The business world today viewed as fast paced, diversified and full of money to be made. If you have the drive to go out there take calculated risks and carve out your place in this ever changing world it could turn out to be a lucrative adventure. The entrepreneurs of today are doing just that, they are examining what consumer??™s trends would be beneficial to their ideas, services and or products. To be successful in today??™s market the modern day entrepreneurs are observing four key environments; The Economic and Legal, Technological, Social, and the Competitive.
In the United States we have the freedom to start a business at any time without excessive government regulations. An individual or group can start a business in their home or in a facility tailored to suit their business needs. There are many things that need to be considered when opening a new business. The four important issues are the economic and legal environment, the technological environment, the social environment, and the competitive environment.
The economics of starting a business are very important. Getting the money to start a business is one of the first things that should be considered before a business is started. The risk of losing the money has to be worth the reward. Before you start your business you need to decide what financial risk you??™re willing to make for the possible reward. When I asked Jamie how much financial risk he was willing to take he had thought the greater the risk the greater the reward. If you really believe in your product taking a big risk is the best way to start a business. Jamie has a simple motto that he goes by when starting a business ???Go big or go home.???
There are many ways that you can get the money to start a business, take out a loan on an asset that you own, have family and friends invest in your business, or get the money from organizations such as the SBA. An estimated ninety percent of all startups receive money from family and friends (Nickels, McHugh, McHugh, 2008). This can be a great option if the loan has little or no interest. Family and friends may also be more flexible on how they are paid back. Often times when starting a new business your income may be inconsistent, so flexibility of how the loan is repaid can be a great option for your company. The down side to borrowing from family and friends is that you run the risk of damaging your personal relationships if you cannot pay the loan back in a timely manner or the business is not a success. If this is the option that you decide make sure specific guidelines are laid out of how the loan well be repaid in multiple circumstances. During my interview I learned that Jaime started his business by taking out a home equity loan. This is also a great option, because the interest on you loan is at a much better rate then on a business loan. Some home equity loans work like a credit card so you only have to pay interest on the money that you are using and you get the great interest rate on a home equity loan. The disadvantage to a home equity loan is that if you default on the loan you run the risk of losing your home.
Starting with a business plan that has a detailed description of how to handle the finances is very important. The first thing that you need to know is how much money you need to get your business started. Starting with a rough budget well help you come to a number of how much money that you will need to get started. This budget may change as your business gets started but it is important not to change your bottom line. If you only have a set amount of money, if you go over that amount something else well not get paid, or you may end up paying the expense of high interest credit cards.
Make sure that all of the things that you will need are in your budget. Such as rent, utilities, inventory, and salaries. A large mistake that people make is that they forget to pay themselves. Be realistic about how much money that you need to live. Nothing makes morale worse than if you??™re not making enough money to live.
Another item that you need to keep a close watch on is your inventory. Make sure that your inventory is not growing faster than you can pay for it. Capital goods are also a large expenditure that can grow out of control very easily. Having the latest and greatest capital does not always work to the companies benefit. Your revenue has to be high enough to keep the capital working efficiently. For example, if you are buying a copy machine and you plan on charging for each copy. There is a copy machine for sale for one thousand dollars and it can copy seven thousand prints per day. You can instead buy a copy machine for two thousand dollars that can print twenty five thousand prints a day. The more expensive copier might seem like a better deal, but if you only make one thousand prints a day the more expensive copier is not necessary. Over time you may be able to utilize the more expensive copier but during the time you do not need the more expensive copier you are paying the extra interest on it.
The government plays a large role in your business as you get started. Understanding how the tax laws work is important. As a starting business, you may want to structure your business so that you can push off paying as much tax as you can. When starting out your cash flow becomes very important to the health of your business.
How to legally structure your company can be a key to your success. Each situation has a different way to set your company up. If you are in a business that the worst case scenario is that you can lose everything that you own, setting up as a corporation may be your best choice. Because then you can protect your personal assets. The biggest problem that I have found with corporations is that when you do go and try to get credit they make you sign a personal guarantee that the money well be paid back. Corporations are also a lot more paper work then a sole proprietorship. A new company usually does not need more work to do. For these reasons a sole proprietorship maybe the best choice for your business. I think that if you are in business by yourself and plan to stay small a sole proprietorship maybe your best choice.
Another choice that you have is to a partnership when your business starts. There are many advantages to a partnership. The amount of time taken to run a business is cut in half which can be a great option. You well have more time to expand the business rather than spending all of your time on day to day operations. Another advantage is help with the financial side. Your partner has to come up with half the money that is needed to start the business. It is also a great asset to half another set of ideas that can help your business start. The biggest disadvantage is that there may be disagreement of how the business should be run. I believe that one person should make decisions. Sometimes splitting up the responsibilities is a great way to handle a partnership. I also believe that silent partner is a great way to start a business. You get a lot of advantages without the disadvantages.
Webster??™s dictionary defines technology as the practical application of knowledge especially in a particular area. When you think of technology this way it changes what most people are picturing in your head as technology. I believe most people think of technology as the newest laptop computer or gadget like an iPhone. While these do fit the definition for technology, if they are not used for the proper purpose they are just another wasted piece of equipment. A better saw blade to most would be considered a tool but not technology, the other side of this definition is something most people would not consider to be technology but really is if used properly. An example of this is if you own a marble business and this new saw blade helps to reduce waste and increases output, it is now a great piece of technology. If a new business takes these three questions into account when looking for the appropriate technology it should do well, what is out there to help the business, what is the appropriate way to use it and is this technology cost effective for the business
Finding technology that will benefit your business is one of the best ways to make the people working there as efficient as possible. There are all kinds of technologies out in the marketplace to help businesses succeed so the first thing you need to do is find what is appropriate to help your business. If your company distributes product to stores all over a designated area and you buy laptops for the trucks so they can constantly be in contact and give and get updated information in real time. This is great use of technology and allows you to have an efficient delivery workforce; however if you did the same thing but later realized that they didn??™t have cellular reception capabilities this technology really would not provide near the value. This is an easy example of two very similar pieces of technology and one provides a business with the efficiencies it needs and the other that is just technology without the benefits needed.
Once a business finds the technology to help improve the business the next step is how it makes use of that piece of technology. With the company I talk about above they could find the best distribution software they can afford and if they do not implement it properly it will not bring them the benefits that they need or expected. There are many ways once a company finds the technology they need to improve the business where things can still go wrong. Implementing technology can be difficult and getting people to use it can be just as much of a problem. It is possible that implementing a piece of technology can cost as much or more then the initial expense to buy it. I have seen people who have been shown simple ways to make their job easier through the use of technology and they continue to do things in a manual way just because they are comfortable with how they are doing it. Technology has many challenges so it is important to remember that purchasing it is just the first step in becoming a more efficient organization.
When it comes to a new business and technology I feel the cost of the technology needs to be looked at two ways. The first is can the organization afford to purchase whatever the technology is. If an organization finds the absolute perfect software to manage its inventory but spending the money on the software will leave the company in such a financial position that they will not have the ability to pay other bills there is no benefit. The other side of the cost effectiveness of technology is the return on investment. Companies have all kinds of return on investment they need to hit to spend money on something and that is ok. As a new company you do need to make sure that the things you spend money on will give you a positive return on your investment otherwise you probably should not spend the money. The one real exception to this is if this technology is something that your business can not exist without, such as a restraint cannot exist without an oven. This leaves an organization with the knowledge that technology for the sake of technology is no good there has to be a benefit or a return on your investment to make a purchase worthwhile.
The social environment that an organization is starting out in is important to understand if you want to be as successful as possible. As the second generation owner of S.C. Johnson, H. F. Johnson Sr. said in his 1927 profit sharing speech ???The goodwill of the people is the only enduring thing in any business. It is the sole substance??¦the rest is shadow.??? If a new organization uses this philosophy in its dealings with its own workforce, customers and the community it operates in it will have a better chance of surviving then one that does not.
Diversity in the United States is a fact of life and companies that understand that have a better chance of being successful. Diversity in a workforce brings more experience, knowledge and opportunity to an organization. Companies that do not take advantage of diversity are not giving themselves all the opportunity to succeed that they should.
Society has trends that are an important part of business and if a company understand these trends then and uses them to their advantage they can grow rapidly. A good example of this is Jane Fonda and the trend of exercising; she was in the right business at the right time and used that to have an incredibly successful line of exercise videos. This trend has lasted a long time but most trends have a shorter lifespan so it is important to understand them and where they are in their life cycle. A business who strives to understand society??™s trends will usually find itself with a plan to take advantage of them.
A new organization that strives to be a good neighbor in the community it exists in is being smart. Small things can make a large difference when a new organization is trying to get positive information out about itself. Generating positive information about any company is important and should never be taken for granted.
When it comes to competition every business wants to know what their competitors are doing, they in turn mimic that product or service but at a cheaper rate. The companies of today from the largest fortune five-hundred companies all the way down to the mom and pop shops are starting to gravitate away from quality of products and services that the consumers are starting to demand.
When it comes to starting and running a business a business owner has to have quality in mind over quantity and eventually when that business becomes bigger and there is more demand on their products or services that company must find a happy medium between quality and quantity to ensure the needs and or wants of the consumers are met.
The struggle between quality and quantity is a constant battle with business owners, especially entrepreneurs as a new product or service has to overcome great opposition from competition that has been well established in the market place in some cases that competition has been established for decades. The entrepreneurs must have a clear business plan in reference to dealing with stiff competition; their product must surpass customer expectations.
So in reference to jams and jellies the CEO of Cobblestone Orchard stated, that if a new business can offer consumers a wholesome jam that is not massed produced with a ton of preservatives in it. Consumers generally will pay the little bit higher price for the quality product. This is part due to the new business catering and thoroughly understanding the consumers??™ wants of having something healthier to give their children, which in turn that consumer will offer free advertising for the company by word of mouth to friends and relatives that this new product is the best way to go. The only down side to that is, the company now has set the standards of quality and expectations in which they must abide by at all times. Due to the extremely high standards they have set for their product and care they have put into the product. If the company deviates from that quality they set the standards for and have forgotten about that quality and exceeding consumer expectations they will lose money and customer base. The consumers will feel betrayed and let down by the company, that the company sacrificed their core values for bigger profit margins.
Another focal point on the competitive market is to exceed consumer expectations, if a new business offers the same old service or product at the same price and are not trying to wow the consumer they will not succeed in moving business to themselves; consumers will stick to their norm of spending and not venture out to see the competition. The new markets of today states that consumers want to be wowed with new fresh ideas that are high end but easy on the pocket book. As previously stated the entrepreneurs of today have to in order to be successful always have the edge over their targeted competition with the ???wow??? factor when it comes to new products.
The ???wow??? factor is achieved by always getting feedback from consumers positive and constructive, by listening to consumers, understanding their needs, wants, and or concerns a business can become very successful. When consumers buy a product or a service they are not only looking for the obvious purchasing of the product, but also the total shopping experience and if a business can offer a quality product with competitive pricing and an unforgettable shopping experience that business will take off.
The way a business can overcome the competitive field is to understand everything previously stated, but also companies have to empower their employees to aid in the consumer experience, as employees are a businesses frontline and even the face of a business. If employees have to go through the chain of command to please a customer it can take several minutes or even hours to get manager approval. However, if employees are empowered to make sound business decisions based on their initial thoughts, the consumer will have an all around more enjoyable experience. This can be evident anywhere where shopping is found one such example comes from entrepreneur and multiple business owner Jamie Patrick this entrepreneur owns four very different types of businesses, during an informal interview with him in regards to empowering his employees, he stated that all employees and employers must have an understanding that decisions can be made by everyone and backed up by the managers and owner/owners without fear of repercussions. What this boils down to is the trust in the employees that decisions for improving the customers shopping experience can be made at the time of check out or during shopping. This freedom allows the employees who are at the forefront of any business to make decisions that can improve and will pay the company back ten-fold, through the word of mouth from a customer and their positive shopping experience.
We have found through our interview with Jamie and from personal experiences there are a number of things that have to be considered when starting a business, a few of these components are the economic and legal, technological, social, and the competitive. By entrepreneurs taking these things into consider they will increase their business??™ chance of becoming successful.
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ed.). Burr Ridge, IL: Irwin/McGraw-Hill