Platinum Business Academy

No 106 SDS Jayasinghe Mawatha

Kohuwela, Nugegoda Ordinary Levels
Business growth

Problems of Business Growth – and how to overcome them

Why some businesses fail

• Poor management –

• Failure to plan for change –

• Over expansion –

• Risks of new business start ups -

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Sameer Anis
CIMA Passed Finalist, Post Graduate Diploma (University of West London)
Platinum Business Academy
No 106 SDS Jayasinghe Mawatha
Kohuwela, Nugegoda Ordinary Levels
Entrepreneur

• Entrepreneur is an individual who has the ability to combine land, labour and capital
to turn a business idea into reality.
• Entrepreneur is called enterprise.

Benefits of being an entrepreneur –

Disadvantages of being an entrepreneur –

Qualities

• Innovation- to come up with new ideas. e.g.- Steve Jobs, Ratan Tata.
• Understanding of the market- an entrepreneur must know what his customers want.
• Resilience- determination to never give up.
• Passion- you must always like what you are doing.
• Risk Taking- he must not be a risk averse person.

Why governments support business start ups.

• Reduce unemployment – new businesses will often create jobs to help reduce
unemployment.
• Increase competition – when more businesses exist there will be more competition
and therefore consumers will benefit by having greater choice at affordable prices.
• Increase output – the GDP of the economy will improve.
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Sameer Anis
CIMA Passed Finalist, Post Graduate Diploma (University of West London)
Platinum Business Academy
No 106 SDS Jayasinghe Mawatha
Kohuwela, Nugegoda Ordinary Levels
• Benefit society – entrepreneurs may create social enterprise which
benefits society other than jobs and profits.
• Can grow further – all large businesses were once small, as they continue to grow
government benefits as more taxes can be collected.

Business plan

This is a document containing the business objectives and important details about the
operations, finance and owners of the new business.

• Without a business plan banks may not give a loan.

• And the business too may not have a good idea on what needs to be done hence the
risk of failure is high.

Types of business organization

Private and public

Private sector comprises businesses owned and controlled by individuals. Businesses

are profit motivated and the price of the selling product is determined by forces of
demand and supply.

Public sector comprises firms accountable to central or local government. Strategic

industries such as energy, defence, and transport will be under state control. They are
not profit motivated. Prices are determined by the state.

3
Sameer Anis
CIMA Passed Finalist, Post Graduate Diploma (University of West London)
Platinum Business Academy
No 106 SDS Jayasinghe Mawatha
Kohuwela, Nugegoda Ordinary Levels
Choosing a legal structure.

Unincorporated. (Not a company) Incorporated.(Setup Company)

- Sole trader - Private limited company.

- Partnership - Public Limited Company.

Sole Trader

A business in which one person provides permanent capital and, in return has full control and
enjoys all the profit. This form of organization is only suitable for small, simple businesses
with few employees and little capital.

Benefits:

• Quick & easy to set up – business can always be transferred to a limited company
once launched
• Simple to run – owner has complete control over decision-making
• Minimal paperwork
• Easy to close / shut down

Limitations

• Full personal liability – “unlimited liability”

• Harder to raise finance – sole traders often have limited funds of their own and
security against which to raise loans
• The business is the owner – the business suffers if the owner becomes ill, loses
interest etc. Can pay a higher tax rate than a company

4
Sameer Anis
CIMA Passed Finalist, Post Graduate Diploma (University of West London)
Platinum Business Academy
No 106 SDS Jayasinghe Mawatha
Kohuwela, Nugegoda Ordinary Levels
Partnership.

2-20 persons can put up capital and start a business called PARTNERSHIP. There will be a
partnership agreement knows as the Partnership deed and the business will have to be
conducted accordingly. The deed will usually cover following aspects of a business.

• How profits and losses are to be shared. For eg: if there are three partners putting in
$10000, $20,000 and $50,000, respectively, then profits will be shared among them in
the same proportion as the capital invested, that is
• How much money can be withdrawn. It is important to have rules about this sp that
the business can continue to grow as a result of profits being reinvested.
• Arrangements about holidays, time off and illness.
• How long the partnership is expected to last.
• Getting rid of a partner or taking another partner.

Benefits.

Limitations.

1) Franchises.

Definition: A business that uses name, logo and trading systems of an existing successful
business.

The franchisor will have to pay an initial payment for franchise agreement (Start-up fee) and
also yearly royalty payment based on a % of sales. Franchisor has developed a successful
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Sameer Anis
CIMA Passed Finalist, Post Graduate Diploma (University of West London)
Platinum Business Academy
No 106 SDS Jayasinghe Mawatha
Kohuwela, Nugegoda Ordinary Levels
business and is willing to allow others to trade under his name. The key support
franchisor offers to the franchisee are as follows.

• A license to trade under franchisors brand name

• Initial help, advise and essential equipments.
• Training
• Marketing support.

Benefits. (Of franchising to the franchisor)

• Does not require significant investment as the franchisee will bear the cost.
• Can collect royalties and the start up fee which is a big income from each franchise.
• Franchisee will have local knowledge which can ensure success to the franchisor.
• Can expand very quickly and cover wide geographic areas.

Limitation (of franchising to the franchisor)

Benefits (of franchising to the franchisee)

Limitation (of franchising to the franchisee)

6
Sameer Anis
CIMA Passed Finalist, Post Graduate Diploma (University of West London)
Platinum Business Academy
No 106 SDS Jayasinghe Mawatha
Kohuwela, Nugegoda Ordinary Levels
Limited liability companies.

- All companies have to be incorporated.

- Until then they cannot start the business.
- Incorporated creates a separate legal entity.
- A company must have the same legal powers as its owner.

To form a limited company it is necessary to follow a legal procedure. Some important

documents must be sent to the registrar of companies before a limited company can be
formed. The 2 most important ones are the memorandum of association and articles of
association.

1. Memorandum of association:

This sets out the constitution and gives details about the company. The following details must
be included.

• Name of the company

• Name and address of the company’s registered office
• Objectives of the company and the nature of its activities
• Amount of capital to be raised and the no of shares to be issued.

2. Articles of Association

This document deals with the internal running of the company. The article includes details
such as:

• Rights of shareholders depending on the type of share they hold.

• Procedure for appointing directors
• Length of time directors should serve before re- election.
• Timing and frequency of company meetings
• Arrangement for auditing company accounts.

7
Sameer Anis
CIMA Passed Finalist, Post Graduate Diploma (University of West London)
Platinum Business Academy
No 106 SDS Jayasinghe Mawatha
Kohuwela, Nugegoda Ordinary Levels
Private limited companies.

A small to medium sized firm that is usually family owned. This type of company cannot
issue shares to the public (Stock market). The name of the company has to end with “Ltd”

Benefits.

Limitations.

Public limited companies.

• To convert private limited to public, you should issue shares to the public (stock
market) and the company name must end with the word “plc”.
• When a private limited company expands to a point of having share capital of more
than £50000, it can convert to a public limited company.

Benefits

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Sameer Anis
CIMA Passed Finalist, Post Graduate Diploma (University of West London)
Platinum Business Academy
No 106 SDS Jayasinghe Mawatha
Kohuwela, Nugegoda Ordinary Levels
Limitations

Joint Venture

Definition: Two or more businesses agree to work closely together on a particular project and
create a separate business division to do so. E.g.: herohonda, Sony Erickson, Fiat and
GAC

Benefits:

• They allow companies to enjoy some of the advantages of mergers, such as higher
turnover, without having to lose their identity.
• Each business can specialise in aspects of the venture to suit its expertise.
• Takeovers are expensive. Takeovers often incur heavy legal and administrative costs.
• Mergers and takeovers are often unfriendly. Most joint ventures are friendly. The
companies commit their funds and share responsibility. This may help to improve the
success of the venture.
• Competition may be eliminated. If companies co-operate in a joint venture they are
less likely to compete with each other.

Limitations.

• Some joint ventures do not work out. There may be control struggles. For eg: who
should have the final say in a 50:50 joint venture?
• Disagreements may occur about the management of the joint venture. As with any
joint venture there may be different views on which direction to take.
• The profit from the venture capital between the investors. This obviously reduces the
profit potential.

9
Sameer Anis
CIMA Passed Finalist, Post Graduate Diploma (University of West London)