Steps of starting a new business (1- come up with the new business idea)
1- come up with the new business idea
2 – choose the form of ownership
The 3 basic choices are proprietorship, partnership, or corporation
Sole proprietorship – a business owned and managed by one individual.
Partnership – two or more people who co-own a business for the purpose of making profits.
Corporation – a legal entity created by the state and existing apart of its owners.
3 – write the business plan
Business plan includes strategic plan
Strategic plan is a document that is primarily intended to be used internally by the organization, to guide itself.
Document specifying the business details prepared by an entrepreneur prior to opening a new business
Clear vision
Realistic financial projections
Target market
Industry and competitors
Management team
Critical risks that could threaten success
4 - determine sources of financing
The financing decision usually involves two options – whether to obtain loan that must be repaid (debt financing) or whether to share ownership (equity financing)
debt financing – borrowing money that has to be repaid at a later dante inn order to start a business
equity financing – any money invested by owners or by those who purchase stock in a corporation
Stages of growth (1-start up, 2- survival, …)
1
.
Start-up: in
this stage, the main problems are producing the product or service
and obtaining customers.
Can we get enough customers?
Will we survive?
Do we have enough money?
2. Survival: the business has demonstrated that it is a workable business entity. It’s producing a product or service and has sufficient customers.
3. Success: the company is solidly based and profitable.
4. Takeoff: problems here: how to grow rapidly and finance growth, how to maintain the advantages of “smallness” as the company grows
5. Resource Maturity: the company has made substantial financial gains, but it may start to loose the advantages of small size, including flexibility and the entrepreneurial spirit.
Stages of growth for an entrepreneurial company.
Compare the three levels of goals and plans.
A goal is a desired future state that the organization attempts to realize.
A plan is a set of actions a company will take to achieve this goal
Goals at each level of the organization guide the organization. There are different levels of planning and goals in an organization:
Strategic Goals - goals that define what the whole company wants to achieve.
Tactical Goals – goals that should be achieved by major divisions and departments in order to attain strategic goal.
Operational Goals – goals that should be achieved by departments, work groups, and individuals. These goals must be precise and measurable.
These goals are associated with specific time horizons. The time horizons are long term, intermediate term, and short term. Long-term planning includes strategic goals and may extend as far as 5 years and more into the future. Intermediate-term planning includes tactical goals and has a time horizon of 1-2 years. Short-term planning includes operational goals for specific departments and individuals and has time horizon of 1 year and less.