Unit assessment Business Mia

1. Variable costs are any costs that are effected directly proportional to your output, eg, raw
materials. The more your output is the more raw materials you will need.

1b. The margin of safety is the gap between your breakeven point and your current output. It
shows how much your output can fall before you start to loose profit .

1.c Profit = TR-TC = £20,000,000 - £17,000,000 = £3,000,000

1d. Venture Capital might benefit lease 2 learn as not would it only support the funds need to
grow the business, but it would also give them the support they need. Peter Jones is a ‘serial
entrepreneur’, his advice and wisdom could guide lease 2 learn in the right path and make sure
they target the right people and places. His advice could also help the business get the right
objectives for their target market.

1e. Budgeting is a finance plan which takes places over a certain amount of time. Lease 2 learn
states themselves as ‘competitive and affordable’, this objective is key to budgeting. They will
have to keep their prices down on raw materials and marketing in order to obtain their ‘affordable’
objective.

Lease 2 learn have done research and have found that over a third of students at their school did
not have access to a computer or laptop at home. Funding this amount of laptops will be very
expensive due to the technology needed. In order for the business to survive they will need to
think carefully about what materials and equipment they will be using to lease the laptops.

Lease 2 learn does not sell items, it leases them. This means that their produce will probably be
paid on trade credit. This means that Lease 2 learn has to be carful when making their cash flow
forecast as profit does not equal cash. They will have to make sure they plan efficiently in when
money is coming in and budget on the bigger things until the leasing cash comes into the
business.

1g. Rebecca Riley is a sole trader, meaning that she is the owner and she manages the business
on her own. Inviting people to purchase shares in her business would be a good idea for raising
funds. As her business is a private limited company, she cannot offer shares on the Stockmarket,
but she can invite her family and friends to be a shareholder. Attracting shareholders can raise
substantial amounts of money in a short period of time. The shareholders could provide money for
Kalma Baby’s expansion. These shareholders do not have to be paid with interest. Shareholders
can also offer advice for Rebecca and help with her management.

However, inviting shareholders into Rebecca’s business could take away the control she has now.
This could be something that Rebecca doesn’t want to do as it is her business and ‘prefers to
focus on growing the business’. Problems could also arise with family members and friends, such
as late dividends causing disagreements and potentially shareholders could withdraw their share.

A bank loan is also a good idea to raise funds. A bank Lone is a big amount of money given to a
business which is paid off over a certain amount of time with interest. Kalma Baby maybe
attractive to a bank as they only started a year ago and already they have rapidly expanded,
teaching in 9 different locations. This can show the bank that the business idea was positive and
Kalma Baby is a stable business. The could push the bank to lend Rebecca the money to extend
her business. In addition, Rebecca has already been to the bank for advice. They helped her
improve her business model. This could also attract Kalma Baby to the bank as it shows
Rebeccas ambition and drive to improve her business.

However, bank loans do have to be paid back with interest. This could be a eery fixed cost that
Rebecca has to pay monthly. The could cause long-term problems for Kalma Baby especially in
months where the profit is low. The extract also tells us that Rebecca ant to ‘attract additional
funding to facilitate her ambiguous expansion plans’. Depending on how ‘ambiguous’ Rebecca’s
plans are, the bank maybe resistant on how much to give her due to her short time being a
business and her management skills. Rebecca has also ‘ploughed a lot of money into marketing’.
This could show the bank that she doesn’t have good management or finance skills which make
make them relocate to give her a loan.

To conclude, I would recommend that Rebecca uses shareholders. The shareholders would be
family or friends meaning they could discuss the amount and dividends that they both agree on.
They can also offer advice and help due to the fact she had only been in the business sector for a
year. Rebecca may loose some control but this may be good as she may get too ambiguous with
 Unit assessment Business Mia
how much she has grown in the last year and this could result in poor maegment or splashing
money everywhere.