO EVALUATE A LOAN APPLICATION
 CAPITAL – Stable equity base of its own before a bank can grant it a loan
 COLLATERAL – Assets pledged as security against the loan
 CHARACTER – Owners personality (honesty,competence,good track record)
 CONDITIONS – Conditions around the loan [Link] reason the loan is requested.
3.3. Developing a business Plan for the New Business

 3.3.4. SCOPE OF THE BUSINESS PLAN

 Consider the amount of planning involved:

 Style and ability of the entrepreneur
 Preferences of the management team
 Complexity of the product/service
 Competitive environment
 Level of uncertainty
 3.3. Developing a business Plan for the New Business
 3.3.5. COMPONENTS OF THE BUSINESS PLAN
 3,3.5.1. FORMAT OF THE BUSINESS PLAN
 Consult experts
 But owner should draw up the plan personally
 Helps owner to map out what employee’s skills will be relevant to his business

 [Link]. CONTENT OF THE BP

 [Link] SUMMARY-1-3 page overview of the total BP
 [Link] DESCRIPTION OF VENTURE –business form/industry type
 [Link] & SERVICES PLAN-unique features of product-competitive advantage
 [Link] PLAN-point out target market/competition-as a result map out the marketing
strategy
 [Link] PLAN-investors/management team/directors
 [Link] PLAN-capital distribution within the business as well as job discriptions
 [Link] PLAN-sources of financing-projections of revenues/costs/profits
 8,SUPPORTING MATERIALS
 3.3. Developing a business Plan for the New Business

 3.3.6. DESCRIPTION OF A NEW VENTURE

 Environmental analysis

 [Link] GENERAL DESCRIPTION OF THE NEW VENTURE

 Location of business
 Sources of raw materials/availability of labour/access to market/transport facilities/costs of power
& water/buildings & sites/capital/
 Form of organisation
 Regulations/existing business environment/social environment/central government
policies/personal preferences
 primary product offering
 climate
 3.3. Developing a business Plan for the
New Business
 3.3.7. ANALYSING THE MARKET

Decide on a marketing strategy based on:

Marketing mix (product, price , promotion , place)

ANALYSIS OF A MARKET AND DEVELOPING A MARKET STRATEGY INVOLVES THE FFG KEY
ITEMS:
[Link]
[Link] target markets
[Link] & forecasting in the target market
[Link] a strategy/marketing plan
 3.3. Developing a business Plan for the New
Business
 3.3.8. DETERMINE FINANCIAL NEEDS OF THE VENTURE
 (financial analysis – project profits & expenses)

 Is the venture feasible?

 (understand financial statements.)

 1. understand how financial statements work

 2. understand how profitability is assessed
 3. ability to determine ventures financial requirements
 3.4. LOCATION OF THE BUSINESS
 3.4.2. LOCATION FACTORS
 [Link] of raw materials
 2. Availability of Labour
 3. access to markets
 4. availability & cost of transport facilities
 [Link] & costs of power and water
 6. availability & costs of site and buildings
 [Link] of capital
 [Link],regulations & tariffs of local authorities
 [Link] business environment
 [Link] environment
 [Link]
 [Link] government policy
 13,personal preferences
SUMMARY OF THEME :Developing a Business Plan

 3.3.1. Objectives of a Business Plan

 BENEFITS OF THE BUSINESS PLAN
 8 Reasons for the Entrepreneur to write a Business Plan:
 3.3.3. STAKEHOLDERS IN A BUSINESS PLAN
 Who are the stakeholders in a business plan and what is their role?
 3.3.4. SCOPE OF THE BUSINESS PLAN
 3.3.5. COMPONENTS OF THE BUSINESS PLAN
 3,3.5.1. FORMAT OF THE BUSINESS PLAN
 [Link] GENERAL DESCRIPTION OF THE NEW VENTURE
 How can an entrepreneur assess a new idea or venture?
 3.3.7. ANALYSING THE MARKET
 ANALYSIS OF A MARKET AND DEVELOPING A MARKET STRATEGY INVOLVES THE FFG KEY ITEMS:
 Why and how should a market analysis be conducted?
 Determining the financial needs of the new venture
 The location of the business
 thirteen location factors