Business Ventures

Forms of Ownership

Key concepts
Form of ownership The legal position of a business and the way it is owned
Continuity Continue to exist even if a change of ownership takes place
Limited liability A legal status where a person’s financial liability is limited to an
amount invested in the business
Unlimited liability Business owners are responsible for all the business debts
Memorandum of A document that sets out the rights, duties and responsibilities of
Incorporation (MOI) shareholders, directors and other stakeholders within the
business
Company A type of business structure that has a separate legal entity from
its owners
Profit companies A business entity whose aim is to generate profit from the regular
operations
Non-profit company A company incorporated for public benefit
Public company A company whose shares are traded freely on a stock exchange
Private company A company whose shares may not be offered to the public for sale
State-owned A legal entity that is created by the government to participate in
company commercial activities on its behalf
Annual General A meeting is held once a year where the shareholders receive a
Meeting (AGM) report stating how well or poorly the company has done
Directors People elected to the board of a company by the shareholders to
represent the shareholders’ interests
Audit A process where financial statements of the business are checked
to confirm that they are correct

Differences between profit and non-profit organisations/companies

Profit companies Non-profit companies

This company is formed with one aim of
making a profit
A company incorporated for financial gain
for its shareholders
Profit organisations are responsible for
paying taxes based on their profit
This company is formed for charity
purposes or to promote social and cultural
activities
A non-profit company is an association
incorporated not for gain
Non-profit organisations are not required
to pay taxes on the net income
 Forms of ownership
 Forms of ownership refers to the legal position of the business and the way its
owned
 An entrepreneur may decide which of the forms of ownership will best suit their
type of business
 New business owners need to consider the following factors when they choose the
form of ownership their business will take:
o The start-up cost and the future capital
o The size and nature of the business
o How capital will be contributed

Characteristics/ advantages/ disadvantages of each form of ownership

Form of ownership Characteristics Advantages Disadvantages

Sole trader No legal Does not need a lot Funding may be
requirements for of capital to start up difficult as the
the name of the the business. No business does not
business. legal requirements have limited liability.
Owned and to start up the The owner is
managed by one business. All profits personally liable for
person. belong to the the debt of the
The owner has owner. business. The owner
unlimited liability for does not enjoy
the debt of the unlimited continuity.
business.
Partnership No legal It is easy and Conflict may arise as
requirements for inexpensive to partners have many
the name of the establish a differences.
business. The partnership. Profits needs to be
partnership is not a It is easy raise shared amongst the
legal entity. The capital as number of partners.
partnership has partners are Decision making can
unlimited liability. unlimited. be time consuming
Partners share as many partners
workload and will give their input.
responsibility.
Co-operatives Name of company It is a legal entity The shares are not
needs to end with and has the right to freely transferable.
 Co-operative act on its own, Financial statements
Limited or Co-Op separate from its must be audited,
Ltd. members. The which will increase
Minimum of 5 members enjoy expenses.
members in a co- limited liability. A lack of support
operative. Aim of Members are from the members
the co-operative is motivated by self- could lead to failure
to create a mutual interest to be loyal of the co-operative.
benefit for its to the Co-op.
members.
Private company Must end with The continuity of the They cannot sell
Propriety Limited or company is their shares to the
Pty-LTD. unlimited. public.
They do not sell The shareholders The establishment
their shares to the have limited liabilityof the company is
public. for the debts of the very expensive and
A private company company. is subject to legal
raises its own capitalThe number of requirements which
by issuing shares to shareholders is costs a lot of money.
its shareholders. unlimited, which The company is
means more capital subject to double
can be raised. tax.
Personal liability company The MOI must state Unlimited number It is expensive and
it is a personal of shareholders, so challenging to
liability company. more capital can be establish a personal
Name must end raised. liability company.
with Incorporated or The continuity is The company may
INC. unlimited. not raise capital by
The company has It is a legal entity selling shares to the
unlimited continuity. and has the right to public.
act on its own. Directors might act
in their own interest
and not in that of
the company.
Public company Name must end The shareholders Auditing of financial
with LTD or Limited. have limited liability statements are
The shareholders for the debts of the compulsory and
enjoy limited company. expensive.
liability. The company enjoys Financial statements
The company enjoys unlimited continuity. and information can
unlimited continuity. It is easy to raise be used by
capital as shares are competitors to their
sold on the JSE. advantage.

Personal liability company The MOI must state Unlimited number It is expensive and
 it is a personal of shareholders, so challenging to
liability company. more capital can be establish a personal
Name must end with raised. liability company.
Incorporated or INC. The continuity is The company may
The company has unlimited. not raise capital by
unlimited continuity. It is a legal entity selling shares to the
and has the right to public.
act on its own. Directors might act
in their own interest
and not in that of the
company
Public company Name must end with The shareholders Auditing of financial
LTD or Limited. have limited liability statements are
The shareholders for the debts of the compulsory and
enjoy limited liability. company. expensive.
The company enjoys The company enjoys Financial statements
unlimited continuity. unlimited continuity. and information can
It is easy to raise be used by
capital as shares are competitors to their
sold on the JSE. advantage.
The company is
subject to double
taxation.
State-owned company Name must end with Profits generated Losses suffered by
SOC Ltd. can be used to the SOC’s are often
The company is listed finance other state recovered by
as a public company. departments. taxpayers.
It is owned by the The liability of the It is complicated and
government and company is limited. expensive to start up
operates to make a They have access to a SOC.
profit. a large potential Shares are not freely
customer base. transferrable, which
hampers the raising
of capital.
Non-profit company Must end with NPC. The company enjoys They rely on
The NPC enjoys unlimited continuity. donations as they
limited liability. The liability for its are not able to
The NPC is a legal members is limited. generate an income.
entity and has The NPC can apply NPC is liable for its
unlimited continuity. for tax exemption. own debt.
NPC must prepare
annual financial
statements.

Business opportunities and related factors

Key concepts

Research The systematic process of collecting data

and information according to a specific
methodology.
Research protocol Refers to the procedure that must be
followed before research is conducted
Research ethnics Supplies guidelines for the responsible
conduct of research.
Research instrument It is the different methods can be used to
collect data from customers
Internal market research Is the gathering of information of factors
within the business.
External market research Is the gathering of information of factors of
the wider business environment that
affects your business.
Questionnaire Is a research instrument that consists of a
set of questions that aims to collect
information from a respondent.
SWOT analysis Is a strategic planning technique used by a
business to find strengths, weaknesses,
opportunities and threats related to the
business.
Market research The collecting of data and information to
provide an insight into target markets.
Data Units of information to provide an insight
into target markets.
Information Knowledge, facts, and processed data
obtained from research.
Viable Something that is feasible, logical and
sensible.
The meaning of a business opportunity with practical examples.
 A business opportunity is an idea for a person to start a business so that they can
generate an income.
 Each need and desire are a possible business opportunity.
 It is a gap in the market when peoples’ needs and desires are unfulfilled.

Examples of business opportunities

 Home care services for senior citizens
 Online education programmes.
 Catering and ready-made meals.

The importance of assessing needs and desires in identifying a business

opportunity
 Needs and desires are the keys to a successful business opportunity.
 Needs and desires create a guarantee for a market.
 Every need and every desire are a possible business opportunity.
 If you see a need that is not met, you have a guaranteed market.

Design a research instrument to assess needs and desires

 A research instrument is a tool/device that can be used to gather information or to
form a set of guidelines for observation.
 Entrepreneurs usually develop a research instrument to find out about people’s
needs and desires.

To design a good research instrument, the following steps must be followed

 Decide what information you need.
 Have a variety of questions.
 Test the questions.

Different types of research instrument

 Questionnaires
 Interviews
Questionnaires
 Questionnaires are designed to collect information from people about their
attitudes/preference/level of knowledge etc.
 Respondents give answers in writing.
 Responses may be direct/immediate.

Interviews
 Business situations provide opportunities for interviews with employers, customers,
analysts etc.
 The interviewer leads the interview by asking questions and the interviewee
responds to the questions.
 Responses are collected from an individual or a group and may be recorded.

Protocol for conducting research

 The research must first be approved if it is taking place within an organisation.
 The researcher must start by introducing himself/herself.
 Information collected from the participants should be collected confidential.
 The researcher must obtain consent (permission) from the participants before
interview takes place.

Conduct market research and identify a business opportunity

 Importance of market research for a business:
o Market research assess the needs and desires of customers.
o It can be used to identify a business opportunity.
o It can guide a business to minimise risks.
o Regular market research will inform the business about the changes.

The difference between internal and external market research

Internal
It is the research conducted
from within the business.
Different resources are used for
gathering business information
for helping management to
make informed decisions.
External
It is the research that is conducted
from outside the business.
Useful information about the
target market, environment and
the customers’ needs and desires
can be obtained.
Compile a SWOT analysis to determine a viable business venture
 It is used to help businesses make decisions by setting out information clearly. In
order to only focus on important information.
 SWOT stands for strengths, weaknesses, opportunities and threats.

Using a SWOT analysis to determine a viable business venture

Strengths Weaknesses
List all the strengths of your List all the areas where the
idea/product/business. business idea/product falls short.
Internal

Opportunities
List all opportunities that
could assist the business
External ideal to improve the
product.
Threats
List everything that threatens the
success of the business
idea/product.
 Presentation of business information

Key concepts

Verbal presentation A presentation delivered through speech or

orally.
Non-verbal presentation The transfer of information using business
reports, handouts, charts, and posters with the
support of visual aids.
Business reports Provides an evaluation of a particular issue
relating to the performance of the business.
Tables A data structure that organises information into
rows and columns.
Graphs Diagrams that show the relationship between
two or more data sets or values.
Diagrams/flow charts A simplified drawing showing a graphic
presentation.
Illustration A picture or a drawing.
Handouts A written summary of information dealt within
a presentation.
Transparencies Transparent and flexible pages used to place
information and images.
Slides A single page of a presentation created with a
software such as PowerPoint.
Charts Is used to record and visually display
information that will engage and stimulate
audience participation.
Audio-visual aids Devices that make use of both sound (audio)
and sight (visual)
Poster Usually a large sheet that contains pictures and
is posted in a public place.

The importance of business reports

 A business report aims to provide critical analysis of how the business is performing
in all business functions of the organisation.
 Business reports are used to guide decision making in the business.

Guidance on writing an effective business report

 Determine the scope of the report and the target audience of the report.
 Write concisely/briefly and only include important information.
 Use accurate/meaningful visual aids.
 Use regular language/ simple grammar and short, clear sentences.
Importance of graphs/diagrams, symbols/pictures
 Diagrammatic presentation allows understanding of data more easily.
 It helps illustrate points to the reader/audience’s interest during the presentation.
 Diagrams are interesting, relevant, and support the presentation.

Advantages and disadvantages of graphs/diagrams, symbols/pictures

Advantages
 A lot of information can be
displayed in an easy-to-understand
format.
 Graphs do not require explanation.
Disadvantages
 Preparation of graphs and diagrams
is time-consuming.
 It may distract the audience from
the speech as they pay more
attention to the visual aids.

Factors that must be considered when preparing for a verbal presentation

 Relevant and accurate presentation of the information.
 Being fully conversant with the content of the presentation.
 Create visual aids that will assist in getting the point across effectively.
 The purpose and main points of the presentation to capture the main aim in the
introduction of the presentation.

Factors that must be considered when designing a PowerPoint presentation

(multi-media presentation)
 Starting with the text and headings.
 Using legible font and font size.
 Choosing images that may help to communicate the message.
 Including graphs and images related to the content.

The different visual aids:

1.Powepoint/Data projectors/Slides
 These visual aids projects images from a computer to a screen.
 An audio-visual aid can be used during the presentation.
 Slides summarises information to increase understanding.
2.Hand-outs/flyers/brochures
 Can be used for both small and large groups.
 Gives a summary of talk and follow up activities.
 They provide structure and focus for the presentation.

3.Flip charts
 Mainly used for a small audience to jot down ideas.
 Very effective in brainstorming sessions to summarise proposals.
 It is used to record ideas and feedback given by a group.

4.Interactive whiteboard/Smart boards

 An interactive display in the format of a whiteboard that reacts to user input either
directly or through other devices.
 It allows multiple people to engage in collaborative experience using a touch screen-
screen to take notes.

5.Posters/signs/banners/portable advertising stands/flags

 They are usually posted on a public street poles/wall.
 Are used to communicate with potential customers.
 It can be used as a marketing strategy.

Factors that must be considered when designing a presentation

 Be clear about the purpose of the presentation.
 Include simple language in your presentation.
 Include visual aids that will enhance your presentation.
 Ensure that the main aim of the presentation is captured in your opening statement.
 Business plan

Key concepts

Business plan A document setting out a business’s future objectives and strategies
for achieving them.
Executive summary A short document or section of a document produced for business
purposes that is, summarises the entire business plan.
Financial analysis Refers to the assessment of the viability and the profitability of the
business.
Environmental Refers to external influences on the business that it has no control
factors over.
Marketing mix A set of actions that the business uses to promote its brand.
Price The amount of money required as payment for goods.
Product An object that is manufactured for sale.
Promotion A method used to advertise the product.
Place A location of the business.
People Refers to employees as well as the target market.
Physical It is the environment around the business.
environment
Process The system used to deliver the product or service.
Competition It is a rivalry between two or more businesses selling the same
goods or services.
Marketing plan A strategy of how the business is going to sell its products/service to
customers.
Market research The action of gathering information about customers’ needs and
preferences.

The importance of a business plan

 A business plan helps entrepreneurs to set goals and objectives.
 It can be used to attract investors and prospective employees.
 It evaluates the success of the business.
 It gives direction once the business is operating.

Challenges of the macro environment on a business using the PESTLE analysis

 Entrepreneurs should look at the factors that could have a negative impact on their
businesses.
 Businesses do not have control over the elements/features of the macro
environment.
The components of a business plan
 Cover page
 Contents page
 Executive summary
 Description of the business
 SWOT analysis

Purpose of the executive summary

 The executive summary gives a reader an overview of the entire document.
 It gives readers an idea of what is contained in the business plan.

Aspects that must be included in the executive summary

 The form of business enterprise.
 The main business activity.
 How capital will be obtained.

The relationship between the structure of the business and forms of ownership
 The business structure should have a description of the following aspects:
o How many people the business intends to employ.
o Administration and record-keeping.
o Staff policies regarding working hours, fringe benefits, overtime, sick leave and
medical aid.
 The form of ownership will determine the following:
o The reason for the form of ownership.
o Legal requirements of the business.
o Products and services offered.
o Legal protection.

Different types of legal requirements of a business

 A business needs to be registered before it can obtain finance or start doing
transactions.
 A business needs to comply with the following types of legal requirements:
- Taxation regulations.
- Registration and registration fees.
- Patents and copyrights.
- Trading licenses and permits to operate legally.
The importance of a marketing plan and market research

Marketing plan meaning

 A marketing plan is an operational document than outlines an advertising strategy to
generate leads and research the target market.
 It explains the marketing mix and provides the marketing strategy of the business.

Importance of market research

 A marketing plan helps businesses to promote products and services.
 It is a process to understand more about the business’s customers’ needs.
 The target market refers to the people who are likely to buy the product or service
offered by the business.

The meaning of a marketing mix with specific reference to the 7p’s

1.Product/service
- It is a description of the product, appearance, and usage that is available to
customers.
- The packaging of the product should protect and preserve the product.

2.Price
- The price of a product refers to the amount of money that must be paid by the
consumer to obtain the product.
- The pricing policy describes how the price is used to attract customers

3.Place/distribution
 This refers to the location where goods and services will be sold/the place where
consumers can access the goods or services.
 Business may use the following channels of distribution:
- Direct selling: manufacturer sells directly to consumers.
- Door to door: selling businesses employ salespeople to sell door to door and they
can carry stock with them.

4.Promotion
 A promotion should communicate the benefits of the product to customers.
 The proposed business must include details about its promotion policy.
 It outlines the following methods of advertisements:
- Special offers
- Free gifts
5.People
 This refers to employees, management, directors and shareholders (all people
involved in selling the products).
 They can offer the business their knowledge, skills and attitudes

6.Process
 Refers to processes that are designed and implemented to ensure a pleasant
shopping experience.
 Examples of systems and processes that will ensure a good customer experience:
- Systems and processes to ensure that e-mailed messages are read.
- Systems and processes to ensure that customers do not wait long in
queues/for goods to be delivered.

7.Physical environment
 Refers to the environment where goods and services are sold/service rendered.
 It includes the appearance of the building and the uniform of employees.
 Clean and functioned facilities attract and restrain customers.

The strategies that you will use to overcome competition in the market.
 Sell quality products and services.
 Offer after-sales services.
 Change reasonable prices.