Introduction: their employers to counteract rising taxes/energy/food

Introduction:

National effect:

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Nationally people have to pay a certain rate of tax. In
an ideal world, people would receive an annual pay rise from their employers to
counteract rising taxes/energy/food costs e.g. cost of living expenses. When
this doesn’t happen e.g. When there is or has been a recession, this factor
effects the amount of money the average person has in his/her pocket therefore,
businesses sales and profits fall.  Few
people achieved pay rises and with fuel and energy prices rising, people have
less ‘pocket money’ which effects sales and profits. They would show a drop in
money. National factors are, therefore, very important when considering starting
up a business.

Political
effect:

The main political parties in the UK are Conservative,
Labour and Lib Dem (Liberal Democrat). A coalition government is formed when
there isn’t a single party that has gained a majority of the voting. This was
the case when the Conservatives and Lib Dem party went into a coalition
government in a previous election.1 Coalitions
are tricky in that two sides of an argument need to be considered before policy
can be established.  A compromise has to
be made and this can take time.  This can
lead to political instability/unrest. 
The government could be considered weak. 
A weak government and therefore, the country it governs doesn’t send out
a good message to businesses in that country or other countries wanting to
invest in it.  Meaning less investment in
the country which effects employment and rates of pay (see above).

Government
loans and Grants:

A government loan is a loan insured or backed
by the government. It is decided by the Department of Veterans Affairs, Rural
Housing Service and Federal Housing Administration. A person may use one of
these when buying their first house or car, but it means that you will have to
pay back the loan. You may need to pay it back year by year. This means after a
specified amount of time you need to gradually pay back the money you were
loaned. This could be used in my business because I could use loans to start up
my business and once the business is established and I have a suitable income,
then I can pay back the government. I would use the loan to buy equipment,
rental of the property and advertising.

TAXATION:

Income
tax: Income tax is a tax that you pay through your income from
your business/job. It is deducted from an employee’s salary leading to less
‘take home’ pay2
This can effect a start-up business because less ‘take home’ pay means that
buyers don’t have much money to spend meaning less profit for the business. If
parents have a high income tax, less ‘take home’ money, they won’t be able to
afford to send their children to the activities. This means we would get less
profit

 

 

BAND

TAXABLE INCOME

TAX RATE

Personal Allowance

Up 
to £11,000

0%

Basic Rate

£11,001 to £43,000

20%

Higher Rate

£43,001 to £150,000

40%

Additional Rate

Over £150,000

45%

3

National
Insurance: These
are fees that are paid by both the employee and the employer.  This allows people state benefits according to
whether or not the worker is employed, self-employed or carrying out voluntary
contributions to charity etc.4
These benefits include state pensions, jobseekers allowance and carer’s
allowance. For a worker it is taken out of their wages and this could also lead
to less take home money for a buyers to spend. My customers won’t be able to
spend money on my business which would mean my business would have less profit.
This could be a problem for my business there could be higher costs also leading
to less profit.

 

Category letter

£112 to £155 a
week (£486 to £672 a month)

£155.01 to £827
a week (£672.01 to £3,583 a month)

Over £827 a
week (£3,583 a month)

A

0%

12%

2%

B

0%

5.85%

2%

C

N/A

N/A

N/A

H

0%

12%

2%

J

0%

2%

2%

M

0%

12%

2%

Z

0%

2%

2%

5

Value
Added Tax (VAT): VAT is a tax put on the goods and services that
have been registered as a VAT business. When these businesses buy goods or
services they can reclaim the VAT they have paid.6  WVAT is added to goods that we buy – if VAT is
increased, the cost of what we buy increases. VAT is not chargeable on some goods
e.g. cold take-away food or nuts in their shells! This could affect a business
because people would spend more money which would lead to lots of income in the
business. If the rate of V.A.T rises, then items will be more expensive to buy.
In my business, I would need to consider this so I can plan how much I will
need to spend and save. The activity would be more expensive run and would lead
to higher costs in equipment, rent etc. which will be hard to pay if we don’t
have a decent profit to begin with.

Rate

% of VAT

What the rate
applies to

Standard

20%

Most goods and services

Reduced rate

5%

Some goods and services, e.g. children’s car
seats and home energy

Zero rate

0%

Zero-rated goods and services, e.g. most food and
children’s clothes

7

Corporation
Tax: This is based on a company’s profit/revenue. Companies
will often keep less of their profits due to a tax rise meaning this leads to
less investment in a company. People may also be at risk of losing their jobs.
It is based on profits and capital gains made by companies. Due to the fact
that not as much profit is kept. My business would not need to pay corporation tax
for the first year because we will be using government loans to start up the
business as we won’t be making a high profit. After the first year when we are
established more as a business we would pay the tax.

Rate

2016

2015

2014

2013

Small profits rate
(companies with profits under £300,000)

20%

20%

Main rate
(companies with profits over £300,000)

21%

23%

Main rate (all
profits except ring fence profits)

20%

20%

Marginal
Relief lower limit

£300,000

£300,000

Marginal Relief
upper limit

£1,500,000

£1,500,000

Standard fraction

1/400

3/400

Special rate for
unit trusts and open-ended
investment companies

20%

20%

20%

20%

8

How
the economy can affect a start-up business?

 

What is an
economy? An
economy is the system of how money is made and
used in different coutries. A region’s economy is connected with things like how many
goods and services are produced and how much money people can spend on these
things.

 

INDICATORS:

Level
of employment:  Many people will
work full-time and the money they receive for this work will allow them to
purchase goods and services.  If there are high levels of employment in a
country, it can have a good affect on start-up business because people will
have higher levels of disposable income which normally encourages consumer
spending possibly on your start-up business. We would have employees from the
garden centre helping us. If the parents either don’t work full time or do
volunteering jobs, then they will struggle to send their child to the
activities. So we would need to consider everyone in our target audience. We
could also take advantage of the unemployment because we could get cheap labour
as there will be people looking for work.

 

Number
(thousands)

Change on Feb to
Apr 2016

Change on May to
Jul 2015

Headline Rate
(%)

Change on Feb to
Apr 2016

Change on May to
Jul 2015

 

Employed

31,767

174

559

 

 

 

Aged 16 to 64

30,577

167

534

74.5

0.3

1.0

Aged 65 and over

1,190

7

25

 

 

 

Unemployed

1,632

-39

-190

4.9

-0.1

-0.6

Aged 16 to 64

1,613

-36

-184

 

 

 

Aged 65 and over

19

-3

-5

 

 

 

Inactive

19,045

-44

-7

 

 

 

Aged 16 to 64

8,832

-92

-195

21.5

-0.2

-0.6

Aged 65 and over

10,214

48

188

 

 

 

Source: Office for National Statistics

 

 

Inflation:
A
period of low inflation means that prices don’t go up by a huge amount. By
keeping prices low, consumers are encouraged to spend.  This would have a positive effect on a
start-up business because the consumers will be taking advantage of the low
prices. This will affect us because if inflation increased, the cost will
increase. The activities will be more expensive to run.

Year

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

2016

0.2%

0.3%

0.5%

0.3%

0.3%

0.4%

0.6%

0.6%

9

Exchange
Rates: The
exchange rate is the relative price of two currencies. It states the amount of
units in one currency you need to buy something in another. For example, $0.95
converts to 1 euro.10
This could affect a start-up business because what may be good value for money
in one country may not be so in another. 
This could lead to less profit/revenue overseas because of the
differential in exchange rate. This won’t affect my business as we will not be buying
or selling a product directly abroad. Maybe the suppliers of equipment would,
but not our business directly.

11

 

Interest
Rates:  An annual
rate which is charged to borrowers of money or paid to savers of money.  If interest rates are high and as a start-up
business you need to borrow money from the bank, this can be very expensive,
meaning that your business needs to do well right from the start.  If you borrow money, you really want to pay
it back as soon as possible because the longer you have it, the more additional
money you are paying to the lender as interest. My business would probably
borrow money to start up the business and once the business is established and
has a suitable income then we would begin to pay it back. If the interest rates
however go up, then it will be harder and more expensive to pay off.

 

 

 

 

 

Local
factors that can affect a start-up business

Premises: This is a building/site occupied by a business.  Premises may be used to develop a product or
to sell a product. There is a level of rent that would need to be paid by the
company for the use of these premises, therefore, the company would need to be
making a high level of revenue/profit to pay for it in addition to their other
costs e.g. Staff wages.  Without a
business premises it can be difficult to gain awareness of the business
however, the internet can help with this. The premises we would be using is the
garden centre nature trail because there is space for us to use and, during
week days, it is suitable to use.

Rent: £25,000 Per Annum

Size: 1126 sq ft105 sqm

A prominent A1 unit well-located on Bromley’s
popular East Street; close to Bromley North Station

                                                                                                                          12

Year

25
and over

21
to 24

18
to 20

Under
18

Apprentice

April
2016 (Current rate)

£7.20

£6.70

£5.30

£3.87

£3.30

 

Staff: Staff are
those employed by the business who make or sell a product.  As an employer you will pay your staff
wages.  Obviously, the higher the wages,
less profit goes into the business. 
Staff numbers should ideally be kept to a minimum to keep wage costs
low. The staff for my business would be people who work at the garden centre,
so we wouldn’t have to pay them as it will be a partnership

13 Table shows
National Minimum Wage

 

 

 

City: Bromley, England: London City Median Salary by Job

Job

Salary Data 

£0

£14K

£28K

£42K

Teaching
Assistant (TA)
8 salaries

£12,370

 

 

 

 

Retail Store
Manager
4 salaries

£22,750

 

Database
Administrator (DBA)
3 salaries

£39,305

 

Administrative
Assistant
3 salaries

£16,000

 

Legal
Secretary
2 salaries

£20,952

 

Network
Manager
2 salaries

£25,500

 

Customer
Service Assistant
2 salaries

£10,500

14

 

Equipment:
These
are items that you will need to utilise to carry out operations in your
business to gain profit. This could include machines, tools or even vehicles.
This could affect a business in a positive and a negative way. It can be good
in that it helps the employees carry out their jobs easily and efficiently,
however, it can be also be a negative because the equipment can be expensive,
require maintenance and updating. In my business, I would go to the local
garden centres e.g. Cooling’s, Polhill, Wyevale and retail shops e.g. Tesco’s,
Argos to buy the equipment. I wouldn’t need to spend money on shipping as I can
get everything locally.

Suppliers
of goods and materials:  Suppliers are
those companies that provide a business with the goods/raw materials required
to make or deliver your product. 
Suppliers obviously charge you as a business for these goods and
materials.  Arrangements have to be made
with them that you will pay an agreed amount of money.  Suppliers can, after they have fulfilled a
first order, increase the costs of these goods and services and it is up to you
as a business to negotiate a price that is agreeable to you both.  Other suppliers can also be considered
however, you will need to ensure that if you chose another supplier, that the
quality of what they are providing is equal to or better than the goods ordered
from the previous supplier. The supplier of some equipment would come from the
garden centre where we would be based. We would also take advantage of other
local garden centres e.g. Cooling’s, Polhill etc. to get equipment.

Customers:
Customers
are people who buy a business’s goods and services.  Business’s love customers because the more
money they spend or give to the company, the more profit the business will
make.  It is important to keep the
customer happy at all times.  A good
customer experience is a great marketing tool for you.  If a customer is very satisfied, he/she is
likely to recommend your business to a friend or several friends!  This type of free advertising is invaluable
because it costs your business nothing!! For my business my target audience
would be younger children in the local area so I would look to catch their attention. It would be aimed at
Middle Income children. The parents with a low income won’t be able to pay the
fee to send their child to the activities. Due the fact that the Bromley has a
higher average income then the UK overall, it is a good place to set up my
business as people are genuinely wealthy.

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