The World of Entrepreneurship - Essay Example

May 2006 Starting a Business The world of entrepreneurship is one that requires careful planning and sound analysis of current business conditions. In starting a new business, one has to first decide on the type of business organization which are of three types: sole proprietorship, partnership and corporation (Barreto 2003). A business under sole proprietorship proves to be the easiest and least costly way of starting a business. It requires lower attorney’s fees than the other business types because of the lesser documents that need to be prepared. One must also decide on the type of business ownership that would suit the owner’s personality, personal needs and concerns about risks. One can choose to start a business from scratch, buy an established business, buy a franchise or build a network sales business (Litman 2001). Each type of ownership has its own advantages and disadvantages. Starting a business from scratch can be rewarding if it succeeds, but the risks are also higher as the owner needs to start from the baseline. Buying an established business is less risky and has its infrastructure and client base in place, but it might have hidden problems such as financial difficulties and a bad reputation that may not initially come to surface. A franchise offers a lesser risk and support from a large network but it is not as flexible as the other types as one has to follow an operations manual to the letter. A network sales business requires low capital investment but could require working late in the evenings and even on weekends. One must also stay motivated and actively involved in selling the product because profits are largely dependent on incurred sales. Suppose one chooses to start a business that is based on sole proprietorship, like a bakeshop. As we know, food is a basic need and therefore a food business would make for a profitable venture as the owner is not limited to the segment of the market that needs to be targeted. To set-up a new business, it is important to know these basic steps. First, one has to develop a business plan. A business plan is like a company’s roadmap to success. It is made up of four parts, namely: 1) Description of the business, 2) Marketing, 3) Finances and 4) Management. According to Barreto, a business plan is a tool which serves three basic purposes. These are communication, management, and planning. It is a tool for communicating to the business community that your business is well-thought out and that you have explored every phase of the business before launching it. A business plan is what an entrepreneur has to show financial institutions when applying for loans to augment the finances of the new business. It is also what an entrepreneur presents to other prospective business partners who might want to invest on your business or to prospective employees during the hiring process. A business plan is also a marketing tool which keeps track of a company’s progress, milestones and timelines. By being able to compare projections with actual accomplishments, a company is able to measure its progress. Finally, a business plan is also a planning tool as it guides a company through the different phases of the business. Through it, roadblocks are identified and avoided by formulating alternatives even before a problem is met. It also creates a clear picture of where a company is going, which is shared with partners and employees to harmonize their vision of the company’s future. A sample business plan for a bakeshop business is as follows : Edible Ideas Bakesop 1. Executive Summary The art of making cake s is one that requires creativity and diligence as the art of baking is an exact science. Some people call it a gift, because not everybody is endowed with the capacity to dream of highly-detailed towering layered cakes and actually build it and make it real. A simple yet carefully handcrafted cake can turn an ordinary event into an extraordinary affair. Different personalities, favorite things and special events are great inspirations for quite a delicious masterpiece. These are the concepts and inspirations behind Edible Ideas, a small bakeshop made for big people. Edible Ideas Bakeshop offers personalized cakes, professionally done to meet the details specified by the client. 1.1 Keys to Success The keys to the success of Edible Ideas are: Location – it is situated in a location that is highly accessible Convenience – customers have the option to drop by the store to place an order or simply log on the website and place online orders. Payments are conveniently done through wire transfers or personal checks. Reputation – Edible Ideas confers to a high standard of food preparation and decoration, using only the highest kind of materials that are both hygienic and safe for clients. 2.0 Company Summary Edible Ideas, upon commencement of operations will sell personalized event cakes that will meet the details specified by the customers. It will cater to the needs of those living around the community through walk-in transactions or through the internet. 2.1 Start-Up Summary Start-up expenses include baking equipment which amount to approximately $25,000 and the lease of the business unit and improvements which cost $20,000. 2.2 Company Location and Facilities The bakeshop is located along the main highway of a busy community making it highly accessible to clients. It has a total floor area of 1500 square feet, which includes a kitchen or working area and a receiving area. 3.0 Services Edible Ideas will provide cakes and pastries to any family event such as weddings, baptismals, bridal showers, birthdays, anniversaires and other events such as corporate events. 4.0 Marketing Strategy As with most other food business, the most effective and fast way of advertising is through word of mouth. That is why the people behind Edible Ideas make sure that every cake is baked using only state-of-the-art equipment and delivered at its freshest. This ensures a high quality of product that the customers would really love to talk about. 5.0 Financial Plan A balance sheet is enclosed to show the projected sales and expenses in the first quarter operations of Edible Ideas. The next step in putting up a new business is by establishing the business infrastructure. After this has been established, licensing and securing other permits should be taken care of (Litman 2001) . Government regulations vary depending on the kind of business one is engaged in and as to where the business is situated. A business that is located within the city obtains its license from the city government, while those from outside the city obtain its license from the county. Different regulations are also enforced depending on the state where the business is. A certificate of occupancy is required if one is planning to occupy a new or used building. This is filed either from the city or from the county zoning department. Different taxes are levied depending on what type of legal structure one might choose for his/her business. The most common structures are Sole Proprietorships, General and Limited Partnerships, C and S Corporations and Limited Liability Companies. Different legal structures also call for different liability issues. As required by the Trade Name Registration Act, businesses that use a name that is different from the owner’s must register a fictitious name with the county. This does not include, though, corporations doing business under their corporate name or those practicing any profession under a partnership name. Whenever applicable, a company may also apply for patents, trademark or copyright to protect the identity of the company. For food businesses, such as Edible Ideas, permits must be secured from the Health Department of the governing city or county (Barreto 2003). Raising money to fund a new business is also one of the challenges that a young entrepreneur has to face early on in the process of starting out. There are several options however, as to where you could get the money one needs to get the ball rolling. These are from 1) your own savings, 2) friends and relatives, 3) banks and credit unions, 4) venture capital firms. Personal savings are the primary source of capital for new businesses, and if this is not enough to cover the start-up, other sources like friends and family might offer some help with minimal interest rates. Banks and credit unions are the most common source of financial assistance, but only if you are able to show a sound business proposal. Venture capital firms are expanding companies that grow in exchange for equity or partial ownership. While it is often thought that borrowing money for start-ups can be difficult, this is not always true. A good business plan is what a borrower needs in order to assure the bank that the company is capable of paying its loan back after a specified time based on the business plan (Barreto 2003). Finally, a system for recordkeeping has to be set up prior to starting a business (Litman 2001). Keeping accurate and up-to-date records is crucial to the success of any business. Hiring an accountant may be the best way to keep the records straight, but as a rule of thumb, it is always best to keep records plain and simple. It is also strongly advised that one should open a business checking account to keep track of company expenses and deposits. Starting up a new business can be a tough task, but following the four steps given above would surely make the job easier, and the chances of achieving your business goals higher. Work cited Barreto, H. Start-Up Basics. June 27, 2003. The United States Small Business Administration. April 30, 2006 < http://www.sba.gov/index.html> Litman, L. How To Start A Small Business. Jan 23, 2001. San Joaquin Delta College Small Business Development Center. May 2, 2006 < http://sbdc.deltacollege.org/startup/ > Read More