How to Start a Business - Term Paper Example

How to Start a Business Introduction Having a great business idea is such an important aspect of becoming an entrepreneur and launching your own venture, and people become exited of the idea of putting a business together. It is important to start by asking questions that cover a range of different issues. The first question an individual should ask is whether he/she is prepared in terms of hard work, long days that he/she will be working. Are there the support structures available; supports of family and folks, considerations of the risks, financial risks, and the time allocated for the project. All of those need to be answered, and in addition, the most important question is whether the business is viable, is the business potentially successful, or just an enjoyable hobby. Evaluating the Idea The next stage is to evaluate the idea itself, to do some market research, market research in itself is an ongoing activity and it continues once the business is up and running. Pinson and Jinnett (2006) state that it is important to evaluate the skills acquired by an individual during the starting of a business (p. 3). One should ask lots more questions while doing that market research; some of the questions are whether there is a gap in the market. Moreover, the research should try to look at the potential customers, the existing competitors and the aspects of pricing. Choosing a Business Name Once the business owner has done the research and is convinced it is going to be viable and will work, the next step is to choose a business name, and it should be a priority. One should choose something that is clear and relevant to the business, ideally unique, and a website for the business because it is increasingly popular now; the domain name has to be unique. This can be done by checking who has what name and what name is available. Trading Status Available For a Business Before one commences trading, one has to adopt a trading status. Hormozi (2004) states that during the process of opening a new business, the legal requirement will include determining the business structure and obtaining the necessary permits for starting a business (p. 282). Trading status is a variety; the common ones are sole trade, entering into partnership, a limited company and limited liability partnerships. Each of these types of trading has pros and cons, and one need to look into them and decide which one is most appropriate for the desired business. Registering the Business To register the business in terms of trading status or getting started, there are various institutions responsible for registration. If one decides to register for a sole trade or partnership, one can register with institution called Her Majesty Revenue and customs. One has a three month window in which to register the business. The company house is the registering institution that is in charge of both limited companies and limited liability companies. Developing a Business Plan Covello & Hazelgren (2005) contend that developing a business plan is difficult but the potential benefits are wonderful (p. 4). When somebody is starting a business, it is important to create and develop a business plan because it has been proven that a business that has a business plan has a greater chance of ultimate success. The business plan is a life manuscript and it should be restructured on a regular basis, particularly the financial information that the business plan contains. The business plan itself is a professional, formal document, and it should be realistic and honest. Some of the information present in the business plans are things like personal details, business details, details around the market research: things to do with the customer base, competitors, how one intends to promote the business, also some of the day-to-day operational issues; and finally it looks at the financial projections in terms of forecasted profit, loss and cash flow. In writing a business plan that is going to be effective to the owner, there are crucial points that must be included. It is important to have crucial points such as the personal survival income that is commonly referred to PSI. PSI is the money needed by the owner of the business and his/her family needs to live on it is really what the business must be capable of generating and covering by the end of its first year. Additionally, another key consideration that is kept in the business plan is the executive summary which is probably produced last once the rest of the plan is produced, although it comes fairly early on in the plan itself. Executive summary is the summary of the business which contains a while factor, it includes what the business will be doing, why one believes it will be successful, and what financial requirements are needed for the business, and indeed how one is going to fund those requirements. .Financial/Cost Implications for a Business Henricks (2004) says that most people make low cost projections when starting a business; moreover it is advisable to expect other costs that are not on the business plan in order to project high sales (p. 85). Any new start business has startup costs and will incur startup costs of one sort or another. It is important to understand, the differences though, between the different types of expenditure that a business is going to incur, usually they fall into three areas: capital expenditure, revenue expenditure and private or personal expenditure. Financial forecasts are important because they help the business owner predict how the business might fair over the coming months and years. Financial Plans Money is the most vital thing in the starting of a business and for one to start a business, there should be enough capital that will cover the startup costs during the early stages of the business until that time when the business is able to provide its own income. Nearly every individual who wants to start a business usually uses some of his/her own money in the running costs of the business. There are different options that an individual will have for financing new businesses, and a business owner should choose the option that is right for the business. One of the ways of getting financial sources is by use of financial investor from outside. Financial investors get involved in businesses that have a high potential of growing; this investor is able to bring funds and also provide the necessary skills and expertise. In addition, another option that can be used for getting funds to start a business is by involving family members and friends. A person intending to start a business can approach his/her family, for some of this is usually an obvious reason while other may consider this option when they experience difficulties in getting funds from institutions that give loans. Furthermore, majority of people would opt to get funds for starting a business from the banks. Even though many prefer this option of getting fund, there are conditions that have to be met by an individual in order to get a loan from a bank. If the bank option is not successful, one might opt to try loans given by commercial loan providers, lending from the community and social institutions, and the available government schemes that give loans. Marketing Marketing entails getting an understanding of the needs of customers and meeting the needs in a better way as compared to the competitors, and doing this at a profit. According to Whiteling (2010) the measure that is incurred during the cost of advertising is the amount of business that can be generated in per the amount of pound spent during advertisement (p. 223). It is important to understand what it is and do effective marketing in order to have a step ahead of the competitors and understanding of what is happening out in the market place. A business has to understand whether there is a demand for what is being offered for the product or service. If the demand is there, the next step is to look at the potential customers, and it entails asking all questions to do with who your customers are, and one cannot know enough about the customer base, so it is asking all questions to do with what they like and what they dislike. It involves all the research done into looking at the potential audience and thinking about price. A business without a defined customer base is a disaster waiting to happen, it can waste a lot of available time and resource, and it will miss a lot of profits. It is important to decide on defined target group of customers, and this will allow the business to maximize the impact of marketing and maximize the investment made. People do not purchase the features of a good or service; they acquire the benefits and what it does for them. It is important to look at what these benefits are; something stronger, bigger, better, faster, or more efficient in some way. The more one understands the benefits from the customers’ perspective, the better; that also include knowing what the competitors are doing because the entrepreneur can get answers from their activities. Marketing makes a business unique as compared to its competitors. Unique selling points are what make the business better and different from the competitor; once the business established these unique features, they are the key messages that are actively promoted. Conclusion It is important to follow all the necessary requirements when starting a new business in order to succeed. The person intending to start a business has to carry out an evaluation of the ideas available so that he/she can choose the best idea. The business should be given a unique name, one that is not used by another individual and ensure the business is registered under the said name. There are various options available for starting the business such as partnership, a sole trader and even a choice between partial and Limited Liability business. When starting a business, it is important to prepare a business plan for the business because it will have all the information regarding the business. The owner of the business has to look for the best option of getting funds for starting and they should be able to support the business until it is able to generate its own income. Moreover, while starting a business it is important to market the idea and the product to potential the clients. Thus, if possible all the people aspiring to start a business would take into account all the above, this would ensure or guarantee the success of the business. References Covello Joseph, Hazelgren Brian. 2005. Your First Business Plan: A Simple Question-And-Answer Format Designed to help you plan your own plan. Illinois: Sourcebooks Inc. Henricks, Mark. (2004). What not to do. Entrepreneur. 32, 2. 85. Retrieved from http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=aadd7ba9-a1c0-409a-9749-11b1dc60dae2%40sessionmgr4&vid=2&hid=17 Hormozi M. Amir. (2004). Becoming an Entrepreneur: How to Start a Small Business. International Journal of Management. 21, 3. 282. Retrieved from http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=a8e593cf-47b6-403d-bddc-6c813a6342a3%40sessionmgr115&vid=1&hid=119 Pinson Linda and Jinnett Jerry. 2008. Steps to Small Business Startup. Chicago: Kaplan Publishing. Whiteling Ian. 2010. Start Your Own Business 2010: The Ultimate Step-by-step Guide. Richmond: Crimson Publishing. Read More