Why start a business?

Before starting and running your own business you should be able to identify the reasons for starting a business, major decisions to be made, to outline the major stages in the planning process, appreciate the importance of planning to the business enterprise and appreciate the main sources of business finance.

There are probably as many reasons and combinations of reasons for starting a business as there are people who make the attempt.

0. A person with an original idea for a service might decide to go into business to exploit the idea, rather than try to find somebody else prepared to adopt it.

1. Some people go into business because they hope for a higher standard of living as an owner of a business rather than as an employee.

2. The desire for independence can also inspire people who are already employed.

3. Redundancy and the fear of never finding another job may persuade someone to take on the risks of a business. The experience of redundancy can also bring on a feeling of revulsion against being dependent on the decisions of other people and a determination to have more control over life.

Whatever the reason for starting a business there are feelings of conviction, determination and optimism on the part of the entrepreneur. The entrepreneur must be careful to find the answers to the following questions if the business is to survive:

1. Have I the skills, experience and determination to run a business? The owner of a business is a resource of that business, and will be offering production and management skills to the small business. We can say that the answer to this question lies within the function of personnel. The success or failure of all the other functions will depend on the skills of the people engaged in them. Yet even the most skilful workforce cannot succeed if it lacks the support of finance, materials, market and organization.

2. What product will I make or what service will I provide? The answer to this question must go further than a list of the good or service. Amongst other things it must concern itself with design and quality. The decision will depend upon who will be likely to buy and the ability of the business to produce the good or service. This lies within both the marketing and production functions.

3. Will people buy my product? Who will buy it? Where will it be bought and at what price? Before an answer can be found to these questions the entrepreneur will have to research the market. This activity is part of the marketing function.

4. Can I supply the product at the right time, in the required quantities, at the desired quality and at the right price? These questions relate to the production activities of the firm.

5. Can I get the product to my customers at the right time, in the right quantities and at the right price? Marketing has the responsibility for answering this question too, together with the problem of informing and persuading people to buy.

6. Have I the money to buy the necessary premises, materials and machinery? Can 1 afford to employ labour? Which machines will give me the greatest profit? Which product will give me the greatest profit? The answers to these questions lie in the function of finance.

7. How am I to combine the different functions listed above so that they will work together and give the maximum reward for the minimum input? The term used to describe this concept is efficiency. The answers lie in the area of organization and control.

2. Comprehension check.

Are the following statements true or false? Correct the false ones.

1. Realization of an original idea, aspiration for a better standard of living, striving for independence, threat of dismissal from the staff are the reasons for starting a business.

2. Assuming risks of business can not prevent an entrepreneur from launching a business.

3. The survival of business involves proficient employees, the support of finance, materials, market and organization.

4. High quality goods and services, right price, market place, prompt delivery of product to customers are the essential conditions for the survival of a business.

5. Insufficient finance will give the maximum return for the minimum costs.

Pre-reading task

Work in small groups.

1) Have any of you ever had to consider or draw up a business plan? Why do you think an entrepreneur needs a business plan? Give specific reasons to support your answer.