Task 3b
In order to set up my business I use the advice of HSBC bank plc how to borrow money from the bank at cheap interest rates For example if I want to buy a premises I can mortgage it for 30 years at a cheap interest rates rather than getting a loan and I can borrow loan in order to set up a business at a cheap interest rates in order to cover the start up cost of a business and I decided to act on their advice and to create a database in my home computer by entering the daily sales and expenses and to calculate the net profit as they advised me.
I used the advice of the people who are already in business for the opening times of the stores and I thought to open my shop at 7.00 am and close at 11 pm because my shop is an off licence and newsagent. Newspapers and groceries are sold early in the morning and the alcohols is used to sell more in the evening from the conclusion of the business people and they says it takes them more than year to make profit so I think to concrete on the sales than the profit for the first six months and I think to introduce offers regularly in order to satisfy the customers.
One of my friend advised me to put a private cash machine so the customers can uses it for urgent purposes and I will be paid commission for it by some private company so I think to allow a private company to put a cash machine on my shop and he advice me to offer 5% on the sales of the product for the first three month in order to get customers.
I think my idea to set up a business will be successful because there is a gap in the market sales because the customers in the modern world want to cut the travelling hours ad expect a high quality services and to be served quickly and I think I have the talents and skills to do it.
I received information from the HSBC Bank including the information and the steps, which I need to start up my own business. They informed me that in order for me to start up my business I must have a well structured business plan containing the product that I would be selling and at what price. I must also know who my potential customers are and where I am planning to locate my business. I must also identify whom my competitors are and what I can do to out run them.
Distinction
Task 3c
Benefits of setting up a business
There is a gap between the market in the local area and the local people need to travel 1 mile to buy the products cheaply and there is a benefit of setting up a business because the local people preferred to buy from me in order to cut the travelling time. If I set up my own business I can have a control over my life style and there is a chance to become successful in working lifestyle and I can make my own decision which let me to successful in my life and I can keep all the profit after all the expenditures.
From my questionnaires I came to know that a family in east ham are spending an average of £100 per week on groceries, buss pass, lotto, cool drinks, cigarettes and alcohol and I am the only shop providing all kind of services at one shop and the customers in east ham may intent to buy products from me in order to cut the travelling time and their shopping time.
According to Newham Council there will be more families in Newham by 2010, which means there will be more peoples in areas so I will have more customers and sales in the future.
Many supermarkets used to provide free delivery on products when they purchase over £50 so I think it’s a good idea to provide free delivery to the customers because this attracts more customers and more sales.
If I set up my business there is a chance to become successful and expand business at higher level and earn higher income and I can work for myself.
The place I choose to set up my business is located near to the east ham campus the students who used to study in Eastham campus will buy my product like cool drinks, chips and Cigratees if I sell them at reasonable prices because 23 people I interviewed are aged between 16 and 18 who are generally are students who tent to buy snack foods.
There is an advantage of me locating near east ham campus because students may buy bus passes and e-top up or buy vouchers for their mobile phones which can bring good sales for my shop of locating near to an college.
Risks of setting up a business
I will be left will be left will a lot of responsibilities when I set up a business. I will need to work long hours and I will need to monitor all the products and to ensure that the store does not run out products and I need to be careful with fraudulent cards and I need to check the expiry dates and I need to ensure that I work within the law.
I need to purchase my product from cash and carry and before I purchase them I have to ensure that I check the expiry dates so that I know that the products that I will be selling to my customers are in good condition. This is because I have to follow the health and safety law and to work within law. I have to be aware of my competitors and to monitor their offers and sales on their products. Some competitors of my business like tesco and Asda etc are open 24 hours and they can sell their products cheaply because they have high purchasing power and they can bring a revolution in local areas in terms of sales due to their prices and they are expanding all over the country and they can attract my potential customers with good offers and they can make my business unsuccessful.
My competitors such as Sainsburys, Tesco and Asda have good control in the markets of East Ham they sell their products at reduced prices at higher quality and they have high purchasing power so they can sell the products at cheaper prices. I also need to pay back my loans and credit card repayments on time every month if my business is not successful then this may indirectly affect my business in terms of tensions and lack of confidence in business.
Many people like to buy the products from supermarkets because they think the products of the supermarkets have high quality opposed to those sold in small local shops. Supermarkets sell reduced prices and customers trust their products under their label and this may affect my business.
Supermarkets provide free delivery on the products if they buy for more than £50 this may affect business like mine because the customers of my business expect this kind of service from my business and this can increases my expenses.
Supermarkets like Asda, Tesco and Sainsbury used to advertise their products thorough leaflets, television and newspaper because they have the high purchasing power if I want to promote my products like supermarkets the sales revenue I receive is not enough for the promotion method.
Task 4
In order to set up my business I looked at the 4ps of my competitors and to be aware of my competitors I look at the methods of 4ps (refer to appendices 3).
From my market research on my local area about my competitors I know that customers usually purchase from Sainsbury in high street north and they used to sell different kinds of product at different kinds of prices such as they sell 2 litres of milk for a £1 and Cigarettes such as Benson and hedges, Marlboro red and white, Rothmans and silk cut ultra and silk cut at £2.35 while some other Cigarettes cheaper than that and some Cigarettes are price marked and supermarkets like sainsburys used to sell chips in 6,12 and 24 packs with their own packing but they are not providing services such as buss pass, electricity and gas charging but they providing various kind that I did not provide such as poultry ,meat and flower shop and lotteries etc.
Sainsburys used to advertise their products thorough leaflets and introduce new offer all the items and sainsburys is the main competitor for my business because it is the nearest supermarket with an radius of 0.2 miles where I want to open a shop but I have the advantage that they are not providing services that I provide such as imported drinks, spice, dhal, etc from Sri Lanka. Sainsburys used to promote their products by distributing leaflets directly to their customers home. They used to
I thought to provide New offers every week in order to attract customers.
Tesco
I have competition from tesco which provide same kinds of product that sainsburys sell but tesco is located nearly 1 mile from my stores and the 50 questionnaire I had given to the general public that they are not using the tesco when compare to sainsbury tesco both provide extra activities other than sainsbury such as clothes and electric items etc. tesco use to sell milk at £1 pound and Cigarettes such as Benson and hedges, Marlboro red and white, Rothmans and silk cut ultra and silk cut at £2.35 while some other Cigarettes cheaper than that and some Cigarettes are price marked and they used to sell chips in 6,12 and 24 with their own packing and they used to advertise their product thorough leaflets, Tele adverts and introduce new offers every week. Tesco is located nearly 1 mile from my shop.
Asda
I have competitions from Asda, which is a part of Wal-mart Company, and they used to sell same kind of services as tesco and they locate nearly 0.8 from the area I want to set up my shop.
Supermarkets like Tesco, Sainsburys and Asda has the high purchasing to sell their product at cheaper rates and I cannot compete but I can sell the product with the low profit without affecting my business.
The main competitors for my business is Seelan enterprises and KSP Super Foods, Judiya enterprises in high street north because they are specialist in Srilankan foods and they have customers all over the Newham and even in Woolwich according to the questionnaire the public and the business and they are well set in business and they used to sell their product same as sainsburys but they do not label their product for chips like Tesco, Asda and Sainsburys. They sell Srilankan drinks such as Necto, Portello and orange crush etc at 1.49 each for 2 litres and they used to sell colanders leaves freely when there customers buys their product if they need it and they sell product like rice flour at 99 pence per kg and 20 kg basmati rice at £10.50 pence and fish for £2.79 and 2 for £5 and they used to sell imported lion beer and stouts at £2.29each and they do not advertise their product.
Task 5
Product
I am going to sell products like newspaper and cool drinks such as Pepsi, coco cola, and their branded products in different quantities such as 330ml, 500ml, 1litres, 1and 1/2 litres and 2 litres and crisps like walkers, red mills etc and Asians special foods like mixtures, cashew nuts and pista and srilankan foods like samosa, stringhoopers, pittu and Indian foods such as dhosai, idly and parota from a restaurant and selling to customers and foods items like tea powder, coffee powder, sugar, flours, ketchup, sauce, and vegetables like bringal and carrots etc and house holds items like shampoo, pampers, tissues and selling Cigarettes and alcohol especially imported srilankan alcohols like lion beer, lion stout and mendis etc. I think to do charge electricity gas and swapping mobile phones cards and selling bus pass and travel cards.
I am going to sell all kinds of things that going to attract Asians and to sell international telephone cards and they are fresh and they are halal products I think to purchase my product from cash and carry for drinks chips and Cigaratees etc and from whole distributors like yaalini for fish and vegetable etc, sindhu mahal restaurant for fresh foods and kP distributors for house hold items.
Prices
Influences of Pricing
When I set up a business before pricing a product I need to look at the factors influences pricing such as average cost of the product, competitors, customers and business objectives.
Cost of the Product If my business want to make profit I need to ensure that I sell the product above their total averages cost
Competitors If my business operates under conditions of perfect competition I have no choice and must accept market prices and I need to be very carefully considered relative to those of close competitors prices.
Customers I should price the product according to my customer’s expectation and my business should attempt to quantify its demand curve to estimate what volume of sales will be achieved at given prices to the customers.
Business Objectives
Possible pricing objectives include
• To maximise profits
• To achieve a target return on investment
• To achieve a target sales figure
• To achieve a target market share
Full cost plus pricing
Full cost pricing is a pricing which include all kinds of relevant cost of production such as
Total budgeted factory cost + selling / distribution costs + other overheads + mark up on cost
The advantages of using cost plus pricing are it is easy to calculate; Price increases can be justified when costs rise and Pricing decisions can be made at a relatively junior level in a business based on formulas
Skimming
The practice of ‘price skimming’ involves charging a relatively high price for a short time where a new, innovative, or much-improved product is launched onto a market.
The objectives with skimming is to ‘skim’ off customers who will pay more to have the products sooner, prices are lowered later when demand fall.
Price tactics
It is good to use price tactics to price the products. Many firms used to price the products by using pricing tactics it attracts customers when you are charging 99p or £1.49 instead of rounding
I think to sell the prices that recommended by the whole distributors and the prices recommended by the government and similar to the competitors and I think to sell less than 5% for the first three month in order to attract customers and then the price that they sell for example I think to sell 95 pence for the milk for the first three month and then I think to sell for £1 and I think to sell Cigarettes such as Benson and hedges, Marlboro red and white, Rothmans and silk cut ultra and silk cut at £2.25 and then £2.35 after three months and Srilankan foods such as Necto, Portello at £1.39 each for the first three month and then £1.49 like and rice flour for 95 pence for the first three month and at 99 pence after three month and 20 kg basmati rice at £10.00 for the first three month and 10.50 after three month and fish for £2.50 for the first three month and £2.79 and 2 for £5after three month and I think to sell imported lion beer and stout at £2.09each for the first three month and then 2.29 after three months
Place
I think to sell the products to the customers in High Street South and to provide free delivery to the customers within half a mile from my shop when they purchase for more than £50. My stores is located an average of 1 miles far away from competitors like Tesco and Asda but Sainsbury which is my main competitors is located nearly 0.2 miles to my stores while Seelan Enterprises, KSP Super Foods and Judiya Enterprises are located more than a miles from my stores. My stores will be well furnished with tiles and the shelves organised by the products such as different shelves for different products so it will be easier for the customers to get along the shop to find the right products for them and some photographs of Srilanka and British Natural Sceneries.
Promotion
I think to promote my products by delivering leaflets to the customer once a month and make them to know about my products and introduce offers to satisfy and keep the customers.
For higher grade
I had design my own leaflets (refer to appendices 5) and I think to print 1000 copies and I had arranged a boy to distribute directly to the potential customers and 1 need to pay him £10 for delivering 500 leaflets and I think to print 1000 copies which will cost me another £90 and I need to pay a person £20 to distribute to their home over all I need £110 to advertise my product.
Advantage
There is an advantage in preparing leaflets it will clearly describe what type of products that I am going to sell and will make my customers to know it and it will help me to increase the sales of the shop and it is cheaper than any other promotion method to advertise our product because if you advertise the products thorough radio or television it going to cost more than leaflets.
Disadvantage
There is a disadvantage in using leaflets as a promotion method it takes time to design it and to find the house of my potential customers. I need to find a person to deliver the newspaper or I need to deliver the leaflet in my spare time. I also need to design leaflet every weak explaining about the price and offers of the products for the week.
I will not be certain that when I deliver the leaflets to my potential customers houses that they will receive and know about my shop.
Task 6
In order to set up my business I need resources such as premises, van, equipment, fixtures and fitting and general staff.
Premises
When I set up a business I need a premises to sell the product directly to the customers so I thought to buy a shop in East Ham high street within area size of 1500-2500 sq feet.
Van
I need a van to purchase the product from cash and carry and to deliver products to the customers when they purchase more than £50 so I thought to buy a Mercedes van to carry goods from cash and carry and supply to the customers.
Equipments
I need equipments such as refrigerator, large cool fridge tills and microwave to heat the foods for the customers.
- Freezer - I want to buy a freezer to keep the ice cream frozen and to ensure that it does not melt.
- Refrigerator - I want to buy a refrigerator to keep the beers cool and separated from the ice-cream and the other frozen foods.
- Large cool fridge - I want to buy a large cool fridge in order to keep milk, cheese, cool drinks, yoghurts and sandwiches cool and fresh.
- Tills - I need to buy tills to account for the goods sold to customers.
- Microwave – to keep the food warm and ready for my customers when they come and buy.
- CCTV Cameras – I need to buy and fix CCTV Cameras in order to monitor the premises in my absence and I can be used in case of theft as a proof.
- Fax machine – I need to buy a fax machine in order to send message to the suppliers or to receive the messages (delivering goods to their house at what time and what are they product they wanted) from potential customers
Fixture and fitting
I need to make fitting like shelves in order to keep the products such as different shelves to keep breads, egg and newspaper and house holds items and groceries.
I need to make some adjustments and fittings and put in counter tops in order to place the tills and small expensive items like cigarettes.
Staff
I need to employ two staff to fill the products in the shelves and to serve the customers when it busy and to deliver the item to the customers.
I am going to employ one person to work from Monday to Sunday except Tuesday from 10.00 AM to 11.00 PM and another person on Tuesday, Saturday and Sunday from 10.00AM to 11.00 PM.
General
I need to connect to utilities such as telephone, electricity, gas and water before opening the stores and I need to also have a telephone connection before opening the shop.
I need to buy bags and to provide freely to the customers when they purchase products from me.
Merit grade
The type of equipment that I will need in shop
In order to set up my business I need appliances like refrigerator, microwave, tills and fridges. I use Internet in order to find the right equipments for me (refer to appendices 4).
A till
Model- Anglia EPOS series 1000
I choose this kind of till because it is most suited for small retail businesses like mine and it is easy to use when compared to other tills.
Cash machine
I think to apply for private cash machine in my shop for public use and I came to know thorough my friend that Triton Cash Machine pay 90 pence for each transaction took place thorough ATM cash machine which charge 1.50 for each transaction and he says there will be minimum of 50 - 60 transaction per week which will significantly bring a profit of more than £50 per week but before issuing a cash machine they do a credit check on my shop and they don’t need to pay any advance on cash machine but we need to put our own cash on the machine which they credit back with the commission to my business account .
Open Fridges
Model- open front multi-tier
1130x680x1950mm CARIB 7.712
I choose this kind of fridge because it is large when compare to other fridges so I can keep many products such as milk, cool drinks, cheese and sandwiches.
Microwave
Model- Sharp R24STM
I choose this microwave because it is cheaper than other microwave and I don’t need expensive one because I don’t need often as restaurants.
Merit Criteria
The type of premises which are most suited for my business
Ill ford Essex
The area is far away from my house and I am not familiar with the area and there is no competition in the area and it is a shop for lease for 21 years and I do not have the facilities such to sell alcohol in the premises.
Church road ill ford
The premises is located opposite to the little ill ford school and it is located near to my house and it is high densely populated area and it is located nearly within an area of 1500sq ft but it is not located in high street.
High street south, east ham
There is no shop providing all kind of services within 200 metres and it is located in high street and it is densely populated and it is located nearly 2500 sq ft
The property I chose to set up my business is high street south in east ham because it is densely populated area without lease and it is located in high street and there is no similar kind of business within 200 metres. I didn’t choose the property in church road because it is not located in high street and the property in Illford is to far away from house and it is a leasehold business.
Cost of gas
I contacted British gas and I came to know they provide two kind of services such as prepay by gas card with an emergency use of £2 or with a monthly bill and both of them is based on how much gas we use and there is no special offer and prices for small business and there is no standing charges for both the services. British gas charge 2.170p for the first 4572 KWH and then they charge 1.5212p for over 4572 KWH (refer to appendices 6)
Cost of electricity
I contact British electricity and I came to know they provide two kind of services such as prepay by electricity key with an emergency use of £5 or with a monthly bill and both of them is based on how much electricity we use and there is no special offer and prices for small business and there is an standing charges of 3 pence per day. British electricity charges 11.866 pence per KWH.
Cost of telephone
I contacted British telecom and i came to know that they are providing three kind of services BT Standard, BT Together, BT Open World and BT Broad band BT Standard line rental cost £10.99 per month, BT Together cost £12.99 per month, BT Open world cost £17.99 per month and BT Broad band cost £27.99 per month.
BT Standard line does not provide any special offer while BT Together has the facilities of recording and my customers or suppliers can give me a message if the line is busy, BT open world provide free services during week ends and after 6pm to 6am and BT Broadband provide free services as BT Open world and many extra services.
I thought to connect BT open world because it provides free services during weekends and evening.
Cost of water
I had already contact Thames water services and I came to know that I need to pay £31.52 for using the water services and £23.49 for drainage water for year and I need to pay a fixed charge for the water services and drainage which is based on the length of the pipes lines (refer to appendices 6). The water bill is not depending on how much we use it is depend on the area we live and the length of the pipeline.
Amount need to be paid for general staff.
In my business I will employ two people to work for me. I will pay them at a price of £4.70 per hour because most of the employers pay £4.50 - £5.00 for retail work in my area.
I am going to pay a person who is working full time from Wednesday to Monday £310.20 as a gross pay per week and I am going to pay £155.10 per week as a gross pay to the person who is working as a part time on Tuesday, Saturday and Sunday.
Insurance of my shop
I would have to insure my shop and my products and to find out it will cost me and I investigated different type of insurance companies and their quotes. In order to insure my shop I contacted an insurance agent in Scottish provident insurance. The person I met who is already specialised in shop and life insurance provide information’s that need to insure when setting up a business (refer to appendices 7). I cannot estimate insurance or quote before starting a business so I conducted the person who are already doing business and I came to know they are paying insurance for their premises and product and the public liability nearly £200 (average) for month.
Task 7
The ownership that suits suit my business is sole trader because sole trader is the kind of ownership that owns and run by one person and it does not have to be registered with the registrar of companies.
The ownership of sole trader has unlimited liability if my business is not successful I can be bankrupt because the money is borrowed on my name and I can lose my personnel belongings.
The ownership of sole trader has a great advantage that I can keep all the profit after all the expenses of the sales but I need to pay income tax on the profit to the Inland Revenue to the government.
I am going to employ two peoples so I need to pay national insurances and tax to the inland revenue department of the government and I need to give pay slip to the employees explaining their gross pay and net pay including deduction.
In sole trader kind of ownership I don’t need to be register anywhere unless I produced myself or the annual sales turnover is more than £56000. I need register for VAT because I expect to sell more than £56000 per year.
Merit
Advantage of my business
It is easy to set up a business because there are no legal procedures and anyone can set up the business and I can make my own decision because I don’t need to consult anyone and my decision can be put effectively and quickly.
I can keep all the profit because I am the owner of the business and responsible for it success. I can work flexibly choosing my own time and hours to works.
I can avoid unpaid debts, as the customers are usually known to me and I will have a social relationship with them.
Disadvantages of my business
I have unlimited liability in ownership of sole trader it means I will lose all the personnel belonging and I can be bankrupt.
As the owner of the business I need to work long hours because I am responsible for the day-to-day running of the business. Illness and sickness can cause problems to the business because there is no one to take responsibility of the business.
I need to specialise in all areas of my business such as checking expiry dates and how to promote the business and when to purchase the products.
The ownership of business
Sole trader: one person owns this type of business and he or she is responsible for the profit or loss of the organisation. If the business is successful he can keep all the profit if the business is unsuccessful the owner loses money. Sole traders have unlimited liability.
Advantages
It can be set up easily because there is no legal procedures in setting up a sole trader kind of business and it is also easy to make decision because there is no one to consult and we have personal contact with the customers in the local area and all profits belong to the owner because he is responsible for the success or failure of the business and the business affairs can be kept private except for completing tax returns and they can work flexibly such as choosing their own hours.
Disadvantages
It has unlimited liability if the business is not successful the owner may intent lose his personnel belongings and the owner need to work long hours because the owner is responsible for the business and illness to owner will affect the business because there is no one to take care of the business.
Partnership: this type of business is set up minimum of 2 members to maximum of 20 members and they are responsible for the profit or loss of the organisation if the business is successful they will divide the profit according to investment, however if the business is unsuccessful they all lose money. Partnerships have unlimited liability.
Advantages
It can be set up easily because there is no legal procedures in setting up a partnership and more capital can be brought to the business because two or less than 20 person sharing the business. Responsibility of the business is shared so the problem of holiday and sickness and working hours are reduced.
Disadvantages
It has unlimited liability if the business is not successful the owner may intent lose his personnel belongings and the disagreement between the partners can cause problems and withdrawal of partners can harm the business and the Profits need to be shared. If a partners act reckless it may affect other partners of the business.
Private limited company: in this type of business, the owner and family members have shares and the public cannot buy shares. Shareholders are often directors they need to have 50% shares to have a control whether singly or together in this business there is a minimum of one shareholder and one director and they have limited liability.
Advantages
It has limited liability. It means the owner will not lose his personnel belonging if the business fails ha may intents to lose the money he invested in the business. And there is great capital potential because bank and building society willing to give loans on their financial records. There is a Benefit of operating in larger scales such as bulk buying.
Disadvantages
Transfer of shares may be limited to approve new members and a copy of the audit accounts should be sent to the registrar of companies.
Public limited company: this kind of business sells shares to the public and anyone can buy the shares. In this business directors are just salaried employees if a business want to go public they must have more then £50,000. They have limited liability
Advantages
It has limited liability. It means the owner will not lose his personnel belonging if the business fails ha may intents to lose the money he invested in the business. And there is great capital potential because bank and building society willing to give loans on their financial records. There is a Benefit of operating in larger scales such as bulk buying. The shares can be selling to the public and there are benefits from economics of scale
Disadvantages
In public limited company Annual accounts must be published and there is Risks of take over companies because shares can be easily bought on the stock exchange and In efficiency may result if a firm becomes very large and difficult to manage
Franchises: a franchise is a way of owing or running a business without taking a risk of starting on your own. This kind of business has two responsible parties involved the franchisee and franchisor. The franchisee is the person running the business on a day- day basis and they keep most of the profit, but they have to raise most of the capital and pay initial licensing fees. The franchisor will often supply raw materials and give help and advice.
Advantages
In franchise type of business they selling a known name to the public so there is no advertising or promotion cost etc and the Advice, guidance and expertise from the franchisor will help to improve the business and Fewer decision to operate the business and most of the profit is retained by the owner.
Disadvantages
Some of the profit has to be paid to the franchisor and the owner is not free to make all of own decision, particularly as to the product range or the price at which to sell the product. Only the franchisor product or services can be sold and they need to work long hours and few holidays
Cooperatives: cooperative is a business where there is no boss, the employees are owners and profits are divided equally and the business is run in the collective interest of the work force.
Advantages
Each worker or owner has a share in the business and an equal rights in making decision and each person has an equal share of the profits. It is possible to form a limited company as a worker co-operative and to have the protection of limited liability. The workers themselves are not forced to be owners
Disadvantages
Decision-making can take a long time because there is many person to consult and Good leaders may be stifled and feel they cannot develop their full potential.
Central government
These are government departments, all dealing with different matters at national levels. A government minister oversees each department and it has own budget. Ministers bid for money each year and the amounts agreed forms part of the main governments budget and it is raised from taxes. It may be HM Treasury, Ministry of Defences, Department of Transport, Home Offices and Department of Health.
Local authorities: local authorities are responsible for local public services. The money is used to provide local government services are mainly from revenue grant, business tax, council tax and they provide services such as education, tourism and highways etc.
Public corporations: in this type of ownership, each industry is operated separately with a chairman and a board responsible for the day-to-day operations of the organisation. Annual reports are submitted to parliament and the accounts are published annually for scrutiny by the publish accounts committee. The organisation received subsidies and grants from the government but was usually expected to pay its way overall. Some of the main public corporations in Britain’s are the post office, the Bank of England and BBC.
The ownership that suits my business is sole trader because I am the only owner of the business and my business is not registered with the companies and I have unlimited liability because the money is borrowed on my name not on the business name. If I set up a private limited company I have limited liability but it should be registered and need more legal procedures while sole trader is easy to set up and don’t need to be registered.
Task 8
In order to set up my business I need to have legal requirement such as Insurances, Licences, VAT, Health and Safety, Income tax, Business rates, Trade Description Act and Employment laws.
Insurances
In order to set up my business I need to meet legal requirement such as insurance for the content (stock) of the shop, premises and life insurances for myself and for the employees who work in my shop.
Licences
Before I set up my business I need to apply for off licences to sell alcohol and I need to take test and give oath to the court before the licensing justice.
Value Added Tax (VAT)
After setting up my business I think to register for vat because when we make more than £56000 revenue I need to register for the VAT.
Health and Safety Act of 1979
When I set up my business I need to look at the health and safety of employees and the customers according to Health and Safety Act of 1979. In order to meet health and safety I need to have fire exit and have good working fire alarms and fire drills for employees in order to act in emergency.
Business Rates
After setting up my business I need to pay business rates to the local council for providing services such as the Fire services, police services etc.
Income Tax
I need to pay income tax to the inland revenue of the government if I am going to make less than £56000 per year if I earn more than £56000 I need to pay income tax with VAT.
Trade Description Act of 1987
Under this act I need to sell the product that the label of the product says and I need to sell the product for the price advertised.
Food Safety Act 1990
According to the food safety act 1990 the food that I sell to the customers should be in good conditions such as the product should not expired.
Employment laws
When I set up my business I need to employ peoples. When I employ peoples I need to ensure that I work within law such as Employment Rights Act 1996, Sexual Discrimination Act 1975, Racial Discrimination Act 1976 and Disability Discrimination Act 1995.
Merit grade
How legal requirement relate to my business idea
Insurances
I need to insure my shop when I set up my business. In case of an accident, a fire which may result in me losing all my goods and premises, injury or death of an employee when they work for me. If my business is insured I can buy back all that have been lost and continue with my business as usual but if it is not I would not be able to pay all that has been lost and may have to close down my business for good.
Licences
I need to apply for licenses such as off-licence to sell alcohol because it is illegal in United Kingdom to sell alcohol without an off-licence. (Refer to appendices 8)
Before applying for a license I need to make a plan to show clearly where the liquor will be placed in the stores and I need to make a secure area to keep the liquor. The customers who purchase liquor is not allowed to drink in the premises. After getting the licenses trading standard officers would also need to inspect the premises likewise the fire brigade. It is illegal to sell liquor to police or any one under the age of 18 so I must try to keep within the law.
Value Added Tax (VAT)
After setting up my business I need to register for vat if I produce some product or if my annual revenue is more than £56000. I think to register for vat because I am expecting an annual turn over more than £150000. I need to pay three different kind of VAT on product (refer to appendices 9).
There is three different kind of vat such as standard rate which applies to most goods and services, reduced rate which applies to fuels and power used in the home and by charities and zero rate which applies to certain goods and services on which you do not need to charge vat.
Small business like mine will need to insure that VAT is paid but it is also difficult to the vat in the first year after starting up in business because in the first year there will be too many expenses and most people will not be aware of my business.
Health and Safety Act of 1979
When I set up my business I need to look at the health and safety of employees of my shop and employees of some other organisation who come to provide a service such as to repair my shop and the customers. As an employer I need to make proper fire exit and fire alarm and to make fire drills for employees in order to act in emergency and I am responsible for the employees and customers when they work or buy their product in the shop.
I need to ensure that I met health and safety regulation and work within law. Health and safety laws will helps to provide safety of employees and customers and it is necessary to met health and safety law in any kind of business in united kingdom
Income Tax
After setting up the business I need to pay income tax to the inland revenue department of the government because according to law in government if a person is self employed should pay income tax if a person is not self employed then he need to pay tax and national insurance contribution to the government.
It is difficult to pay income tax in the first few year after starting up the business as a new comer to the market I will have more expenses and it takes few years to make profit.
Business Rates
After setting up my business I need to pay business rates to the local council. I need to pay business rates to the local council for their contribution in the local area so they can provide better facilities in the local area improving services such as police, fire brigade and social security services in local area.
It is very difficult to pay business rates because whether the business is successful is or not I need to pay business rates.
Trade Description Act of 1987
After setting up my business I need to obey certain laws such as trade description act which says that I need to sell the product for the prices it is published cannot sell more than that but I can sell less that that prices. If I sell more than the price I published it is against the law.
I need to ensure that I work within law in united kingdom but it is difficult to met laws such as trade description act in small business because I cannot employ specialised people as supermarkets in order to met laws and regulations.
Employment laws
When I set up my business I employ peoples. When I employ peoples I undergo many laws such as Employment Rights Act 1996, Sexual Discrimination Act 1975, Racial Discrimination Act 1976 and Disability Discrimination Act 1995. I need to ensure I work within law these laws are came to force in order to prevent the employees are discriminated by the employers. As an employer I need to use pay slip to my employees explaining about their deduction including gross pay and net pay and I need to give written contract of employment within two month to the employees if I fail to met these kind of law I can be taken to the tribunal court. It is hard to met employment laws in small business like myself.
There are many laws that affect small business like mine such as minimum wage act under this act I cannot pay an employee less than £4.50 it is difficult to meet like this law in sole trader kind of ownership.
Distinction
Ownership that suits my business
I can work flexibly and I can choose my own working times to work in my shop and I can make easy decision because there is no one to consult. I am the only owner of my business and I think I have the potential to succeed and I can keep all the profit and this encourage me to make good decisions because I am the owner and I am working for myself.
The product I am going to sell
I think my business is going to be succeeded because the product I am going to sell such as Cigratees, groceries, alcohol, Bus passes, newspaper, e-top up, electricity and gas charge and lottery. All kind of services that I am going to provide is not provided by any supermarket or shop in the local area.
Market research
From my market research that I came to know the average spending of my potential customers is high in the area I want to set up my business because a family in east ham spend more than £100 per week on groceries, cool drink, Cigratees and alcohol. In my business I provide many services such as lotto, buss passes and newspaper so the customers of my competitors may be encourage to buy products from me in order to cut the shopping time.
Gap between the markets.
There was a gap between the markets the peoples in High Street South travel to high Street North in Manor Park to buy their product I think after opening of my shop the peoples in High Street South may intent to buy the products from me in order to cut the travelling time.
My promotion method
I am going to provide free delivery on groceries if they are going to buy more than £50 and I am going to deliver newspaper freely to their home. The promotion I used to attract customer is not used in local sole trader kind of business and this can attract customers from my major competitors such as Seelan Enterprises, KSP Super Foods and Judiya enterprises.
The advice and help
Government in Britain encourage small business with advice and financial help and I can receive grant and free advice to set up a business and the capital need to start the business can be received from the bank in form of loan or from credit card. I can get any kind of help from my local council such as where to get help and advice and what are the changes going to take place in the future in Newham such as growth in population and giving information about the market research about the local area and the information provided by local council such as there will be more families in Newham in 2010. This will encourage business like myself because if there is more families then I will have more customers and sales.
Close relationship with the customers
As the owner of the shop I used to work in the shop I will have the advantage of close relationship directly with the customers and I can avoid debits from the customers.
To be my own boss
I am the person responsible for the success or failure of the business I can take easy decisions because there is none to consult and I can put them into action immediately and effectively and I am working for myself so I will try to put all kind of hard work to make my business successful.
Task 9
I visited many websites in order to find the right sources of finances for my business.(refer to appendices 10)
Halifax mortgage the premises or properties at an interest rates of 4.94 for 30 years and they provide 97% of the value of the property and they also mortgage the premises or shop at interest rate of 4.04 at Halifax for 30 years but they provide only 80% of the value of the property otherwise we can mortgage the premise at a interest rate of 4.34 for 30 years for 95% of the value of the property.
Nat west(refer to appendix 11 of page 56 and 57) mortgage the premises or shop at an interest rate of 4.94 for 25 years and they provide 100% of the value of the property but their interest is higher than Halifax and the time span is less than Halifax.
Northern rock provide the cheapest interest rates of 6.5 for loans in United Kingdom and I can apply between £2000 and £25000 with a time span of 1-10years.
Natwest (refer to appendix 11 of page 55) provide loans at an interest rate of 6.9. I can apply between £5000 and 25000 and I need to repay them in 7 years.
I think to apply credit cards such as mint and Barclay platinum card for my commercial use I can use my credit card if I am short of any finances. In mint platinum credit card I can apply from £15000 - £50000, which interest rate is 10.9 and in my Barclay card I apply for a maximum of £15000, which interest rate, is 17.4. In credit cards I need to pay the minimum amount they usually used to send us to pay but I can pay as much as I like but I cannot pay less than the amount they send us to pay. I can clear the credit card anytime or just pay the minimum amount of 2% of the outstanding balance and it has an advantage that I can borrow the money at any time and I need to pay the minimum amount after using the card.
I think to mortgage my shop at Halifax (refer to appendix 11 of page 59) because Halifax provide the cheapest interest rate with a maximum (97%) amount when compared to Nat west other banks and I thought to apply loan at northern rock(refer to appendix 11 of page 58) because it provide cheapest interest rate (6.5) and an maximum of £25,000. if I am short of finances I will use my credit card and I will the minimum payment and I can clear the full payment if my business became successful I can pay the full amounts if I make more profit.
I think to apply for regional select allowance from the government and I expect to receive 10-15% grant because at present I am unemployed and I am receiving jobseeker allowances.
I came to through my friend that local council supporting small business with 15% grant of regional select allowances and he said that he would help me in terms of finance if I need it.
I think to ask my local council to do not charge business rates for the first 6 month in order to establish myself in local market. I
My family promised to help me by lending £10,000 when I start up my business.
TASK 10
Bibliography
The sources I used to obtain information in my portfolio
The books I used to obtain information in my portfolio are
Carol Carysforth, and mike Neild(2000), GNVQ Intermediate business, Hieneman
The Websites I used to obtain information are
