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Flip to reveal answersState the first step in starting a business.
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All 20 Flashcards — Process of starting a business
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Question
State the first step in starting a business.
Answer
Identify a business opportunity, such as a gap in the market (unmet need).
💡 Hint
Start with a gap/problem.
Question
What is meant by a gap in the market?
Answer
A gap in the market is an unmet customer need or want that existing businesses do not satisfy well.
💡 Hint
Unmet need.
Question
Define a business plan.
Answer
A business plan is a written document outlining the business idea and how it will succeed.
💡 Hint
Written plan for success.
Question
State one reason market research reduces risk.
Answer
It checks if there is real customer demand and identifies competitors before money is invested.
💡 Hint
Validate demand.
Question
Why is market research an important step before launching?
Answer
It reduces risk by checking customer demand, competitors, and acceptable prices before investing.
💡 Hint
Validate demand.
Question
State one reason a business plan helps attract finance.
Answer
It shows lenders/investors how the business will operate and generate revenue, with financial projections.
💡 Hint
Shows viability.
Question
State two key questions market research should answer.
Answer
Who are the customers and what do they want? Who are the competitors and what do they offer?
💡 Hint
Customers + competitors.
Question
State three typical sections of a business plan.
Answer
Examples include market analysis, marketing strategy, and financial projections (also operations plan, funding requirements).
💡 Hint
Plan sections.
Question
Give two possible sources of start-up finance.
Answer
Personal savings and a bank loan.
💡 Hint
Internal vs external.
Question
Why do many new businesses fail if they skip market research?
Answer
They may misjudge demand, set wrong prices, or underestimate competition, leading to low sales and losses.
💡 Hint
Wrong assumptions.
Question
Why do investors/lenders ask to see a business plan?
Answer
To judge the viability of the idea, the strategy to achieve sales, and whether finances support repayment/returns.
💡 Hint
They want proof it will work.
Question
What is the purpose of a business plan?
Answer
To outline the business idea, strategy, operations, and finances, and to persuade investors/lenders to provide funding.
💡 Hint
Plan + funding.
Question
Give two common sources of start-up finance.
Answer
Examples include personal savings and bank loans (also family/friends, angels, crowdfunding, grants).
💡 Hint
Where does the money come from?
Question
Give one example of improving on an existing product to create a business idea.
Answer
Creating a longer-lasting phone battery or a more sustainable packaging option than competitors.
💡 Hint
Improve existing offer.
Question
State the correct sequence: business plan or finance first?
Answer
Usually the business plan comes before finance because it is used to persuade lenders/investors.
💡 Hint
Plan supports funding.
Question
What is meant by start-up capital?
Answer
Start-up capital is the money needed to set up a business before it starts earning revenue.
💡 Hint
Money to begin operations.
Question
Why is choosing a legal structure important in one sentence?
Answer
It determines liability, control, and how the business is financed and taxed.
💡 Hint
Liability + control + tax.
Question
Give two external sources of finance for a start-up.
Answer
Examples include bank loans and angel investors (also crowdfunding, grants).
💡 Hint
External = outside the owner.
Question
What does it mean to identify a target market?
Answer
It means defining the specific group of customers the business will focus on, based on needs, income, location, and preferences.
💡 Hint
Who exactly are you selling to?
Question
Why is choosing a legal structure a key step?
Answer
It affects liability, control, taxation, and access to finance, so it shapes risk and long-term growth.
💡 Hint
Liability + control + tax + finance.
Read the notes
Full study notes for Process of starting a business
Topic 1.1 hub
What is a business?
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