Certain key factors which need to be addressed before starting your own business.
This article describes different factors which need to be kept in mind before starting your own business. It mainly talks about a business from a proprietorship point of view, rather than from a corporate point of view. Thus it is intended for small business.
A number of factors are important in order to start a successful business. Here an effort is made to describe some of the key factors.
Any business requires some amount of basic knowledge and experience. The owner needs to be aware about the business he intends to start. Knowledge and expertise about the product or service are keys to a successful business.
In case of limited knowledge the owner may not be able to sustain the business and can be fooled by the vendors, suppliers and competitors.
When you ask yourself a question “What business shall I start?” you need to get a convincing reply about what you intend to do and how you are going to go about it. Read more in Small Business
« Small Business Survival in a Down Economy
Four Easy Ways to Double Your Economic Stimulus Check »
Expert knowledge is especially required if the field of business is a niche field. For instance the construction or software industry would require more knowledge as against a retail business selling a particular brand of clothes or shoes. Market/Demand
Once a decision is taken on the business you intend to start, the next step is to explore the demand / market for the product / service. Certain products will only have a domestic market for them whereas others can be successful on an international level.
The key question is “Who are the customers?” A market survey can be conducted to identify the market for the business to be started.
If the product / service is expected to be sold locally, the demand for it needs to be assessed. In case an international market is expected then rules and regulations for dealing internationally need to be found out. Total Project Costs
It is important to correctly assess the total project cost required to set up and run the business successfully.
In a capital intensive business such as starting a manufacturing plant, the start up costs can be very high. You need to identify the total amount which will be spent on the land & building, plant & machinery, furniture and office equipment, vehicles etc.
If a business is in the nature of retail you will need to identify the cost of the store and furniture. Amount required for the decoration of the store needs to be assessed. Similarly in case of an office the major cost will be for the furniture and office equipment. An office or firm can be started at a relatively lower cost initially with only the basic requirements.
One also needs to take care of the working capital requirement. This will mainly consist of the inventory which needs to maintained and the credit which is extended to the customers. From this the supplier’s credit is deducted to arrive at the Working Capital Requirement. The Working Capital Requirement can be quite high for certain industries for example inventory will need to be maintained in a garment store. Similarly in case of a grocery shop there is need for huge inventory for which credit may not be given initially by the suppliers. Financing/Capital
After identifying the initial costs required for starting the business, the financing pattern will need to be decided. The financing pattern will be mainly by way of capital introduction by the owner and borrowed funds.
Depending on how much capital the owner can introduce the balance amount will need to be borrowed. Funds borrowed will be either short term loans...