- Report/Findings
Sole trader
I am starting off my business in a small workshop of my father’s building and fixing computers. The customers that I am currently getting are mainly friends and family and on the odd occasion people they tell about me if they have any problems. I use the skills I already acquire to build and fix computers and my customers are always satisfied with the overall result. The appropriate source of finance would be venture capital when going from a sole trader to a partnership as I can find a partner who is willing to pay so much towards the expanding business. Then I can share the business with someone so the work is more spread out but I will have to find someone who I think of as trustworthy. I would say the inappropriate source of finance to use is owner savings. If I put my own money into the business I am at the risk of losing it all and as the business is not supported by anyone but myself I find it very risky as I do not want to lose everything I have worked for.
Partnership
I will get together with a trustworthy friend and together we will put money together into opening a small street shop. The business will continue to build and fix computers but also expand the business to selling spare computer parts and software that may be of use to the customers. Also bringing in a few games may attract younger customers willing to spend their money on some fun things to do. I would say leasing would be an appropriate source of finance to use for a partnership and an inappropriate source of finance would be an overdraft. The reason I think leasing would be appropriate is because I will be able to avoid the capital cost of actually owning the property so this will be cheaper for our company. I find an overdraft would be inappropriate as the company is still in the early stages and if I were to take out an overdraft I may not be able to pay it back within the given time and will end up facing paying more out than intended.
Private Limited Company
Now to expand the business my partner and I will look to open more shops within the region and possibly in other surrounding areas. We will continue with all the previous activities of the business but will also go on to selling computers and laptops, and bring in other electronical goods such as game consoles, stereo players and telephones. As the business is to be expanded to more areas we will need to employ a lot more employees and as we have to pay them a reasonable wage I would say an appropriate source of finance would have to be a bank loan. As the business will be quite large by now there should be no problem in getting a loan and I would be able to choose how much I’d prefer to cover all my costs from leasing property to paying the employees wages. I still wouldn’t recommend an overdraft as I would much rather stay in the clear of debts especially if I am going to take out a loan.
Public Limited Company
For the final step I would look to get more partners into the business and possibly from different countries so that the business could have stores worldwide and in the meantime have stores nation-wide. Now the business will sell all types of electronical goods ranging from computers, as the business started, through to anything such as mobile phones and telephones, DVD players, music players, televisions and games consoles, like the business Dixons. I would find shares appropriate as a source of finance in a Plc as it will help the business to find more partners for the business. Shares can also be sold to the public from all over the place so it helps expand the business nation-wide, possibly even world-wide. A source of finance I would find inappropriate for my business would be lines of credit because the business could become seriously overdrawn. As it is a Plc and there are numerous stores all over the country, then it would be difficult to keep an eye on all lines of credit and the business can go bankrupt.
3 End of report
3.1 Conclusions
From this report I have decided on which sources of finance I would much prefer to use for my business to help me to get to the final expansion stage. I have decided on which sources of finance to avoid when getting through to a public limited company from a sole trader. The sources of finance most appropriate would be venture capital, leasing, bank loans and shares but other sources of finance, which could be best used, would be Loans, owner savings, trade credit, grants, share issues and hire purchase. Even though I would say inappropriate sources of finance to use for my business would be owner savings and overdrafts.
3.2 Recommendations
The main sources of finance I would recommend would be venture capital, leasing, bank loans and shares when going from a sole trader through to a public limited company.
3.3 Summary
I have written this report to explain the best sources of finance used when moving through the stages of going from a Sole Trader to a Public Limited Company. I have explained each of Sole Trader, Partnership, Private Limited Company and Public Limited Company for my business at each stage and what my business will do and sell and produce at each stage to get to the next. I have also looked at which sources of finance are appropriate for my business at each stage and which source of finance is inappropriate at each stage for my business.
3.4 Bibliography
- to search advantages and disadvantages for each source of finance
– to find the meanings of each source of finance
Business Studies A level book