The first and foremost factor needed to set up a small
business is deciding on the mode of business – entrepreneurs can opt from
buying franchises or taking over another existing small business set-up. They
can also look for some original ideas to start their 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.
Legal
Issues
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.
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