All business ventures begin with the conceptualization of an idea. At this initial stage the product or service idea is envisioned. Most Entrepreneurs identify a need in the market i.e. a service that is not being provided or a product that does not exist. If the product or service already exists then ideas to make improvements may be conceptualized.
The entrepreneur is a shrewd investor and takes calculated risks. Before investing money in a business venture a market research must therefore be done to ascertain the extent of the need for the product or service. This helps to minimize losses. A market research involves gathering information about a potential market to help an investor make decisions about entering that market.
3. Identification of resources
What resources are needed to start the business?
If the market research is favourable the entrepreneur must now identify the necessary resources to operate business. The resources required are land, labour and capital. Land refers to location or place used to set up a business. This may be bought, rented or family home. Labour employed must be qualified and skilled to efficiently carry out their duties. Capital includes money, raw material and assets such as machinery and equipment.
4. Creation of a business plan
Preparing a business plan is very important before the start of a business. This will help the business to ascertain whether or not the business will be profitable. A business plan outlines the goals of a business and the strategies that will be employed to achieve them. Usually financial institutions require that a business plan be presented when a loan is requested for business investment.
5. Acquisition of funds
There are several ways of acquiring funds to start a business. There are a myriad of financial institutions that are willing to assist small businesses once their business plans are deemed workable. The investor must weigh the advantages and disadvantages of acquiring funds from the various financial institutions. The cost of borrowing i.e. the interest rate charged and the length of the repayment period are factors to consider.
Funds may be borrowed from friends and relatives that may attract a lower or no repayment cost and a more flexible repayment schedule. Funds can also be acquired from personal savings. Encouraging partners or selling shares are ways of avoiding high costs of capital.
6. Operation of a business
A business must be efficiently operated to ensure high quality goods and service. This is important to keep existing customers and for business growth. Many companies employ an operation manager to design and oversee its operations. This person develops and manages the various processes used to create goods and services efficiently to ensure customer satisfaction.