How to Start a Small Business
Creating a business plan
Once the entrepreneurs decide the form of operations, they need to create a proper business plan for starting their business. A well documented business plan is extremely important as it helps in proper evaluation of the company that is going to be established. It also becomes important for lenders and investors who want to read the plan thoroughly before investing their money.
If the business is self financed then the owner will be required to create proper financial projections and come up with relevant business strategies. The marketing plan is an integral part of the business plan as it contains the marketing strategies that will be adopted to promote and advertise the services and products.
The business plan also contains the goals that come in handy when the business performance is reviewed in the future. This part also provides a proper indication of the capital required to run the organization and achieve overall parity.
Financing the business
Once the entrepreneurs have finalized their business plans they need to initiate the process of procuring the necessary capital. Majority of the small business set-ups have three major sources for financing their operations – friends and family, bank loans, and investors.
Normally, all the choices come with their unique considerations. Normally, the investors, and at times the friends and family members who have provided financial assistance, want certain amount of control and ownership in the set-up.
If an entrepreneur has taken a bank loan then his/her profits can be diminished due to the fact that they have to pay the loan back every month.
Once the entrepreneur has taken care of basic pre-requisites like a business plan and finances, he or she will be required to decide on the legal framework of the company – sole proprietorship, corporation, and partnership.
The financing decisions of the organization will be dependent on the legal structure chosen by the entrepreneurs. Once the legal structure is determined the owner can register an application for incorporation and get the papers in place.
Setting up the office space
The entrepreneurs need to decide on the type of establishment they are going to operate out of a home office or a commercial set-up. The choice needs to be made on the basis of the core product or service. The owners also need to decide if they want assistance in any form in running the organization like hiring employees or accountants.
An important part in setting up a small business organization is determining the taxes – the owner needs to be mindful of the taxes he/she can collect and ones that will have to be paid by him or her.
Procuring the machinery and equipment
In India the small businesses can procure necessary equipment and machinery from the 30 Micro, Small and Medium Enterprises Development Institutes (MSME-DIs) and 28 Branch MSME-DIs that have been set up in the state capitals and leading industrial cities across the country.
The primary aim of the National Small Industries Corporation Limited is to make equipment and machines available to the smaller industrial organizations at moderate interest rates and longer periods of repayment.
In India, it is common to see smaller companies unable to purchase modern equipments and machines owing to paucity of funds. The Indian government has come up with several plans to assist such companies.
Now the smaller firms will be able to procure industrial machinery, vehicles, and office equipment through hire purchase agreements, which means that they will not be required to make full payment for the same. They can make the installment payments and ultimately buy the particular equipment.
Following are various steps followed in the hire purchase agreements:
- The application has to be made on prescribed forms
- The Director of Industries of the State who heads the jurisdiction of the concerned applicant, will then forward the application form to NSIC’s headquarters at Delhi along with his/her comments and recommendations
- The applications for machines made in India as well as imported are reviewed by acceptance committees that are made up of officials who represent the Chief Controller of Imports, Small Scale Industries, Development Commissioner, and other relevant departments
- The concerned entrepreneurs are informed once the committees take the decisions. Copies of the decision are also provided to the relevant Directorate of Industries and NSIC regional offices
- If an applicant has his or her proposal rejected, then he or she can approach a higher committee for review
- After the hirer finishes the various formalities, the suppliers are provided with the necessary instructions to send the consignment that is normally insured against transit risk. The suppliers are also asked to provide the regional offices with either C/R or R/R as per applicability
- The NSIC provides the hirer with the C/R or R/R for collecting the goods, after receiving information of payment of dues
- The procedures are little different when it comes to the imported equipments. Here the shipping papers are given to the clearing agents for obtaining permits from the Customs for entry of the consignments, which are consequently sent to the hirers.
Last Updated on 23 March 2012