(KMBN 302) Unit 5: Launching a New Venture
Steps involved in launching a business (Process charts)
Launching a business involves several steps that can be simplified for easy understanding.
First, start with an idea by deciding what product or service you want to offer.
Next, conduct market research to check if people need your offering and to understand your competition. Once you’re clear, create a business plan that outlines what your business does, how it will make money, and its goals.
Then, choose your business type, whether it’s a small shop, an online store, or a formal company.
After that, register your business to get legal permissions and secure your business name. with legalities in place, arrange finances by using your savings, applying for loans, or seeking investors to fund your startup costs.
Once funding is secured, set up operations by finding a workspace, purchasing equipment, and hiring employees if needed.
Next, create a marketing strategy to promote your product or service through ads, social media, or events. Finally, launch your business, whether it’s opening a shop, going live online, or starting sales.
After the launch, continuously review your progress and make improvements to grow and succeed in the mark.
Various Forms of business ownership
1. Sole Proprietorship - This is when one person owns and runs the business. They get to keep all the profits but also take full responsibility for any losses. It’s the easiest and simplest type of business to start. Example: A small shop or freelance work
2. Partnership - In this type, two or more people come together to run a business. They share the profits and also the risks or losses based on an agreement. Example: A law firm run by two lawyers together.
3. Limited Liability Partnership (LLP) - Similar to a partnership, but here the partners have limited liability. This means their personal assets are protected, and they are not fully responsible for business debts. Example: A consultancy firm.
4. Private Limited Company (Pvt. Ltd.) - This type is run by a small group of people, like family or close friends, and it has its own legal identity. The business owners’ personal wealth is safe if the company faces losses. Example: A startup company with private investors.
5. Public Limited Company - A larger type of business where shares are sold to the public through the stock market. This type requires more regulations and is often used for big companies. Example: Big companies like Tata Steel or Reliance.
6. Co-operative Society - A business owned and managed by a group of people for their mutual benefit. Everyone contributes equally and shares profits. Example: Milk cooperatives like Amul.
7. Franchise - This is when someone buys the rights to use another company’s brand and business model. The owner of the franchise operates the business under the original company’s name. Example: McDonald’s outlets.
Registering a Business Unit
When you start a business, you need to register it with the government to make it legal. This involves choosing a business name, deciding on the type (sole proprietorship, partnership, company), and getting the necessary licenses and tax registrations.
The first step to starting a legal business is to register it. This involves:
- Choosing a Business Name: Pick a unique name that reflects your business.
- Selecting Business Structure: Decide on the type of ownership—sole proprietorship, partnership, LLP, or company.
- Getting Necessary Permits: Apply for licenses or certifications specific to your industry (e.g., food licenses, GST registration).
- Opening a Business Bank Account: Create a separate bank account for your business transactions.
This step ensures your business is recognized by the government and operates legally.
1. Start-Up Phase - This is when the business is just starting. You have your idea, you gather funds (like savings, loans, or investors), and you begin operations. You focus on building your product or service, finding customers, and establishing your brand.
Once registered, you enter the start-up phase:
- Setting Up Operations: Arrange a workspace, buy equipment, and hire staff if needed.
- Product or Service Launch: Develop your product or service and test it in the market.
- Finding Customers: Focus on marketing and advertising to attract your first set of clients.
- Securing Funding: At this stage, funds might come from personal savings, loans, angel investors, or venture capitalists.
This phase is all about establishing a foundation for the business.
2. Growth Phase - As your business becomes stable, you focus on expanding it. This could mean hiring more employees, reaching new markets, or developing new products. During this phase, you might need more funds to grow, so you could attract investors or take loans.
When your business gains traction, the focus shifts to scaling:
- Expanding Operations: Open more locations, develop new products, or target new markets.
- Building a Team: Hire experts and create departments for smooth operations (e.g., marketing, HR, finance).
- Securing Additional Funding: You may need more funds to expand, either through additional loans, investors, or joint ventures.
- Brand Building: Focus on strengthening your brand image through consistent quality and marketing efforts.
In this phase, the business grows steadily and may explore partnerships or collaborations.
3. Going IPO (Initial Public Offering) - When a business grows big and needs even more money to expand, it can "go public." This means selling shares of the company to the public through the stock market. Before going IPO, the company needs to prepare legal documents, financial audits, and register with the stock exchange.
When a business becomes successful and needs significant funds to grow further, it can go public.
- Preparing for IPO: The company must restructure to meet legal and financial standards for the stock market.
- Selling Shares: Shares are offered to the public, allowing individuals and institutional investors to buy a piece of the company.
- Raising Capital: The funds raised through IPO are used for expansion, research, or paying off debts.
An IPO also gives early investors and founders a chance to sell their shares and make profits.
4. Revival (If the Business Struggles) - If the business faces problems, like low sales or high debts, it can try to revive itself. This might involve changing strategies, reducing costs, or bringing in new management. Sometimes, businesses seek financial help, like restructuring loans or attracting new investors.
If the business encounters difficulties, it can attempt revival through:
- Reorganizing Finances: Renegotiate loans, cut unnecessary expenses, or find new investors.
- Rebranding: Revive the brand image by changing its marketing strategies or introducing new offerings.
- Leadership Changes: Bring in experienced leaders or consultants to guide the business out of trouble.
- Mergers and Acquisitions: Sometimes, a struggling business merges with or sells itself to a stronger company.
Revival efforts aim to stabilize the business and regain profitability.
5. Exit Strategy - An exit is when the owners decide to leave the business. This can happen for various reasons, like selling the business to someone else (merger or acquisition), passing it to family members, or closing it altogether.
Business owners may decide to exit for various reasons, such as personal goals or market conditions:
- Mergers and Acquisitions: Selling the business to a larger company or merging with another to combine resources.
- Selling the Business: Handing over the company to a new owner for a lump sum payment.
- Succession Planning: Passing the business to family members or trusted partners.
- Franchise Model: Expanding the business by allowing others to operate it under your brand.
Exits can be profitable if planned well, ensuring the owner gains maximum returns.
6. End of a Venture - If the business cannot continue, it may shut down. This involves paying off debts, selling assets, and legally closing the company by deregistering it. The process ensures all responsibilities are settled.
If revival isn’t possible, the business may need to shut down:
- Liquidating Assets: Sell off equipment, inventory, and other assets to pay off debts.
- Paying Creditors: Clear loans, employee salaries, and other liabilities.
- Deregistering the Business: File for closure with government authorities to officially end operations.
- Learning and Moving On: Even if the business ends, the experience gained can help in starting a new venture in the future.