FREE ESSAY ON FINANCING A BUSINESS

FINANCING A BUSINESS

Financing a business is a process that requires much planning. A business plan should be
made mapping the future business. A business plan is a lengthy plan but when done
properly will make the actual process of setting up a business much simpler. The business
plan includes many steps that will be explained.
The first step in a business plan is deciding the nature of the business. A detailed
description of products and services is the first part of a business plan. For the bike
shop, which is the business that is being setup, the products would be all the bikes and
parts. In addition to a detailed description of products, a detailed description of
services must also be made. The owners must decide where or not there will be a service
department with the bike shop. The next part in figuring the nature of the business is to
decided the estimated risk. The risk of the business is based on the analysis of the
industry. To analyze the industry one should take several considerations into thought.
For example, how much demand for the business there will be in the area, as well as, how
other businesses of the same nature have done in the area. Size and location of the
business are also required to figure the nature of the business. The size of the business
can be based on the capital available, the demand in the location, as well as any other
factor that might affect the business. Location is based on many of the same factors.
The second step of a business plan is to plan the goals and objectives of the business.
This step requires thinking about what the short-term and long-term goals will be. In
addition to the short-term and long-term goals, the owners must express the expected
results in sales volume and profits. These goals and objectives should be based on the
amount of capital invested and the amount of the loan. The business must plan to make a
profit, however, the profit does not have to be immediate. It may take a little while for
the business to become established in order to make a profit. The long-term plan of the
business might take all this into account.
A marketing plan is the next step of a business plan. A marketing plan takes into account
customers and their demand for the bikes, parts, and/or service. A marketing plan should
also include prices for the products and services, and a comparison of products and
services with competitors in the area. The prices should be figured based on the supply
and demand theory. If there is a large demand and no other competitors in the area your
prices can be much higher than if there is little demand for you products or services, or
if there are several other competitors in the area.
After figuring all the prior steps of the business plan, the financial plan is next to be
determined. A financial plan includes initial investment needed to start and maintain the
business; and projected income, expenses, and profit. Hiring an account might be helpful
at this stage. While these steps are not the easiest to figure, they are the most
important steps in the business plan, in regards to applying for a loan.
The final step of a business plan is the organizational plan. First in the organizational
plan is to figure the legal form of the ownership. The different types of ownership are a
proprietorship, a partnership, or a corporation. A proprietorship is a business owned by
one person called the proprietor. Since several owners will own the bike shop a
proprietorship is not an option. Two or more people can own the other two options, a
partnership or a corporation. A typical corporation is very large in size but since the
bike shop is just starting out; a partnership is the best option for the bike shop. A
partnership is much simpler to set up and after the business is well established a
corporation can be formed in the future. The second part in figuring the organizational
plan is getting an idea of any legal factors such as licenses, leases, and contracts. Tom
Oxford, Vice President of Foth & Van Dyke, said "hiring a lawyer is a good idea in
figuring these factors."(VanOss, Jan 12 2001) In organizing the business the owners need
to figure employee needs and job descriptions for future hiring. The physical facilities
such as buildings, equipment, and tools also need to be figured in this step of the
business plan.
After the business plan is all figured an organizational chart should be assembled based
on the plan. This chart will be useful for many reasons. One reason is when applying for
a loan at a financial institution a chart will be helpful in explaining the business
plan. Another reason an organizational chart is useful is when hiring employees the
owners can use the chart to explain the goals and objectives of the business. A chart can
be used in any other way that the owners would find useful as well.
In financing a business such as the bike shop there are several steps that need to be
thought about and completed. These steps are called a business plan. The business plan is
essential in the formation of any business. In addition to the business plan a list
financial institutions which to apply for a loan should be assembled, as well as, hiring
a lawyer to help in the formation of the business. Proper planning might take a long time
but in the end it will make the formation process much easier.
Bibliography
http://www.ideacafe.com/getmoney/FINANCING.shtml, January 15, 2001
Kenneth E. Everard & James L. Burrow, 1996, Business Principles and Management,
South-Western Educational Publishing