process of starting a business

steps

organize the basics, conduct market research, construct a business plan, check legal constraints, raise finance, test the market

organize basics/identify essential elements

must decide business and product name, location of the business, the form of ownership the business will take, equipment required, operational format and infrastructure

conduct market research

This helps the business determine how they will distinguish itself from others in the market

Market research should be carried out to determine the needs of customers. price, design, and quality expectations, desirable product features and benefits, suitable promotional activity, preferred distribution options.

Additionally, research into the nature of the market should be conducted. competitors, rate of market growth, potential market niches, economic conditions legal factors, demographic structure

construct a business plan

a business plan sets out how the entrepreneur intends to realise their objectives and run the business. the business plan includes information on the owner and their backgorund/experience, overview of the business, market analysis, goals (short, medium, long), financial information, and human resources needs.

what does the business plan help do

It helps focus the entrepreneur, and can help raise money from financial institutions or investors and fulfil a range of internal purposes. It enables the entrepreneur to plot business progress against the plan. it identifies both the resources needed nand the time required. it ensure all stakeholders are aware of the businesses direction.

check legal constraints

before starting the business, the entrepreneur should ensure that all legal requirements have been met and legislation related to the product or market in which it is to operate has been reviewed. This can include employment (pay/conditions), health and safety, consumer protection, provision of financial products, company formation

raise finance

the entrepreneur is likely to invest some of their own capital into teh business. other sources of funds include banks, friends/family, investors (business angels, crowdfunding, peer-to-peer lending)

test the market

initially launching the business on a small scale or selling a limited range of products is a sensible option. then, the entrepreneur can establish whether the business idea will be well-received and can identify at an early stage the relative popularity of products.

organizational reasons why businesses fail

the location of the business was inappropriate, the structure of the business doesn’t work, the supplies were unreliable

market research reasons why the business failed

market research was poor, target market wasn’t appropriate, test was too optimistic, channels of communication were weak

business plan reasons why the business failed

business plan did not convince, goals were too vague or contradictory

legal requirement reasons why the business failed

labor laws were not addressed, legislation was too difficult, tax obligations were not addressed

finance reasons why the business failed

the accounts were not kept properly (cash flow), raising start-up capital was too difficult, raising medium-term to long-term finance was difficult

the market reasons why the business failed

the launch failed, the pilot was inconclusive, success was limited (product failed to inspire)