Venture start up process

Would-be entrepreneurs must decide how to get into business. Should they:

Buy Out an Existing Business? Start from Scratch?

A startup:

Follow your own dream

You will have current customers and a known track record of performance Brand recognition reduces marketing costs

Buying an existing business:

Franchising:

Advantages of Buying an Existing Business The new entrepreneur can look at historical records for the business and see exactly how much revenue and profit has been generated, the kind of cash flow to expect, and so forth. The entrepreneur also gets existing supplier, distributor, and customer networks and has to do less guesswork about what to expect.
Risks

the entrepreneur inherits whatever problems the business may already have and may be forced to accept contractual agreements prepared by others.

Advantages of Starting a New Business allows the entrepreneur to avoid the weaknesses or shortcomings of an existing business. A great deal of excitement is often associated with opening a new enterprise. The entrepreneur has the opportunity to make his mark and can choose suppliers, bankers, lawyers, and employees without worrying about existing agreements or contractual arrangements.
Risks

there is more uncertainty involved in starting a new business than in taking over an existing one. The entrepreneur will have less information about projected revenues and cash flow, will have to build a customer base from zero, and may be forced to accept unfavorable credit terms from suppliers. harder for a new business to borrow money because the bank has little or no experience with it.

Franchising The entrepreneur pays a parent company (the franchiser) a flat fee or a share of the income from the business. In return, the entrepreneur (the franchisee) gets to use the company's trademarks, products, formulas, and business plan. Advantages may reduce the entrepreneur's risks because parent companies often provide advice and assistance. they also provide proven methods, training, financial support, and an established identity and image.
Risks

franchises may cost a lot of money. The franchisee is often restricted in what she or he can do. Some franchise agreements are difficult to terminate.

Self-Analysis: Are You Entrepreneurial?

Considering Other Factors Determining Your Product/ Service Line and Type of Business

Writing a Business Plan

Determining Your Financial Requirements Seeking Sources of Capital

Choosing the Site/Location of Your Business

Registering Your Business

Hiring/Training Personnel

Getting Your Business Started

Rewards of Entrepreneurship

Have Unlimited Opportunity to Make Money - When you have your own business, you will most certainly have unlimited potential to earn money. How much money you earn depends on the time and effort you put into your enterprise. Successful entrepreneurs have earned their wealth and prestige through hard work and by having the right product for the right market at the right time.

Be Your Own Boss - As sole proprietor of your business, you make the decisions for your enterprise and take full responsibility for them. The quality of these decisions will translate into either gain or loss for your business. Being your own boss means you are in control of your future. You have a better grasp of what you want to be.

 Tap Your Creativity - A business usually starts out as

an idea. You will have the opportunity to harness this creativity and turn your idea into products and processes.
Overcome Challenges and Feel Fulfilled - Starting a business is by itself an accomplishment. Running a business tests an entrepreneurs capability in securing and managing resources. How well a business turns out depends on the owners ability to face challenges and overcome them.

 Risk of Failure - Small businesses are prone to risks

and the possibility of failure a single wrong business decision can bring a business to bankruptcy.
Unpredictable Business Conditions - A small business is vulnerable to sudden changes in the business environment. In a fast-paced industry, a small firm may not possess the financial capability nor the organizational capacity to respond adequately to new opportunities and their concomitant problems.

 Long Hours of Work - A prospective entrepreneur must be ready to spend most if not all his waking hours immersed in the business. Also, family time and personal affairs may be jeopardized. Unwanted or Unexpected Responsibilities The entrepreneur may eventually find himself saddled with management responsibilities he did not bargain for.

Are You Entrepreneurial? A successful entrepreneur possesses key characteristics that help his business grow and thrive. Other Factors to be considered Personal Interest Knowledge/Talents Training/Work Experience Government Support/Assistance Programs Rate of Growth of Business Other Considerations also consider the return in terms of income, employment generation, services, and the like

Provided below are the different types of product/service lines:

Product Industries - You may choose to manufacture your own product, either for the mass market or for specialized or individual demands. Canned goods, wooden or plastic toys, and ready-to-wear garments are examples of goods produced for the mass market, while precision instruments for industrial use of made-to-order furniture are examples of specialized products.

Process Industries - You may decide to perform only one or two operations in the total manufacturing process. If so, you are not, strictly speaking, a manufacturer but rather a process enterprise. The activities you perform can be initial operations on raw materials (milling, corrugating, sawing, or cutting), final operations (fishing, assembly, packing, or binding), or skilled or precision operations (embroidery, testing, woodcarving).

Subcontracting Industries - If you choose to be a subcontractor, you will undertake subcontracting work for other industries, usually bigger ones. Bigger industries sometimes subcontract the manufacture of components, supplies, or other specialized operations to smaller shops because the quality required is not viable for their high-capacity operations. Many big companies also find subcontracting a more low-cost and faster way of manufacturing products. Also, you are assured of a market for your products. You can also avail of technical and financial assistance from the big companies. One drawback of subcontracting, though, is that you rely on only one firm or two for your survival.

Service Industries - Service enterprises include

repair and maintenance shops, printing and machine shops, and food catering establishments. Beauty parlors, dress and tailoring shops, recreation establishments (bowling alleys and billiard halls), and entertainment enterprises (theaters, discos, and pub houses) are also considered service businesses. Although falling under the broad classification of a service enterprise, you may consider the trading business a fifth option. The most common type of trading enterprise is retailing.

Different legal structures protect you in different ways and offer varying tax advantages:

Sole Proprietorships General Partnerships and Joint Ventures Corporations Limited Liability Company (LLCs)

A sole proprietorship is the establishment of a business by an individual; there is no legal entity that owns ands operates the business The owner is personally responsible for all debts ands contracts Profits are disclosed on the owners personal income tax return and he or she can deduct business losses

A general partnership is an agreement by two or more persons or entities to establish and operate a business A written agreement should be prepared between the partners Each partner discloses business profits in his or her personal tax return and deducts proportionate losses A joint venture is a general partnership set up to make a profit on a one-time basis

A corporation is created by filing articles of incorporation with the appropriate agency in the State The corporation is separate and distinct from the owners of the corporation Owners of an interest in the corporation are called shareholders or stockholders They are protected from liability from the corporations debts and obligations

A limited liability company (LLC) combines liability protection with the tax status of a general partnership Owners of an interest in the LLC are called members Members have no personal liability for the debts and obligations of the LLC Members disclose profits and deduct losses on their individual tax returns

Personal

Business

Personal Bank Account

Business Bank Account

Personal Bank Account Credit Card

Business Bank Account Credit Card

Personal Bank Account Credit Card Phone

Business Bank Account Credit Card Phone/Fax/Internet

Personal Bank Account Credit Card Phone Utilities

Business Bank Account Credit Card Phone/Fax/Internet Utilities

Personal Bank Account Credit Card Phone Utilities Other Expenses

Business Bank Account Credit Card Phone/Fax/Internet Utilities Other Expenses: Health Insurance Advertising/Printing Travel Professional Devel.

Who are my customers? Where are they? At what price will they buy my product? In what quantities will they buy?

Who are my competitors?

How will my product differ from those of my competitors?

The best way to gain knowledge about a market is to work in it before going into business in it. Internet search will reveal many potential competitors. Studying magazines, books, and web sites aimed specifically at small businesses can be helpful. Hired a professionals to survey the market .

Name Your Business Write a Business Plan Find the Best Location Get Funding

A business plan is a roadmap that describes where youre going and how youre going to get there A guide to achieving your goals A tool to spark investor interest A document that helps employees understand the company mission

Description of your products and services Market and industry analysis that demonstrates the need for your business List of competitors, including their strengths and weaknesses Marketing strategy (sales approach) Management team and operations plan Financial analysis: the investment needed

A business plan is a document prepared by an entrepreneur in preparation for opening a new business. It should describe the match between the entrepreneur's abilities and the requirements for producing and marketing a particular product or service. It should define strategies for production and marketing, legal aspects and organization, and accounting and finance. In particular, it should answer three basic questions: (1) What does the entrepreneur want and what is he or she capable of doing? What are the entrepreneur's strengths? (2) What are the most workable ways of achieving the entrepreneur's goals? (3). What does the entrepreneur expect in the future?

The key steps in planning to launch a new business. The development of a business plan consists of a set of specific activities having to do with such things as marketing research and marketing mix, location, and production. Figure demonstrates the sequential nature of many of the decisions that must be made. For example, entrepreneurs cannot forecast sales revenues without first researching markets. Without such forecasts, it is all but impossible to estimate intelligently the size of a plant, store, or office. Nor is it possible to determine how much inventory to carry or how many employees to hire. Another important activity is financial planning, which translates all other activities into money. Generally, the financial plan is made up of a cash budget, an income statement, balance sheets, and a breakeven chart. The most important of these statements is the cash budget, because it tells entrepreneurs how much money they need before they open for business and how much money they need after they open for business.

Common sources for funding are:

Family & Friends

Personal Savings
Banks & Similar Lending Institutions Investors

Governmental Agencies

Lending institutions are more likely to help finance the purchase of an existing business than a new business because the risks are better understood. Individuals starting up new businesses, on the other hand, are more likely to have to rely on their personal resources.

How banks determine whether to loan you money:

Character: Credit history is very important! Capacity: What is your track record of debt repayment? Capital: How long will personal resources support both you and the business? Conditions: Current economic conditions Collateral: Assets the company pledges as a source of repayment for the loan

A marketing plan serves as a blueprint for you to follow to get your products and services known and recognized. It has:

Competitor and issue analysis: challenges and opportunities facing the business Objectives: What do you want to achieve? Action program: A to-do list Budget: Detail expenses Strategy: The Four Ps

Product: Describes features and benefits Price: Lists prices and pricing strategy Promotion: Tools or tactics to achieve marketing objectives Placement: Sales philosophies and methods

The Human Resources function deals with hiring and managing employees Be specific when interviewing candidates

Avoid inappropriate and illegal questions during the interview

Provide competitive compensation and benefits Maintain detailed employee records Consider an Employee Stock Ownership Plan (ESOP)

Know the population of the trading area Study the competition Study the location's accessibility

GETTING YOUR BUSINESS STARTED