Why Lena left her job: Before the bakery, Lena worked nights at a large bread factory. Steady pay, fixed shifts, and someone else decided what got baked.
She left to open her own shop. The reasons she gives are the reasons most people give for starting a business: the rewards go to the person who starts it.
People give up a steady wage to start a business. They do it because what the business earns, and how it is run, belongs to them. Four rewards come up again and again.
What the owner gets
Being your own boss
Lena decides what to bake, when to open and who to hire. Nobody at the factory let her try a new loaf; now nobody has to (independence).
Keeping the reward
At the factory Lena earned the same wage however well the bread sold. Now what is left after the costs are paid (the profit) is hers.
Choosing her hours
She bakes from five and closes at two, so she is home when her daughter gets in. She chose those hours herself (flexibility).
Doing what she is good at
Lena has baked since she was twelve. The business turns a skill and a passion into a living, and that satisfaction is a reward on its own.
The two bakers: Lena's shop now employs two bakers who live nearby and were looking for work.
A new business creates jobs for other people as well as for its owner. For many founders that is part of the pride: the town has two jobs it did not have before.
| Financial rewards | Personal rewards | |
|---|---|---|
| What they are | Money the owner keeps | Everything that is not money |
| At Lena's | The profit is hers. A shop that grows is worth more, and she could sell it one day. | Her own boss, her own hours, a living from baking, two jobs created. |
| The test | Could you count it in currency? | Would she still value it if it paid the same as the factory? |
Keep the two lists apart. Questions ask for personal opportunities or for financial ones, and an answer that gives profit when asked for a personal reward has picked from the wrong list.
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Liking baking was not enough on its own. Lena opened where she did because her side of town had no bakery: four thousand people, one supermarket, and bread that arrived in a lorry at dawn already two days old.
A gap in the market: A group of customers wanted something, and nobody was selling it to them. That is a gap in the market, and it is what a new business is built on.
Spotting one is a business opportunity: a chance to sell something people want and cannot yet buy.
Where gaps come from
- A place nobody serves. No bakery on Lena's side of town; no pharmacy on a new housing estate.
- A change in what people want. Sourdough became fashionable and the supermarket did not stock it.
- A new technology. An ordering app lets a one-shop bakery take orders overnight, which only chains could do before.
- Customers unhappy with what exists. Two-day-old bread from a lorry is a gap waiting to be filled.
First in
nobody else sells it
- Lena opens; there is nowhere else nearby to buy fresh bread
- Every customer who wants it comes to her
Habits form
the name is known
- Saturday morning means Lena's
- She learns what sells and drops what does not
Rivals arrive late
the head start holds
- A second bakery opens two years on
- It must win customers who already have a favourite
The head start a business gets from being the first to sell something is called first-mover advantage. The first mover is known before anyone else, wins loyal customers while there is no rival, and sets the standard later shops are judged against. A second mover has to take customers away; the first mover only had to attract them.
The gap has to be real: A gap is only an opportunity if enough people want the thing and will pay for it. Lena counted the houses and asked her neighbours what they would buy before she signed the lease.
Nobody sells snow shovels in the desert. That is not a gap.
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What the factory could not do: At the factory, Lena never met the person who ate the bread. In her own shop she knows that Mr Reyes wants his loaf sliced thick and that the school fair is on Friday.
A small new business is close to its customers. That closeness is an advantage a large business cannot buy.
Treating each customer as a person rather than as a queue is called personalised service. Lena pipes a name on a cake, keeps a loaf back for a regular and changes a recipe when someone asks. A chain with three hundred shops cannot do that for every customer, so the customers who value it come to her.
Personal service
- Customers are known by name and get what they ask for.
- They pay a little more for it, and they come back.
Quick decisions
- Lena decides at six in the morning to bake extra for the fair.
- Nobody has to sign it off. A large rival needs a meeting.
Ideas from the counter
- The Saturday class started because three customers asked for it.
- Being close means hearing what people want before anyone else does.
Friday's fair: On Thursday a teacher mentions the school fair. On Friday there are two hundred extra rolls on the shelf and a sign in the window.
The supermarket's bread order was fixed a week ago at head office. Small means fast.
All three advantages come from the same fact: in a small new business the owner is at the counter. The person who decides is the person who listens.
How this comes up: Two shapes. Short ones: state two personal (or two financial) opportunities of starting a business, or define first-mover advantage, for two marks.
And the four-marker: explain one advantage and one disadvantage for a named business of being small. Two marks for each half, and the second mark of each half only comes when the point is tied to the business in the case.
The four-mark pattern
- Name the advantage. A small business can give personalised service.
- Show the business doing it. Lena knows her regulars by name and bakes extra for the school fair the day after she hears about it; the supermarket cannot.
- Name the disadvantage. A small business has fewer resources than a large one.
- Show the business living with it. Lena cannot afford the supermarket's advertising, and with two ovens she cannot take a large order.
The trap: an advantage with no business in it: 'Small businesses give personalised service' is true of every small business on earth. It earns the first mark and stops there.
The second mark needs the business in the question doing it: what does this business do for its customers that a large rival cannot? One sentence with a name in it.
Explain one advantage and one disadvantage for Lena's bakery of being a small new business.
Model answer plan
See the answer broken into clear points, with guidance on how each point earns marks.