Things to consider when starting a business
Have you got what it takes?
When considering whether or not you want to take up the opportunity of starting or running a small business there are a number of factors you may want to consider:
Owning or managing your own business implies that at the start up stage you take responsibility for all aspects of the business such as sales, accounts, purchasing, production, administration etc.
It also implies that you have the necessary skills required in the execution of these responsibilities. Are you able to sell and market your business? Address financial book keeping requirements, monthly and annually, address government requirements and the potential red tape involved?
It is important to ensure that you answer these questions as honestly as possible. The road of a small business owner is not an easy one but often holds individual rewards for those who risk the venture.
There are also a number of general traits associated with small business owners. If you adhere to the questions, then it is the right move. You will need to develop or improve on skill sets which build these traits, if they don't already come naturally to you.
Assessing the viability of your business idea
In testing the viability of your proposed idea you may want to check whether you could answer the following questions:
- What are all the advantages or benefits of the idea? Is there a real need for it?
- Have you established some of the problems or difficulties your idea is expected to solve?
- Does your idea satisfy a consumer need in the market, or does the need have to be created through marketing and advertising efforts? What would the degree of these efforts be?
- Is your idea based on an entirely new concept, or is it a new combination or adaptation?
- What immediate or short-range gains or results can be anticipated? Are the projected returns adequate? Are the risk factors acceptable?
- What long-range benefits can be anticipated?
- Have you checked the idea for faults or limitations?
- Are there any problems the idea might create (e.g. will it result in any environmental impacts)? What are the changes involved?
- Have you considered variations or alternatives?
- Does your idea have an inherent marketing appeal? Is the market ready for it? Can customers easily access it and can they afford it? Why would customers want to buy it? Is there a timing factor?
- What is your competition doing in this area? Can your business compete?
- Have you considered the possibility of user resistance or difficulties?
There are many methods available for evaluating the viability of your idea. You should select the criteria that best suit your needs, depending on the type of business you intend to undertake.
These considerations also raise the importance of undertaking market research.
Challenges and risks when starting a business
Starting a business can be very challenging and risky, and there needs to be a degree of awareness by potential small businesses of these challenges as well as risks involved. Knowing what they are, will allow for a degree of planning in order to mitigate as many as possible.
- Developing the business idea and the vision – this is normally the first challenge faced by an entrepreneur and it requires some creativity and the ability to identify challenges that require innovative solutions your business could offer.
- Raising capital for your start-up – potential small businesses must be able to convince potential investor(s) about his/her own business idea. This is very challenging because you are trying to sell to your potential investor(s) something which does not exist yet.
- Finding the right business location – you will need to find a location that will meet the requirements for business operation which is also located near markets and suppliers.
- Sourcing required human resources – the business will have to consider what it's skills requirements are and link it to a good recruitment strategy.
- Threats from competition – competition is a necessary challenge as it will always keep you predicting what competition in the market looks like in order to be more creative gaining competitive advantage.
- Unforeseen disasters – despite all the planning in the beginning there will always be unforeseen events and circumstances including bad debts, government red tape, unexpected lawsuits, and resignation of employees.
- Insufficient funds – many financial institutions and entities may be reluctant to lend money to a business that lacks a proven track record of experience.
- Utilising your own capital – some entrepreneurs are not privileged enough to get the start-up funding from investors and therefore they are forced to fund themselves which is a big risk if the business fails.
- Reliance on human resources – when starting a business you will need to rely on the performance and abilities of employees, particularly when they are managing the business in your absence.
- Illness – in the case of a sole trader, starting a business is risky because the operation of your business is wholly dependent on you.
If you have considered the challenges and risks and are keen as ever to start a business then you next need to assess your business idea.
How to research your market
To start and run a successful business you need to be aware of your potential and existing customers and the market you operate in. Market research represents an important tool for all businesses e.g. government statistics, trade publications and industry association.
Statistics and other market research assists you making informed decisions about understanding of your market, your customers and their needs, as well as giving you a better insight into your competitors.
This improved understanding of your market can help you better focus your marketing efforts, make informed decisions about your business and make the most of available opportunities.
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Disclaimer: This article has been prepared for information purposes only and does not constitute legal advice, or a legal opinion. The practical application of the provisions of this article will vary depending on the facts of each case. The publication, author of the article and companies or individuals providing commentary cannot be held liable in any way.
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