Starting a Business Venture - Coursework Example

Starting A Business Venture Customer Inserts His/Her Name Customer Inserts Grade Course Customer Inserts Tutor’s Name 23rd April, 2015. Introduction Businesses and Entrepreneurs rely on vast information sources and strategies in the process of ensuring their outfits become profitable. The process of developing a business from a conceptual stage or idea into an operational and successful venture depends on a lot of factors. The Australian government has developed a guide and website to guide upcoming entrepreneurs on the steps necessary for the formation of business or setting up an organization within the country. This paper will analyze on the roles of businesses, challenges and prerequisites needed in navigating and succeeding in the business world. Entrepreneurship Entrepreneurs can be defined as people or organizations which implement new ideas to current problems and thus turning these ideas into innovation for offering across markets and industries. As a result, an entrepreneur should ensure that he/she has the capability of prudent leadership, communication and team-building skills to ensure ideas are implemented into innovations that can profit the entrepreneur, society and other stakeholders. Entrepreneurship encompasses a lot of tasks, activities and knowledge that must be utilized in the process of nurturing a business idea or venture. Entrepreneurs rely on knowledge, skills, innovation and experience which should be researched, sourced and learnt in the process of implementing a business venture. Inception The process of entrepreneurship starts with an idea, thought or a plan to venture into a certain field or develop an innovation that will simplify a challenge leading into a successful business venture. The initial stage of a business is crucial since it determines the likely survival path or success of the business. Data from analysts and policy makers outline that 8% of all start-ups in Australia fail in the 1st year while another 8% of the remaining 92% fail in the 2nd Year. Most start-ups and businesses take a period of between 5 to 8 years in order to start reaping consistent returns (Department of Commerce 2015). This is compared to 80% of all businesses failing in most global jurisdictions especially in the developing world. As a result, an entrepreneur should relay on the critical skills of knowledge, creativity/innovation and leadership to ensure that the ideas that are implemented are prudent for the future growth of the business (Cheshire 2009, p. 86). Developing an idea into a sound business that is operational requires a lot of planning, skills and knowledge to ensure the idea develops into well developed business plan or venture. At the initial stages, an entrepreneur should be keen to ensure that he/she undertakes or undergoes the four inception stages as outlined; a) Conceptualization: this is the initial step where the idea is formed through existing knowledge or past experiences. b) Experimentation: At this stage the entrepreneur engages the idea into active experimentation by trying out on the knowledge of the initial idea. c) Experience: Implement the idea to the market as test to look at the reaction of the market and the effect of the idea (Urquhart-Brown 2010). d) Reflection: this is the stage where you undertake a reflective study on the achievements, failures, mistakes and lessons learnt in the process of implementing the idea within your target market (Merrett 2013). Entrepreneurs employ creativity and innovation coupled with knowledge to churn ideas which are employed in solving problems within the marketplace. The life cycle of a business should be anchored on great ideas that meet societal needs while at the tap of strategies such as technological advantage as outlined in the diagram 1 below; Diagram 1: Showing the cycle of idea generation & implementation Prior to venturing into a business, an entrepreneur should undertake proper research of the market and consult widely from different sources for business information. Governments and other policy makers have undertaken research on business and entrepreneurship and thus they provide rich source for information that could be relied upon by business people and entrepreneurs in the process of implementing their plans or ideas (Merrett 2013). For instance, the Australian government does have a portal that assists interested entrepreneurs in sourcing for business information with ease (Wan 2012, p. 109). Consequently, seeking business information or mentorship from established businesses would equip an entrepreneur with information that would greatly assist in the navigation of common pitfalls that entrepreneurs encounter (Sykes 2010). There are several ways in which an entrepreneur can venture into business as outlined; a) Starting a business venture from scratch b) Buying into an already established business c) Entering into a franchise arrangement with another business Legal Framework & Prerequisites Once the idea has been fully thought out and a decision or solution has been designed then it is vital for the business person to look into the legal means of setting up the business. An entrepreneur should understand that businesses have to operate within a certain legal framework and thus it is vital to understand the business operating legal framework. There are various legal requirements that business should understand and align their goals towards as outlined; a) Registration: All businesses require to be registered based on the laws of the country or region of operation. For instance, Australian businesses require registration so as to acquire an Australian Business Number (ABN). A registration document outlines various details concerning the business venture (Department of Commerce 2015). These details include; type of business, the owners, liability, location and other fundamental business details (Weir 2012). b) Licensing: Before commencing operations, a business should ensure that its operations are licensed with the relevant authorities. Licenses and permits ensure business operate legal and safe entities. For instance, Australian businesses are required to put in place safety measures under the Workplace Health and Safety (WHS) regulations (Department of Industry and Science 2015). There are several licenses applied on the operational jurisdiction and nature of business or industry. In case, a entrepreneur engages in an intellectual sector, it is vital for the entrepreneur to ensure that he/she has acquired copyrights to materials or patents so as to protect his/her innovations from intellectual theft (Frederick 2006). c) Taxation: All business entities must be licensed in order for them to operate efficiently within ay region or sector of the global economy. Taxation rates are varied from sector to sector or regions. As a result, an entrepreneur should understand the taxation regime of the business with analysis into tax registration, rates, exemptions and penalties (Cheshire 2009, p. 83). Consequently, the employees of a business entity should also be tax compliant and regular audits should be undertaken to ensure proper compliance. d) Miscellaneous: There are several other legal requirements that might not be mandatory but vital in the operation of businesses. An entrepreneur should ensure requirements such as insurance for his/her business and employees are put in place to ensure compensation is paid in case of emergencies (Kirby 2008, p. 93-97). Banking and financial facilities are vital for the business and thus entrepreneurs should ensure that the business’s financial records are in order. Other requirements that a business should arrange for include pension schemes for employees or societal engagement (Perry 2013, p. 90-92). Market Analysis An entrepreneur should understand the business venture that he/she intends to venture into by analysing the internal and external factors that affect his/her business. This analysis is known as market analysis which looks into the internal and external environment within which the business operates. Several techniques are utilized in the process of undertaking market analysis such as SWOT and Porter’s five forces analysis. Undertaking this analysis will give a clear feasibility report on the business venture (Timmons 2011). Useful indicators are obtained from the analysis of these factors such as the level of competition, political situation in a region and other factors that could adversely affect the business. The important factors to look into in the process of undertaking this analysis include; a) Technical analysis: this procedure tries to analyze the product or idea that your business has a plan to launch into the market (Wan 2012, p. 112). b) Internal Analysis: within this step, we undertake an analysis of the business’s strength in terms of technology, team or products. Using the above factor, we then apply the use of either SWOT or Porter’s five force analysis with the main emphasis being laid upon; a) Threat of New Entrants: Porter’s five forces explains that in case there is a threat of a new entrant in the market then profits available in the market will shrink unless the incumbent business fight these entrants (Cavusgil 2014). As a result, an entrepreneur should analyze if there are enough forces to ensure that market will become competitive or strategies which will be deployed by the business in ensuring market domination (Sykes 2010). b) Substitute products: The entrepreneur should analyze the products or ideas in the market in comparison to that of the business. For instance, is the entrepreneur introducing a substitute product or idea or is there the possibility of existence of a substitute product in the future that might affect the business’s market share (Rebekah 2010, p. 77-81). c) Bargaining power of customers: The measure of the effect of the customer in terms of purchasing power of goods and services is vital. Several factors usually affect the bargaining power of customer such as offering incentives such as loyalty programs or constant discounts on selected services or goods. In most cases the purchasing power of a customer is low if they act independently or the existence of cheap substitute goods (Curry 2009). d) Bargaining power of suppliers: this affects the inputs within the business that are utilized in the production and supply of goods and services by the business. In case suppliers have a huge bargaining power then it is a disadvantage to the business and vice-versa. For example if a producer sources good exclusively from one supplier then this producer might be held hostage to this producer since there exists no alternatives (Weir 2012). e) Competition: competition from external producers especially within the same market segment could contribute to increased competition which is unhealthy for the business. An entrepreneur should be aware of the competitive edge of external firms such leverage of innovation, firm’s concentration ratio or the advertising expense or budget outlay deployed by the firm (McLean 2009). Financials In the process of venturing into a business, an entrepreneur should have some knowledge on financial fundamentals such as budgeting, revenue, financial ratios and bookkeeping. Fundamentals of financial aspects and accounting assist an entrepreneur to plan prudently and gauge the growth of the business venture. A good business plan should inculcate some financial measures as outlined; a) Budgeting: It is vital and imperative that for an entrepreneur to have a budget that will be utilized in the process of planning. A business plan should contain a budget that outlines expenditure, capital costs and expected revenues for a business. A budget ensures an entrepreneur minimizes operational cost while maximizing revenues/profits with the aim of business expansion (Cavusgil 2014). b) Financial ratios: And entrepreneur should understand a little bit of book keeping and financial ratios in the process of implementing the business plan. Knowledge on assets, liabilities and debt/asset ratios are vital in business valuation and assessment of business growth. Having this vital knowledge affords a business person the opportunity of acquitting loans and finances with ease from banks and financial institutions (Oxley 2014). Some of the important ratio for an entrepreneur to understand and utilize include; statement of cash flows, balance sheet, current ratio, profit margin, inventory turnover and return on investment (ROI) (Perry 2013, p. 93-94). c) Auditing: An entrepreneur should undertake financial audits within certain periods of the business. Audits assist a business in monitoring growth or financial impropriety within a business. This process should be undertaken by professionals well versed in this field to ensure proper financial reports are produced (Rebekah 2010, p. 82). Financial institutions and finance planner are always willing to partner and work with upcoming entrepreneurs as witnessed by the support availed by the Australian government. Upcoming entrepreneurs in some jurisdictions such as youths are supported by governmental funds meant to boost entrepreneurship. Prudent financial planning gives upcoming entrepreneurs the opportunity to raise capital with ease from friends, family or formal financial institutions. Recommendations & Conclusion A business venture requires the utilization of intricate skills, knowledge, innovation and good leadership to ensure success and growth. However, experience of running a business should be inculcated among upcoming entrepreneurs. Upcoming entrepreneurs often make a lot of mistakes and assumptions which lead to collapse of their nascent business ventures. Some of the common pitfalls that entrepreneurs should be aware of are; a) Lack of a clear plan or objective valuation of the idea or business venture b) Lack of proper information or insight into the identified market resulting in failed ventures. c) Poor or lack of proper and efficient understanding of technical requirements of a business. For instance, an entrepreneur might not have a clear strategy in the implementation of the idea or roll out of the business’s products (Smyth 2013). d) Lack of a differentiation strategy leads to business people rolling out copy and paste business ideas that might not be sustainable in the long run. e) Poor understanding of the business’s legal framework might also affect the implementation of the business. Improper compliance to business laws might lead to far reaching repercussions such as business closure (Colebatch 2013). Research undertaken on entrepreneurship outlines myriad challenges faced in the process of nurturing these new business ventures. Some of the problems and challenges faced include; Market knowledge, customer contact, Marketing planning, pricing and other challenges as outlined in the diagram 2 below. Diagram 2: Showing challenges faced by Entrepreneurs Due to the numerous pitfalls and challenges that upcoming entrepreneurs face in implementing their ideas and business ventures, it is vital that undertake certain recommendations as outlined; a) Strategy: In the development of a business plan or venture, an entrepreneur should develop a well researched, thought and realistic plan. This plan should encompass all the basic requirements for the implementation of a business plan (Oxley 2014). b) Review: A business plans should be thoroughly reviewed and benchmarked against the best strategies and current ventures. As a result, an aspiring entrepreneur should pitch his/her business plan to knowledgeable and experienced business leaders. Business strategies are usually reviewed often in order to address business challenges and problems which are common. c) Innovation and Technology: An entrepreneur should ensure that he/she leverages the business based on innovation and technology since they assist in coping up with the fast paced and modern business world. Modern technologies allow the reduction of operational costs since a business will be able to automate numerous manual tasks which would be tedious and costly (Colebatch 2013). d) Leadership & Management: A successful entrepreneur is also a good leaders and manager since these qualities have been relied upon since time in memorial. As a good business leader, an entrepreneur should cultivate innovation and ensure all employees develop a strong teamwork (Smyth 2013). In order for entrepreneurs to develop good leadership and management, it is imperative that integrity, trust and value for business are developed by entrepreneurs. Good leadership encourages and nurtures a good environment for growth, innovation and knowledge exchange as it has been witnessed across all global successful business ventures (Baker 2011). Entrepreneurship is about a set of skills, knowledge, innovation fused with personal qualities such as leadership, integrity and trust. Consequently, entrepreneurs should have the zeal and determination to succeed based on practices, rules and innovation that come with business. References Baker, R Gary, R & Anzus, H 2011, Economics: Economic Trends and Relations among Australia, New Zealand, and the United States. Praeger Publishers, Wellington. Cavusgil, S Knight, G & Riesenberger, J 2014, International Business. Ashgate Publishing, Chicago. Cheshire, L Higgins, V & Geoffrey, L 2009, Business Governance in Australia: Changing Forms and Emerging Actors. Rural Society, vol. 16, no. 3, pp. 79-87. Colebatch, H 2013, Beyond the Policy Cycle: The Policy Process in Australia. Allen & Unwin, Adelaide. 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AMACOM, Sydney. Wan, V 2012, “Enterprise Workshop: An Entrepreneurship Training Program in Australia”. Journal of Small Business Management, vol. 26, no. 4, pp. 107-114. Weir, M 2012, Law and Ethics in Contemporary Business: A Handbook for Businesspeople in Australia and New Zealand. John Wiley and Sons, Canberra. Read More