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Discuss the three challenges below that a new business start-up must address - Leaving Cert Business - Question A - 2021
Question A
Discuss the three challenges below that a new business start-up must address. Ownership structure Production Finance
Worked Solution & Example Answer:Discuss the three challenges below that a new business start-up must address - Leaving Cert Business - Question A - 2021
Step 1
Access to Finance
Answer
One of the significant challenges a new start-up faces is acquiring sufficient financing to launch and sustain its operations. This involves:
- Sharing Profits: New businesses must persuade investors that their ventures are worthwhile, which may involve sharing potential profits.
- Adequate Working Capital: Start-ups need to ensure they have adequate working capital to cover their initial expenses, which can be challenging without previous business experience or established credibility.
- Short-term and Long-term Financing: Entrepreneurs often seek both short-term funds to kickstart the business and long-term financing for sustainability. They may need to acquire loans from banks or investors willing to fund their vision.
Step 2
Choose the correct ownership structure
Answer
Determining the right ownership structure is crucial for a new business. The factors to consider include:
- Type of Business: The nature of the business influences the choice of ownership structure.
- Number of Owners: Businesses must weigh how many owners will be involved and their willingness to share control and profits.
- Tax and Administrative Implications: The selected structure can impact taxes and regulatory requirements. Common structures include sole proprietorship, partnerships, or corporations.
Step 3
Choosing a method of production
Answer
Selecting the most effective method of production poses another challenge. Key considerations include:
- Economies of Scale: New businesses must consider strategies that minimize costs through economies of scale.
- Workforce Skills: The choice of production method may depend on the skill level of available workers, necessitating a balance between hiring low-skilled and high-skilled labor.
- Production Type: Depending on their products, businesses may choose between job, batch, or mass production methods to optimize efficiency and meet customer demand.