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Business Studies · May / June 2026 · Paper 11 · Question 1

0450

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Peter wants to start up a small business as a photographer who takes photographs at weddings. He has been told that there is government support available for new businesses. Peter will operate 1 his business as a sole trader. He is considering using crowdfunding as a source of finance. Peter knows that many businesses fail.

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  • 1(a)[2]

    Identify two ways the size of a business can be measured. Award one mark per way (max 2). Points might include:

    (Number of) employees/size of workforce / (amount of) labour
    Value of output / value of sales / revenue/turnover
    Number of customers / numbers of sales / volume of output
    (Value of) capital employed / value of statement of financial position
    Market share
    (Number of) outlets/shops/factories Other appropriate responses should be credited. 2 Notes:
    Can accept ‘sales’ or ‘output’ if no specific reference to value or volume. Do not award:
    Profit
    Value of assets
    How much business is worth

  • 1(b)[2]

    Identify two reasons why governments support new businesses. Award one mark per reason (max 2). Points might include:

    Reduce unemployment/create jobs
    Increase competition
    Increase output / increase GDP / economic growth
    Benefit society/improve environment
    Small businesses can grow
    Generate taxation/taxes
    Motivate/encourage entrepreneurs/innovation
    Reduce imports / increase export
    Provide a variety of goods/services/can provide specialist goods
    Some start-up/smaller businesses often have lower costs than larger businesses and can pass these onto consumers through lower prices
    Help attract investors/businesses from other countries. Other appropriate responses should be credited. 2 Only award the first two responses given. Do not award:
    Examples of government support
    Improve/develop economy
    Improve productivity

  • 1(c)[4]

    Identify four reasons why a business might fail. Award one mark per reason (max 4). Points might include:

    Poor planning / lack of objectives / poor business plan
    Cash flow problems / lack of working capital/liquidity issues
    High/rising costs/persistent loss/not meeting break even
    Poor management (skills) / lack experience / lack of knowledge/poor decision making/co-ordination
    Overexpansion / business expands too quickly
    Lack of demand/sales / (too much) competition / no customer loyalty
    Poor marketing/low recognition
    Lack/poor market research
    Economic influences / changes in business environment e.g. inflation/ recession/exchange rate
    Failure to invest in new technologies/failure to adapt to changes in the market
    Lack of finance/capital
    Poor choice of location
    Bad reputation / poor brand image Other appropriate responses should be credited. 4 Only award the first four responses given. Do not award:
    Lack of efficiency in production
    Low quality/bad products
    No profit
    Communication problems

  • 1(d)[6]

    Explain one advantage and one disadvantage to Peter of using crowdfunding as a source of finance. Award 1 mark for identification of each relevant advantage/disadvantage (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: Advantages:

    No/low interest charged [k] so does not increase cash outflows [an] for this sole trader [app]
    Can raise a large amount of finance [k]
    Can test public reaction [k] and decide whether to start the business [an]
    Builds customer relationship/create brand awareness [k] which could lead to more customers [an] for this small business [app]
    May not need to repay/permanent [k] so does not add to its liabilities/debt [an]
    No collateral/security/credit history needed [k]
    May get advice/feedback [k]
    Fast way to raise finance [k]
    Maybe available when other sources of finance are not available [k] Disadvantages:
    No guarantee can raise full amount / may not raise sufficient funds / not reliable source [k] must repay everyone if cannot raise full amount /so may need to find another source [an] for this new business [app]
    Crowdfunding site may reject the proposal [k] therefore the owner’s time has been wasted [an]
    Competitors may learn more about your business before launch [k] and use Peter’s ideas [an] for being a photographer [app]
    A lot of paperwork [k]
    Slow to organise [k] because media interest / publicity needs to be generated to increase chance of success [an]
    Site may take a percentage of the funds raised [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:
    Start-up/new business
    Small (business)
    Weddings
    Photographer or related words
    Sole trader
    Government support
    Service Other appropriate examples can be credited. Notes:
    Some points could be awarded as [k] or [an] but only award once. Do not award:
    Points about other sources of finance
    Mirror arguments such as: fast method (advantage) and slow method (disadvantage).

  • 1(e)[6]

    Do you think the advantages of being a sole trader are greater than the disadvantages? 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 justified decision about whether the advantages of being a sole trader are greater than the disadvantages. Points might include: Advantages:

    Keep all the profit [k] so owner has an incentive to work harder / so can decide how to invest it [an]
    Quick decision-making [k] so may be more responsive to changes in demand [an]
    Complete control/own boss/all decisions[k]so less chance for disagreement/ no need to consult anyone before making decisions [an]
    Has freedom to choose own holidays/work hours [k] to gain a better work/life balance [an]
    Easy to set up/few legal requirements [k]
    Financial information is kept private [k]
    Maintains close contact with customers [k] Disadvantages:
    Unlimited liability [k] so personal assets are at risk (if the business is unable to pay its debts) [an]
    Limited/less access to finance [k] which could limit expansion [an]
    No one to share workload/responsibility/control with [k] so less time to specialise on certain activities [an]
    Few ideas / less knowledge/experience [k] which may restrict its ability to compete with competitors [an]
    Carry all the risks/potential loss/costs [k]
    Unincorporated/ no separate (legal) identity [k]
    Lack of continuity [k] Other appropriate responses should be credited. 6 This is a generic question so there are no marks for application. To access evaluation must refer to an advantage and disadvantage. For evaluation to be awarded justification will usually follow on from relevant analysis of points. Notes:
    Some points can be [k] or [an] but only award once. Do not award:
    Definitions
    Points about other types of business organisation
    Mirror arguments e.g. complete control as advantage and all the responsibility as the disadvantage Guidance Justification might include: One advantage is the owner can keep all the profit [k] so has an incentive to work harder [an]. However, having less access to finance [k] could limit expansion [an]. The disadvantages are greater, because if the business misses out on the opportunity to expand, this could result in less potential sales/revenue [eval] and if costs remain the same, there could be less potential profit. [eval]
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