A3 Factors to be Considered When Setting up a Micro-Business
There is no guarantee that your business will be a sucess. It is estimated that 20% of new businesses fail within the first two years. This means that your preparation is key to sucess and part of that is being aware of all the factors that will affect you and your business so you don’t fall into that 20%.
What are your capabilities and core competencies? When you start and run a business, you have to be multi-skilled. You are not just creating products and delivering services, you also have to do accounts, marketing, understand legal implications, manage staff and source materials and equipment. It is important that you understand what you are best at and what you need support with. This may involve training, recruiting staff with those skills and outsourcing.
What are your time constraints? Starting a business is very time consuming. You may have to work a lot longer than the standard 9am - 5pm working day. Issues may arise at any time of day or night that you will be responsible for dealing with. Are you willing to put this much time in? Do you have the time available? What commitments do you have in your personal life? You may need to put your hobbies and holidays on hold while you get the business up and running.
What are your financial constraints? To start the business, you will need start-up capital to cover investments in equipment, initial stocks, rent, staff payments etc before you start bringing in enough revenue to cover them. How will you cover those costs? You could take out a loan which incurs interest or you could use your own savings or borrow from friends and family which has implications if the business fails and you can’t pay it back.
Have you considered your potential stakeholder influences? What are the government regulations in your industry? What do you customers want? What are your competitors doing? How will the local community react to your business activity? What will your relationships with your suppliers be like? Your stakeholders will have an impact on the choices that you make in your business activity, it is therefore essential that you predict this.
Will you have access to the physical resources you need to operate your business? Where are you going to buy your raw materials from? Where will you buy your equipment from? What is the proximity to your suppliers? How will that have an impact on your lead times? Can you negotiate with the suppliers available to you?
What is the availability of IT? It is likely that you will rely on IT across a range of your business activities. You may have automated production processes, databases for stock control and marketing, a website for sales and communications through a range of methods such as email and video conferencing. IT can support improvements to innovation, efficiency and communication. However, good internet is not always available in every area, technology may not be available or affordable.
What are the environmental influences that will affect your business? How does the weather affect the products and services your customers want? Does the weather affect the production of your products? E.g. if you are in the primary sector, what crops can you grow? What is the probability of a natural disaster? What would its impact be? What are the attitudes towards business impact on the environment? What support is there for recycling and waste disposal?
What are the internal risks that may affect the success of your start-up? How well equipped are your staff to achieve your goals? Are there any issues with morale or conflict? Are there any issues with your equipment and technology that could affect performance? How secure are your premises and databases? How stable is the organisation financially? Do you have enough liquidity?
What are the external risks that may affect the success of your start-up? Conduct an analysis of the external environment in order to prepare for any challenges you may face. You can use a PESTLE analysis as a framework which organises factors into political, economic, social, technological, legal and ethical.
