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Starting a Business- Basic Factors

Successful results in business depend largely upon the ability of the entrepreneurs or the starters of a new business to anticipate problems and solve them with minimum cost. And as always said, well begun is half done. This is especially true of the modern business world where competition is very tough and risks are high. Some of the problems, which business firms encounter, are of a basic nature. For example, to start a factory, plans must be made and implemented about such problems as the location of the business, the possible number of customers, the kind and amount of equipment, the shop layout, purchasing and financing needs, and hiring of workers. These problems become more complex in a big business. However, some of the basic factors, which must be considered by anybody who is to start business, are as follows:
  1. Selection of line of business: The first decision which has to be made is the line of business. Line of business refers, in plain words, to the specific products or services to be offered. This will also involve decisions on issues like whether the enterprise will be a manufacturing, ancillary or a trading one. All these decisions will depend upon the market prospects, market size, the capacity, ability and the level of expertise of the entrepreneur.
  2. Size of the firm: Size of the firm or scale of its operation is another important decision to be taken at the start of the business. Some factors like economies of scale favour a large size whereas others tend to restrict the scale of operation. If the entrepreneur is confident that the demand for the proposed product is likely to be good over time and he can arrange the necessary capital for business, he will start the operation at a large scale. If the market conditions are uncertain and risks are high, a small size business would be better choice.
  3. Choice of form of ownership: With respect to ownership, the business organization may take the form of a sole proprietorship, partnership, or a joint stock company. Each form has its own merits and demerits. The choice of the suitable form of ownership will depend on such factors as the line of business, capital requirements, liability of owners, division of profit, legal formalities, continuity of business, transferability of interest and so on. Tax considerations play a major part in the above decision too.
  4. Location of business enterprise: The location of business enterprise makes or breaks the project. This decision revolves around factors like availability of raw materials, skilled labour, concentration of buyers and besides such natural factors, political factors like Government sops for industries in backward areas have been the major considerations behind the location of projects these days. While the first set of factors inherently attract industries, the second set of factors viz. political factors induce concentration of industries by making it attractive to start ventures in certain areas.
  5. Financing the venture: Financing is concerned with providing the necessary capital for starting as well as for continuing the proposed business. Capital is required for investment in fixed assets like land, building, machinery and equipment and in current assets like raw materials, book debts, stock of finished goods, etc. Capital is also required for meeting day-to-day expenses. Proper financial planning must be done to determine (a) the requirement of capital, (b) source from which capital will be raised and (c) the best ways of utilizing the capital in the firm.
  6. Physical facilities: Availability of physical facilities including machines and equipment, building and supportive services is a very important factor to be considered at the start of the business. The decision relating to this factor will depend on the nature and size of business, availability of funds and the process of production.
  7. Plant layout and Production systems: Once the requirement of physical facilities has been determined, the entrepreneur should draw a layout plan showing the arrangement of these facilities. Layout means the physical arrangement of machines and equipment needed to manufacture a product. Plant layout determines in which the way things are carried out which has a major impact on the cost considerations and efficiency. Plant layout and production systems are to be designed scientifically based on time and motion studies.
  8. Competent and committed worked force: Materials and money alone do not make an enterprise. Manpower forms a pivotal make or break factor. A motivated and dedicated workforce is what every organization needs to translate its goals and capabilities into reality. Manpower planning spanning from job analysis, job specifications, manpower requirement analysis, recruitment, selection, promotion, transfer and compensation planning is basic to every organization. Besides business considerations, legal compliances like pension fund, working conditions are to be complied with properly.
  9. Tax planning: Taxes have come to be the major factor which decides many of the questions relating to business. Various taxes like income tax, wealth tax, excise duties, sales tax, etc. are levied and the tax statutes do offer some concessions in order to further the economic objectives of the State policies. In order to make full use of such concessions and exemptions, proper tax planning has to be made by every enterprise. Tax planning is the right and duty of every economic entity.
  10. Launching the enterprise: After the decisions relating to the above mentioned factors have been taken, the entrepreneur can go ahead with actual launching of the enterprise which would mean mobilizing various resources, fulfilling necessary legal formalities, starting the production process and initiating the sales promotion campaign. It would be in the best interests of the entrepreneur to engage the services of professionals like lawyers, finance and corporate law experts and technical experts to avoid any bottlenecks that may come up in the way of starting the venture.

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