Entrepreneurship in engineering An Institution of Engineering and Technology case study
Page 4: Starting up a business
There are a number of legal requirements that must be met to form a business. A new business will adopt one of a number of possible structures. Many very small start-up businesses are in the form of a sole trader (one owner) or partnership (two or more owners). These forms of business give the owner/s more freedom to make decisions themselves and to keep the profits their hard work has earned.
A business can also take the form of a limited company. A limited company is owned by shareholders who share the profits the business makes. The company is run by directors. However, limited companies tend to be more expensive to run and administer than sole traders or partnerships. They need to be registered with the Registrar of Companies and have to produce complicated paperwork.
Steps to starting a business
Starting up a business involves a number of steps: Step 1: Generating good business ideas. These might be, for example, based on the skills of the owners, or by spotting a gap in the market or extending an existing idea.
Step 2: Market research in order to find out information such as whether potential customers like the product or service, how they would use it, how often they would use it and how much they would be willing to pay. For example, in creating the hybrid car, the developers needed to check that customers would be prepared to pay for the extra engineering that went into the new designs.
Step 3: Identifying the target audience and the characteristics of the typical customer for the new product. This allows the business to create the right sort of advertising and promotion to reach them. For example, competitive long distance runners make up a distinct segment of customers for SatNav directed watches as they show distance travelled.
Step 4: Identifying suitable sources of finance. These may come from personal funds, bank loans or special grants from trust funds for new enterprises such as the Prince’s Trust and Shell Livewire.
Finally, all start-up businesses need a well worked business plan. The plan should set out the objectives of the business, sales targets, marketing details, the main costs and the resources needed, including equipment, accommodation and people. The plan can be used to demonstrate to a potential lender or investor that the business idea is well thought out and likely to generate a return on investment.
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