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Small Business Establishment, Development, And Management

1124 words - 4 pages

The key to establishing, developing and managing a small business is to keep the basics in mind. There are certain issues which a future business owner must pursue. Issues such as planning, financing, marketing, employees, taxes and legal aspects are just a few that must constantly be in a future business owner's focus.The main reason for writing a business plan is to raise finance for a new enterprise. Without a good business plan, no bank, individual investor or venture capital firm will consider providing a future owner with the money needed to start up a new business. A business plan is a proven to be the catalyst to establishing a business. It is an essential first step to establishment. A business plan, first and foremost, is a form of communication. It binds everyone from future employees to investors. Good communication is essential during this critical time of development. A business plan can refine your own ideas and bring in ideas from key customers and team members. The business plan also keeps everyone involved and sets priorities. It can develop goals and objectives for the whole business and individual departments. (SBA Online)The internet is an excellent tool that can be used to gather information on small business. Web sites such as Entreworld.org, Quicken Small Business Site, and SBA Online serve as solid references for understanding the basics of starting small businesses. These websites also recommend exploring sources of financing such as debt financing: banks, savings and loans, commercial finance companies, and the U.S. Small Business Administration (SBA) are the most common. Most small or growth-stage businesses use limited equity financing. As with debt financing, additional equity often comes from non-professional investors such as friends, relatives, employees, customers, or industry colleagues. (SBA Online)Financing your new business can be categorized into two different types: debt financing and equity financing. These two major sources of financing have their advantages and disadvantages. One advantage of debt financing is that you retain maximum control over your business. Another advantage is that the interest on debt financing is tax deductible. A disadvantage of debt financing is that too much debt can cause problems if you begin to rely on it and do not have the revenue to pay it back. Another disadvantage is that too much debt will make you unattractive to investors who will view you as "high risk."Equity financing also has its disadvantages and advantages. One advantage equity financing has is that you don't have to worry about repayment in the traditional way. As long as your business makes a profit, the lenders will be repaid. Another advantage is that with the help of investors, your business becomes more credible and may win new attention from the lenders' networks. A disadvantage that can be faced is as the business owner, you lose your complete control and autonomy. Now, investors have a say in the...

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