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MSc in Clinical Research January 2011 Module 7: Different Types of Business Kamal Sehdev

MSc in Clinical Research January 2011 Module 7: Different Types of Business Kamal Sehdev. Why do businesses exist?. Why do businesses exist?. To develop a good idea To employ people To make things To provide services To make money (profits) For charitable reasons.

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MSc in Clinical Research January 2011 Module 7: Different Types of Business Kamal Sehdev

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  1. MSc in Clinical Research January 2011 Module 7: Different Types of Business Kamal Sehdev

  2. Why do businesses exist?

  3. Why do businesses exist? • To develop a good idea • To employ people • To make things • To provide services • To make money (profits) • For charitable reasons Often: To provide return on shareholder capital

  4. To develop a good idea Also known as Enterprise People who take risks to develop good ideas are Entrepreneurs A good example is Richard Branson and Virgin

  5. Virgin started off as a mail order record business but now includes: Airline Trains Cars Drinks Insurance Telephones Banking……..

  6. Most of them came about because Richard Branson thought he could improve on goods or services which already existed It is easy to forget that this often applies in most industries.

  7. Completely new ideas are less common than most people believe.

  8. To make a profit • By selling something at a price that is • higher than it cost to produce • Profit is the return on investment made • by the owner, or owners • If they are not making a profit, they may • decide to sell up and invest in • something else

  9. Most profit seeking businesses seek to achieve some of the following: Survival – making sure that the business does not fail Growth – increasing the size of the business by winning more customers, or opening new branches International Growth – selling goods abroad

  10. Maximising profit Increasing market share – gaining more customers, beating the opposition Efficiency – minimising costs Quality – produce goods of a very high standard Other aims – eg Bodyshop, Co-Op

  11. Starting up a business • There are five popular options for starting up in business.  You could: • buy an existing business • become an agent for a larger firm • become a sub-contractor to other • businesses - or offer business services • open a shop, factory or office • or buy a franchise

  12. Starting up a business The Form You'll also have to think about the way you operate your business. Most people set up as a sole trader (one person owns 100% of the business); in a partnership (setting up a firm with two or more people); or as a limited company.

  13. Which form is best for me? There are pros and cons to the way each of the above operates. If you can start trading without spending a lot on overheads and equipment, a sole trader is probably the best option. If you are planning a high-risk venture that needs a lot of capital up front, you should probably choose a limited company.

  14. How do we classify businesses? • By sector • By size • By ownership • By location

  15. Who Owns Businesses? • Private individuals • Governments • Public shareholders • Trusts etc. • Sometimes a combination of these

  16. Some types of Business • Manufacturing • Services • Financial • Legal (arguably services)

  17. Different Sizes of Business • Very large companies - often multinational • Large companies - >250 employees • Small / medium enterprises (SMEs) • (50-250 employees) • Small companies (1-50 employees)

  18. SMEs The sector of small and medium sized enterprizes (SMEs) is an important factor in most economies. In Germany, for instance, there over 3 million SMEs. These are 99.3 % of all enterprises subject to VAT and generate 44.8 % of the total turnover subject to VAT. SMEs carry out 46.0 % of gross investments; hence contribute significantly to total demand.

  19. Business Management These different types of companies require different strategies for successful management. The decisions that need to be made will often be different. SMEs have a good reputation for their ability to innovate and for their close customer relationships. Smaller businesses, however, have some disadvantages that make it difficult for them to compete with the large players in their industry.

  20. Healthcare Sector Companies What are the main areas companies operate in?

  21. Healthcare Sector Companies What are the main areas companies operate in? • Medical instrument / devices companies • Therapeutics / pharmaceutical companies • Equipment / consumable suppliers • Consultancies

  22. Medical instrument / devices companies • Surgical instruments • Consumables / supplies • Laboratory instruments • Diagnostics

  23. What are the issues that concern them? Obviously they need the right product in the right marketplace at the right price

  24. What are the differences between small and large companies? Large companies have considerable inertia (don’t make quick decisions) Large companies have money to invest Large companies are responsible to a diverse group of shareholders

  25. What are the differences between small and large companies? Large companies can take on patent disputes and win Large companies can wield influence e.g. on governments

  26. What are the differences between small and large companies? Small companies can make quick decisions Small companies have tight loyal workforce but Small companies often have less money and influence

  27. What other issues concern them? Like all innovative technologies diagnostics requires front-end investment - to develop the product - to satisfy regulators - to establish the market

  28. How will they know if their product is good? May use a consultant to - assess feasibility - assess the market Their potential investor may do this (due diligence)

  29. How is the money to do this found? Established large company will have an R&D budget Medium size public company might make a rights issue Small company will need an investor

  30. Who might the investor be? • You could phone a friend or involve a member of your family • An established bank • Raise it yourself • Go to a business angel, VC or similar

  31. Business Angels http://www.bbaa.org.uk/portal/ Business angels are wealthy individuals who invest in high growth industries in return for equity. Sometimes they invest alone, or they may form a partnership of investors.

  32. Business Angels Often make their skills, experience and contacts available as well. Typical funding level £10k - £250k Not averse to high risk Quick decisions May be difficult to find

  33. Venture Capitalists http://www.bvca.co.uk/ VC investments are generally high-risk Offer the potential for above-average returns and/or a percentage of ownership of the company A VC fund is a pooled investment vehicle (often a partnership)

  34. Primarily invests the financial capital of third-party investors in enterprises that are too risky for the standard capital markets or bank loans In a typical venture capital fund, the general partners receive an annual management fee equal to 2% of the committed capital to the fund and 20% of the net profits of the fund (a so-called "two and 20" arrangement)

  35. What will the investor want? He will want to manage his investment and ensure an appropriate return at the right time

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