<div id="content"> <div class="post"> <H2 class="title">Things to consider before starting a business</H2> <div class="shadedEntry2"> <p>&nbsp;</p> <p>Starting a business can be a big decision.For some people~ it is a progression of their skills while for others it may be a milestone.In case you fall in the later ~ you may need to identify and manage the factors that are involved in setting up a business profitably, including raising capital~ drawing up a business plan~ acquiring real estate~ hiring staff etc etc.One is, therefore, expected to have a fair level of understanding of the complexities of starting and running a business before they venture out and take the plunge.</p> <p>Most large corporations utilize the services of professional managers or consultants to appraise a new Business.The job of a manager or appraisers includes determining the path the projected business will likely take and the likely outcome of the venture.If the managers deem that the project will be able to recover the capital invested~ the cashflow required for running the business~ the dividends payout to shareholders and finally the paybacks on debts~ and then generate positive returns ~the project is given a thumbs up or else it is canned.</p> <p>Deciding to start your own business is a first step in the right direction. Most people who decide to go on their own~ achieve success sooner than later~ if they can manage to stay afloat just long enough. The challenge is about riding the wave and not going down with it.</p> <p>There are some important questions one must raise before starting a new venture.These questions are a fundamental to investigations about future profitability of a business.Lets analyze the factors that comprise the fundamental analysis for business profitability. </p> <p><u>Q 1) Can I be innovative ? </u></p> <p>Innovation is often the secret ingredient to success as it allows you to adapt, adopt and stay ahead.The fundamental question to ask is that~ can my business continue to be innovative to keep ahead and adapt.Can I emulate what my competitors are thinking or doing.Can I continue to invest in new ideas into my business and offerings. </p> <p>In a free market economy ~ everyone aims to maximize their profits and add value to their product or business offerings.Customers benefit with improvements in technology~quality~packaging~after sales servicing and overall buying experience.Without innovation~a small improvement in your competitors value offering may leave you gasping for something to match.Without innovation and benchmarking~ competition catches up or moves ahead~ leaving you desperate for answers.But Innovation often comes with a price tag and must be used wisely.As it is often a necessary investment, business must continuously ask the following questions : why is the need to innovate ~ how will the innovation help the customer~ What will be the cost and how often will I need to innovate / improve my business offerings to stay ahead. </p> <p><u>Q 2) Has everything beein invented or can I offer something different</u></p> <p>Customers usually decide the lifecycle of your product or offering.It usually lasts till there is something newer out there.Ford's Model T cars failed eventually because people eventually got tired of buying black.There is often scope for adding something new in any product or industry.'Niche' segments often appear as a result of repositioning your business in a cluttered market space.Consider the Automotive industry as an example.Car makers are always on the look out for niche segments they can market to.Ford would have been outsold if they did not block competition effectively by offering in many niche segments. </p> <p><u>Q 3) Who is my target market and what are their consumption patterns.</u></p> <p>To be able to sell your product profitably~ you need to identify your target customers~ their buying behaviour and their buying motivators.Market Segmentation is ~undoubtedly~ the key process in evaluating business profitability.Identifying target markets~ customer demographics and what influences buying decisions helps to formulate pricing~promotion and placement strategies.Propensity to consume is the technical term for the rate at which your target segment consumes its income.If the propensity to consume is low~ your business will need higher expenditures on promotion~ provide price incentives to influence buying decisions~ and you may even decide not to address the target segment.Historically~ Asians have a higher propensity to save versus the west~ which has higher propensity to consume.This implies that it may~often~ be easier to sell to the West than to Asians.You may also need to consider the competition~from within your industry and from substitute industries (e.g. tea and coffee are considered as subsutitute industries ~Coke and Pepsi are competing brands in the same industry~ namely soft drinks).Prices and availability often force consumers to switch between brands and subsitute industries.They may switch easily between brands and industries~ or with some loyalty to a brand or industry.It is important to consider the number of substitutes available for the product or brand and the loyalty customers associate with the product.How will the consumers behave if all suppliers but you were to suddenly vanish and you could set your price.If there are plenty of suppliers and low customer loyalty~ there are chances you will~ at some point or the other~ struggle to sell your product.That said~ there is hardly any industry which has no competition from others.Our Idea is not to reduce competition~ but to measure and manage profitability in the conditions that exist. </p> <p><u>Q 4) What are the critical success factors for my business profitability</u></p> <p>Understanding the critical factors that would make the difference between your earning profits and going out with a bang is important before you decide to venture out.This requires a detailed discussion.</p> <p><u>Q 5) What are the key risks for failure.</u></p> <p>As important as it is to understand the factors for success~ it is important to understand the reasons for failure.Not reading the market or demand correctly can lead to disastrous consequences.Some important business failures are as follows</p> <li> <ul>Failure to understand customer requirements.</ul> <ul> Failure to understand competition from products and people.</ul> <ul> Failure to understand costs ~ time involved in market your business~running costs~ insurance charges~ holding and Break even costs.</ul> <ul> Failure to Market (brand name ~ pricing ~ promotion~ positioning).</ul> <ul> Technical failures (product or service non availability)</ul> </li> </div> </div> <div align="right"><a href="./PatternDetail.html?id=85">Next : <b>Role Of Success Factors in Project Valuation</b></a></div> </div>