Being a sole trader or a partner in a business is a complicated decision. Partnerships are very popular ways of starting a business.
A sole trader is generally someone who runs their own business. Unlike other forms of business, a sole trader is entirely responsible for any debt.
This means that your private possessions could be at risk if your business fails. This might seem like a scary thought but don’t let it put you off.
There are many advantages to running your business as a sole trader.
Louise lives with her partner Patrick. They have a three-year-old and another child in a second year at primary school. Patrick has a full-time job during the week. However, to supplement her family’s income, Louise works 20 hours each week at a call center for a credit card company, mainly weekday and Sunday evenings.
When she has time, Louise makes her own jewelry which she sells on her website. The credit card company pays Louise a monthly wage which has had income tax and national insurance contributions deducted from it. This means that she’s an employee of the credit card company. But, Louise is also a sole trader because she’s responsible for making all her own decisions for her jewelry making business.
She’s thinking of selling to customers in person. So, she’s contacted the local council to discuss getting a license to have a stall at the weekend market in town. She’s also spoken to an events promoter to find out how to get a stall at the major outdoor festivals and other open-air events next summer.
If her business starts expanding, she might need some help; someone to run her website perhaps or manage her paperwork while she’s busy selling rings and necklaces at the festivals. If she starts employing someone she becomes an employer.
But, it’s important to remember that being an employer doesn’t mean she stops being a sole trader. She can still be both so with or without an employee.
Louise is definitely in charge of her business. This means she’s self-employed amidst. Therefore she should tell HMRC she started in business, she’ll also in due course have to complete a tax return.
Partners are members of business partnerships. There are three types of partnership. Ordinary partnerships, limited partnerships and limited liability partnerships.
Concentrating on ordinary partnerships, this is the most common type of partnership for people starting up in business.
An ordinary partnership or just partnership for short is basically two or more people coming together to jointly run a business. Like sole traders, partners are personally responsible for any debts the business may have.
However, there are many advantages to running your business as a partnership. For example, having partners means your business may have a wider skills base and more possible sources of business finance.
Case Study: Jacob
He used to have a fairly well paid sales job. But, didn’t get on with the boss. So, before resigning, he started looking into setting up his own business.
What Jacob needed was certain specialist skills and knowledge and he felt that his two old school friends Alan and Mahendra fitted the bill. Jacob knew that Alan’s just back from his travels in Asia. He had been keen on art and design from an early age.
Jacob had also recently found out from an Avengers page on a social networking website that he build a website for his father’s business. So, one day Jacob sent his two friends an email proposing that they set up a marketing and design firm.
Alan thought the idea assigned a good on paper. So, they set up a meeting to discuss it. The meeting went well and the three agreed to set up as soon as possible.
They agreed to put some of their own savings into the business to help get it started. There were no set rules and running a partnership four months later and with the help of a solicitor, the boys finalized a written agreement on how they’d make decisions, share out the various responsibilities and divide the profits.
Partners are self-employed individuals and therefore separate for tax purposes. This means the partners must each give details of the share of the business profit on their individual tax return.
All businesses in the private sector are owned are operated by private individuals or companies and generally private sets of businesses are run with the objective of profits, to earn returns for the business owners.
In the public sector, these organizations are either owned by or run on behalf of the government or organisations whose funding comes from the government and public sector businesses whilst they can be run for profit, t earn a profit they don’t necessarily exist for that. They are mainly to provide goods and services to the public. This is because they’re using public funds.
What are the biggest challenges facing organizations from the public to the private sector?
The biggest difference is understanding up they are not the same. Every organization has a public responsibility because every organization has a constituency whether it’s the Motor Vehicles department, they have a constituency that requires a product or a service from them or whether you are an IBM that makes computers and software and things like that.
But, a private business is allowed to make a profit there. Therefore, to make a profit for the investors and people who had put their money in. Most public sector organizations are simply there to fulfill a social responsibility that people have decided. They will handle it where the business is owned and directed by a small group of people who are the owners, it’s really directed by the society and how they budget for that work.
Stay tuned for the next lesson about Soletradership and Partnerships.
Every business has a unique objective. So, every business is trying to achieve different things.
On what does that going to depend on?
1 Size of the business -The target has to be realistic for the business to achieve.
2 Age of a business- Businesses will simply set the aim of survivor in their first year or two. But, as an organization grows and becomes established, that aim of simply surviving becomes less appropriate. Over time it’s time to start setting more realistic objectives like growth or making a profit etc.
The level of competition and organization phases can have an act on an organization to profitability and what’s realistic for it to achieve. So, more competition tends to mean fewer opportunities for sales and profit growth.
So, an organization might wish to consider in a highly competitive market, increasing its market share, gaining sales from its competitors might be a good way. As a business, it faces relatively low levels of competition.
3 Not-for-profit organizations- They would tend to look at providing a service or achieving a particular target that’s not related to making profit. The owners of a business can have hugely different objectives.
Sole trader would be able to set their own target. But, as an organization grows, the ownership structure changes.
Thus, business objectives change. In the early stages of a business, its simply wanting to survive, to break-even, just to make enough money to cover its costs.
As a business becomes established and gains in confidence, it might look to increase the number of branches within the country. You might want to increase their market share, steal customers off their competitors, look at increasing customer satisfaction. As an organization continues to grow and might look at maximizing shareholder value, maximizing profit or look to international growth.
Some people might aim some social and ethical aims. Other businesses do that right from the start and you could make an argument for putting all of these in different places.
Business objectives change as a business grows and evolves and this might be a useful framework for looking at how that happens .
There was a skilled and hardworking carpenter named Ole Kirk Christiansen . Ole was a respected carpenter with his own company. But, times were hard. So, he didn’t have much money and had to dismiss his last worker.
It got worse shortly after Ole lost his wife. But, he was a special person, he wasn’t the type that gave up and with the responsibility of his four sons, he had to think of something.
He had gotten an idea and for him it never took long to put an idea into action. His little invention made his boys so happy that he thought maybe he should start making toys. He decided to give it a try. Luckily, he had saved up a lot of wood from the carpentry production. He could now use it to make toys.
Time passed by and even though Ole was a skilled carpenter and had a good eye for quality and detail, sales were very slow. Luckily one of his sons Godfrey started helping out his dad after school. Together they just barely managed to keep up the production.
Eventually, word began to spread that wooden toys of the finest quality were being made in the little workshop. One day, a man drove into town, a man who would change Ole’s future. He was a wholesaler from Fredericka. “I’ve heard that you’re making some very nice wooden toys.”
The wholesaler was very impressed with all the wooden toys and placed a big order before he left. Now there was a lot to do in the little workshop and Ole could rehire his former workers. They only used the highest quality wood which was hand-picked and very carefully prepared. They work day and night to get the order finished. So, the wholesaler could get the toys out in stores before Christmas.
In the middle of their work, Ole received a letter saying that the wholesaler had filed for bankruptcy and couldn’t buy the toys that he had ordered. There was no time to lose, only pack the car with all the toys and drove off . Ole was a very good toy maker, but was not a very good salesman. He didn’t like praising himself or talking about how carefully the toys had been made but he had to keep trying.
If he was going to sell anything, this is going to be a blast.In the end, he succeeded in selling all the toys. He didn’t receive as much money as he had hoped. But, the family managed and they had plenty of food for Christmas.
Time passed by, but the toys didn’t sell as quickly as they had expected. Ole thought perhaps the company needed a good name. It has to be a short word, Ole wanted to convey playing. Olay himself ended up finding a very suitable name but what he didn’t know was that in Latin the word leggo means I put together.
The name leggo was well received and the company slowly started to move forward. Eventhough Godfreid wasn’t comfortable spending money on a milling machine, he could see that it was useful and that the quality of the toys improved.
Ole believed in high quality and not cheating his customers.In the late 1930s Lego was making a profit. Even when the second world war broke out, they tried to make the best out of a difficult time. It seemed nothing could go wrong.
But, a stormy night in 1942 changed their luck. “There’s a fire!! The workshop is on fire.”
But, when the firemen arrived, they were unable to save the workshop. It burned to the ground and all the drawings and models were destroyed. Ole was beginning to lose hope. All that he had worked for was gone and he almost lost his company.
But, being responsible for his children and workers inspired him to rebuild LEGO, a new factory was constructed soon. The production of wooden toys started again. The little company fought its way back into the market.
Gradually, the Lego factory began to run smoothly and Ole started looking for new challenges. One day, he went to Copenhagen to look at a new machine that had just arrived in Denmark. It was a plastic moulding machine and Ole was very excited about it.
When the plastic molding machine finally arrived they started making little plastic teddy bears and rattles. But, he still had the plastic bricks that he had received at the fair. There was something about them that he couldn’t stop thinking about it. Even though no one else could see the potential in it Ole decided to redesign and put them into production. But, it was when Lego first launched the Great Ferguson tractor that the plastic toys became a success.
Unfortunately, the sales were dropping during the summer and the company had too many toys in stock. “This can’t be right of course our products can be sold the whole year, not only for Christmas. “
Godfreid decided that he would go out and sell the toys himself . Godfreid brought his wife Edith as company and moral support. “If you can’t get cash, then we lead by butter and eggs.”
It wasn’t that bad, Godfreid was a success in his trip around the country, which helped Lego to get out of its financial crisis. They reached home just in time for Ole’s birthday party.
The whole family was gathered to celebrate with him. “Hey, I got an idea, what about a picture with the three generations”
Everyone thought that was a good idea and they were placed on the sofa with all the presents and flowers around them. On a business trip to England, Gottfried met the head of a big shopping center on his way home. They discussed the toy industry and the conversation would be very important to the future of Lego.
“The toys need an idea and a system built around it. I want to put system into play. Children have only been offered ready-made solutions. They need something different that will strengthen their imagination and creativity.”
That same year, Lego started producing the first Lego system of play. Children could now build houses from the Lego bricks, the town plan gave play a realistic town setting and with this, children learned about traffic safety.
Godfreid decided to try selling it outside of Denmark. The system of clay was so popular that they managed to sell it to many countries. There was just one problem, the bricks can’t lift up. They keep falling apart. That made Godfreid wonder. He wanted to find a way to make the Lego bricks stick together. But, that was easier said than done. Godfreid noticed that the Lego bricks got a better clutch power with tubes inside.
Now, it was no longer just bricks, but a whole construction system with endless possibilities. This was groundbreaking for the Lego product. With a child’s imagination, Lego could be anything in the world. Over and over again the imagination is the limit.
Unfortunately Ole never got to see how successful the little brick actually became. Godfreid was left on his own and he had to go through another fire at Lego that destroyed most of the wood production.
Just like his father Godfreid knew that he had to try to get the best out of any situation and never give up. Godfrid took the hard times with his 1head held high. As sales grew, the company also got bigger. He had to think ahead and he decided not to resume the production of wooden toys and to only focus on the Lego system.
It turned out to be a great decision. Many new models were built and Lego got stronger in the toy industry. Eventhough it got busier at Lego, Godfried still had bigger plans now.
He wanted to build an airport so it would be easier to sell his toys to the whole world. It didn’t take long to put his idea into action.Only three years later, Billund airport was open. The many guests and business connections who visited the company always wanted to see the modeling department.
Gradually, it got so crowded that it was hard for the employees to keep up their work. “I think we better wait awhile.”
Godfrid could see that something had to be done, he needed a bigger place to display the lego models. “I don’t want to interrupt, so I’ll just put this package of our new Lego train on the table. Just put it there.”
The idea grew quickly from an exhibition room to an amusement park and then we could have a tower. So, you could look over the whole park from above the whole town, it will be a land made out of Lego.
Legoland looks interesting, but how many visitors are you actually counting on. There were six hundred thousand guests the very first year, the family was there to greet the guests. They’ve kept up this tradition ever since now.
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First, personal satisfaction -many business owners set up a business because they think they will be happier and feel more satisfied in their work environment than when working for an employer.
Under personal satisfaction, we have three categories.
1.The person is happy because the person is able to take risks.
2.They are implementing their own ideas
3.They are turning their hobby into a business
The next objective is challenge– some people are motivated by challenges and starting a business can be very challenging.
To be successful in a business, people need to be committed, hard-working, multitasked and motivated.
Next one is independence and control– some people want to be their own boss. These entrepreneurs are driven by the desire to be independent and to take control of their own future, the freedom to make all the decisions when running a business is very appealing. Some people often dislike being told what to do at work.
Business objectives as you have learned in the previous lesson, are key to business success. There are two main types of business objectives; Financial and non-financial.
Financial objectives are going to be targets or goals in relation to financial performance. But, it’s not just about sales or profit.
Financial objectives can cover a range of different types of financial performance.
They are quite important when it comes to effective management of a business.
- Revenue objectives
To achieve 10 million pounds with the sales, really does Drive and focus the attention of management’s and employees on what you need to do to achieve that objective.
Perhaps, the most common financial objectives set by businesses of all sizes and types.
A particular value- for example, 10 billion pounds worth in sales each year
A percentage growth in revenues-for example, growing revenues by a 20% per year
Sales maximization- a potentially dangerous objective because here the aim is not to maximize profits, but to simply grow as fast and as far as possible regardless of whether or not those sales are profitable.
Market share- to increase our revenues faster than the growth of the market
2. Cost minimization objectives
Minimize costs; variable costs and fixed costs- keep costs as low as possible also consistent with achieving our other objectives and also importantly without damaging the business’s level or reputation for quality. It’s more about efficiency and speed rather than cutting corners to reduce quality.
But, hopefully the overall effect is to reduce costs and if you are successful in minimizing your costs, there are a number of benefits that flow from this.
3. Profit objectives
These are particularly common in larger businesses particularly those that whose shares are traded on stock markets. They’ll often talk about their target level of profitability, both in terms of the absolute amount for example making a profit of say 10 million pounds a year but also they often talk in terms of their profitability.
If you’re operating in a market where competitors have a higher level of profitability, a higher profit margin that often is a good reason to set a profit objective where you at least achieve the same profit margin as competitors and even better be than now.
4. Remain solvent
To continue to trade and therefore it’s important to set objectives in relation to cash flow. You will certainly set an objective for cash flow to be within a range that’s acceptable and as a consequence of setting cashflow objectives is that you’ll often be able to make some decisions in relation to aspects such as how much inventory hold or how long you allow your customers or receivables to pay their bills.
A business is any activity which provides a good or service, formed by an individual or group of individuals working towards a common objective.
What is a business objective?
A business objective is a result that a company aims to achieve. It also includes the strategies that the company will use to get there.
A business objective usually includes a time frame and list the resources available.
A business objective is more specific and easier to measure than a goal.
All our basic tools that underlie our planning and strategic activities are our objectives. They serve as the basis for creating policy and measuring performance.
Making a profit
Reducing the workforce
Goals on the other hand are statements that business makes regarding 7its future and they represent aspirations and are less specific.
The CEO of a company may say we seek to become the largest maker of bicycles in the world. This is a goal as they do not explain how the company will achieve this. The exact steps a company plans to make, to reach his goals are its business objectives.
For example, the CEO might say we will increase bicycle sales by 2.5 percent each quarter of this year, we will open new branches and factories in Germany and France.
During the next 12 months, sometimes one business objective can clash with another. For example, growth and profit may clash when a company achieves greater sales in the short term by slashing prices. It reduces short-term profit. Long-term business objectives can affect short-term prospects.
If a company invests heavily in plant equipment or new products, its cash flow in the short term will suffer.
Mosquito bites last a few seconds, but the irritation sticks around long after the mosquito is gone.
The science behind a mosquito bite is that female mosquitoes use specialized sense organs to hone in on the best spot on your body, to probe for a blood meal. She uses substances on the surface of your skin as indicators of where she is most likely to strike blood.
Once she lands on you, the female mosquito spits on her victim’s skin to numb the area where her thin sharp proboscis will go in search of blood. But, finding a blood vessel on the first attempt isn’t always easy.
The hungry mosquito moves her needle-like proboscis around in your skin tissue searching for the ideal place to tap into a blood source. When she does find a blood vessel, she injects saliva to prevent clotting and to keep your blood flowing. She then uses a specialized pumping system to suction blood cells up through her feeding tube.
This system is so powerful. It can cause a blood vessel to collapse during a meal. Feeding will continue until her belly is full or until she’s noticed and slapped.
A female mosquito can take in two to three times her body weight in blood at a single feeding. After the mosquito bite, a bump on your skin is caused by your body’s immune response to mosquito saliva, which is an allergen.
During an allergic reaction, the immune system releases fluid and cells into the site of the bite to destroy the foreign substance. This extra fluid in cells results in the swelling and itching that accompanies a bite.
Some mosquito bites are bigger and itchier than others. This is because the mosquito had to move her proboscis around to find a vessel which means that she spread more saliva over a greater area. Most times, the sneaky pests get away with all of this without being noticed.
Everybody wants to kill mosquitoes. But, in Singapore, they create mosquitoes and spread them in the millions to fly free in the country. The first thing on your mind is why are they doing this?
Mosquitoes aren’t just annoying, they are also deadly. Many female mosquitoes have dengue virus and just like malaria, you can get dengue from a mosquito bite. In severe cases, you could die.
Between 50 and 500 million people get dengue every year and 10 to 20 thousand people die from mosquito bites. So, if you want to eliminate dengue you must kill all the dengue mosquitoes everywhere.
But, they are hard to find and therefore, hard to kill. So, how do you stop mosquitoes?
A team of researchers in Singapore came up with an idea. They stop mosquitoes from having babies and that’s exactly what they did. They created a new type of mosquito that is so strong that it can go out there and find all the bad mosquitos and stop them from having babies.
So, apparently this is like a mosquito nursing room and there’s like hundreds of thousands, if not millions of mosquitos right here waiting to be released to the outside world.
This is as crazy as it sounds. This new mosquito doesn’t bite or hurt you at all. If this good mosquito falls in love with a bad mosquito, the bad mosquito will no longer be able to have kids. No new babies, no new mosquitoes.
So, Singapore created millions of these good mosquitos and put them in a mosquito gun and blasted them to neighborhoods, to rooftops, to gardens, everywhere. The good mosquitos make it with the bad ones and they could no longer reproduce.
In no time, all mosquitoes good and bad will die naturally without having any kids. This is literally how Singapore is fighting the dengue virus. Dengue mosquitoes dropped significantly by more than 90 percent and saved many residents from the virus threat.
This ingenious method is such a success, that they are opening a mosquito Factory in Singapore just to fight dengue. This factory is so advanced, it can create tens of thousands of good mosquitos every single day.
There are 7Ps in the international marketing mix, including product, price, place, promotion, people, process and physical evidence.
This is a bundle of things that generate satisfaction for the customer. Products have a life cycle and they are developed and launched. If they are successful, their sales will grow. Eventually the market will mature and it will decline when there are many other rival entrances.
Decisions about the product and how it fits into the market with the competition is the basic marketing decision. These decisions will be different at different stages in the product life cycle.
In this case two generic strategies can be used to set prices. They include
- premium pricing- where there is a premium product
- price competition- where there is no differentiation
In addition to the above, there are various price tactics. They include:
Penetration pricing– Where the companies set low prices to build market share
Price skimming-Where companies take a temporary competitive advantage to charge high prices
Optional pricing– Where additional benefits are priced separately
Captive pricing– This is for additional products or services, once a customer is captured
Price discrimination-This is when the same product has a different price in different market segments or locations.
Usually, the pricing choices are done based on the competitors’ prices and competitors’ likely reactions to price changes. Hence, pricing is a dynamic process in which companies struggle for a position in the market.
- This is the distribution channel that a company uses to get the product to the customers.
- In this case, it should be decided whether the product is supplied directly to customers or intermediaries are used.
- Types of intermediaries include
- Buy the product from the producers
- Break down the bulk into smaller quantities for retailers
- Store the goods
- Take on some of the marketing function
- Do not buy the product
- Find the customers and take orders in exchange for a commission
- Product is stored on behalf of the producer
- They do not own it while it is in storage
- They are commonly used in countries other than the one in which the manufacturer is based
- Sell many brands and may have a strong brand themselves
- Decide what price to charge, carry out advertising and promotion
- Provides credit to the customers
- Offers a direct to customer channel for producers, wholesalers and retailers
- Low set up costs
- An alternative to the use of agents
- Considering the distribution strategy, the choice and mix of channels should be decided.
- Choice of single or multiple channels of distribution
- Choice of changing the distribution channel according to the stage in the product life cycle
- Length of distribution channel from production to sales
- Avoiding conflict between distribution channels
- This involves strategic choices among a range of possibilities
- Personal selling- individual sales people meet customers(this requires high gross margins)
- Public relations- Stories are placed in various media to transmit the company’s message to its customers
- Direct mail- Using databases to identify and target potential customers who are likely to buy the product
- Trade fairs and exhibitions
- Advertising- In a variety of media
- Sponsorship- A company pays to be associated with an event
However, in some markets for some products, personal contacts and commission paid to important people are essential parts of promotion. This is sometimes considered as corrupt. But, it is required for success.
In e-businesses, there is viral marketing, where the customers recommend the product to their friends and news spread like a virus. For example, Hotmail.
- In this case, people involved at the interface and who are in contact with the customers are a valuable source of information about customer requirements and preferences.
- In service industries, process of accessing and receiving the service is an important part of the marketing mix. The strategic choices include in this are
- Technology- to use call centers, direct contact, web based service
- Customer co-production-choosing how much work the customer has to do to get service benefits
- This includes the physical appearance of all the
elements of the product and service that the customer experiences. They
- Physical product design
- Staff uniforms and grooming
- Printed matter
- Website design
- Logos and other branding tools
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