Download Appendix C

Functions of a
Business
1. Production

Production is the making of a good and or service.
The term production can be used to
mean/include:

Land: The physical space in which the product will be
produced/sold

Labour: The workforce that will make the product

Capital: The money/equipment/machinery used for production

Information: the information and tracking necessary for
production
Costs of production
For this project your production costs will
include:
1. Bill of materials costs (provided)
2. Equipment list (researched)
1. Production
Explain below how you will use each of these factors of production for
your project:
Land
Labour
Capital
Information
2. Human resources

The people involved in the business

Can be internal


Permanent employees for your company
Can be external

People brought in and paid to work on specific
projects
Cost of Human Reources


Since you are the owner of your business,
you will be the only employee
Questions for you to answer about your
business:
-
-
What skills for this business do you have?
What skills for this business do you need to
improve?
In what ways will you have to be flexible?
3. Marketing

The activities a business does in order to convince people to
sell a product. In this project this could include:

Personal selling: one on one communication to promote or sell a
product



In your opinion, what are two advantages to selling things to one
customer at a time?
In your opinion, what are two disadvantages to selling things to one
customer at a time?
Advertising



Mass advertising through the use of a medium (such as posters,
t.v. adds, the internet, magazines, newspapers, radio, outdoor
advertising)
In your opinion, what are two advantages to selling things this way?
In your opinion, what are two disadvantages to selling things this
way?
Costs of marketing
Your marketing will have four components:
- Creation of a name for your business (to be included on
the reports that follow)
- Creation of a prototype
- Creation of a sign
- Creation of business cards to hand out to friends/family
- Using the website www.staplescopyandprint.ca,
come up with and print off estimates for the cost of a
colour sign for your business (size 24 X 36), as well as
the cost of 100 one sided black & white business cards
Costs of marketing
Name for business:
Cost for poster (include
link in box to the right)
Cost for business cards
(include link in box to the
right)
4. Financing

Obtaining money to start and continue to
operate the business



Initially done through either debt or equity
financing
If successful, business can continue to operate
using operating revenue (revenue from sales of
goods/services)
There are two general ways of finding the
financing to start up a business
Debt Financing


Debt Financing occurs when a person is
loaned money to complete a task (or assist
in a business). The person lending the
money is then given the money back either
over time or at the end of a period with
interest
Interest is extra money paid for the use of
money (the cost of borrowing)
Debt Financing

Example





Todd wants to buy a car
He borrows $10,000 from the bank to buy the car
The bank charges a yearly interest rate of 5%
At the end of the year, how much will he have to pay back
to the bank? Answer below
In this case, the principal is the amount originally loaned
out ($10,000)
Answer:
Debt Financing

Advantages



You do not give up ownership in your business
You can do whatever you want with the money
Disadvantages

You must pay back the loan with interest
Equity Financing


Equity Financing occurs when a business
allows investors to become co-owners in a
business
The new owner may or may not have say in
what happens to the business, but MUST
have a share of the profits and/or losses of
the business
Equity Financing

Advantages



You do not have to pay back the new owner’s
investment
You don’t have to pay any interest
Disadvantages


You are giving up some ownership and say in the
business
You are giving up a share of the profits
Potential Financing Costs

There are two options for this business:

The bank will offer you a loan (debt financing)



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Anywhere between $500 and $5000
You choose amount loaned
Interest rate is 8% annual (8% / 12 for each month) Principal is due at
the end of August.
A friend, Dave Smith, has offered to be a partner (equity financing)


Will give you $2000 to become a 50% partner in the business
The friend does not want to work for the business at all, but must share
50-50 in projected profit
Financing advtanges and
disadvantages

Complete the chart to analyze the two options for
financing
Option
Debt financing
from the bank
Equity financing
from a friend
Advantage
Disadvantage