Starting up a Business (DP IB Business Management)
Revision Note
Written by: Lisa Eades
Reviewed by: Steve Vorster
Reasons for Starting up a Business
People set up businesses for a variety of financial and non-financial reasons
Reasons for setting up a business
Financial Reasons | Explanation | Example |
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Necessity |
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Profit maximisation |
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Profit satisficing |
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Non-financial Reasons | Explanation | Example |
Gap in the market |
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Ethical stance |
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Social entrepreneurship |
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Independence & personal challenge |
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Home working |
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The Process Involved in Starting a Business
All businesses start with an idea that fundamentally identifies a product or service that the entrepreneur intends to offer
Ideas can be generated from a range of sources
Diagram: sources of business ideas
Once a suitable idea has been identified, the entrepreneur is likely to take a series of steps to reduce risk and improve the chances of success
Step | Explanation |
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1. Identify essential elements |
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2. Conduct market research |
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3. Construct a business plan |
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4. Check legal constraints |
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5. Raise finance |
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6. Test the market |
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Problems that a new Business may face
Starting a new business can be exciting but it also comes with its own set of challenges
Overcoming these issues requires effective strategic planning, hard work and a willingness to adapt and learn as the business evolves
Some of the common problems that new businesses may face include
1. Lack of funding
One of the biggest challenges for new businesses is securing enough funding to get started and sustain operations until they become profitable
2. Lack of market demand
A business idea may seem great on paper, but if there is no market demand for the product or service, it may not be viable
3. Competition
New businesses may face competition from established players in the industry, making it difficult to attract customers and establish a foothold in the market
4. Hiring and retaining talent
Finding and retaining skilled employees can be challenging, especially for new businesses that may not have the resources to offer competitive salaries and benefits
5. Legal issues
New businesses may need to follow to a range of laws, which can be complex and time-consuming to navigate
6. Operational issues
Running a business requires a range of operational skills such as managing finances, marketing and sales
New business owners may struggle to manage all of these responsibilities
7. Scaling
As a business grows, it faces new challenges, such as managing increased demand and expanding into new markets
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