Mini-Lesson
Investigating small business
This mini-lesson covers Edexcel Theme 1 — Investigating small business : enterprise and entrepreneurship , spotting a business opportunity , putting an idea into practice (finance, cash flow), making the business effective (ownership, break-even), and external influences .
enterprise & opportunity idea into practice effective & influences
how an entrepreneur starts and runs a small business
Work through each screen, answer the questions as you go (some are wordy, some are calculations) and collect ⭐ stars. Press Start when you're ready.
1.1 Enterprise & entrepreneurship
Enterprise & entrepreneurship
An entrepreneur spots a gap in the market, takes a risk and organises resources to start a business. New businesses aim to meet customer needs and add value .
Why start a business? spotting an opportunity, being your own boss, a hobby/interest, spotting a gap in the market.Risk vs reward: risks include losing money and long hours; rewards include profit, independence and satisfaction.
added value = selling price − cost of bought-in inputsadded value comes from branding, quality, convenience or design
Quick check
Role of the entrepreneur
? Which of these best describes the entrepreneur's role when starting a small business?
Taking the risk and organising the other resources ✅
Guaranteeing the business will make a profit ❌
Removing all competition from the market ❌
Working for free forever ❌
Calculate
Your turn — added value
1 A stall sells smoothies for £3.50 . The fruit and cup cost £1.10 per smoothie. Calculate the value added per smoothie.
£
Check ✓
Hint: added value = selling price − cost of inputs = 3.50 − 1.10.
1.2 Spotting an opportunity
Spotting a business opportunity
Entrepreneurs research the market to reduce risk:
Market research: primary (new, first-hand — surveys) vs secondary (existing — reports).Market segmentation: splitting customers by age, income, location or lifestyle.The competitive environment: understanding rivals' strengths and weaknesses.
Market share shows how a business compares to the whole market: (firm's sales ÷ total market sales) × 100.
Calculate
Your turn — market share
2 A start-up sells £3m of goods in a market worth £15m . Calculate its market share.
%
Check ✓
Hint: market share = (firm sales ÷ total market) × 100 = (3 ÷ 15) × 100.
1.3 Idea into practice
Putting an idea into practice
Turning an idea into a real business needs aims, finance and planning .
Business aims: survival, profit, independence, market share.Sources of finance for a start-up: personal savings, family/friends, loans, overdrafts, crowdfunding.Cash flow tracks money in and out — a business can be profitable but still run short of cash.
net cash flow = cash inflows − cash outflowsclosing balance = opening balance + net cash flow
Calculate
Your turn — closing cash balance
3 A start-up opens the month with £1,500 . Inflows are £6,000 and outflows are £5,200 . Calculate the closing cash balance.
£
Check ✓
Hint: net cash flow = 6,000 − 5,200 = 800; closing = 1,500 + 800.
Sort it
Cash inflow, cash outflow, or an aim?
Tap an item, then the group it belongs to.
1.4 Making it effective
Making the business effective
Key start-up decisions:
Ownership: sole trader & partnership (unlimited liability) vs private limited company (limited liability).Location and the marketing mix (4 Ps).Break-even: the output where total revenue = total costs.
break-even (units) = fixed costs ÷ (price − variable cost per unit)contribution per unit = price − variable cost per unit
Calculate
Your turn — break-even
4 A product sells for £15 , has a variable cost of £9 per unit, and fixed costs are £3,000 . Calculate the break-even output.
units
Check ✓
Hint: break-even = fixed costs ÷ (price − variable cost) = 3,000 ÷ (15 − 9).
Quick check
Which ownership?
? Jamie is setting up alone and wants limited liability to protect personal savings. Which structure fits best?
Private limited company (Ltd) ✅
Sole trader ❌
Ordinary partnership ❌
Public limited company floated on the stock exchange ❌
Match it
Match the term to its meaning
Tap a statement on the left, then the correct term on the right.
1.5 External influences
Understanding external influences
Small businesses are affected by outside forces they cannot control:
Stakeholders — owners, customers, employees, suppliers, local community, government — whose aims can conflict.Technology — e-commerce and social media widen reach and cut costs.Legislation — consumer, employment and health & safety law.The economy — interest rates, unemployment, consumer income.
Calculate
Your turn — cost of a loan
5 A start-up borrows £10,000 at 5% simple interest per year. Calculate one year's interest.
£
Check ✓
Hint: interest = loan × rate = 10,000 × 0.05.
Quick check
Effect of higher interest rates
? Interest rates rise. What is the most likely effect on a small business that has a bank loan?
Higher loan repayments, squeezing profit ✅
Lower wages automatically ❌
Instant higher sales ❌
Lower material costs ❌
Recap
The big ideas to know
1.1 Enterprise: entrepreneurs take risk and add value (price − input cost)
1.2 Opportunity: market research, segmentation, market share
1.3 Into practice: aims, finance, cash flow (inflows − outflows)
1.4 Effective: ownership & liability, marketing mix, break-even = fixed ÷ (price − variable)
1.5 Influences: stakeholders, technology, legislation, the economy
You've covered Edexcel Theme 1 — Investigating small business. Press Finish to see your score.
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Mini-lesson complete!
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