Business Studies · May / June 2025 · Paper 12 · Question 3

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Hal wants to be a successful entrepreneur. He plans to leave his job to start up a bakery. The bakery will operate in the private sector. The business will have many stakeholder groups. Hal has 3 been told it is important for a new business to select an appropriate source of start-up capital. He also knows new businesses are at a greater risk of failure.

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3(a)[2]
Define ‘private sector’. Award 2 marks for a full definition. Award 1 mark for a partial definition.
(When business activities are) owned by individuals [2]
(The part of the economy that is) controlled by individuals and companies for profit [2]
Partial definition e.g.
Not government/state controlled [1]
Run/controlled by individuals [1]
2
3(b)[2]
Identify two reasons why new businesses are at a greater risk of failure. Award 1 mark for each reason (max 2). Points might include:
Lack of finance/(start-up) capital
Cash flow problems/lack of liquidity
Level of competition/market already saturated
Lack/low level of customers/demand/sales/lack of customer loyalty
Poor planning/no business plan/lack of objectives
Lack of (managerial/business) experience/skills
Inadequate/no market research/poor marketing
No/low reputation/brand awareness/brand image Other appropriate responses should be credited. 2 Only award the first two responses given.
3(c)[4]
Identify four stakeholder groups a business might have. Award 1 mark for each stakeholder group (max 4). Points might include:
Employees/workers
Managers/directors
Owners/shareholders
Suppliers
Lenders/banks
Government
Local community
Customers Other appropriate responses should be credited. 4 Only award the first four responses given.
3(d)[6]
Explain two characteristics Hal will need to become a successful entrepreneur. Award 1 mark for identification of each relevant characteristic (max 2). Award 1 mark for each relevant reference to this business (max 2). Award 1 mark for each relevant explanation (max 2). Points might include:
Risk-taking [k] especially as plans to leave his job [app] because the owner may lose their investment [an]
Hard-working [k] as must be ready to do everything on own/as may have to work long hours [an] to set up his bakery [app]
Creative [k] as having (new) ideas can help gain customers [an] for his private sector business [app]
Effective communicator/persuasive [k] with his stakeholders [app] as may need to convince its banks/suppliers/customers to lend/provide/buy goods [an]
Perseverance/determination/resilience/self-motivated [k] so needs to be prepared to keep going when faced with problems [an]
Optimistic [k] so always think they will/can succeed [an]
(Self-) confident [k] so convince people/banks to invest [an]
Independent [k] as be able to work without any help [an]
Innovative [k] Other appropriate responses should be credited. 6 To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words are likely to be appropriate for this question:
Leave his job
Start-up/new business
Bakery or examples e.g. cakes, recipes
Private sector
Stakeholder (groups) Other appropriate examples can be credited. To access knowledge must identify a recognised characteristic.
3(e)[6]
Do you think a bank loan is the best source of start-up capital for a new business? Justify your answer. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to whether a bank loan is the best source of start-up capital for a new business. Points might include: Bank loan
Quick to arrange [k] so does not delay plans/so can pay bills on time [an]
Must pay interest [k] increasing costs/expenses/cash outflows [an]
Must repay [k]
Able to obtain large/full amount [k]
May need security/collateral [k] which may not be available for a start-up / so personal assets may be at risk [an] Other methods could include:
Own savings [k] as no need to repay [an]
Borrow from friends/family [k] as may give long time to repay [an]
Overdraft [k] can arrange quickly/only pay interest when used [an]
Government grant [k] which has no interest [an]
Crowdfunding [k] but no guarantee can raise full amount [an] Other appropriate responses should be credited. 6 This is a general question so there are no marks for application. Some points analysis can be advantages and/or disadvantages for different sources but only award the same point once. For evaluation to be awarded justification will usually follow on from relevant analysis of points. Guidance Justification might include: One advantage of a bank loan is it is quick to arrange [k] so does not delay plans/ability to pay bills straightaway [an]. Another source is own savings [k] because there is no need to repay [an]. A bank loan is the best source because speed means they do not miss out on the opportunity whereas it can take time to build up enough savings [eval], and by the time they do, there may be insufficient demand [eval].

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