The process of setting up a small business

To start a new business it demands new idea, new location, new plant, new machinery, new
inventory and new personnel.
The steps in setting up a small business are:
a) Selection of idea: It is selecting idea for a product line that satisfies customer need a
small business is born with an idea. A small business owner should have the ability to
generate a number of ideas. Such ideas should have potential to make profit the most
promising idea should be selected for establishing small business.
b) Business plan: It deals with the approach to exploit the new ideas. it covers:
Marketing aspects: about market potentials, competition, customers, price quality
or service.
Production aspects: it is about technology, processes, methods, location
Organization and management aspect: it is about form of business, its
organization and management
Financial aspects: capital needs, sources, financial projections, records.
c) Location selection: In this step the appropriate site is selected. Location affects
accessibility of small business to customers, suppliers, employees, infrastructures and
transportation. Various factors that should be considered while selecting location is;
proximity to suppliers, proximity to market, availability of transport facility, availability
of labor, environmental factors etc.
d) Form of ownership: The legal form of ownership is decided and registered. The choice
of forms depends upon needs of the owner, nature and size of the business, personal
responsibility for debts, etc. It could be sole proprietorship, partnership, public and
private limited company.
e) Formalities: Environmental and other clearance is obtained. Licenses are obtained. Other
procedural formalities have to be fulfilled.
f) Finance: financial resources are acquired. It Small business owner is supposed to
carefully estimate initial capital requirements for start-up of business. It could saving,
borrowed money and loan from bank. this is done by estimating the following:

Fixed assets requirements

Current assets requirements
Business promotion cost requirements
Personal living expenses of the owner

1. Assets: fixed assets are acquired. Plant and machinery have to be installed.
2. Employees: right type of employees is hired. It could be unskilled, semi-skilled and
skilled employs.
3. Production: in this step technology is selected. It can be labour or capital based. Raw
material is procured. Products are produced for marketing
4. Clearances: in this step license and permits, if needed, are obtained. Taxation matters are
handled.