It is presumed in this article that the reader is primarily interested in a small scale business, defined in terms of the amount of capital invested, the number of employees, and the annual turnover. This definition as nothing to do with the level of the sophistication of the production process or the efficiency of the management. Small scale businesses range from village level cottage industries using traditional methods of production, to modern, unban based Enterprise employing the latest technology.
Certain small scale business enterprises letter expand into medium or large-scale businesses whilst others stay small. This characteristic of staying small maybe due to any of several factors. For example if the cost of transporting the finished products is very high, is the case with concrete block making, output is likely to be limited to the demand generated with a certain distance of the production center. The same may be said of goods with a short "shelf life" (bread), who is service wolves clientele is highly localized (barbering).
In the deciding which business to go into, one would be influenced by The following:
1. Is there available capital adequate?
Certain businesses require more capital and starting up costs than others. 10,000 dollars maybe sufficient for starting a fast food athlete, but not for setting up a machine foundry. Even where the capital is adequate, if production and other costs are likely to be so high as to live little or no managing for profit, then it is literally not worth it to proceed with the business.
2. Is the market big enough?
If a sufficient number of customers cannot be induced to buy or use the product or service being offered, the business would soon fold up. A clever little cock screw that chimes in Christmas carol when being used would not make the producer very rich if only a negligible proportion of the population drinks wine. But if that device where to combine a cock screw, a can opener and a knife blade, its appeal and therefore its market would be considerably expanded.
3. Is the technology readingly available?
An idea may seem good on paper, but if the technology for converting it into reality is beyond rich, the entrepreneur should turn his attention to something more practical. It would be or to together a different matter though, if he first turns his full attention to developing the technology himself.
Having decided which business to go into, the entrepreneur's next question would be where?
1. Access to raw materials
If the cost of transporting raw materials is prohibitively high than the business should be located as close to the source of raw materials are possible. Brick making requires a lot of clay, and rather than locate a brick making industry in an urban industrial estate and having a shift endless lorry loads of clay there, the brief factory should be built right where the clay is, or as close as possible.
2. Access to market
Some businesses especially services have to be located close to the customers. And example is why you wait should cobbling, which is usually located on a busy street or in a well patronized department store.
Access to infrastructure.
If the business requires a lot of water, electricity and good communication, it would be unwise to site it in a place that lacks this services, unless the proprietor is prepared to bear the cost of sinking boreholes or buying electrical generating plants and radio equipment. Leather tanning, as an example, requires a plentiful supply of water with low iron content, and is generally cited where supply is available.
Sometimes, the location of a business is decided for no other reason than that it happens to be the village of the proprietor, room wishes there by to bring "development" to his people. This may make for good clansmanship, but if the other requirements are not there, it could prove to be a costly gesture.
From the forgoing it is clear that, before making a decision to start a business the entrepreneur needs to carry out a thorough evaluation. This evaluation should not be limited to the financial viability of the project, but should also cover other factors that are capable of having a major impact on the operation of the business. Sum of this will be dealt with in my subsequent articles on business as we follow. Thanks
Dimma Chris
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