But I have also seen that there are too many of these businesses in my area, and the competition of these businesses is high as well. But some of these businesses are successful, not all are. So it would be risky to open a similar business, as there is already too much competition and some similar businesses are unsuccessful, so there is a high chance of being unsuccessful
So the type of business I want to open is Blockbuster Video, because there is not many video stores in Southall, there are a few video stores for Indian films, but not many stores where we can rent out english films. So I also know there won’t be much competition, as there are not many similar businesses near. I want to set up a number of services where customers can hire out english films, and well as other language films, as Indian films. There will also be films in DVD, in many different languages, so people can rent out DVD’s as well as films. Also I want a service where people can buy a video or a DVD, of their choice. I think in my business will be successful, as there won’t be much competition, and that alot of people would be pleased that there is video store in their area.
The Type of Business Ownership suitable for my business
There are many types of different business ownership’s, like sole proprietor, partnership, private limited companies, public limited companies and franchising.
Sole proprietor is when a firm is owned by one person who provides all of the capital needed, to form, operate, or expand the business. The sole proprietor is the simplest and most common type of enterprise. It is the easiest form of business to set up and it is most likely to fail than any other.
Partnership is a business owned by two twenty members. Some of the problems faced by a sole proprietor can be overcome by incorporating more owners into the business to form a partnership. A deed of a partnership sets out the rights of each partner, such as the way in which profits are divided. All partners are equally responsible for the debts of a business.
Private limited company is any company, which is not registered as a public company. The type of business must include Limited (Ltd) in its title name. Both private and public limited companies are sometimes referred to as joint stock companies. The private company is allowed two to an unlimited number of members (shareholders).
The public limited company must indicate its public status by including the letters plc (public limited company) in its title name. It is allowed two to an unlimited number of shareholders, and can advertise shares and debentures for public sale. When an investor buys a share in a limited company they become a part owner. This not only entitles them to a share of the company’s profits, but also gives them the rights to some say in the way the company is operated.
Franchising is when a company allows someone to buy the right to se their products or techniques under their trade names. This is one of the fastest growing sectors of the company and over 20 per cent retail sales is accounted for by this for trading. Franchise offers a ‘ready made’ business opportunity for those who have the capital and are willing to work hard. The potential entrepreneur or franchisee pays to use the name, products, or service of the franchiser who receives a lump sum and share of the profits of the business. The franchisee receives the majority of the profits, but must also meet most of any losses.
The best business ownership for my business, I think would be franchising. As it already a part of an extensive franchising company, and other stores are quite successful. So there is a high chance that my business of being successful and they usually provide you with an extensive marketing back up. It is a ‘ready made’ business, so there won’t as much work setting it up.
Best Method for getting Finance for my Business
Finance is required to form a business and to fund its operation. It is required, for example to my products, machinery and pay wages to workers. A business also needs finance to meet day to day running expenses and maintenance costs. The four main types of finance are capital borrowed from the bank or other financial institution, leasing, selling assets and retained profits.
A loan is a form of borrowing by individuals, businesses, and governments. Individuals and companies usually obtain loans from banks. The loan with interest is typically paid back in fixed monthly installments over a period of between one and five years in the UK, although longer-term loans and different repayment conditions may be negotiated. In business, loans are the second most important way after retained profit in which firms finance their expansion.
Assets can be leased. Equal payments are made out at regular intervals, as with high purchase. The advantages are that tax relief is given on the whole of the payment (not just the interest) and there is no deposit, so that the business does not have to use any of its capital.
Selling investment, is money which is not immediately required, such as retained profits, can be invested so that it makes a profit.
Selling assets, this method needs ‘careful consideration’. An asset should not be sold just because the firm is desperate for ready cash. The sale of asset provides only a ‘once off’ source of cash.
The best method for raising finance for my business, I think is a capital borrowed from the bank. Because selling assets is ‘once off’ source cash, and will not help, later if there are any problems.
Selling investments, is not a very reliable source of cash. Assets leased is a good way to raise some finance, but I think the best method is by taking a loan, and paying back slowly in installments. I will have money to start the business off, and then when I start making profit, it will be easier to pay the loan back.
How Profit is worked out
Profit is the reward the business receives for taking the risk involved in business and for being able to combine all the factors required to produce and sell goods or services. The profitability of a business can be looked at from the point of view of gross profit and net profit.
The gross profit of a firm is the net sales minus the cost of the goods sold. Gross profit can be expressed as a percentage of the cost or selling price.
For example,
Selling price £1.00
Cost price £0.75
Gross profit £0.25
Mark up (on cost price) = 25 100 = 33 %
75
Profit margin (on selling price) = 25 100 = 25%
100
Gross profit takes no account of the overheads; the business has to pay, for example, wages, advertising, etc.
Gross profit can be put as a percentage figure, for comparison with previous trading period. The method for calculating the gross profit percentage is as follows:
Gross profit percentage = Gross profit 100
Turnover
Net profit is the residue of gross profit after allowing all expenses incurred on carrying on the business.
Net profit = Gross profit – Expenses
If expressed in percentage, net profit can be used to make comparisons - Net profit percentage = Net profit 100
Turnover
Pavandeep Johal 10z
Business Studies Coursework
