IGCSE, A Level Business Student Forum

Q2 Analyse the disadvantages of a sole trader. [6]

Possible Structure:
[KN]
[AN]
[AN+]

[KN]
[AN]
[AN+]

(kn) bears all the loss herself
(an) the owner makes all the investment and the profit might not be as expected
(an+) hence all his invest goes to waste
(kn) stress
(an)he would have to make all the decisions by herself which could be wrong for the business
(an+) making a loss and putting mores stress on the owner

[KN] limited growth
[AN] it would be difficult for the sole trader to enter new market and start hiring employees which makes to difficult for a single person to manage.
[AN+] which reduces the output as business is likely to shut down

[KN] Loss of the business
[AN] Profits which are sole traders are expecting may not be up to the mark which reduces the confident of the owner.
[AN+] Thus leading to stress and investments may decline.

[KN] Business matters cannot be discussed.
[AN] There is only one owner of the business so there is no one available to discuss the matters of the business.
[AN+] This would lead losses in the business.
[KN] Debts cannot be paid.
[AN] Sole trader cannot pay large amount of debts as there is no support from the back.
[AN+] This leads to selling of possessions in order to pay the debts.

[KN] you have limited resources and capital to wokr with
[AN] this can put a limit to their growth or expansion
[AN+] it may also limit the ability to invest in technology or hire additional staff.

[KN] limited innovation and ideas
[AN] this because of lack of surrounding ideas from for e.g partners or stakeholders
[AN+] this leads to a quicker decline of their business as there is limited innovation

[KN] Limited expertise and not skilled in different areas
[AN] Sole traders often have to wear multiple hats and handle various aspects of their business, from marketing and sales to finance and operations.
[AN+] This can be challenging, especially if the owner lacks expertise in certain areas. Limited access to specialized skills and knowledge can hinder the business's overall performance and growth.

[KN] Difficulty in long term succession
[AN] Planning for the long-term continuity of the business can be challenging for sole traders.
[AN+] In the absence of partners or a clear succession plan, the business's future may be uncertain if the owner decides to retire, sell the business, or faces unexpected circumstances. Without a well-defined transition strategy, the business's value and customer relationships may be at risk, making it more challenging to ensure a seamless transfer of ownership or continued success.

Syed Raza wrote: ↑Tue Oct 31, 2023 8:42 pm [KN] limited growth
[AN] it would be difficult for the sole trader to enter new market and start hiring employees which makes to difficult for a single person to manage.
[AN+] which reduces the output as business is likely to shut down

[KN] Loss of the business
[AN] Profits which are sole traders are expecting may not be up to the mark which reduces the confident of the owner.
[AN+] Thus leading to stress and investments may decline.

The second analysis point is grammatically incorrect. Please improve it.

[KN] Lack of resources.
[AN] Sole traders often face an issue of lack of financial resources to be spent on business.
[AN+] Businesses often go short on capital due to this reason and often face a shortage of capital.

[KN] Extra working hours.
[AN] Sole traders have to work multiple extra hours to make sure business is going on the right track.
[AN+] This can over-exert them leading to health issues of the owner and their lack of focus on the business.

[KN]Huge responsibility to manage the business alone.
[AN]Sole trade has to bare with all problems by himself and there is no one to share the risk of the business
[AN+]thus this will reduce the productivity of owner and there will be lack of focus on the business'
[KN]Sole trader may find it difficult to expand the business when reach certain level'
[AN]Sole trader will find difficult to control it bcz of limited capital as there is a huge financial responsibility on a sole trader.
[AN]this lead to decline of the business as it would be hard to control it'

[kn] a sole trader is personally reliable for all the debts
[an] therefore if the business fails they will have to use their own personal assets to seize off the debts
[an+] putting the sole trader at a lot of risk
[kn] sole traders may lack experience or expertise in many areas
[an] they may not have access to the same resources as larger business may
[an+] due to such bridges and gaps they may not be able to properly respond to changes in spending patterns leading to a business decline.

(Kn)unlimited liability (an) this means the owner can and will be held responsible for any debt of the business even if it fails(an+) this can be a high risk for the owner as he will be forced to pay back through any means necessary

(Kn) more stress compared to other forms of businesses (an) since a sole trader has only one owner he/she can’t discuss or take anyone else’s help and will have to make stressful decisions through his/her own intuition (an+) being responsible for all such decisions and management may become over burdening for one person

[KN] work load
{AN] being an sole trader means that all the work on the business is your responsibility
[AN+] this would lead to high work load on one person which makes them unmotivated

[KN] loss of the business
[AN] if the business goes into an loss it would be only be covered by one person
[AN+] this creates an higher risk on starting up the business

[KN] fewer resources and capital
[AN] Due to the owner not selling the share to shareholders there would be a lack of investment in the business
[AN+] Thus due to a lack of investment the business loses out on achieving economies of scale

[KN] Extra working hours.
[AN] Sole traders have to work multiple extra hours to make sure business is going on the right track.
[AN+] This can over-exert them leading to health issues of the owner and their lack of focus on the business.

[KN] Work load
[AN] all the responsibility of the business is on one person
[AN+] thus due to over load work might delayed which can result in a decrease in productivity

[KN] Less investment which means less resources
[AN] due to less resources there would be less output produce
[AN+] less supply of goods so less profit.

[KN] Extra working hours.
[AN] Sole traders may have to work for extra time in order to meet all dues which may result in slower decision making.
[AN+] Thus this may also lead to frustration and mental health being compromised as there will be nobody with whom workload can be shared..

[KN] Sole responsibility.
[AN] Any ineffective decision taken and implemented, the sole trader will solely responsible for it as it can lead to loss of potential customers.
[AN+] Thus this will also result in loss of brand identity and market share.