Steps in establishing a business
Yvonne Harvey, Contributor

As usual, it is a pleasure to be with you all again. I am sure you will all agree that in establishing a business, it is important to do things in the right order. Therefore, today we will look at the logical order that should be followed in setting up a business to ensure its success.

Let us begin with step number one. Conceptualisation. The person who desires to set up the business must come up with ideas regarding the product, type of business, size of business, etc.

Step number two is market research (market probe). This is done in order to be aware of customers' needs, which the business will attempt to satisfy, with the aim of making a profit. Market research is a systematic approach to collecting information, recording and analysing the information collected and adopting it to fit the marketing plan of the business. The aims of market research are:

• to find out what the public wants
• to assess the likely volume of demand
• to discuss what will influence consumers, for example product name, style and colour of packaging, price, etc.

Identification of resources

Step number three is identification of resources. Resources refer to the factors that will be utilised in producing the good or service. A decision must be taken as to the type of resources and where they will come from. These resources include the financial resources, man-made resources (capital) human resources (labour and enterprise) and the natural resource (land). Time is also a resource that must be considered.

Step number four is the very important step of creating a business plan. A business plan is a written summary of an entrepreneur's proposed business venture. It includes its operational and financial details, its marketing strategies, its management skills and abilities, etc.

The plan serves as an entrepreneur's road map on a journey towards building a successful business. It describes the direction the business is taking, what its goals are, where it wants to be and how it is going to get there.

A business plan is also used to attract lenders and investors and serves as a sales tool.

Step number five is the acquisition of funds. Having already decided how much funds will be required for the business, the future business owner must decide how the funds will be obtained. Will it be by public means or from a financial institution? If it will be from a financial institution, the financial requirements and the terms of repayment for the loan must be taken into consideration

Finally, step number six, operation of the business. You are now ready to begin producing or selling your goods and services. For this to happen, an organisational structure must be in place and each department of the business must realise its role in the successful operation of the business.

In establishing your business, you must ensure that you have the required functional areas of the business. These refer to specialised departments within a business. These departments carry out specific functions that assist the business overall.

Businesses can vary greatly in size. When a business is small, there are no definite functional areas evident. This is so because the owner usually produces and markets his own products and does his own accounting and personnel work. As the business expands, however, specialised (functional areas) departments become necessary. Most large businesses have four functional areas: production, finance, marketing and personnel. In very large businesses, there are two additional functional areas: research and development and social.

We will now take a brief look at what takes place in these specialised departments.

The production function

In this department, raw materials are combined to produce goods, and services are also provided. Designers make specifications which are fully developed and tested. Sample products are also made. There will be no production department, however, if the business is only engaged in retailing or wholesaling, since they are buying and selling already-manufactured goods or they are in the service industry.

The finance function

This department is responsible for the accounting procedures and processes of the business. Its staff are also involved in the investment of funds in plant and machinery, as well as in the purchasing of the needs of other departments of the business. Where shareholders are paid dividends, this department will make it a reality for them.

The marketing function

The marketing function includes market research, publicity, distribution, selling, merchandising and after-sales services, advertising and sales promotion.

The personnel function

This department is sometimes referred to as the human resource department. The functions and duties of this department concern mainly the employees of the business. Primary concerns are: planning and forecasting manpower requirements; recruitment and selection of employees; job analysis and job description; job specifications and employee training, etc.

Having looked at the four main areas, let us spend a few minutes on the additional functional areas that may exist if the business is large.

The research and development function

The work of this department includes many types of research, for example consumer research, product research and motivation research. Feasibility studies and pilot projects are carried out and communication with research institutes, such as the Department of Statistics, takes place.

The social function

This may include trade union negotiations, efforts to reduce pollution and dumping of waste products, provision of health facilities and provision of clean working environments and the initiation of social groups in the business, for example clubs and credit unions.

That's it for the functional areas of the business. Next week we will be looking at the sources of information for conducting research into the establishment of businesses. Take care.

Students of Children First Vocational Training School in Spanish Town, St Catherine, show what they learned in cosmetology and grooming classes. Children First partners with the Ministry of Health in educating at-risk youths about sexual health. - Ian Allen/Staff Photographer

Yvonne Harvey teaches at Glenmuir High School.