The Art of Business: Starting a New Business - Coursework Example

The art of Business Introduction “Whatever you can do or dream you can, begin it. Boldness has genius, power and magic in it.' -Murray (qtd. in Tracy, 236) Starting a new business is a very exciting, and rewarding venture. Taking this route offers a person a sense of freedom, and financial independence. At the same time, it also calls for a huge commitment, perseverance, and dedication. It also involves a lot of risk. Before starting to research, raise funds, and finishing other tasks, it is imperative that we first analyze if we fit the bill for an entrepreneur. There are generally 2 thoughts of school of how to start a business: Guy Kawasaki way of articulating your vision, and then making it a reality, and the step by step approach of starting a new business An entrepreneur has to have both vision, and pragmatism to be successful in his venture. Finding a Business Idea As said by Guy Kawasaki, “The best reason to start an organization is to make meaning-to create a product or service that makes the world a better place (3)”. A great business idea is the first and foremost step to entrepreneurial success. There are many places, where one can get business idea from: Previous Employment: The entrepreneur is familiar with the product or service, has the knowledge of potential clients, and competitors, and knows his weakness and strengths in the field. Hobbies: Hobbies such as paining, cooking, and teaching can be used for start-ups. Observation of the daily life: Observations made during travelling, while interacting with people, personal needs, books, and magazines may give a great idea for a start-up. While analyzing the business idea, the entrepreneur should look at the following factors: Amount of investment required, Government or local regulations in the field of the business, Amount and level of competition in the market, the market size, profit Margins, payback period, Net present value, and the legal entity of his start up (sole proprietorship partnership, or a corporation) The Feasibility Analysis This is the step where an entrepreneur analyzes his business idea from the various perspectives. These perspectives are: The Market Size: It is important to understand the target market, the size, the income levels and spending levels of potential customers. It is also necessary to understand the phase of lifecycle (growth, stable, or decline), the product is in. Costs and Investment Requirement: What are the capital investments, the running costs, and other overhead expenses of the business? The Competition: It is necessary to analyze the competitors, if any in the same field. It is a good idea to do a SWOT analysis of all the competitors. SWOT analysis enables a start up to match its resource capabilities, and deficiencies to market opportunities, and external threats (QuickMBA). Manpower: The entrepreneur shall analyze the manpower requirements of the new venture. Will he be able to get the require personnel with necessary skills, at a reasonable cost, is another question that he should answer. An entrepreneur shall also undertake the Porter’s 5 forces model analysis for his business idea. He shall analyze the following forces with reference to his industry: Competition within existing players, threat of new entrants, bargaining power of suppliers, and customers, and threat of substitutes (Porter, 78-93). Detailed market research and feasibility analysis is very important to understand the dynamics of the business, one is venturing into. Writing the business Plan A business plan is a formal document that evaluates all aspects of the economic and operational viability of the business. It lays down a set of goals, and the plans to achieve those goals. A business plan may be prepared for anywhere about 5 years of forecast. The essential components of a business plan include: Executive Summary, Company description, Market Analysis, Operations, Project Requirements, and Financial Statement forecasts A business plan is necessary as it not enables one to get financing, but is also a great aid in the success of the venture. Techniques like break-even analysis; profit and loss forecast, cash flows forecast, and Net Present value are a good aid in deciding the worth of business. Financing If an entrepreneur is not having capital to start business on how own, s/he can raise funds from various institutions, such as banks, commercial term loans, lease etc. While raising funds from external sources, the entrepreneur should study the loan amounts and costs (interest payment), repayment period, moratorium period, and security for the loan taken. The rates can be fixed or floating. Completing the legal and regulatory requirements An entrepreneur should analyze the legal constraints such as the building requirements, licenses, permits, and taxation etc. If the start up is in the form of partnerships the necessary agreements should be signed between the partners. The business name has to be registered with the appropriate authorities. The entrepreneur should establish Articles of Incorporation. It sets the purpose, and the type of the corporation, the rights, and liabilities of shareholders, and directors, and other typical provisions required in the state prescribed format (The Free library). Apart from these, an entrepreneur might have to answer a wide range of questions such as the insurance, bank A/c, payroll deductions, and business taxes. If an entrepreneur is not aware of these legalities, it is advised to hire a lawyer. Successful Business Planning Planning is an essential step in determining the success of star up. Planning has to be done at two levels: The Strategic Level: This is the level, where the overall direction of the venture is set in the form of goals, objectives, and targets. The operational level: This planning is meant to ensure that the daily activities necessary to make a business run successfully are carried out with utmost efficiency. Business Planning is an ongoing process, and continues even after the start of the business. These business plans are dynamic and shall be changed according to the nature of the business, and the deviation from the last plan to actual outcomes. Generally operational plans are changed on a weekly to daily basis, and strategic plans are changed on monthly to yearly basis. Managing Finances In order to successfully manage business, it is necessary that the entrepreneur keeps his personal and business finance separate. It is required to maintain the business’s financial records- receipts, sales, and bank statements. It is necessary to establish a perfect record-keeping system. Up-to date and correct records can be a very useful aid in understanding the outflow and inflow sources of the business. This data can be used to operate the business more efficiently, and profitably. Clear account statements also help a long way at time of taxation. Apart from these, the entrepreneur should also make a budget. A budget is a quantitative representation of the expected sales, costs, output, and other financial transactions. It is a very useful aid for planning, performance measurement, and control (Shim, and Siegel, 114). It is necessary to constantly monitor the deviation of the budgeted and actual financials, and take appropriate action if a major deviation occurs frequently. Another tool that can be used to manage finances properly is the cash flows of the business. Marketing Before undertaking any marketing decision, it is necessary to understand the customer, his need, the competitor, and the product. Some of the factors that can be used to market the product are: quality, convenience, uniqueness, price, and status. It is a good idea to conduct research of the market for analyzing the thought process of customers, what are the qualities that a customer looks at while buying a particular product. This research can be done through primary sources such as the internet or through surveys. The research can be used to understand the target market, the direct and the indirect competitions, and to develop marketing budget, pricing strategy, and marketing strategy. Human Resource Management One-man startups may prove to be erratic in their profitability. So, it is necessary to hire people with necessary skill set. An entrepreneur should estimate his manpower needs, and the skill sets required by him for successful operation of his business. For good personnel management, the entrepreneur shall establish brief but clear job descriptions, remuneration schemes, company policy, and performance measurement, and appraisal. Be a Mensch In order to be a successful, the entrepreneur should be a person of honor, ethics and integrity, or a Mensch as said by Guy Kawasaki (211). Any business is a part of the larger society, and the business should make sure that it is not detrimental to the growth of the society. The business should have high moral and ethical standards. The entrepreneur shall help a lot of people, and add value to the society. Annotated Bibliography Kawasaki, Guy. The Art of the Start. California: Portfolio, 2004. Kawasaki, in his book describes the necessary steps one should take to start up a business. He offers iconoclastic ideas on fostering great innovative ideas, and creativity. He provides readers with GIST (Great Ideas for Starting Things), and techniques for bootstrapping, branding, networking, recruiting, pitching, rainmaking, and building buzz. Shim, Jae, K., and Joel G. Siegel, Schaum’s outline of Theory and Problems of Managerial Accounting, 2nd ed. USA: McGraw Hill, 1999. This book contains explanation for all important concepts relating to the field of Cost Accounting. The authors have explained the utility of managerial accounting for the purpose of planning, control, and decision making. “Articles of Incorporation”. The free library. 16 June 2009. The Free Library is an online database containing free, full-text versions of classic literary works from hundreds of celebrated authors, whose biographies, images, and famous quotations can also be found on the site. Porter, Michael. “The Five Competitive Forces that Shape Strategy.” Harvard Business Review January 2008: pp 79-93 The paper starts with a description of the forces that shape competition. It then delves into the area of industry analysis covering topics like industry growth rate, innovation, government regulations, and complementary products and services. Porter then describes the factors that may lead to changes in industry structures. The paper presents a very vivid description of the industry forces, and their impact on strategy. “SWOT Analysis.” QuickMBA. 17 June 2009. < http://www.quickmba.com/strategy/swot/> QuickMBA is an online repository of articles on various topics that one studies in MBA. The subjects covered range from Accounting, Statistics, Economics, Business Law, Strategy, Entrepreneurship, and so on. Tracy, Brian. Create your own Future.  New Jersey: John Wiley and Sons, 2002 It is a powerful book that contains a lot of ideas of self-empowerment. These ideas if implemented can help the readers get control over their personal and work life. Tracy offers 12 principles and real-world action plans from his experience which can be used for success and reaching the goals of life. Read More