However there is a downside which comes from segmentation of the market. When segmentation of the market leads to developing variations of the same product, it increases the overall production cost as a result. Inevitably, this will lead to a rise in the cost of stock holding as there are more variations of the product to keep in storage. As well as this, advertising costs will also increase due to the cost of having to promote a wider range of products.
National Diploma Business
Unit 37: Starting a small business
P3 – Describe the skills needed to run the business successfully and what areas required further development
Skills:
Own contribution
As the owner of the business, my contribution will be vital to the success of the business. Therefore, learning new skills as well as making the most of the skills that I already possess is really important. Very rarely does one person posses all the skills required in the running of a successful business therefore recruiting the right staff to take on certain roles is a must.
Technical/operational skills
These skills cover various business activities ranging from customer satisfaction, stock ordering and other general management skills which are important for the effective operation of business.
Relating to products/services
My business proposal ‘Serenity Beach Café’ is in essence a state of the art Internet Café with additional facilities such as video and recording studios on site. The wealth of technological equipment which is to be utilised means that I and my employees require excellent computing and software skills/knowledge. If these skills are not up to scratch, it could cause a seriously affect the level of service and quality the business can offer to its customers.
Management
The following skills are vital tools for any manager and are essential for the overall success of the organisation.
Technical skills – having an in-depth understanding of the various processes and steps required to provide the service or create the product required.
Human skills – being able to deal properly with both employees as well as customers. Human skills are also an integral part of employee-employer relations in relation to how well the manager can influence and lead the groups.
Conceptual skills - having an aptitude for creativity, problem solving and decision making.
Recording and checking performance of business
It is the owner’s duty to oversee the businesses progress and ensure that pre-emptive/corrective steps can be taken if there are any issues that need to be addressed and resolved.
Setting smart targets are also another effective method of improving the performance of the business. By having smart targets, the business can see the improvements which they have to make which in turn provides a stepping stone to achieving their aims and objectives.
Personal selling
Personal selling involves being face to face with a customer and persuading them to purchase a service or product. Good personal selling skills can have a positive impact on sales and can boost it significantly.
However, it requires the employees to be able to greet the customers properly, quickly identify the product the customer requires, present the product in a persuasive manner. As well as having good overall knowledge about the product, the employee must be able to convey this to consumers in a manner that they will understand.
As well as these basic skills, the employee must be able to satisfy and questions or objections that the consumer may have and most importantly the ability to close a sale or sense whether or not the consumer is not interested in making a purchase. .
Administration
Good administration is an integral part of an efficient and productive business. Administration deals with the accurate and efficient organisation of documents, files, business correspondence, invoices and reminders for payments etc. Administration helps with tasks such as maintaining stock levels and ensuring that payments are collected/paid on time.
Previous experience
Having a previous experience in a similar working environment could prove to be an invaluable asset as it would provide a basis for me to continue to develop the skills and knowledge I have acquired beforehand and put it to use with this new business. As well as this prior experience, computing is a long standing interest of mine which will also serve me well with this new business venture.
Strengths and weaknesses
Every business has strengths and weaknesses and any course of action should be taken with these in mind. Once the business identifies its strengths, it should take steps to build on and strengthen it. Likewise, once the business has identified its weaknesses, steps should be taken to negate its impact or eradicate it completely.
Development:
Identify skills gap/shortages
One good way of developing the skills that are available to the business is to carry out an assessment of my own suitability when it comes to running the business. This will involve an appraisal of my skills as well as identifying whether there are any shortcomings in our skills. This will in turn help to plug those gaps and ensure that the business has the right skills and personnel at its disposable to function effectively.
Professional help
If the need ever arises, a business can call on professional assistance.
Business consultants help by giving good practical advice, help to keep costs down as well as dealing with development and expansion and various other business issues.
Accountants provide important assistance regarding financial issues during the initial start-up of the business as well as helping with the preparation of the annual accounts. While bringing in an accountant can be costly, a competent accountant will save you a lot of money by ensuring that the business only pays the required amount of income tax.
Solicitors are an important source of legal advice relating the business. As with accountants, the costs can be high however they provide an invaluable service and can get the business out of many a tight corner.
Training
Many of the skill gaps identified in an audit can be filled by taking training courses. Colleges in the local area may offer the required courses and may prove to be a cheaper alternative to consultants; however the latter will be more flexible and thorough in its approach.
M2 – Analyse the development needed to run the business successfully
Identify skills gap/shortages
The importance of a business having the right skills and developing these further are cannot be understated and are pivotal to the success of the business. An important part of this process is identifying any skill gaps or shortages within the business. It is with these wide ranging skills that the success of the business relies on for success.
Having employees that have the relevant skills and knowledge provide are huge asset to any business and well positively influence the level of service that the business offers. The employees are the public face of the organisation and therefore their ability to interact well with customers and convince them to make a purchase is essential.
Once the business identifies these gaps and shortages, the business will have to allocate the required resources to recruit the right individuals and/or train the current staff up to the required standards. This can be a time consuming and expensive process.
Professional help
Business Consultants
At one time or another, the business will need to bring in external professional help to assist the business. One of the most common example are business consultants who specialise in providing vital advice and experience to the business in order to improve their overall performance. This can be invaluable to a business when it is looking to expand its operations or overcoming deep, underlying management issues within the business. However, all this support often comes at a very high price which means that it can be out of the reach of smaller organisations such as ours.
Accountants
While hiring an accountant may seem expensive and out of the reach of small businesses (in terms of expense), it is definitely worth while. Accountants can help the business monitor their budgets and other financial related aspects of the organisation. This is even more so important when the business does not have any staff members with accountancy skills.
Having an accountant on hand is very beneficial as it saves a lot of time meaning that as a business owner, I can focus more on ensuring the business succeeds rather than spending hours poring over financial documents. An accountant will ensure that important financial forms and documents are completed correctly and sent off on time.
If for example a business owner forgets to send off company accounts when required or makes a mistake in the forms, the business could face paying large fines or at worst having a tax inspector looking through go through all the businesses files. However this scenario is unlikely to occur with an accountant on hand who is responsible for seeing important financial issues such as that.
The main issue with accountants that puts many people off is the cost of hiring one. While the expense can be significant depending on the workload and the size of the organisation, as a whole it worth bringing one in if only to sort out the annual accounts.
Solicitor
When running a business, there may be many occasions when there will be a need for legal advice. The services of a solicitor maybe be called upon when reviewing a contract, or providing a legal opinion on a wide variety of business issues such as drawing up contracts with suppliers/clients as well as the contract of employment for staff so that the business does not fall foul of the law.
If things go wrong as they sometimes do, or a potential legal problem arises between the business and a third party, having a solicitor at hand could save considerable hassles (and costs) further on down the line especially if the solicitor has been in your service for quite a while meaning that he will have a better overall understanding of your business and requirement. As with business consultants and accountants however, the costs can be quite high depending on the tasks at hand and what is required of the solicitor on a regular basis.
Training
Training for staff is very important as it equips them with the skills required to carry out their duties properly. By training the staff well, the business will benefit from increased productivity as they will be able to work more efficiently and effectively resulting in an improvement in their work rate.
As well as boosting productivity, good training will also help to improve the quality of service the business offers. By training staff so that they are competent and confident will also allow them to reflect the image and quality of service that the business offers. This in turn will go a long way in helping the business to grow and expand which could see a significant rise in profits.
Often, the training employees receive will be obligatory due to Health and Safety purposes, as well as to comply with the Disability Discrimination Act, Equal Opportunities Commission and so forth.
P4 – Describe the legal and financial aspects that will affect the start-up of the business. – Chose at least 5 from each section
Legal Aspects
Legal status – Upon starting up a new business, one of the decisions that I had to make was the legal status of the business. Considering my financial position and the risks involved, setting up as a limited company is the most viable and safest option. A limited company is a separate entity - a legal person in its own right, quite separate from those who own it (the shareholders) and those who run it.
Record keeping – it can be very beneficial to keep all the businesses financial and other correspondences on record as it allows the business to monitor its progress. Some financial records however must be kept for a minimum of six years as it is a legal requirement. These include the cash book; sales/purchase ledgers; wages and petty cash book; accident records; stock records; and minutes of meetings.
Health and safety – as the owner of the business, one of my main responsibilities is the safety of my employees and all the people who visit the café. It is a legal requirement (The Management of Health and Safety at Work Regulations) that I carry out a risk assessment on my premises to ensure that it is safe. My business should also have a health and safety policy in place which details the various procedures and systems which safeguard the safety of my staff, visitors and customers.
Duties and responsibilities – As a responsible employer, I have to consider all the legal obligations and duties I have towards my employees and adhering to the law. I have to ensure that I offer my employees a written contract of employment within two months of them starting.
As part of the terms of the contract, the employees must be paid a fair wage, be given reasonable hours as regulated by the working time directive. I should also take care not to discriminate against my employees due to race, gender, nationality or any other discriminatory criteria.
National/local laws – In order to comply with national law, there are certain types of insurance which must be taken out while others are optional. The compulsory insurance I will be taking out will be Employer’s liability insurance which covers you if an employee suffers an injury while working. This means that I will be protected from any law suits against myself or the business.
The other type of compulsory insurance I require is motor insurance as I will be utilising a company vehicle and therefore it must be insured and cover all the people who need to make use of it.
Financial Aspects
Cost of premises – When deciding to start-up a business, one of the most significant initial expenses is that of the premises therefore it is essential that the right location is chosen. Selecting the right location is vital and therefore research has to be carried out to decide which premises is idea for the business while taking costs and other factors into consideration.
Equipment and supplies – thinking carefully about the equipment and supplies required for the start-up and running of the business is important as it can be a huge initial cost. As well as locating and acquiring the required equipment, the business has to locate a reliable supplier who can provide the items needed.
Employing staff – taking on workers is another large expense for the business however this can depend on the number of staff employed and the salaries paid. The business is legally obliged to pay the employees at least the minimum wage as well as making a national insurance contribution for each member of staff. If the business so wishes, it can also contribute towards a pension scheme however this is beyond the scope of a small business such as mine.
Sources of finance - without sufficient financial backing, any business venture will struggle to get off the ground. When starting up a business of this nature, there are various sources to consider.
One source of finance is owner capital which is money the owner currently has available to spend on the business. Another option is a bank loan which could either be long term or short term loan depending on the sum required.
Other possible options for the future include retained profits, sale of assets – such as buildings or equipment or even issuing shares if the firm becomes a public limited company.
Cash flow forecast – provides an estimate of the timing and amounts of cash inflows and outflows over a specific period (usually one year). A cash flow forecast shows if a firm needs to borrow, how much, when, and how it will repay the loan.
National Diploma Business
Unit 37: Starting a new business
M3 – Assess the implications of legal and financial aspects that will affect the start-up of the business.
When someone intends to start up a new business, there are various legal and financial factors to consider. These legal and financial factors have various implications and can have a big impact on the kind of business it is, how it operates and ultimately, its success.
The professional help and advice of accountants and solicitors as explained in the previous tasks are invaluable in guiding the owner of the business through the various legal and financial aspects that will be encountered.
Legal Status
There are many benefits of selecting a limited company as the legal status of my business. A limited company is a separate legal entity in its own right which means that it can sue and be sued. It is owned by the shareholders and it set up through registration at Companies House.
The main advantages of setting up as a limited company is that there is limited liability meaning that my liability is limited to the amount of money I put into the business. This means that if the business does go bankrupt, my personal assets will not be at risk of being seized and liquidated to pay off the debts. As well as this, there is a perception that limited companies are considered to be more trustworthy than partnerships or sole traders.
However, starting up a limited company can be a little difficult in comparison to the other statuses due to the amount of paperwork that needs to be completed as well as the higher costs of setting it up and running the business. As well as this, each year, a limited company is required to submit its annual accounts. If the business fails to make it s annual returns, then it can be fined.
Health and Safety
Health and safety is another legal aspect which a business must take into consideration when starting up. Every business is legally required to comply with various health and safety regulations therefore it is important that the business has a robust health and safety policy in place so that chances of employees, customers or visitors getting injured are significantly reduced.
As Serenity Beach Café will have a lot of electrical and technological equipment on site, it is vital that regular checks are carried out to certify all the equipment are safe and in working order. If the business is found not to be following these regulations, it could lead to huge fines and even prosecution. Therefore it is in everyone’s interest to ensure that health and safety are up to the required standards.
Duties and responsibilities
As a responsible employer, I have to ensure that my employees receive a written contract of employment within two months of starting work. A contract of employment sets out the relationship between the employer and the employee. A contract of employment should include the agreed level of pay, the hours that will be worked, holiday and sick pay arrangements and so forth.
The benefits of a written contract of employment rather than a verbal one is that it will go a long way in preventing any disputes from arising in the future if the contract is worded clearly to avoid any ambiguity or misinterpretation. Once the contract is signed, it can be legally enforced if any breach occurs on either side.
Record Keeping
As explained before, there are some financial records which must be kept for a minimum of six years as required by the law. This includes records such as the cash book details all the money coming into and out of the business. The sales and purchase ledgers record all the sales the business has made as well as any money received from these transactions.
The purchases ledger as can be derived from the name records all the purchases a business makes and the wages and petty cash books deal with the wages that a firm pays to its employees as well as small expenses paid with cash. Regardless of the fact that retaining these records are a legal obligation, the business can benefit greatly from keeping them as it gives a good overview of the amount of money the business is spending as well as what the income flowing into the business.
Equipment and supplies
Considering the nature of my business as a high-end internet café, the initial cost of bringing in all the computing and technological equipment required will be pretty high. As well as this, they will need to be routinely updated and maintenance checks need to be carried out to ensure all the hardware and software are in safe working condition.
Therefore it is up to me to ensure that locate the best possible suppliers who can provide the highest quality equipment at reasonable prices. However care must be taken not to go overbroad with the equipment as it can cause a huge dent in the businesses finances before trading has even begun. That is why the cost of the equipment and supplies should be taken into account before working on any budgets or cash flow forecasts.
Cashflow forecast
Cash flow forecasts show the amount of cash coming into and out of a business during a certain time period. By preparing a cash flow forecast, a business owner can get a clear picture of what he expects to spend and receive in a given time period. If used appropriately, the forecast can provide the means with which to make smart decisions. It can allow management to prepare for periods where cashflow will be poor or there will be shortfalls so that they can take the appropriate steps to minimise the impact.
To conclude, if a business owner wishes to succeed in their endeavours, they must take into consideration the wide range of legal and financial aspects that affect the business. By being aware of the various implications of these factors, the business navigate their way through any difficulties and make the whole journey much smoother for all concerned.
National Diploma Business
Unit 37: Starting a new business
P5 - Produce a written outline proposal for starting up a new small business following an acceptable business model.
Section 1: Type of business
Serenity Beach café is a state of the art web café located in Brighton. The café will be based on the familiar concept of an internet café however it will take the concept to a new level by expanding on the services offered and with the professionalism it will be delivered with. This venture will take advantage of the lack of competition in the area and aim to establish a firm dominance in the market.
This venture aims to change the image most people have of the typical internet café by breaking away from this mould. By bringing all the various services offered into one complete package in a sophisticated and welcoming environment, the Café aims to attract a whole new group of potential consumers.
Section 2: Target market
In order to identify our target market, we need to separate the market into segments.
These segments have their own characteristics and can be described using classification methods such as ACORN and MOSAIC.
By carrying out their own primary research, Serenity Beach Café will be able to cover specific issues that apply to their situation. The primary information will allow the business to gather information that would be of interest to them and is beneficial to them in some way. While secondary research may be useful, it may not always fit with the needs of the business as it was conducted with a different purpose in mind. Primary methods I would use would include surveys and questionnaires.
Section 3: Human resources plan
A skills audit will help Serenity Beach to identify the various strengths and weaknesses and highlights areas for improvements within different skills areas. By carrying out a skills audit, the business will have a clearer picture of the skills which their employees have and identify any areas in which they can improve or where new staff with the required skills need to be brought in.
Having employees that have the relevant skills and knowledge provide are huge asset to any business and well positively influence the level of service that the business offers. The employees are the public face of the organisation and therefore their ability to interact well with customers and convince them to make a purchase is essential. Once the business identifies these gaps and shortages, the business will have to allocate the required resources to recruit the right individuals and/or train the current staff up to the required standards. This can be a time consuming and expensive process.
Section 4: Legal and physical resources plans
There are many benefits of selecting a limited company as the legal status of my business. A limited company is a separate legal entity in its own right which means that it can sue and be sued. It is owned by the shareholders and it set up through registration at Companies House.
The main advantages of setting up as a limited company is that there is limited liability meaning that my liability is limited to the amount of money I put into the business. This means that if the business does go bankrupt, my personal assets will not be at risk of being seized and liquidated to pay off the debts.
There are certain types of insurance which must be taken out while others are optional. The compulsory insurance I will be taking out will be Employer’s liability insurance which covers you if an employee suffers an injury while working. This means that I will be protected from any law suits against myself or the business.
The other type of compulsory insurance I require is motor insurance as I will be utilising a company vehicle and therefore it must be insured and cover all the people who need to make use of it.
Section 5: Financial resources plan
It is important that the business will be able to provide me with my personal survival budget. The initial main costs for Serenity beach will be the premises, equipment including all the computing hardware and software as well as renovating the café area and locating a suitable supplier for it.
It is also vital that Serenity Beach adopt a sound pricing and marketing strategy if the business is to raise awareness, attract and retain customers and succeed in the long run. Our promotional activity will focus on the local area and will include local news, flyers and leaflets as well as radio slots on regional radio.
As Serenity Beach are new on the market, it is important the right pricing policy is adopted as pricing has a huge impact on sales and profits. If the pricing policy is spot on, it will allow our business to establish itself firmly in the market and hopefully set us up for many prosperous years of trading.
Section 6: Growth and development plan
While Serenity Beach are currently focusing on Brighton, if this first store thrives then it will pave the way for further expansion to other regions across the UK. If Serenity Beach Brighton generates the amount of cash required for expansion, we could be looking towards extending operations in London, Edinburgh and Glasgow.
Section 7: Financial contingency plans
If in the even of financial hardship, Serenity Beach has a financial contingency plan in place. Personal savings and assets could be ploughed into the business to shore up Serenity Beach during rough periods. As well as this, emergency loans can be arranged with the bank to help the business remain solvent during tumultuous times.
