Basic Factors of Starting a Business
Starting a business enterprise is similar to any other human effort in which resources are employed to achieve certain objectives. Successful results in business depend largely upon the ability of the entrepreneurs or the starters of new business to anticipate problems and solve them with minimum cost. Some of the basic factors which must be considered by anybody who is to start the business are:
- Selection of line of business:
The first thing to be decided by any entrepreneur of a new business is the nature and type of business to be undertaken. Methodological knowledge and awareness the entrepreneur has for producing an exacting product is also significant in this observe.
- Size of the firm:
Size of the firm or scale of its operation is another important decision to be taken at the start of the business. Business can be started at a big scale if the entrepreneur is affirmative that the demand for the planned product is likely to be high over time. A business should be started at a little or medium scale if the market conditions are doubtful and risks are high. Some factors favor a large size whereas others tend to restrict the scale of operation.
- Choice of the form of ownership:
With respect to ownership, the business organization may take the form of a sole proprietorship, partnership, or a joint-stock company. The preference of the appropriate structure of ownership will depend on such factors as the capital requirements, responsibility of owners, allotment of revenue, transferability of interest and so on.
- Location of business enterprise:
An important factor to be considered at the start of the business is the place where the enterprise will be located. Availability of raw resources and labor; and services like banking, transportation, communication, etc, are significant factors while making a preference of location. Any mistake in this regard can result in a high cost of production, inconvenience in getting the right kind of production inputs or serving the customers in the best possible way.
- Financing the proposition:
Financing is concerned with providing the necessary capital for starting as well as for continuing the proposed business. Appropriate financial planning must be done to find out the necessity, resource, and distribution of funds.
- Physical facilities:
Availability of physical facilities including machines and equipment, building and supportive services is a very important factor to be considered at the start of the business. The assessment involving this aspect will depend on the nature and size of the business, accessibility of funds and the progression of manufacture.
- Plant layout:
Once the requirement of physical facilities has been determined, the entrepreneur should draw a layout plan showing the arrangement of these facilities. It refers to a layout plan showing the collection of substantial facilities such as machines and equipment for manufacture.
- Competent and committed worked force:
Every enterprise needs a competent and committed workforce to perform various activities so that physical and financial resources are converted into desired outputs and they are rehabilitated into preferred outputs in a proficient and effectual approach.
- Tax planning:
Every business has to reimburse definite taxes as levied by the government. Tax planning has become necessary these days because there are a number of tax laws in the country and they influence almost every aspect of the functioning of modern business. The entrepreneur must believe in advance the tax responsibility under various tax laws and its contact on business decisions.
After the decisions involving to the above-mentioned features have been taken, the entrepreneur can go forward with the beginning of the project which would denote mobilizing diverse resources, fulfilling essential lawful formalities, starting the manufacturing procedure and initiating the sales endorsement operation.