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.

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?

Calculate

Your turn — added value

1A stall sells smoothies for £3.50. The fruit and cup cost £1.10 per smoothie. Calculate the value added per smoothie.

£

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

2A start-up sells £3m of goods in a market worth £15m. Calculate its market share.

%

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

3A start-up opens the month with £1,500. Inflows are £6,000 and outflows are £5,200. Calculate the closing cash balance.

£

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.

⬇️ Cash inflow

⬆️ Cash outflow

🎯 Business aim

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

4A product sells for £15, has a variable cost of £9 per unit, and fixed costs are £3,000. Calculate the break-even output.

units

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?

Match it

Match the term to its meaning

Tap a statement on the left, then the correct term on the right.

Statement

Answer

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

5A start-up borrows £10,000 at 5% simple interest per year. Calculate one year's interest.

£

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?

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.

🏆

Mini-lesson complete!

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You've worked through Investigating small business for Edexcel GCSE Business. 🎉

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