One sure way of succeeding in business is to
engage in marketing all the time.
Steps in starting a new business
enterprise are as follows:
1. First, the promoter must discover
a good business opportunity.
2. Then he must decide on the size
of the business unit.
3. This must be followed by
determining the form of business
ownership.
4. He must take proper care while
selecting the location of business.
5. The amount of finance or capital
(money) required to run the business must
also be fixed.
6. Good selection and well-
organization of the physical facilities
is crucial.
7. He must have a good plant layout.
8. Organizational structure is
needed to run business smoothly.
9. He must use scientific methods to
fulfill the requirement (demand) of
efficient employees.
10. Before initiation, business shall
be duly registered to avail a legal
status and enjoy its all rights.
11. After registration, business can
start its operation in full swing.
12. Once under operation, tax
liability of the business must be
properly planned, managed and cleared
regularly to minimize taxes.
Generally; all this work is done by the
Promoter.
Now let's discuss one by one important
steps involved in setting up a new
business enterprise.
1. Discover a business opportunity:
The Promoter first finds out a business
opportunity. He can get this information
from newspapers, magazines, market
surveys, research, etc.
A business opportunity may be to:
• Start a new business,
• Expand or diversify the existing
(old) business,
• Purchase another company,
• Enter a joint venture or foreign
collaboration, etc.
All business opportunities look very good
in the beginning. However, the Promoter
must investigate the business opportunity
very carefully. He must find out whether
it is profitable or not. He must study
the competition, future prospectus of the
business, demand and supply position,
availability of raw materials, etc. He
must start the business only if he is
fully satisfied.
2. Size of business:
The promoter has to decide about the size
of the business unit. He has to decide
whether the business unit will be a
small, medium-one or large size. The size
of the business depends on many factors
such as economics of scale, future
demand, finance, etc. He must see that
there is optimum utilization of resources
and maximum profit.
3. Form of business ownership:
The promoter must decide about the form
of business ownership. The forms of
business ownership are sole trader,
partnership firm, private company, public
company and co-operative society. The
form of ownership depends on many factors
such as size of business, finance, tax,
extent of liability, etc.
4. Location of business:
The promoter must decide about the
location of the business unit. He must
consider factors like availability of
land, electricity, water, nearness to
market, transportation, scope for
expansion, and so on. Unscientific
location affects the efficiency of
business. It increases the cost of
production and decreases the
profitability. Therefore, immense care
must be taken while selecting the region,
location and site for the business unit.
5. Capital needs:
Finance is the life-line of a business.
As a result, the promoter has to decide
about business capital requirements and
also find out different sources of
finance.
While starting a new business the
promoter has to decide on:
1. The financial needs of the
business. That is, short-term and long-
term capital requirements.
2. Sources of finance like shares,
debentures, loans from banks and other
financial institutions.
3. Cost of collecting finance and
the returns on capital invested.
4. The capital structure and
appropriate time for collecting finance.
5. Sources of working capital.
6. Organization of physical facilities:
Physical facilities mean the resources
used to convert raw-materials into
finished products.
Promoter has to decide about the machines
and equipment to be used, the process of
production and the skilled and unskilled
workers required to perform jobs. He must
get the best-quality raw materials,
machines and workers. So that he can
produce good quality goods.
7. Layout:
Layout means an arrangement of physical
facilities like machines, equipment and
workers that are required for
manufacturing goods.
Plant layout is a scientific and
systematic arrangement of machines and
equipment within the factory.
A good layout ensures minimum wastage,
better use of available space, minimize
production loss, safety and security of
workers. It also increases the profits of
the business. So the promoter must have a
good plant layout.
8. Organizational structure:
A proper organizational structure is
needed to conduct business smoothly and
efficiently. The business is divided,
according to functions, into departments.
After making departments, the employees
are assigned their duties and shouldered
important responsibilities. This results
into a superior-subordinate relationship
between them. Organization structure is a
pattern of relationships, and it is
necessary to fix responsibilities on the
employees.
9. Manpower requirements:
Business enterprise requires skilled and
semi-skilled workers to do factory and
clerical jobs. The success of any
organization depends upon selecting a
right man for the right job. The Promoter
must use scientific methods for selection
and training manpower (personnel) and
match the right person with right job.
10. Registration:
Registering a new business is a very
important step. Registration is not
compulsory but is beneficial to business
due to the following main reasons:
1. It gives a legal entity and
status to the business, and so it can
enforce its legal rights.
2. A registered business gets all
government assistance and incentives.
3. A registered business can get
licenses to import raw-material.
In short, after the registration, a
business legally comes into existence and
can enjoy its all legal rights.
11. Starting the business:
After registration, the promoter can
launch (start) the business. He brings
together the physical facilities, starts
the production process, recruits labour,
produces and distributes goods. If
everything goes well, then the business
runs smoothly and starts making profit.
12. Tax planning:
The promoter has to decide about the tax
liability. Tax liability should not be
avoided, but it can be minimized by
better management. Tax planning does not
mean non-payment of tax. It means to
minimize the taxes and the effect of the
taxes on the business. Therefore, tax
planning influences the promoter's
decision about location, size, form and
profitability of the business.
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