Desmond wants to be a successful entrepreneur. He has decided to leave his office job to start up a gardening business cutting grass and planting flowers. It will be an unincorporated business. Desmond is aware that a new business is at greater risk of failure than an established business. He has identified his business objectives for the first year. Desmond has calculated he will need $750 for his start-up capital.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2023). The mark or mark type is shown in brackets.

1. [2] Award 2 marks for a full definition. Award 1 mark for a partial definition. A business that does not have a separate legal identity [2]
2. [1] Partial definition e.g. owner is/are responsible for business debts/unlimited liability [1]
3. [1] Survival
4. [1] Break-even
5. [1] Make a profit
6. [1] Become known in the market/create good reputation
7. [1] Encourage customer loyalty
8. [1] Generate sales/gain customers
9. [1] Offer good customer service
10. [1] Create added value
11. [1] Social responsibility/ethical
12. [1] Growth/expansion/increase market share
13. [1] Risk-taker
14. [1] Problem solver
15. [1] Decisive
16. [1] Creative
17. [1] Innovative
18. [1] Hard-working
19. [1] Perseverance/determined/focused/(self-)motivated
20. [1] Resourceful/adaptable
21. [1] Optimistic
22. [1] Self-confident/esteem
23. [1] Independent
24. [1] Effective communicator
25. [1] Organised
26. [1] Multi-skilled
27. [1] Results driven/ambitious
28. [1] Leadership
29. [1] Team player
30. [1] Good at networking/prepared to learn from others
31. [1] Inadequate/no market research [k] about gardening [app] so may not offer what customers want [an]
32. [1] Providing wrong/poor quality [k] service [app]
33. [1] Lack of experience/poor decision-making/skills [k] as only worked in an office [app] so more likely to make mistakes [an]
34. [1] Difficult to compete with competitors/lack of customers/insufficient sales [k] for this unincorporated business [app] leading to less revenue [an]
35. [1] Poor planning/no business plan [k] despite setting objectives [app] so does not have time/opportunity to resolve problems [an]
36. [1] No reputation/brand image/poor marketing [k] therefore potential customers do not trust him [an].
37. [2] Award up to 2 marks for identification of relevant points.
38. [2] Award up to 2 marks for relevant development of points.
39. [2] Award up to 2 marks for a justified decision as to whether owner's savings are the most suitable source of finance for a start-up business to use.
40. Owner's savings: [k] No need to repay/no debt [an] helping to reduce/keep cash outflows low/less risk [an]
41. Owner's savings: [k] No interest payable [an] therefore not increasing cost [an]
42. Owner's savings: [k] May not have enough/any savings [an] delaying/stop their plans [an]
43. Owner's savings: [k] Immediately available [k]
44. Crowdfunding [k]: No initial fees payable (to the crowdfunding platform) [an]
45. Crowdfunding [k]: Allows public's reaction to the new business venture to be tested [an]
46. Crowdfunding [k]: Crowdfunding platform might reject the entrepreneur's proposal [an]
47. Crowdfunding [k]: Publicising could allow competitors to copy the idea [an] leading to fewer sales [an]
48. Bank loan [k]: Could provide all the finance (at once) [an] but must be repaid [an]
49. Bank loan [k]: Interest payable [an] increases expenses [an]
50. Bank loan [k]: Quick to arrange [an]
51. Borrow from friends and family [k]: May give longer time/better terms to repay [an]
52. Government grant [k]: No need to repay/no interest [an]
53. Government grant [k]: May be conditions attached [an]
54. Microfinance [k]
55. Overdraft [k]
56. Justification: Owner's savings may not provide enough funds [k]. Another option is a bank loan [k] although interest must be paid [an] increasing expenses. [an]. The best option is a bank loan because plans are not delayed through lack of finance [eval]. By the time the owner has saved enough, they might have missed out on the business opportunity [eval].