Stages of growth of small Business
Business is a success when it makes money. Business becomes profitable only after the earlier stage of growth. Through this stage, a business may remain unprofitable or be closed down. The primary purpose is to discuss the various stages through which a business goes during its life cycle, its early development, and further growth.
Progress of the business depends upon the capital resources available with it for the production, promotion, and distribution of its products or services. It also depends on efficient management, organizational set-up, marketing strategy, etc. Thus for most businesses, their progress involves increasing investment in fixed assets such as plant and machinery, customer base, etc., increased output per unit of capital employed, improved quality control measures, and better cost control methods, among others things.
It may be noted that the growth of a business depends not only on better production methods or improving product quality but also on successful marketing. So, above all else, it is vital to have total control over the market factors before venturing into any new business according to RemoteDBA.com.
The decision to enter or not enter the business
The first stage in the life cycle of a business is often the most difficult and crucial one for making an appropriate decision about starting or not starting a particular unit. These decisions should be made by an entrepreneur only after careful analysis of available resources like capital, managerial talents, etc., factor endowments, competition in the industry sector (or absence thereof), policies of government related to industrial development, and foreign investment, and so on. Thus a proper business environment is a critical factor in the decision-making process that determines whether to start a new venture or not.
A large part of entrepreneurial activity results from people who want to establish an independent organization that reflects their values and objectives. In general, entrepreneurs are different from managers because they have a strong desire to control what happens around them. In contrast, managers seek less personal involvement in their careers and focus more on the organization. This distinction between entrepreneurs and managers should be kept in mind while considering the various factors relevant for starting a new unit.
The background against which Businesses Are Started
The background against which businesses are started may vary depending upon national economic policies, political considerations, etc. It may be noted that the main reason for starting a business is to make profits. It also gives employment to people and helps in developing infrastructure. It can give rise to secondary industries like the construction of buildings, equipment, etc. It provides goods and services that help improve people’s living standards. It plays a vital role in the national economy by providing funds for expanding various sectors (like agriculture), and so on.
Branches of Business
There are numerous branches or types of businesses depending upon the nature of their products or services offered. The principal divisions of various kinds appear to determine whether they produce merchandise embodying physical attributes or provide intangible benefits. For example, manufacturers deal with tangible goods while service enterprises provide intangible benefits. However, the distinction between the two is often confusing since many goods (like motor cars, cosmetics, etc.) embody both tangible and intangible attributes. At the same time, some services like air-mail transportation are purely intangibles. Besides this, functional differences also play an important role in determining the types of business units; for example, banks perform certain functions which do not belong to any other type.
It must be borne in mind that the cost of starting up a new unit varies from industry to industry depending on many factors like market situation, legal requirements, etc. 3) Initial Investment Required: Deciding whether to enter into business or not depends on the availability of funds with an entrepreneur because, without sufficient capital, no business can expand its activities on a large scale. For example, the cost of running a business involving heavy-duty equipment like an oil refinery is far more than that dealing with, say, a boutique or grocery store.
Despite the type of the business, especially during the initial stage, when the business is small yet, it is crucial to managing the finances in the most optimal way. Otherwise, the business can encounter many unnecessary expenses, such as tax expenses and problems with the IRS. These kinds of problems are easy to manage by hiring professionals who really know what they are dealing with. In the case of taxes, the most optimal solution is hiring small business tax services and dealing with more important operational problems.
Deciding on Location
Another factor in the decision-making process is determining the location for starting up a new unit. For instance, if it has to run successfully, it must be accessible to sources of raw materials and markets for its products. The entrepreneurs may identify specific locations where raw materials are available at lower costs than other regions while consumers are willing to buy their produce.
Size of Business Unit
After establishing that there is enough capital at its disposal and after deciding about location comes the question about the size of the unit. Generally, the size of a firm is determined by the market situation in which it operates, i.e., whether demand for its products is large enough to warrant expansion. Bigger enterprises can realize greater economies of scale than smaller units because they enjoy better bargaining power with their suppliers and customers. This enables them to set up more extensive inventories enabling lower per-unit costs. Besides this, bigger businesses can spread heavy research and development costs over a wide range of products, while small firms cannot maintain specialized R&D departments.
A Business Is Born
As said earlier, entrepreneurs are different from managers because they want to control what happens around them, while managers seek less personal involvement in their careers and focus more on the organization. Entrepreneurs take calculated risks and consider themselves managers who are responsible for the success of their enterprise. However, if they fail, they do not quite like managers but remain determined to make it work by taking other initiatives (like hiring new employees). It is only when the entrepreneurs become convinced that there will be no let-up in losses that they turn to either selling off or closing down their business units.
Decision to Sell
An entrepreneur decides on selling his business for several reasons: one reason may be that he has acquired other businesses and wishes to focus on them; secondly, he may want to utilize the funds generated from the sale of one unit to finance another venture; thirdly, as an older person with wider experience and time on his hands, he may like to turn into a consultant and guide other entrepreneurs; and finally, as an older adult one with limited energy he does not care whether the unit generates any profit or loss.
The decision to Close Down
On the other hand, there is also a situation where it makes perfect sense for the entrepreneur to close down his business. For example, if there were no buyers willing to pay a reasonable price for his, to wait for someone who is interested in buying it. Also, the costs of keeping such unproductive units running can offset even potential benefits if they existed. Besides this, some businesses may have become obsolete, and their owners try to sell them off at throwaway prices.