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Example research essay topic: Lending Institutions Venture Capital - 1,293 words

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Principles of Business - P 2 IP It is a common knowledge that hundreds and thousands of new small businesses are started in the United States every month. However, for each success there are plenty of failures. New businesses emerge as there are plenty opportunities for growth, increased opportunities for women, the possibility to use e-commerce, as well as new opportunities in global and home markets. Starting a small business in the United States has both opportunities and threats. In order to be successful, you need to accept and be aware of all possible risks and opportunities. As it was already mentioned, I've decided to start a new business through beginning a partnership with one other business associate that I trust and have known for several years.

By the terms of assignment, there will be hired three managers and another twenty employees. However, as far as understanding all possible risks and threats of starting new business is crucial to the company's success, it is essential to discuss and develop a plan of action that we will implement to avoid the failure mechanisms of small business. The four main failure mechanisms of small business are as follows: Managerial incompetence or inexperience; Neglect; Weak control systems; Insufficient capital As far as managerial incompetence or inexperience, is one of the most common mistakes that may lead to failure, we will need to develop our management skills. We plan to attend courses for small business owners where we will learn how to make better business and strategic decision, enhance our planning, communication, marketing, and recruiting skills. It is important to understand that inexperienced management poses a significant threat, because the inexperienced manager, who has no vision or knowledge to run the business, may lead to the bankruptcy of the company, - as it is claimed by the business consultants, 90 per cent of business failures were due to management inadequacy (48 % incompetence and 42 % inexperience) (What Causes Small Businesses to Fail? ).

According to the article How Not to Fail, written by Joseph M. Sherlock, approximately four percent of new businesses fail because of neglect. Indeed, it is very important to understand that running your own business requires maximum possible efforts, and time and efforts you spend will evidently repay in the future. Some newly emerged businessmen consider by mistake, that they can successfully run business simply by phone and fax, and delegate everything to their long-time employees. However, rarely enough the company is able to run with no additional efforts, and, as we do not believe in success by chance, we will undertake all efforts to control our company, and to devote enough time for our business company. Evidently, in the very beginning, in the starting up stages of our business, we will need more time, as well need to control all initial stages, and all possible details of the business, and employees.

We will also need to develop the efficient control system in order to show the employees and the managers that we are interested and fully devoted to all processes in the business. In addition, we will try to explain the employees that we want to be informed in everything related to our business, and will undertake all efforts to establish an open communication between the managers and employees. We also understand that the amount of effort exerted is, probably, the most common blunders that results to failure (What Causes Small Businesses to Fail? ). Being an entrepreneur and running a small business requires much more efforts that simply being employed by somebody else, going to the office and working from eight-to-five five days a week with a manager or boss, who assumes all responsibility for the employees actions. Therefore, we will have to be more disciplined to work independently, as we will have to maintain the same work schedule of the same number of hours virtually every day and to plan it in the most efficient way. Finally, we have to be ready that, especially during the initial period of running our business well have to work more hours, and not fewer.

Although managerial incompetence or inexperience, and neglect are the most common mistakes that may lead to failure, there are two most common failure mechanisms that cannot be underestimated as well. These are weak control systems and insufficient financing, correspondingly. Being the entrepreneurs, we will have to undertake all efforts to develop efficient and strong control systems, because weak control systems can destroy all efforts spent on development of our business structure. Therefore, we will need to establish an effective performance monitoring, "trying to keep pace with the daily demands of business", and to establish effective procedures and policies for the business and strategic tasks to be handled on a planned basis (In a Successful Small Business Everything is Under Control). Finally, as far as we try to take into consideration all potential failure mechanisms for our small business, we have an action plan in the event of insufficient capital that comprises of a list of common sources for funding and other sources that may also be used (Understanding Entrepreneurship & the Small Business).

First, in case there will be some difficulties, my partner and I can use our personal savings, or ask for support in our families or friends. This may work in case we need a relatively small amount of money, and, in case we will have to ask our families and friends, we can offer them either to have some share in our company (respectively to their investments), or to lend us some money for the agreed period of time. In case the amount of money will be relatively large, it is better to apply for funding for investors, banks or similar lending institutions, or governmental agencies (Understanding Entrepreneurship & the Small Business). However, it is important to take into account that banks and lending institutions prefer financing the existing business, because the risks of a new business may be not understood very well.

Therefore, in case we need additional investments in the very beginning of our business, we should better rely on our personal resources, such as our personal savings or investments from our families or friends. What concerns additional sources of investments, we may apply for help to a venture capital company (venture capital company consists of a group of relatively small investors that may consider investing their money in the company with rapid growth potential). Another source to be considered is a Small-Business Investment Company (SBIC) the government-regulated investment company able to borrow funds from the SBA. In case of emergency we may ask such a company either to lend or to invest money in our business. Finally, we may turn to SBA Financial Programs, such as Guaranteed Loans Program (according to which the SBA can repay 75 - 85 % of small-business commercial loans up to $ 750, 000) (Understanding Entrepreneurship & the Small Business), Immediate Participation Loans Program, under which we can loan money that will be put up by the SBA and banks, or look for a Local Development Companies (LDCs) Program, in case we decide to run a for-profit company. In conclusion it may be said that taking into consideration all possible risks and threats of starting new business will evidently allow us avoiding the failure mechanisms of small business and lead us to success.

References In a Successful Small Business Everything is Under Control. (n. d. ). Retrieved December 21, 2007, from web Sherlock, J. M. (n. d. ). How Not to Fail.

Retrieved December 21, 2007, from web Understanding Entrepreneurship & the Small Business. (n. d. ). Retrieved December 21, 2007, from web What Causes Small Businesses to Fail? (n. d. ). Retrieved December 21, 2007, from web


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