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ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(Department of Business Administration)

Reg No: 21FID01479 Roll No: CE522294

Name: Amber Mehdi Father Name: Ghulam Mehdi

Course: Entrepreneurship (8503) Semester: Spring, 2021

Level: M. Com Course Code: 8503

Q. 1 Sociological factors are the most important factors that contribute to starting a
new enterprise. Do you agree? Discuss.

Answer

1. Almost every individual dreams about starting his own business. Yet only 4%
of the newly started businesses manage to reach the 10-year mark. In fact, over
50% of the small businesses don’t even make it to the fifth year. Most people have
no idea about the various things to consider when starting a new business.

2. It is just a desire to be on top of things that motivates many to start

businesses. They have no idea about the money that is required, the hard work that
they have to put in, the knowledge and the experience that they have to gain, and
the kind of patience they need to have, until their business reaches up to a certain
level for them to break even or make profits.

3. Here is a checklist that will give you a list of factors to consider before starting
a business:

a. A Business Idea. Every business starts with an idea – a super duper

idea that actually works. If one wants his business to stand out, he will
need to offer something that no one else has offered till date. That said
not everyone can come up with a unique business idea. There
might be hundreds of businesses just like the one you are going to
start. Yet one can make it better by answering the following questions:
(1) What do I need to do to make this better?

(2) What is it that I can do better than what the other guys are
doing?
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(3) Will I be able to grab some market share in this category?

(4) You may have a great business idea; but unless it solves
someone’s problem it is not going to work. So start by listening
to frustrations – both of yours as well as others (your family
members, your neighbors, your friends, and your associates).
Once you have understood these, here is what you can do:

(5) See what best you can do to address these frustrations.

(6) Identify the skills in you that will help you offer the right solution.

(7) Find out if you are actually passionate about offering that
solution.

b. Knowledge or Expertise
(1) Once one knows what business he wants to start, he will have to
start gaining the required knowledge and expertise to start that
business. This might take a lot of research and planning; but at
the end all these efforts will ensure that one have everything in
place to get his business idea off the ground.

(2) Having a business plan can be highly advantageous at this

stage. It will tell whether business has a place in the market and
if the idea is worth or profitable enough to go ahead with.

(3) If you have the knowledge he can construct one, all by yourself.
If not, can always hire a professional business consultant to do
it.

(4) Meanwhile will have to continue with research to keep his

knowledge up-to-date.

c. Market or Demand
(1) Once you are sure of starting your business, your next step
would be to explore the market or the demand for your product
or service.

(2) Start by answering the question, who are your customers. If you
are selling your product or service locally, you may have to
assess the demand for it. In case you are taking up on an
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international level, you may have to understand the rules and

regulations of dealing internationally.

(3) A market survey should reveal all the details that you may need
about the market for your product or service. Basically you are
looking for:

(a) The current size of the market (the approximate number

of potential buyers).

(b) Its growth potential (whether it is likely to grow in size or

contract).

(c) The market share that you can expect to take.

(d) The buying habits of the target audience (and how to

exploit them).

(e) The different segments of the market.

(f) The kind of margins that you can expect from the market.

(4) Thankfully social media has made it possible to reach out to

target audience, anywhere in the world, without having to put in
too much of efforts.

d. Start-up Costs
(1) Estimating your start-up costs is one of the very important things
to consider when starting a new business. You will have to
assess the total cost that is required to set up and run your
business successfully.

(2) If you are thinking of starting a manufacturing plant, your start-

up costs could be very high. You may have to think about the
cost of the land or building, setting up the plant, buying the
equipment and machinery, investing in furniture and office
equipment, and various other things.

(3) In case of a retail business, you may still need to think of the
cost of the store as well as the furniture required to decorate it.
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An office can be started with relatively lower cost since all you
may have to invest would be in furniture and office equipment.

(4) Once your business is set up, you will have to think about the
working capital needed to run your business.

(5) You will have to take into account the inventory that you need to
maintain, the credit that you can extend to your customers and
the supplier’s credit that you can get.

(6) In not all cases can you expect credit to be given by the
suppliers, especially if you are a new name in the market.

e. Capital and Finance

(1) No business in this world can run without money. Depending on
the type of business you are starting and the initial costs that
you will have to pay up for, you will know what kind of capital
you would need to start your business.

(2) Whatever steps you take, to finance your business, you will
have to make sure you have the required funds to take you
through the start-up phase.

(3) The financing pattern is one of the most important factors to

consider before starting a business. This generally includes the
capital that you can introduce from your savings as well as the
funds that you can borrow.

(4) Personal savings are what 77 percent of the small businesses

rely upon while gathering their initial funds. But you can’t really
go over the board if you cannot fund your entire business.

(5) Funds can be borrowed for business, either through short-term

or long-term loans. Nevertheless, you may have to keep in mind
the terms and conditions of borrowing such funds including the
cost of borrowing, the rate of interest, the repayment terms, and
the security that is required. Approach a few banks and private
lenders, get a few quotes, and compare them to identify the
most beneficial type of funding.
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(6) It would be ideal to go for long-term funds only if you have to

purchase any fixed assets. For working capital requirement
short-term funds would be sufficient. This way you can make
sure they are paid back once your business starts progressing.

f. Competition
(1) Unless you know who your competitors are and what they are
doing, you will not be able to survive in the market for long.

(2) If your product is a monopoly competition will not matter. Else,

you will have to come up with an excellent strategy to fill in the
demand and supply gap.

(3) Gaining a market share should be on top of your mind if you are
about to start a business. If there is a huge demand for your
product, this shouldn’t be too difficult. If not you may have to
strengthen the position of your business to gain an entry into the
competitive market.

(4) Analyzing competition includes getting to know your

competitors, figuring out how they have positioned themselves,
identifying their pricing and marketing strategies, and evaluating
their strengths and weaknesses.

(5) Once you have all the information it is all about conveying your
unique selling point to your target audience. If you can do this
well you will survive no matter how tough the competition is.

g. Location. One of the most important things needed to start a business

is a good location.
(1) If yours is a retail business you will have to look for a well-
populated area that is easily accessible.

(2) If it is a manufacturing unit you can choose a location that can

let you save money on electricity, water, taxes, and
transportation. Look for a place where manpower is easily
available and raw materials can be sourced easily. You can
even look for a location that can get you rebates and subsidies
from the government.
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(3) If yours is a niche product or a service, you may have to look for
a single location where all your competitors are. For instance, if
it is a software company you want to start, you may have to look
for a software belt where all other software companies have set
their shops. Similarly, the ideal location for a gold vendor /
jeweller would be a gold mart that has housed many such
shops.

(4) Offices can be set up in any place that is accessible and offers
good facilities such as parking spaces, refreshments,
transportation, and so on.

(5) Make sure the location fits well within your budget and offers
scope for expansion. An ideal location would be one that
complements your business in the best possible way.

h. The Team. Your team members are the ones that can make or break
your business.
(1) Without efficient manpower no business can ever succeed. That
said an efficient teaming strategy needs to be in place if you
want to reduce your team replacement expenses.

(2) You can hire a recruitment agency or use various recruitment

tools to fill in your positions with the right talent.

(3) There are also a number of websites that make it easy to find
the exact kind of people you are looking for. Signing up for a
couple of these can make your job, both easy and cost-effective.

(4) Apart from hiring the right team there is also the training that you
need to think of. This will ensure your team members will be in a
better position to handle their responsibilities and meet the
expectations you have set for them.

(5) Finally, you will also need to think about paying their salaries
and perks to keep them motivated enough at work.

i. Technology. Technology is one thing you can never compromise on

when it comes to starting a new business in today’s world.
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(1) Whether it is office equipment, plant and machinery, or the

software required to monitor your business, you will have to
make sure it helps your business to perform well in the long-run.

(2) Here are a few steps you can follow, while choosing the right
technology for your business:

(g) Assess the requirements of your business.

(h) Make sure the technology you choose helps in making

things run smoothly.

(i) Consider leasing technological equipment if you want to

stay up-to-date.

(j) Always have a backup plan.

(k) Make sure you have the required support for installing,
upgrading, and troubleshooting the technology that you
choose.

(l) Invest in training so that you can make maximum use of

the technology.

j. The growth
(1) Finally, the path you choose toward growth plays a significant
role in how you end up. Grow too fast and you’ll stretch yourself
thin. Grow too slowly and you’ll never get anywhere. So, find a
balance, and treat your growth carefully.

(2) If you look at each of these factors objectively and can say that
your business meets or exceeds their demands, chances are
you’re already primed for success. If you notice any one of these
factors as being weaker than the other, you'll have the cue you
need to invest more time and resources into that weakness, to
overcome it.

(3) For some factors, like timing, this type of assessment can be
nearly impossible, but make adjustments where you can and
maximize your chances for success.
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k. Bonus Factor: A ‘Can-Do’ Attitude

(1) When trying to start a new business you may see a lot of doors
getting slammed in your face, a lot of people trying to shut you
down, and a zillion cant’s and don’ts from all over; but with a
‘Can Do Attitude’ you can rise above all of it.

(2) Dreaming big is not the only thing needed to start a business.
You will also need to believe in that dream and work towards
achieving it with an excellent business strategy.

4. Apart from the above factors to consider before starting a business, there is
another one that seems to be very important – web presence.

a. In fact, every business can benefit from web presence, whether it is a

website, a social media page, or an online brochure.
b. Today there are many websites that offer all the tools and templates
that you would need to create your own site within minutes.
c. But if you have the funds, it can be extremely beneficial to get a
professional web designing company to do up your website for you. For
all you know they may also have an SEO expert who can help you
save a lot of money on marketing your business.
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References

[1]. 9 Indispensable Factors to Consider Before Starting a Business

(litmusbranding.com)
[2]. https://www.entrepreneur.com/article/246400
[3]. https://smallbiztrends.com/2016/11/startup-statistics-small-business.html
[4]. https://smallbusiness.chron.com/borrow-money-business-1946.html
[5]. https://www.jeffbullas.com/the-simple-6-step-checklist-for-analyzing-your-
competition-on-the-web/
[6]. http://www.inc.com/jayson-demers/7-habits-of-the-world-s-most-successful-
people.html
[7]. https://www.allbusiness.com/5-reasons-online-presence-essential-small-businesses-
106737-1.html
[8].