Start Up & Expansions by Sorcha https://padlet.com/sk42/StartupsandExpansions Chapters 17 and 18 en-us 2018-03-07 10:01:13 UTC 2018-03-16 12:23:40 UTC hello@padlet.com https://padlet-assets.s3.amazonaws.com/icons/Babyhead.png Development Cycle of a business sk42 https://padlet.com/sk42/StartupsandExpansions/wish/239060231 Starting- When firm begins business. Firm requires management, finance, products, customers, sales and profits.
Surviving- Sign of success. Firm has overcome initial problems, but now additional problems, but now additional problem can surface. Owner is often also the manager and performs a lot of managerial tasks. Management are planning for the future, so they are happy to reinvest profits to help finance growth.
Growth- Firm expands and it can afford to take some commercial risks. A proper management team is in place, the firm is well organised and profits are good/ steady. Owners are now reaping rewards of their initial investment and hard work. Additional finance is required in order to fund growth.
The Future- Future growth may be in the form of diversification or acquisitions. Some firms are happy at existing size and therefore opportunities will be lost. Some firms decline, sell out or close down. Some companies engage in a management buy-out or bring in new management to further develop businesss]]> 2018-03-07 10:08:12 UTC https://padlet.com/sk42/StartupsandExpansions/wish/239060231 Considerations before starting a business: cd41 https://padlet.com/sk42/StartupsandExpansions/wish/239063252 There are concerns and risks involved in starting up your own business.
-Investing money
-Targeting the market
-producing and selling the product
-having to work long hours.

]]> 2018-03-07 10:18:25 UTC https://padlet.com/sk42/StartupsandExpansions/wish/239063252 Benefits of setting up a business and being self-employed: cd41 https://padlet.com/sk42/StartupsandExpansions/wish/239064945 The entrepreneur is independent and flexible in areas such as working hours and decision making.
When the venture succeeds,the investor will be satisfied with the profitable return on the investment.
A successful business person will enjoy a good image and high status in the community.
The business provides employment for the owner and his/her family.
It makes you your own boss which means you make all the decisions.]]> 2018-03-07 10:23:57 UTC https://padlet.com/sk42/StartupsandExpansions/wish/239064945 Sources of Finance sk42 https://padlet.com/sk42/StartupsandExpansions/wish/239067226 Short term- Due to be repaid within one year.
e.g -Trade creditors
        -Bank overdraft
        -Accrued expenses
Medium term- due for repayment between one and five years.
e.g -Leasing
       -Term loan
       -Hire purchase
Long term- available to a firm for more than five years before it has to be repaid.
e.g -Ordinary share capital
       -Grants
       -Venture capital
-Long term loan/debenture]]> 2018-03-07 10:31:18 UTC https://padlet.com/sk42/StartupsandExpansions/wish/239067226 Qualities necessary to start a successful business: cd41 https://padlet.com/sk42/StartupsandExpansions/wish/239067808 -Ambitious and want to achieve and be seen as successful
-Flexible and prepare to compromise.Being flexible enables you to take advantage of opportunities to achieve that vision.
-Resilient and determined to overcome setbacks and turn problems into opportunities.
-prepared to seek and take advice.Decision making is important and you may need to seek advice before making decisions.
-Creative with new ideas and suggestions on how to improve matters.
-Recognise the importance of teamwork, meet deadlines,accept responsibility for decision making and satisfy the requirements of customers.


]]> 2018-03-07 10:33:15 UTC https://padlet.com/sk42/StartupsandExpansions/wish/239067808 Steps to Improve Cash Flow sk42 https://padlet.com/sk42/StartupsandExpansions/wish/239069425 -Make sure there is no delay in sending out invoices to debtors.

-Avoid operating on an overdraft from the bank.

-Offer an attractive cash discount to encourage an early settlement of accounts by debtors.

-Ensure business has a good credit control system.

-Have a good stock control system and operate a just-in-time system of ordering from suppliers.

-Certain assets such as machinery and computers can be leased rather than bought as it saves money.

-Invoice discounting can be used to convert debts into cash so that the cash flow in the business is quickened.

]]> 2018-03-07 10:39:03 UTC https://padlet.com/sk42/StartupsandExpansions/wish/239069425 What is a cash flow forecast sk42 https://padlet.com/sk42/StartupsandExpansions/wish/239071585 An estimate of future movements of cash into and out of the business.
- To check when money is due to be received & when payments are due to be made.
- To check whether or not the business can pay its creditors when payments are due.
- To check whether or not there will be a shortfall or surplus and if so, when
- To highlight if areas of weak financial management exist.
- To know what level of overdraft may be required from the bank and when.]]> 2018-03-07 10:46:50 UTC https://padlet.com/sk42/StartupsandExpansions/wish/239071585 Cash flow projections: cd41 https://padlet.com/sk42/StartupsandExpansions/wish/239072002 Cash inflows- amounts of money being received by a business.
These include :
Cash sales
Receipts from debtors
Loan received from a bank
Grant received
Money received from an issue of shares to shareholders
A VAT refund from the Revenue Commissioners.

Cash outflows-Payments made by a business.
These include:
Cash purchases
Payments to creditors
Wages
Insurance,light and heat,telephone
Advertising
Loan repayments
PAYE
Capital expenditure,eg purchase of machinery.


]]> 2018-03-07 10:48:39 UTC https://padlet.com/sk42/StartupsandExpansions/wish/239072002 Importance of Cash Flow sk42 https://padlet.com/sk42/StartupsandExpansions/wish/239073207 Enables firm to predict potential bank balance at any given time.

Highlights when payments have to be made and their impact on the bank balance.

Shows how payments can be streamlined to be cost-effective for the firm.

Opportunity cost can be maximised.]]> 2018-03-07 10:53:14 UTC https://padlet.com/sk42/StartupsandExpansions/wish/239073207 Opportunity Cost sk42 https://padlet.com/sk42/StartupsandExpansions/wish/239074527 The cost of not being able to do something else with the sum of money in question.]]> 2018-03-07 10:57:43 UTC https://padlet.com/sk42/StartupsandExpansions/wish/239074527 What are Cash Flow Forecasts used for? sk42 https://padlet.com/sk42/StartupsandExpansions/wish/239885057 - As a guide for the owner of a new business, who uses them to prepare cash projections.

- In order to keep the bank manager informed of the financial position of the firm.

- To ensure that income and expenditure budgets are being adhered to in an existing business.]]> 2018-03-08 19:48:10 UTC https://padlet.com/sk42/StartupsandExpansions/wish/239885057 Sole Trader sk42 https://padlet.com/sk42/StartupsandExpansions/wish/239888243 This is where one person owns and runs a business. In law, the sole trader and the business are the same.
Opportunities- Quick and easy to form this type of business
- Quick decision making is possible without consulting others.
- Sole trader can keep all the profits.
Challenges- Unlimited liability
- One person is responsible for everything.
- May not be enough money for business expansion.]]> 2018-03-08 19:54:08 UTC https://padlet.com/sk42/StartupsandExpansions/wish/239888243 Partnership sk42 https://padlet.com/sk42/StartupsandExpansions/wish/239891481 Relationship that exists between at least two and not more than 20 people carrying on a business with a view to making profit.
Opportunities- Partners invest money so there is more capital available.
- Better decision making possible as problems can be discussed.
- Losses can be shared so risk is reduced.
Challenges- Disagreements between partners may cause poor decision making.
- Profits have to be shared between partners.
- Unlimited liability if business goes bankrupt.]]> 2018-03-08 20:00:37 UTC https://padlet.com/sk42/StartupsandExpansions/wish/239891481 Private limited company sk42 https://padlet.com/sk42/StartupsandExpansions/wish/239894794 A business that is set up under Companies Act 1963-2009 and is owned by a min of 1 and max of 149 shareholders. all of which have limited liability and the share price is not quoted on the stock exchange.
Opportunities- Limited liability
- Proper management structure means firm can be run efficiently.
- Continuity of existence after a shareholders death.
- Corporation tax rates are lower than PAYE tax rates.
Challenges- Annual audited accounts must be submitted to Registrar of Companies. 
- Legal issues involved and registration expenses are incurred when forming company.
- Directors acting ultra vires may lose their limited liability.
- Relationships with suppliers and customers are not personal.
- Finance cant be raised by selling shares to the public.]]> 2018-03-08 20:07:11 UTC https://padlet.com/sk42/StartupsandExpansions/wish/239894794 Job Production sk42 https://padlet.com/sk42/StartupsandExpansions/wish/239900904 Involves producing a single product to specific requirements. Each operation is a unique job which might not be required again. The product is not produced for stock, its produced to order e.g making a suit to measure.
Main features-
- single product produced to specific requirements.
- Order is received and advanced down payment is made before production starts.
- Involves use of highly skilled labour.
- Selling price is high.]]> 2018-03-08 20:19:23 UTC https://padlet.com/sk42/StartupsandExpansions/wish/239900904 Batch Production sk42 https://padlet.com/sk42/StartupsandExpansions/wish/239904032 Relates to majority of industrial firms of medium size producing a range and a quantity of products e.g Printing books for the home market.
Main features-
- Goods produced for stock in anticipation of their being sold in normal course of events.
- Production must be carefully planned because its necessary to stop and restart machinery to produce the different batches required.
- Labour required doesnt have to be as skilled as in job production.
- Most widely practised form of production of average quality products.]]> 2018-03-08 20:25:35 UTC https://padlet.com/sk42/StartupsandExpansions/wish/239904032 Mass Production sk42 https://padlet.com/sk42/StartupsandExpansions/wish/239907483 Involves producing large quantities of the same product. Helps to reduce the unit cost of production greatly. Good marketing campaign must exist as there must also be mass sales. e.g Biro pens.
Main features-
- Production price and selling price are reasonably low.
- Standardised goods are produced in huge quantities in anticipation of huge sales.
- High Quality is not associated with some mass produced goods.
- Specialised costly machinery is used and this is geared towards producing identical products only.
- Majority of staff are unskilled assembly line workers working repetitively.]]> 2018-03-08 20:32:55 UTC https://padlet.com/sk42/StartupsandExpansions/wish/239907483 What is expansion? cd41 https://padlet.com/sk42/StartupsandExpansions/wish/240096977 The main goal of business is to make a profit.This can be achieved by expansion.Expansion can be achieved by organic growth and inorganic growth.

-Organic growth:This involves growing the business in order to increase sales and profits. eg Lidl and Tesco Ireland have opened branches nationwide to increase sales and profits.

-Inorganic growth:This involves increasing the size of the business by merging with or taking over another business.This expansion could be vertical (different type of business) or horizontal(in the same type of business).]]> 2018-03-09 11:49:05 UTC https://padlet.com/sk42/StartupsandExpansions/wish/240096977 Reasons why established firms wish to expand. sk42 https://padlet.com/sk42/StartupsandExpansions/wish/240097237 Economies of Scale- Some business  functions can be rationalised, which results in savings on things. The cost benefits and savings that arise from doing things on a bigger scale are called economies of scale.

Synergy- The combined effect of two firms merging will give a greater overall benefit than if the two firms than if they remained separate and continued to compete with each other. After the merger, surplus assets can be sold and competing products can be reduced.

Security- Becoming a bigger firm in the marketplace will make it difficult for smaller competitors to survive and new competition to enter the market. Sales & profits will increase. Big firms can withstand problems like bad debt.

Diversification- Enables firm to spread the risk and not be overdependent on any one area.

Supplies- Merging with the major supplier of a raw material that a firm is dependant on will ensure future supplies of raw materials for production.

Markets- Firm may want to be less dependant on home market. Growth can be achieved by merging with a firm that has established itself in global markets. This should increase sales and profits.]]> 2018-03-09 11:50:06 UTC https://padlet.com/sk42/StartupsandExpansions/wish/240097237 Sources of finance for expansion: cd41 https://padlet.com/sk42/StartupsandExpansions/wish/240100730 -Issuing new shares.This is only possible for a private or public company.
-Ploughing back profits(retained earnings)
-Getting a long term bank loan.
-Getting investment from venture capital companies.
-Availing of state grants,eg from enterprise Ireland,the aim of which are to give financial support to Irish firms in all sectors.
 ]]> 2018-03-09 12:03:02 UTC https://padlet.com/sk42/StartupsandExpansions/wish/240100730 Issuing ordinary share capital: cd41 https://padlet.com/sk42/StartupsandExpansions/wish/240102518 -Investors who buy ordinary shares are the risk-takers in the company.There are no guaranteed dividends.
Ordinary shares are the equity share capital.The holders of these shares are entitled to the equity or balance of profits on the winding up of the company.
-The shareholders appoint the directors and the company auditors.

Benefits of funding expansion by ordinary share capital:

-It provides the company with a cheap source of long term finance.No repayments have to be made to the shareholders unless the company is being dissolved.

-There is no interest repayment on the ordinary share capital.

Drawbacks:
-If profits are low in a public limited company,many shareholders may decide to sell their shares.This brings down the share price and the company may become a target for a cheap takeover bid.

-There are legal formalities and high costs involved in selling shares to the public.

-It is difficult to raise finance from a share issue during an economic recession when share prices are low, eg Kingspan plc's share price in January 2012 was 6.50,down from 28 in 2009.

]]> 2018-03-09 12:11:06 UTC https://padlet.com/sk42/StartupsandExpansions/wish/240102518 Ploughing Back Profits. (Retained Earnings) sk42 https://padlet.com/sk42/StartupsandExpansions/wish/240102903 Benefits
- Free source of long-term finance as there are no repayments of interest/money.
- Doesnt create any external debt
- No security has to be provided
- No control of the firm is lost

Drawbacks
- Profits must be earned before this source can be used. 
- Shareholders in PLC who disagree with decision to use this source may sell their shares]]> 2018-03-09 12:12:51 UTC https://padlet.com/sk42/StartupsandExpansions/wish/240102903 Long-term loan (Debt Capital) sk42 https://padlet.com/sk42/StartupsandExpansions/wish/240104386 Benefits
- Quick and easy form of finance to source
- Repayments are structured to suit borrower and are included in the loan agreement.
- Interest on loan is a tax-allowable expense. This reduces the amount of tax the company has to pay.

Drawbacks
- Interest and amount borrowed must be repaid.
- Using a loan as a source of finance may cause capital structure of the company to become highly geared.]]> 2018-03-09 12:19:30 UTC https://padlet.com/sk42/StartupsandExpansions/wish/240104386 Implications of Business expansion sk42 https://padlet.com/sk42/StartupsandExpansions/wish/240106177 Short term
  • Management structure
  • Funding
  • Financial structure and control (financial budgets must be monitored to avoid cash flow problems)
  • Human resources (Avoid industrial relations problems)
Long-term 
  •  Research and Development (Necessary for a firm to sustain its success)
  • Planning (SWOT analysis is important along with ongoing strategic planning)
  • Profits and Dividends 

]]> 2018-03-09 12:26:13 UTC https://padlet.com/sk42/StartupsandExpansions/wish/240106177 Methods of expansion/growth for an enterprise: cd41 https://padlet.com/sk42/StartupsandExpansions/wish/240108549 -Growth (Organic growth)
  • Widening product range
  • Selling into new target markets
  • Employing more sales people
  • Reinvesting profits
-Buying an existing business (acquisition)
- Management buy-out 
Reasons:
  • Parent company may decide to sell off a subsidiary as going concern to management 
  • Parent company may need cash 
  • Owners may want to retire with no successors
  • Owner may be unhappy with level of profit so may want to sell the business.
  • - Diversification 
Reasons
  • To spread risk by not having to rely on one business / product range
  • To produce & distribute additional products that are more profitable than existing range
  • To make max use of all firms resources 
Horizontal- Occurs when two firms producing similar products merge
Vertical- Occurs when two firms involved in different types of business merge.
- Developing a new business.
- Takeover
- Strategic alliances and joint ventures
Benefits of alliance
  • Voluntary agreement so legal formalities are kept to minimum
  • Each party remains a separate legal entity
  • Both parties benefit as skills are shared
  • Can be ended so its more suitable than a merger
  • Increases range of services offered
  • Easier to succeed in global market
- Merger:
Occurs if two or more firms which were previously independent of one another voluntarily agree to merge. Very attractive option for an ambitious business
Benefits:
- Quick form of inorganic expansion & it enables restructure, eliminates duplication and expansion
- Overall costs will be reduced as economies of scale can be achieved in many areas
- Enables firms involved to get access new markets faster and cheaper
- May lead to creation of new jobs
Risks:
- If merger results in redundancy then it may lead to industrial conflict
- May lead to conflict, absence of teamwork and poor decision-making

]]> 2018-03-09 12:34:34 UTC https://padlet.com/sk42/StartupsandExpansions/wish/240108549 Expansion in enterprise: cd41 https://padlet.com/sk42/StartupsandExpansions/wish/242764317 Enterprise Ireland decided to invest taxpayers money to provide finance for expansion instead of giving grants for free.Enterprise prefer to give equity finance by purchasing shares in different companies]]> 2018-03-16 12:02:03 UTC https://padlet.com/sk42/StartupsandExpansions/wish/242764317 Expansion by acquisition: cd41 https://padlet.com/sk42/StartupsandExpansions/wish/242767679 Mercedes Benz went under SWOT analysis in order to diversify their Market.They wanted to reduce the of failure.They expanded by taking over other existing businesses.
Mercedes then realised that they didn't understand the new product areas.After realising this problem they decided to change their marketing strategy-They sold of the new businesses and decided to expand by internal organic growth.]]> 2018-03-16 12:11:59 UTC https://padlet.com/sk42/StartupsandExpansions/wish/242767679