How to Start and Manage a Successful Business

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The high failure rate of business start-ups has become common knowledge over time. According to the study by Van de Ven, Ar, Hudson, R and Schroeder (1984), the survival of a business over a short-term period of about a year and half is 54% and 25% over a period of six years. This means that the failure rate of business start-ups is a high 75%. Although studies show that business start-ups have a high failure rate, strategic business and financial planning, good management and marketing skills are important factors to consider to avoid failure and to be a successful business. As an aspiring entrepreneur that wants to start a new business, they have to make sure that they have a well thought out business plan. Planning is the most critical part of the process because it sets the stage for success. The first step involves a personal evaluation of readiness, motivation, and commitment. In consideration of the high failure rates of new businesses, there are no guarantees. Therefore, thorough evaluation of oneself is necessary to determine if being an entrepreneur is the right choice. Some examples of important questions to ask oneself are: Why do you want to start a business? How is this business going to affect your personal life (family, friends, work)? How much are you willing to sacrifice towards the success of a new business? What are your strengths and weaknesses towards being a potential business owner? Starting a business is a risky decision but knowing how to judge and manage these risks will increase the odds of success. Another option to think about is finding a mentor. According to the Small Business Administration (2007), “Never think you can do it alone! One of the best ways to insulate yourself against business failure is to find and work with a mentor, someone with business experience who can guide and assist you.” Having a partner or even multiple partners who also share the same drive towards starting a business will increase the chances of success. The second step is writing an effective business plan. A basic business plan includes: a description of the business (purpose, goals, and mission statement), a description of how the business will be marketed (market research, target demographic, and consumers), financial data (loans, cash flow analysis, and income projections), and how the business will be managed (employment, sales, and sales strategy) (SBA, 2007). Many entrepreneurs put off writing a business plan because they argue that they do not have the time, or it will not be useful because the market changes too fast (SBA, 2007). However, this plan acts as a blueprint for the new business that is being built. Therefore, a business cannot be started without a business plan because it will help start, guide, and promote growth for the new business. Strategic planning involves fully understanding the new business, its strengths, weaknesses and assessing how well it will do in the business environment to develop clear goals, objectives, and a mission. In addition, the potential business owner will be prepared for any obstacles that are encountered through the business venture. The third step in the business-planning phase is deciding on the type of business structure. There are 5 basic structures to choose from: sole proprietorship, limited liability company (LLC), general partnership, C Corporation (Inc. or Ltd.), and sub chapter S Corporation (Inc. or Ltd.). (Kathleen, 2001) The sole proprietorship structure is usually owned by one person, it is a simple and inexpensive form of business. The business is operated by the owner, the owner has full responsibility for all business debts, the business is freely transferable, and the owner can report losses and profit on personal income tax returns. (SBA, 2007) The general partnership structure is also an inexpensive form of business that is usually operated by two or more people. Responsibility of business debts, profits, and losses are...
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