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 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．（b）Identify two reasons why new businesses are at a greater risk of failure． Reason 1： Reason 2：

Business

IGCSE&ALevel

CAIE

Exam No：0450_s25_qp_12 Year：2025 Question No：3(b)

Answer:

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.

Knowledge points:

1.3.1.1. Characteristics of successful entrepreneurs

1.3.1.2. Contents of a business plan and how business plans assist entrepreneurs

1.3.1.3. Why and how governments support business start-ups, e.g. grants, training schemes

1.3.2.1. Methods of measuring business size, e.g. number of people employed, value of output, capital employed (profit is not a method of measuring business size)

1.3.2.2. Limitations of methods of measuring business size

1.3.3.1. Why the owners of a business may want to expand the business

1.3.3.2. Different ways in which businesses can grow, e.g. internal/external

1.3.3.3. Problems linked to business growth and how these might be overcome

1.3.3.4. Why some businesses remain small

1.3.4.1. Causes of business failure, e.g. lack of management skills, changes in the business environment, liquidity problems

Answer:

Knowledge points:

Solution:

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