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An idea doesn't become a business without effort. Learn the basic things you need to consider before starting a business.
It’s always daunting to embark on an entrepreneurial journey. There’s no way you can be ready for the obstacles you may face along the way. Of course, there’s also no guarantee of success. However, it can be hugely rewarding to pursue a career in entrepreneurship despite all of the many challenges surrounding it. It can even be life-changing in some cases.
It’s crucial that you’re confident in your own capacity to successfully carry out your project before taking on an entrepreneurial venture. In this post, you’ll learn the basic things you need to consider when setting up your first business venture. Read on below to learn more.
1. Nature Of Business
What you’ll offer is the very first thing you need to be thinking about. In general, aspiring business owners can choose the following natures of business: merchandising, service, or manufacturing.
- Merchandising - A merchandising business is a business that sells products, sometimes also referred to as merchandise. Products sold by a merchandising business are generally purchased from a distributor or supplier, which usually acts as the middle man in the process of selling the product to the final end consumer. Some common examples of merchandising businesses include retail stores, clothing outlets, and grocery stores. Note that some companies make their own products, while others purchase and resell wholesale products that they’ve bought from an actual manufacturer.
- Service – A service-based business is engaged in selling time and expertise. A business that sells a service can be a niche agency, like one that helps other businesses with their marketing campaigns, an IT consultancy firm, or event organizers, among many others. A spa, salon, food kiosk, restaurant, and those that offer public transportation are also considered as service-based businesses.
- Manufacturing – A manufacturing company combines the use of equipment, raw materials, and labor, and turn them into a saleable product. Manufacturers of daily essentials, bags, clothing, gadgets, and cars are good examples of this nature of business.
2. Target Market/Customer
If you don’t have loyal customers or clients who'll buy from you, having a product or service to sell is useless. A product or service alone isn’t going to make your business profitable. That’s why before you begin, study a market for what you’re selling first. Identify your customers.
The target market is the key to growing sales. Target market basically involves breaking down your target market into various segments and, then, focusing your advertising efforts only on one or some specific segments comprised of your potential customers, whose specific needs and wants most closely correspond to your products or services.
3. Business Location
If you're just starting a new business, it's important that you find the best location for your venture to increase its chances of becoming successful. When you're choosing a location, it’s also important to look at several factors, such as the benefits that the business location has to offer, the size of your business, and the number of other businesses in the area that offer the same products or services as yours do.
The most important consideration when deciding on a location for a business is the type of business you're going to start. This is where identifying the nature of your business comes in and becomes of great help. Different businesses all have different needs when it comes to a location.
For instance, a fast-food restaurant needs to have a lot of room to operate and to accommodate customers. You also need to choose a location that's in an area that has more people walking by to eat. A BPO office, on the other hand, needs more privacy, so choosing a place that’s not so crowded is the ideal thing to do.
4. Form Of Business
After identifying what to sell, your target market, and where to sell your product or service, it’s time to decide which type of organization your business will have. You have three options: a single proprietorship, partnership, or corporation.
- Sole Proprietorship - A sole proprietorship is an easiest and simplest arrangement chosen to establish a new business. It's an unincorporated entity owned and operated by only one person, with no distinction between you and the company, because you're the sole owner. You're responsible for all of your company's debts, expenses, and profits.
- Partnership - A business partnership is an agreement that's usually formed by two or more parties or entities. The partnership usually consists of a co-operative agreement, which outlines who will be the partners, when it will start, and what will be expected of them. Partnerships are considered beneficial in that they allow the partners to concentrate on their businesses and work together towards achieving a common goal.
- Corporation - In particular, a corporation is a legal entity that operates as a different and separate legal entity from its owners. It's usually owned by investors and governed by a board of management that appoints directors to manage the business's day-to-day operations. In a corporation, the company will be divided into shares, each representing a share of the assets of the company. The shareholders are allowed to exercise control over the company, with limited liability. These shareholders have rights of ownership as they're the legal owners of the company, but can be held liable to pay damages if they're found to have misused the assets of the corporation.
For your business to get started, you need to put a certain value or amount in it, which is known as capital. Capital is, most of the time, cash, but it can also be non-cash. How do you know approximately how much capital your business venture needs? What you can do is to list down all of the possible spendings you’ll need to make in order to start and operate. Possible spending includes assets to buy, lease payments, renovations, and operating expenses, among others.
Now that you’ve already considered the capital and expense requirements of your business, don’t forget to have the necessary registrations needed for you to legalize your business before you start operating.
It’s always a good decision to start a business, however, aspiring business owners should keep in mind that it can also be challenging and stressful. It isn’t as simple as it sounds or looks like, especially if you haven’t set up the basics properly. Hopefully, this article can help you start off your business venture on the right foot.
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