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It is known that different factors should be taken into consideration while start a new business project. Your success will depend on your fortune, hard work. But you will not reach any success without business knowledge. Starting up a new business, one should make an environmental analysis. It includes political, legal, economic, socio-cultural and technological aspects. It is a type of external business environment.
Usually for short it is called PEST. All components of the analysis interplay with each other and impact each other. Political factors consist of laws, political change in the government and even environmental policy. It is evident that any political or legislative changes affect business greatly. They could impact product specification, information access and employment terms. Obviously, political life of the country and its changes influence greatly some changes in the economy or in social and cultural life.
For example lets take taxation. Politicians fix tax rates, but for making tax decisions the state of the economy should be taken into consideration. Technological changes also have a major impact on business, as well as affect political and economic fields. The best example is the Internet innovation. Nowadays consumers and businesses can get and purchase products using eBay system. It helps to make cross-border purchases and gives an opportunity to small businesses to be involved in a global market.
By the way new forms of contacting in business could help to ignore climatic conditions. It is evident that climate changes could play a dramatic role for business. And during the last years it had been proved several times. Climate changes led to great losses. Many aircraft firms, fuel firms and tour companies incurred losses. Ultimately all PEST factors are depend on the sociocultural factors.
These factors are the basis of any society. They affect people's choices. You should take into account demographic changes, lifestyle changes and attitudes to health etc. Sociocultural factors include societal beliefs, values and attitudes. And these factors cannot be taken separately, they are closely connected with political and technological changes. If you have decided to start your own business and have made an environmental analysis it would be useful to know about ideas for business startups.
You can get them from various sources. A lot of small firms have to choose different sources of capital. These sources are your own savings, loans from family and friends, and business loans. In general there can be pointed out 5 main sources of startup funding. A lot of entrepreneurs get their startup funding from their friends and family. But there are some advantages and disadvantages in this system of loaning.
The advantage is that it is easy to loan money from friends and family, because you know them well. But there are three disadvantages in the system. First of all you have to mix together your business and personal life. It can interfere your work.
Then your relatives and friends cannot be angels or venture firms; and they cannot be accredited like investors. In further it may lead to conflicts and complicate your relationships. There is a proverb that the money borrowed to your friends or relatives is the spent money. It means that you have no any obligations except moral; and often you cannot return your money back. Another source is to get a job. The best way is to do it is to organized some kind of a consulting company.
You need not to loan money - your clients pay your development expenses. Later youll have an opportunity to transform your company into a product company. The main advantage of such kind of company is that risk and reward are usually proportionate. But a consulting company isn't itself startup. A consulting company is, as a rule, a service business, not a product business. A good example of a consulting company is teaching children after classes.
But the problem is that your clients should call you any time he wants to make some change in a schedule. And finally, you have to be very disciplined. You have to work hard for extend your business, though the source of money is not difficult but low. There is no excuse for failure. You may get rich, or you fail. The third source for business startups is angel investors.
They are individual rich people who invest their money in your projects or companies. Obviously they want to get their capital back in future. Thats why they control wastes as usual (though you can use money from consulting or friends and family however you want). It is better to contact with persons (angels), who have ado their money in technology. They an understand you situation and can give you an advice. The danger of working with individual angels is that you dont have protection.
As to angels, they also has some disadvantages. The point is that investing in startups is risky. When a company is new the rate of its profits is low. But the investor has an opportunity to buy the stock in the low price. Angels have another advantage: they are not bound by rules. While looking for angel investors, his personal introduction s should be taken into account.
You can establish some terms with angels, but they have no accepted standards. There are firms, so-called seed funding firms that invest relatively small amounts of money at early stages. It is some kind of business for these companies (as well as individuals make occasional investments). Working with such companies you have several advantages. First of all you can easily contact with them. They usually have their web site or an email.
The investment process is more standardized, and they have set terms for every startup they fund. There are a lot of the problems such as technical, organizational and business in the earliest phases. Seed firms can help you with them, giving you an advice as for technical and business problems But the companies can invest only in the earliest stage of the business. The greatest amount of money can be taken for startup from Venture Capital Funds (VS). The companies are quite different from previous ones.
They invest much larger amounts of money, taken from other people. Usually they invest several million dollars. As a rule they come later in the life of a startup. They have direct obligations and terms. VC companies are organized as funds. There is a great risk of taking money from less known firms, because they have less reputation to protect.
You can become a victim of different tricks, thats why some VC firms have such a bad reputation. Having examined the main sources for business startups, we can estimate pros and cons of them. I think the most reliable way is to start working with seed companies, because they were established for this purpose; they can offer you advice and risk can be diminished. Though, may be, the most successful startups is to get money from different sources. The lifeblood of a small business is cash flow.
It is an indicator of a company's financial strength, because it is some kind of insurance that staff and creditors will be paid in time. It is necessary to forecast cash requirements (as carefully as possible) while planning any type of funding requirements. As usual cash inflows can be received from sales, bank loans, disposals and other income. Cash outflows mean payments.
A firm can pay suppliers and staff, dividends, taxation etc. The indicator of your business is the difference between sales and costs. It does not mean pure profit. Profitable does not mean developing. Lack of cash flow is a real purpose for troubling. Though sometimes the payment may be fulfilled in a form of credit to the customer.
But payments to suppliers, staff must be made. In this case sales and costs cannot be associated with cash inflows and outflows. Any firm should make cash flow planning to indicate the net cash flow. It is the difference between the cash in- and out-flows in a given period. For many business startups credits are necessary. And the main suppliers of credit are commercial banks.
Different programs were issued by the U. S. Small Business Administration (SBA) with the purpose to satisfied needs of different types of companies. Each of the programs has its advantages and disadvantages. Lets examine the main three: SBA 7 a loan, SBA 504 loan and an SBA Low Doc loan. First of all it should be pointed that loans can be used for different business purposes.
For example for purchase equipment, expand a business, make improvements to your business etc. Thats why the type of credit will differ. The 7 (a) Loan Program seems to be the most widely used lending program. It is the government guaranteed program and a lot of small businesses use it.
They can get up to $ 2, 000, 000, and can use them for almost any business purpose. The program give you certain loan guarantees. They are approved by banks. The great advantage is that the SBA can reimburse up to 90 % of the loss in the case of default. The program allows to retain and utilize your working capital and it works with a longer term. It means that your payments will be lower.
By the way you should not give prepayment penalties on this type of loans. Finally, it takes you about 45 - 60 days from submission to final funding. There is another type of program, which is called the SBA 504 loan program. It is mainly for small and medium size businesses with long-term fixed rate financing.
The main advantage of the project is that the amount, normally required, can be reduced for private lender. As usual the financing is shared according to the scheme: 50 % private lender, 40 % SBA and 10 % by the small business. But it can be reviewed. The project works good with a passive company, such as real estate or equipment.
Though the both types of companies (passive and operating) must meet small business size standards. If the lenders need loans as low as $ 25, 000 they can use SBA's "Low Doc" program. It is based upon existing relationships. Bibliography: web web
Free research essays on topics related to: amounts of money, cash inflows, advantages and disadvantages, cash flow, friends and family
Research essay sample on Friends And Family Advantages And Disadvantages
