Fabulous Frets is an electric guitar tuition service owned by Tony Palmer as of 15 th April
2016. The business has a target market of children aged 5-16. The business is going to be
based in Barrowford. However, Tony will be travelling to student’s homes to provide them
with his service. The business will be operated as a Sole trader. This is because it is a new
start-up business that only requires an owner that is exclusive, this owner is Tony. As Tony
will be the only owner, he will have full control of the business and he will be his own boss.
This will allow Tony to develop the business how he wants without the input of anyone else.
This is the more suitable form of ownership for the business as it is a new business and
although it could be a partnership, Tony would have to find someone to be his business
partner. He would also have a 50% equity in the business which is much less compared to a
sole trader. Also, it would not be suitable for Tony to set the business up as a private limited
or public limited company due to the business being new and it is nowhere near large
enough. This might be an option in the future if Tony expanded the business substantially
and had several teachers in different locations but for now it is not appropriate. Therefore,
the business will operating as a sole trader.
As Fabulous Frets is a new business that is just getting off the ground, the most appropriate
source of finance must be used. Straight away it is apparent that sources of finance such as
retained profit and sale of assets would not be suitable since the business currently does
not have enough assets or a profit. This is the same for debt factoring as the business does
not currently have any outstanding bills or invoices because Tony Palmer is making sure
parents pay monthly in advance to avoid there being any debtors. Therefore, I have
concluded that the most appropriate source of finance would be a loan. This is because a
large sum of money can be barrowed within a short time period, even though interest must
be paid back on it. This is ideal for Fabulous Frets as it is a start-up business that requires
finance quickly to get the business off the ground. The other alternative source of finance
would be venture capital. This is where a venture capitalist would invest in Fabulous Frets
for a % equity in the business. This is not as appropriate for Fabulous Frets because it might
take a while before a venture capitalist is found and even then, they might want a large
stake in the business which means Tony will have less control in the business. Therefore, I
think that a loan is the most appropriate.
There are 5 main areas of expenditure as this business is forming. The first item is a car that
is found listed on the Autotrader website at around £6000 which is considerably low for a
car but is necessary for Tony to commute to his customers. This car is taxed for 6 months at
a price of £63 so that the start-up costs of this business can be kept to a minimum. One
other area of expenditure is £400 for insurance for this car. As Tony already has equipment,
not much is needed. However, two more areas of expenditure would be £20 for a music
stand and £40 for a music case to carry books. Although this may sound pricey, it is
necessary so that it lasts a long time and looks professional to Fabulous Frets’ customers.
These are the 5 main areas of expenditure when forming the business and they are kept to a
bare minimum price that still allows Tony to maintain quality and value for money for the
businesses operations.
There are 8 areas of regular expenditure that this business has. As mentioned above, the
most appropriate way for the business to raise finance is through a loan. I also mentioned
that interest must be paid back on that loan. Thus, one area of regular expenditure for
2016. The business has a target market of children aged 5-16. The business is going to be
based in Barrowford. However, Tony will be travelling to student’s homes to provide them
with his service. The business will be operated as a Sole trader. This is because it is a new
start-up business that only requires an owner that is exclusive, this owner is Tony. As Tony
will be the only owner, he will have full control of the business and he will be his own boss.
This will allow Tony to develop the business how he wants without the input of anyone else.
This is the more suitable form of ownership for the business as it is a new business and
although it could be a partnership, Tony would have to find someone to be his business
partner. He would also have a 50% equity in the business which is much less compared to a
sole trader. Also, it would not be suitable for Tony to set the business up as a private limited
or public limited company due to the business being new and it is nowhere near large
enough. This might be an option in the future if Tony expanded the business substantially
and had several teachers in different locations but for now it is not appropriate. Therefore,
the business will operating as a sole trader.
As Fabulous Frets is a new business that is just getting off the ground, the most appropriate
source of finance must be used. Straight away it is apparent that sources of finance such as
retained profit and sale of assets would not be suitable since the business currently does
not have enough assets or a profit. This is the same for debt factoring as the business does
not currently have any outstanding bills or invoices because Tony Palmer is making sure
parents pay monthly in advance to avoid there being any debtors. Therefore, I have
concluded that the most appropriate source of finance would be a loan. This is because a
large sum of money can be barrowed within a short time period, even though interest must
be paid back on it. This is ideal for Fabulous Frets as it is a start-up business that requires
finance quickly to get the business off the ground. The other alternative source of finance
would be venture capital. This is where a venture capitalist would invest in Fabulous Frets
for a % equity in the business. This is not as appropriate for Fabulous Frets because it might
take a while before a venture capitalist is found and even then, they might want a large
stake in the business which means Tony will have less control in the business. Therefore, I
think that a loan is the most appropriate.
There are 5 main areas of expenditure as this business is forming. The first item is a car that
is found listed on the Autotrader website at around £6000 which is considerably low for a
car but is necessary for Tony to commute to his customers. This car is taxed for 6 months at
a price of £63 so that the start-up costs of this business can be kept to a minimum. One
other area of expenditure is £400 for insurance for this car. As Tony already has equipment,
not much is needed. However, two more areas of expenditure would be £20 for a music
stand and £40 for a music case to carry books. Although this may sound pricey, it is
necessary so that it lasts a long time and looks professional to Fabulous Frets’ customers.
These are the 5 main areas of expenditure when forming the business and they are kept to a
bare minimum price that still allows Tony to maintain quality and value for money for the
businesses operations.
There are 8 areas of regular expenditure that this business has. As mentioned above, the
most appropriate way for the business to raise finance is through a loan. I also mentioned
that interest must be paid back on that loan. Thus, one area of regular expenditure for
