Name: Adepoju Ridwan Bidemi

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 NAME: ADEPOJU RIDWAN BIDEMI

 LEVEL: 400 LEVEL

 DEPARTMENT: BUSINESS ADMINISTRATION

 MATRIC NO: 18/0229

 COURSE TITLE : SMALL BUSINESS MANAGEMENT

 COURSE CODE: BUS411

QUESTIONS:

Enumerate A/D of the following 3ways in which people become owners of small business.

1. Buying an existing business


2. Inheriting an existing business
3. Starting a new business
ADVANTAGES OF BUYING AN EXISTING BUSINESS

Buying a business is generally considered less risky than starting your own business,
especially if you can buy a well-managed, profitable business for the right price.
Consider these advantages:

 The difficult start-up work has already been done. The business should have plans
and procedures in place.

 Buying an established business means immediate cash flow.

 The business will have a financial history, which gives you an idea of what to
expect and can make it easier to secure loans and attract investors.

 You will acquire existing customers, contacts, goodwill, suppliers, staff, plant,
equipment and stock

 A market for your product or service is already established.

 Existing employees and managers will have experience they can share.

DISADVANTAGES OF BUYING AN EXISTING BUSINESS

Keep in mind that not every business on the market is a good prospect. Many owners will
be selling unprofitable or under-performing businesses. While this can be a chance to buy
and develop a cheap business, it can also be a risky investment. Consider these
disadvantages:

 The business might need major improvements to old plant and equipment.

 You often need to invest a large amount up front, and will also have to budget for
professional fees for solicitors and accountants.

 The business may be poorly located or badly managed, with low staff morale.
 External factors, such as increasing competition or a declining industry, can affect
future growth.
 Under-performing businesses can require a lot of investment to make them
profitable.
 The seller's personality and their established relationships may be a major factor
for the success of the business.

ADVANTAGES OF INHERITING AN EXISTING BUSINESS

1. Common values: You and your family are likely to share the same ethos and
beliefs on how things should be done. This will give you an extra sense of purpose
and pride - and a competitive edge for your business.

2. Strong commitment - Building a lasting family enterprise means you're more


likely to put in the extra hours and effort needed to make it a success. Your family
is more likely to understand that you need to take a more flexible approach to your
working hours.

3. Loyalty - Strong personal bonds mean you and family members are likely to stick
together in hard times and show the determination needed for business success.

4. Stability - Knowing you're building for future generations encourages the long-
term thinking needed for growth and success - though it can also produce a
potentially damaging inability to react to change.

5. Decreased costs - Family members may be more willing to make financial


sacrifices for the sake of the business. For example, accepting lower pay than they
would get elsewhere to help the business in the longer term, or deferring wages
during a cash flow crisis. You may also find you don't need employers' liability
insurance if you only employ close family members.

DISAVANTAGES OF INHERITING AN EXISTING BUSINESS

1. Lack of skills or experience - Some family businesses will appoint family


members into roles that they do not have the skills or training for. This can have a
negative effect on the success of the business and lead to a stressful working
environment.

2. Family conflict - Conflict can arise in any business, but it's important to consider
that disputes within a family business can become personal as the staff are
working with the people closest to them. Bad feelings and resentment could
destabilize the business' operations and put your family relations at risk.

3. Favoritism - Can you be objective when promoting staff and only promote the best
person for the job whether they are a relative or not? It is important to make
business decisions for business reasons, rather than personal ones. This can
sometimes be difficult if family members are involved.
4. Succession planning - Many family business owners may find it difficult to decide
who will be in charge of the business if they were to step down. The leader must
determine objectively who can best take the business forward and aim to reduce
the potential for future conflict - this can be a daunting decision.

ADVANTAGES OF STARTING A NEW BUSINESS

1. Have more freedom: You no longer have to answer to someone else. You work
the hours you want, and you make all the decisions without having to consult
anyone else. You get to decide what type of business you want, make your own
lifestyle choices and set your own schedule. If you want to set aside time during
the week to coach your kid’s soccer team, you can do that.

2. Unlimited income: The owner's income from a small business is one of the best
ways for a person to make money far in excess of working for a wage. You have
the opportunity to build your business to achieve whatever financial goals you
want. According to a report published by CNBC, almost 68 percent of the
world's richest people created their wealth themselves. They didn't do it working
for someone else. With your own business, there's no financial limit. The only
limit is whatever you want it to be.

3. Establish your own brand: Starting from scratch gives you the opportunity to
create a business in the image you want. You can use your own talents and
creativity in ways that suit your personality. You're creating a personal brand that
is a reflection of your morals, ethics and beliefs.

4. Create a unique culture: When you start off with no employees, you're free to
hire the type of people you want to represent your company. You can create a
unique company culture that conforms to the image that you think a business
should look like.

5. Taxes advantages: Tax laws are structured to encourage the development of


small businesses by reducing the tax liabilities of the owners. Nearly all business
expenses can be deducted to reduce taxable income. Certain business forms, such
as limited partnerships and Sub S corporations, pass business losses to investors
that can be offset against their other income.

DISADVANTAGES OF STARTING A NEW BUSINESS

Starting a new business is risky: When you start a new business, you're taking a
chance. You don't know if you're going to succeed or fail. You don't know if your
business model will work or not. And you don't know if you'll have enough capital to
survive. There are no guarantees when you start a new business.

Requires careful preparation: Starting a new business means conducting market


research, developing products, preparing a business plan, making financial projections
and securing enough capital to start the business and survive until the cash flow starts to
come in.

Must assume responsibility: The success or failure of your new venture rests on your
shoulders. It's your job to think through every decision to find the best solution.

Suppliers reluctant to extend credit: Suppliers are hesitant to extend credit to a


business that has no history. Without supplier credit, you may have to pay for your
purchases upfront. At the same time, you may be selling to your customers and giving
them terms of 30, 60 days or 90 days. This time differential will create a cash flow
deficit that must somehow be funded.

Takes a lot of time: When you work for someone else, you probably have fixed
working hours, like 8 to 5. When you have your own business, especially a new one,
you work as many hours as it takes. That could be 40 hours per week or as many as 80
or 90 hours, with nights and weekends. The responsibility of creating and building the
business is yours, and the commitment in time can be substantial.
Possibility of failure : According to the Small Business Administration, only about one-
half of new businesses survive for five years and only one-third are still in existence
after 10 years.
REFERENCE :

https://pocketsense.com/220476-advantages-disadvantages-of-starting-a-
new-business.html

https://www.nibusinessinfo.co.uk/content/advantages-and-disadvantages-
family-businesses

https://www.nibusinessinfo.co.uk/content/advantages-and-disadvantages-
buying-existing-business

https://www.business.qld.gov.au/starting-business/buying-business/buying-
business-guide/advantages

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