SETTING UP A NEW BUSINESS ENTERPRISE

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   BEGINNING  

NEW BUSINESS VENTURE 

Starting a new business enterprise is not an easy job to do. It is a job as complex as difficult as the birth of a  newborn boy. The entrepreneurs have to act both as a mother and a midwife. It is an entrepreneur who conceives the business idea, faces various difficulties in creating a new enterprise and brings it up to a successful venture. The ultimate success of a business depends upon the entrepreneur’s skill to handle various problems on starting a new enterprise and then make it a ‘going concern

The entrepreneur going to start a new enterprise must have several qualities like wide knowledge, skills, experience, foresightedness, dynamic outlook, self-confidence, and willingness to take the risks.If an entrepreneur or businessman lacks these qualities, he cannot BE successful in launching a new enterprise.

Basically, the analogy involved in the birth of a newborn child can be used to explain problems involved in launching or floating a new enterprise. The person who has a business idea and takes steps to implement it is known as an entrepreneur or a promoter. The entrepreneur has to act both as a mother and a midwife because it is he who faces various difficulties to bring the new enterprise into existence and bring it up into a successful venture, that is why business is also called an ADVENTURE. The entrepreneurs assemble and coordinate various factors of production, namely human resources, machines, capital and materials to start a new enterprise and keep it running.T he ultimate success of a business depends upon the entrepreneur’s skills to manage various problems with which he is confronted while starting a new enterprise.

CONSIDERATIONS IN GETTING UP A NEW BUSINESS UNIT

1.Selection of the line of business

The process of setting up a new business enterprise when the businessman has some idea which can be implemented to earn profits. The businessman will analyze the proposed idea to find out whether the business would be profitable or not including the analysis of risks involved and probable amount of capital required for this purpose.

2. The choice form of ownership

On the basis of ownership, a business organisation may take the form of SOLE PROPRIETORSHIP, PARTNERSHIP, or JOINT STOCK COMPANY. The choice of the form of organisation will determine the authority of the entrepreneur launching a business. However, in certain lines of business, there is no choice left in the selection of the form of organisation. For instance, insurance, and banking business can be done only by the joint stock companies. The size of the business will also determine the form of organisation company form is more suitable in case of large-scale operations. Sole trader or proprietorship is more suitable for a small scale and medium scale operations.Other factors that affect the choice of ownership are the capital requirement, managerial skills requirement, market coverage , limits of liability tax liability, legal formalities etc.

3.Size of business

The size of the business is influenced by various factors like technical, managerial, finance and marketing. Some factors favour the larger size while others operate to restrict the scale of operations. Where the entrepreneurs are confident that they will be able to market their products and raise a sufficient amount of capital, They will start their operations at on a large scale.

4.Financing the proposition

The promoters or the entrepreneurs have to make available sufficient amount of capital for the working of the business. Capital is required for investment in fixed assets like land, building, machines etc. It is utmost importance to have adequate capital for meeting the initial needs and future requirements of the business. Managerial decisions are required to be taken with regard to the following :

1.The amount of long-term capital required

2.The amount of short-term capital required

3.The cost of raising  funds

4.The determination  of an optimum capital structure

5.The estimation of return of investment and

6.The determination of the time appropriate for raising the funds from various resources

5.Location of business

The location is a very important aspect fo a business. The owner has to take adequate care while selecting the location of the proposed business activities.they are to search a location where the access to raw material, labour, communication, markets, power and certain banking, transportation insurance warehousing most importantly the manpower is easy to get

6.Procedural formalities

In almost every type of business, some procedural formalities have to be observed while starting a new business. In Sole proprietorship or a partnership, there are no such procedural formalities. Only permission from the municipality is taken to run or start the business. Registration of partnership firm is not necessary but a joint stock company is exposed to greater procedural formalities both at the time of incorporation and during its life

7.Tax planning

Tax planning has become an essential task these days because of a number of tax laws prevailing in the country. The promoter of the business has to visualise well in advance the various taxes which the enterprise will have to pay. Of all the taxes, income tax is the most important factor which determines the type of ownership. Company typed of the organisation is not preferred because the profits of the company are taxed twice firs t1. As the profit of company and 2. As the dividend of the company but the rate of tax remains in the case of companies irrespective of the volume of profits. Hence this is one big reason to prefer the sole proprietorship.

8.Launching the business enterprises

Like the stage, the promoter arranges for the acquisition of necessary man, material, machinery, money and managerial ability. After this, the organisation structure is made and the work is assigned to each personnel. Hence now the production will start and varies department sets are created namely:

1. Product

2.Financing

3.Marketing

4.Sales

MANAGEMENT coordinates the working of these departments and communicates the availability of the products to the prospective customers through advertising and sales promotion.