Sign up to access the complete lesson and track your progress!
Unlock This CourseSmall businesses are the backbone of most economies around the world. They're typically defined as businesses with fewer than 50 employees, though this can vary by country and industry. Understanding small businesses is crucial for your iGCSE Business Studies exam, as they often feature heavily in Paper 1 short answer questions.
Key Definitions:
Small businesses typically have limited resources, serve local markets, have personal customer relationships and operate with flexible decision-making processes. They often specialise in niche markets and can adapt quickly to changes.
Understanding different ownership structures is essential for exam success. Each type has distinct features, advantages and disadvantages that frequently appear in short answer questions.
The most common form of small business ownership, where one person owns and operates the business. They keep all profits but are also responsible for all debts and losses.
Easy to set up, complete control, keep all profits, flexible working hours, personal satisfaction.
Unlimited liability, limited capital, long working hours, lack of continuity, limited expertise.
Local shops, plumbers, hairdressers, freelance writers, taxi drivers.
A business owned by 2-20 people who share profits, losses and responsibilities. Partners typically have different skills and can contribute more capital than sole traders.
Ben & Jerry's Ice Cream: Started as a partnership between Ben Cohen and Jerry Greenfield in 1978. They combined their different skills - Ben's business knowledge and Jerry's ice cream making expertise - to create a successful small business that eventually became a global brand.
Small businesses often struggle to access finance, making this a popular exam topic. Understanding different sources and their suitability is crucial for short answer questions.
Personal Savings: Owner's own money - quick access but limited amount.
Retained Profit: Profits kept in the business - free but only available after trading.
Sale of Assets: Selling equipment or property - immediate cash but loses resources.
Bank Loans: Fixed amount repaid with interest - reliable but requires good credit.
Overdrafts: Flexible borrowing up to a limit - convenient but expensive.
Government Grants: Free money for specific purposes - no repayment but strict criteria.
This topic frequently appears in comparison questions. You need to understand both sides to provide balanced answers.
Independence, job satisfaction, flexible working, potential for high income, using personal skills and interests.
Filling market gaps, personal customer service, quick decision making, local knowledge, niche specialisation.
Opportunity to expand, build reputation, develop expertise, create employment, potential high returns.
Small businesses face numerous challenges that can lead to failure. Understanding these helps explain why many small businesses don't survive their first few years.
Local Restaurant Challenge: Sarah opened a small restaurant with £20,000 savings. Despite good food, she struggled with cash flow during quiet winter months, couldn't afford marketing to compete with chain restaurants and worked 70-hour weeks. After 18 months, she had to close due to mounting debts and exhaustion - illustrating common small business challenges.
Paper 1 short answer questions on small businesses typically ask for definitions, examples, advantages/disadvantages, or explanations. Here's how to approach them effectively.
Define: Give clear, concise definitions with examples.
State: List points without detailed explanation.
Explain: Give reasons why something happens.
Identify: Pick out relevant points from information given.
These areas frequently appear in Paper 1 questions, so ensure you understand them thoroughly:
Read questions carefully: Look for command words and mark allocations. A 2-mark question needs 2 distinct points. Use business terminology: Show your knowledge by using correct terms like 'unlimited liability' rather than 'responsible for debts'. Give examples: Where possible, provide real business examples to support your answers. Structure answers clearly: Use bullet points or numbered lists for multiple-point answers.
Understanding what makes small businesses successful helps you answer evaluation questions and provides context for other topics.
Understanding customer needs, competitor analysis, identifying market gaps, testing demand before launching.
Adequate start-up capital, cash flow management, realistic financial forecasts, monitoring costs and revenues.
Excellent customer service, building relationships, responding to feedback, maintaining quality standards.
Governments recognise the importance of small businesses and provide various forms of support. This topic often appears in questions about external influences on business.
Types of Government Support:
Contemporary challenges facing small businesses include digital transformation, environmental concerns and changing customer expectations. These modern issues increasingly appear in exam questions.
Need for online presence, e-commerce capabilities, social media marketing, cybersecurity concerns, keeping up with technology changes while managing costs.
COVID-19 Impact on Small Businesses: The pandemic forced many small businesses to adapt rapidly. Local cafés had to offer takeaway and delivery services, retail shops needed online sales platforms and service businesses had to implement safety measures. Those that adapted quickly survived, while others struggled or closed permanently.