Unit 1 Exam Jan 2011

1. Unit 1 Exam Jan 2011 Learning exam technique

2. Edexcel Unit 1 • Marks: ____ • Time: ____ • No of supported multi-choice Qs: _____ • When reading the text, identify: • 2 distinctive features of the Business • 2 distinctive features of the People • 2 distinctive features of the Start-Up

3. Section B, summary of text • A Community Learning Centre (CLC) wants to open a ‘Leisure Library’ offering sports equipment for hire to local groups • Primary market research has been used to assess demand and identify the most necessary types of equipment • Launch funding is from a grant; regular operations must be funded by charges

4. Section B, what’s distinctive? • It’s a business plan based on a social objective; the only financial objective is (probably) to break even • Although no profit motive, it seems professional, e.g. ‘robust procedure to control lending & recovery of equipment’ • There’s a contingency plan in case demand proves disappointing

5. 10. Why may the primary research (Evidence B) be inadequate? (4) • Primary research asks potential users specific questions relating to the needs of a specific business/organisation (1 mark) • Here, the research question asked ‘what’s lacking?’ but didn’t ask whether people would pay to hire equipment – so effective demand is uncertain (2 marks) • The sample might be biased (schools?)

6. 13. Assess the likely implications for a private sector leisure business of changes in any two economic influences. (12) • NB they are marked as 6 x 2; one third of the marks are for evaluation (‘balance’) • Rising unemployment could have quite an impact on demand; in some towns, a large factory or business closure might have a huge effect on non-necessity spending; so a locally-based independent leisure business might be hit hard (or, in a posh area, might be affected minimally)

7. Quick Question – be quick • Cardel Ltd sells 50 units a day. Price is £80 and variable costs are £20 per unit. Fixed costs are £1,200 per day • A) Calculate current daily profit • B) Calculate the daily break-even point • C) Calculate the daily margin of safety • D) Calculate the new profit if sales volume doubles

8. Evaluating a Business Plan Ian Marcouse, 2010

9. The keys to start-up success • Full understanding of ‘the market’ … • …i.e. consumers, competitors and retailers (who buys, who competes & who sells) • A clear idea of where the business or product fits into the market (the gap – perhaps new, or perhaps replacement) • A real commitment to providing customers with what they really want.

10. Personal qualities required • Confidence without arrogance • Hard-working – see Scoop (B Rev Nov 08) • Resilient (things will go wrong; are you strong enough to cope?) • Understands risk should be calculated, not shied away from • Can show initiative and creativity

11. Being prepared financially • Has saved enough to provide the bulk of the funding (most start with no external finance) • Knows the need for funds to finance the early, loss-making months • Is willing to make short-term sacrifices • Always keeps the cash balances high enough to cope with crisis

12. Having (or finding) a Plan B • i.e. willing to rethink the business plan when needed (e.g. in winter 2008/9) • The estate agent switches from sales to managing rented property … or the new café switches from £2 lattes to £1 white coffees • If you understand the market, you’ll understand how and why it’s changing

13. What’s in a good business plan? • A convincing case for the product’s distinctiveness and how it can be protected • Consistent logic backed by figures; see how the Dragons demand ‘Yr 3 projections’ • Contingency plans and budgets, i.e. a numerical look at What if? possibilities. What if sales are 20% below target? Or what if our planned high prices wont stick?

14. Part of GF Ltd. business plan

15. Part of GF Ltd. business plan £65,000 of long-term finance £30,000 of agreed overdraft facility

16. What’s in a good business plan? • The people: their passion, their planning and their commitment • The ‘exit strategy’ for the investor • The practical detail on how the great idea is to be turned into a consistently good customer experience • Understanding of now.

17. What’s in a bad plan? • Nothing convincing about what makes this business/product stand out • Lots of figures with too little justification • Based on a fad, not a trend • Overly dependent on the entrepreneur’s dreams rather than passions • Good(ish) idea but bad timing

18. Economy 2010 for Unit 1 Economic context for start-up

19. Key 2010 Economic Topics • Starting a business when in recession • Which business might be suitable? (99p stores; seaside camping/caravan site etc) • Which opportunities arise? High Street locations become available; business closures may open new opportunities • 2010 start-up is different: bank finance harder than ever; be willing to start poor

20. Key 2010 Economic Topics (2) • The £ has been weak for more than a year; many predict it’ll get weaker; so it’s a good time to start a manufacturing business; or a retail business selling UK goods overseas • The expectation is for several years of tough ‘public’ (govt) spending; perhaps govt may switch to smaller suppliers

21. Questions – True or False? • A fall in the £ makes UK imports cheaper • A rise in interest rates makes people keen to spend more in the shops • A rise in inflation makes people better off • A rise in the £ makes UK exports more expensive • Rising unemployment leads to lower govt revenue and higher government spending

22. Unit 1 Exam - Evaluation Mastering a key exam technique

23. What is good evaluation? • Judgements rooted in own argument … • … and in answering the question set • Clear sense of what is important and what is less so; well weighted conclusions • Based upon the case, not on prepared cliches, stock phrases or kneejerk Crunch

24. Show your judgement • After a 300% rise in the world oil price in the past 5 years, Kamal decided it was time to launch his ‘Fuelite’TM product. One Fuelite capsule dropped into a car fuel tank could cut fuel consumption by up to 15%. For a price of £49.99, the average UK driver would save £20 a month. The capsule would keep working for 5 years – well beyond the average ownership timespan for a car. • Launching the product would cost £500,000, but the world market of 1,000 million drivers made the market potential as high as £49,990 million – enough to buy out Richard Branson many times over! If you had the money, would you invest in Kamal’s business?