ENTREPRENEURIAL SPIRIT
Leonardo da Vinci project EL/2000/B/P/114153

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A step-by-step Guide for the students to start-up a business

"You want to start your own business, but don't know were to start. Follow these steps and you'll be well on your way."

STEP 1 : Business Idea

To start a business you will need to choose or create a business idea. While this is an obvious step many people who want their own business don't have an idea, just the desire to be an entrepreneur. For the budding entrepreneur, there are many options; buying a franchise or an existing business, or looking to others for ideas for a start-up business. Once you have decided on the business you wish to start, then the real work begins.

You don’t need to be a genius or an MBA to spot those ideas and turn them into profits, either. Identifying business opportunities is often as easy as identifying problems many people share and finding a way to solve them.

Other business owners have turned their hobbies, interests, and skills into satisfying and often lucrative businesses, simply by seeing a need in the world around them and finding a way to fill it. You can, too.

Writing a business plan is your next and most important step, this is how you and others will evaluate your business. Why prepare a plan?

• The business plan identifies the amount and the type of financing or outside investment required.
• A plan makes it easier for a lender or investor to assess you and your proposal.
• It encourages realism.
• It helps you to better identify your customers, your market, your pricing strategies and the competitive conditions under which you must operate to succeed.
• It improves your ability to manage your business.

A business plan provides an outline of your short term and long term business goals.

With your business plan in hand, you are ready to go find yourself some capital. Most small businesses have three options for financing: friends & family, investors or bank loans. Each of these options has different considerations for the business. Investors and even friends & family usually want ownership and control of their portion of the business. Bank loans burden the business with an additional expense of the loan payment, which can erode the business profits.

You, like most of us, are probably reluctant to ask friends and relatives for money. But a lot of people do, at one stage or another, when they are running their own businesses. If you are really serious about starting and/or staying in business, swallow your pride and go beg for those funds.

If your friends and family express an interest in assisting you with your business financing, pitch them professionally. Don't be embarrassed to show financial statements, tax returns, or whatever else they want to see. Do anything to get that money!

You will want to prepare a written agreement about any loans. If you don't, bitter arguments are bound to sour the relationship eventually. Even some minor detail, such as the timing of interest payments, can cause great friction if arrangements aren't backed up in writing.

Don't be surprised when your friends and relatives suddenly turn into business tycoons once they have agreed to lend you funding. They may insist on terms that are more stringent than those you might get through a commercial bank!

Despite all of the attention venture capital firms get in the business press, they actually finance very few businesses. The better venture capital firms are deluged with proposals from budding entrepreneurs. But most of these entrepreneurial proposals are inappropriate to the goals of venture capitalists.

Most venture capitalists concentrate their financing efforts on later-stage business funding. Some venture capital firms will, however, consider financing a start-up. What they want to see from any entrepreneur seeking funding is a history of start-up successes under the applicant's belt. They are best known for financing high-tech firms, but they do finance other types of businesses over 50 percent non-high-tech businesses for some venture capitalists.

Venture capital firms prefer to cut deals that provide an exit path within five years. They view the probability, or not, that a firm will be successful enough to go public or be purchased by a larger company. They also expect very high returns for their investment risk that only the fast pace of highly profitable growth will bring. They want to see a management team in place that can handle rapid growth. And they want that management team to be well balanced with all types of experience and skill represented creative, engineering, financial, marketing, and management.

Banks don't care whether or not your business has sky-high profit potential. They are only interested in the business' ability to cover the principal and interest payments.

In making a proposal for a loan, the bank will want to see all of your recent tax returns, financial statements, and cash flow projections. They will also want to know how much you would like to borrow. And, if yours is a small business, it will expect you to conduct all of your business banking activities through its institution.

Banks are reluctant to loan to businesses that cannot show at least two years of profitable operation. They want to see that the owner of the business is heavily invested in the enterprise.

Many bankers feel they are extending a loan not only to the small business, but to the owner-operator as well. They will feel more comfortable loaning business funds to someone with community ties, who has experience related to the business he or she is conducting, and who has made a complete and total commitment to that business.

Small business loan criteria vary greatly from one bank to another. It can even vary from one loan officer to another. If you have been turned down by nine out of ten banks in your region go ahead and try the tenth. While all banks and loan officers consider the same factors when weighing a loan request, they will place different emphasis on those factors. Some bankers place great store in hard asset collateral, some in the profitability or continuity of the business, and yet others will go with their impression of the owner as the deciding factor.

If you have concluded in the sort of business that you like to start, try to apply your idea. It is important to identify the current weaknesses, threats, strengths and opportunities of the sector, as well as its future prospects; or else we may begin our activity in a declining sector.

It is important that we observe from varying standpoints any rival companies within the sector, in order to compare them with our own; for this purpose we should look for information about: their structure, reputation, size, areas of influence, etc. Hence, in order to position our product adequately within the market we may follow two strategies: distinguish ourselves (for our quality, service or product) or by competing directly (generally through prices).

In addition, we must adequately determine the profile of potential clients, which will later help us define criteria regarding product design, its price, publicity schemes, etc.

Another thing we mustn't forget is to acquaint ourselves with the location of suppliers of the equipment and raw materials we need to set up the company, since they may not always be situated nearby in which case we might have to reconsider the headquarters of our activity.

You've got the plan, the money and the enthusiasm; you're ready, right? Not yet, as with everything you need to take the legal issues into consideration. First you should choose a legal structure: Sole Proprietorship, Partnership, or Corporation. Your financing decisions will have an effect on what legal structure you choose. Now you can file with the state to incorporate and obtain a federal Identification number. (Link with different forms of Business Entity)

Okay, it's time to get on the road to making some money; this of course means spending money. Where are you going to run your business? Will a home office do or is commercial space needed to service your customers? You have to study the following elements:

• Whether you will work from home, the store, the office, the lab or the factory
• The total surface of the installation area and whether there is enough space for future expansion
• The availability of electricity, water and sewage
• The required special licenses of installation and operation
• Whether you will build or rent the areas you need. You have to compare the prices of one solution with the others
• The parking areas for loading and unloading.
• Whether the area is located in an environment that is in conformity to the image you want to give to your enterprise

Your final choice depends on the money you can dispose.

There are Registrations and Licences which are required for all types of enterprises and some others which depend on the type and legal form of your business. Some examples are mentioned:

• Declaration for opening profession-Taxpayer identification number-books attestation
• Registration at the relative Chamber (Chambers of Commerce and Industry or Chambers of Arts and Crafts)
• Registration at the proper Social Fund
• Technical installation license and technical operations license
• Practicing Certificate for certain occupation categories

The correct choice and exploitation of your enterprise’s personnel is directly linked to productivity.

• Do you know what specialties you need for the operation of your enterprise?
• Have you defined the profile of the persons you want to employ?
• Have you developed an organization chart for your enterprise?
• Have you found the persons to employ that will cover all functions of your enterprise as well as your weak features?
• Do you know the procedures required to hire personnel?
• Do you know the obligations of an employer towards his employees?

You have to fix the prices that you will charge, so as to cover the cost and make a profit. Each decision that has to do with sales prices is based on two criteria:

1. The production cost of a product
2. The quantity of the product that the market is ready to absorb, depending on the prices that the enterprise charges and subsequently the total of sales that the enterprise shall realize.

The crucial question is the following: "What is the most profitable price for the enterprise?"

In order to answer this question, COST and DEMAND have to be counterweighed.

The design of the promotion sales and the choice of the proper means will open the markets for your products.

Having located the demand for your product, and after invoicing it, you have to think how to inform your potential clients. The promotion way of your product depends on the region and the size of the market to which you address.

Facilities, vehicles, adv leaflets, everything send its message and the first impression is important. The best and cheapest form of advertising is the recommendation of your enterprise to new clients by already satisfied clients.

Other ways that you may think are the following:

• Distribution of leaflets in your region or sending informative letters to potential clients
• Advertising in local newspapers, magazines, branch brochures, cinemas, local radio, will make your enterprise known to the wide public. Remember that one single ad action has not the same results as an organized and coordinated ad campaign
• Participation of the enterprise to exhibitions of the sector, allow you to personally meet your potential clients
• Development of public relations to attract proper persons (ex. journalists), which could contribute in the promotion of your products

Don’t forget to estimate the success of any advertising method that you used, by asking your clients from which source they found out about your business.

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