Setting up a new enterprise and Types of enterprises.

Setting up a new Enterprise

An enterprise could be set in different ways, at different places, using different methods, an overview is as follows:

  • Ways of enterprising at home –
  • Organizing a talk.
  • Taking responsibility.
  • Earning money.
  • Organizing yourself.
  • Ways of enterprising at school –
  • Organizing a talk and putting up posters.
  • Self-awareness and Time management.
  • Creativity.
  • Leadership.
  • Ways of being Enterprising, developing wider enterprising skills –
  • Applying Technology.
  • Building communica5ion and numeracy skills.
  • Thinking creatively and independently.
  • Learning independently.
  • Reasoned Evaluations.

What is the process of enterprising? – The enterprise process is the various stages in starting and running an enterprise.

The process of enterprising comprises of 6 main steps which are as follows:

  1. Identifying the problem, people’s needs and wants or a gap in the market.
  2. Exploring creative solutions to fill that gap.
  3. Action planning, which is very important to organize and coordinate tasks according to timeframes allocated, this is essential in timekeeping.
  4. Implementing the plan.
  5. Monitoring progress, which is necessary to identify weak points in ideas and actions taken and rectify them, or to correct errors made.
  6. Evaluation of successes and failures, which would help us understand what went wrong and what went right, and how we could execute it better next time.
  1. Identifying the problem, people’s needs and wants or a gap in the market. (Stage 1)
  2. Group discussion, brain storming and individual reflection.
  3. Collecting ideas from shareholders.
  4. Risk assessments i.e. “PEST, SWOT, SMART”
  5. Identifying the opportunity
  6. Thorough research about the market gap
  7. Clear aim and vision
  8. Expected rate of return to be predicted
  9. Evaluating the stalls available and planning for any skill gap
  10. Exploring creative solutions to fill the gap. (Stage 2)
  11. Looking for creative and innovative ways.
  12. These creative ideas then need to be analyzed and evaluated to find the best solutions
  13. Use of mind maps help in developing an effective enterprise plan
  14. Action planning, which is very important to organize and coordinate tasks according to timeframes allocated, this is essential in timekeeping. (Stage 3)
  15. Making plans i.e. Budgeting, Financial Capacity, Keeping the cost under the bearable limit.
  16. Breaking down the long term plan (objectives) into achievable tasks.
  17. Allocating these tasks to different team members, according to their strengths and skills
  18. Setting short targets, timescales and making sure goals are achieved by then.
  19. Implementing the plan. (Stage 4)
  20. Enterprise activities to be carried out effectively and lawfully.
  21. Timescales, health and safety issues should be frequently adhered to.
  22. The tasks and activities should be directed towards meeting objectives.
  23. Decision making needs to be quick, flexible and responsive.
  24. Monitoring progress, which is necessary to identify weak points in ideas and actions taken and rectify them, or to correct errors made. (Stage 5)
  25. Questions should be asked to one’s self such as, “Has each step of the plan been implemented efficiently and on time etc.”
  26. Errors which needs correction should not interfere with other steps and if interfered those steps should be adjusted accordingly too.
  27. Evaluation of successes and failures, which would help us understand what went wrong and what went right, and how we could execute it better next time. (Stage 6)
  28. Successes and failures should be analyzed according to expected results.
  29. Methods to do it better next time should include the faults made previously in order for it to not be repeated

Different methods to analyze through setting up an Enterprise –

  • PEST, as shown before.
  • SMART – These direct your goals on how it can be more efficient and best suitable to each business, they are as follows :
  • Specific – These are meant to constrict your goal within boundaries to make it more direct to approach.
  • Measurable – These would make your goals quantified which would make it easier to work with in many areas such as financially, and so on.
  • Achievable – This would help you to identify whether the resources that is put forward a goal is worth it or not, because wasting all your resources towards a goal that requires more than you have isn’t efficient.
  • Realistic – The goal should be within the possibility of your efforts.
  • Time-bound – This would help you figure out a time target for yourself to work between to motivate you, and to be as efficient as possible.
  • SWOT – It identifies the current strengths, weaknesses, opportunities, threats for an idea or a project.
  • Strengths – Internal features that the enterprise is good at and that can be controlled.
  • Weaknesses – Internal features that the enterprise needs to improve on and has control over.
  • Opportunities – External changes that the enterprise cannot control and which they could benefit from.
  • Threats – External changes that the enterprise cannot control which could place the enterprise at risk.

Types of Enterprises

Sole Trader and Partnership

Sole Trader:

People who are usually running very small and lean businesses with usually just themselves, or a small group of employees.

Pros:
1) Usually it is a lot easier to set up legally and you don’t need to get too many special legal documents.

2) Owner takes decisions and has full control and keeps all profits after tax

3) Not much legal requirements to publish records

4) Lots of flexibility in terms of work hours, and in the services that they can provide to customers

5) In some countries, the government provides a lot of support such as subsidies.

Cons:

1) Unlimited Liability, which means that owner is responsible for all the debt that the enterprise has and if needed, can be forced to sell personal possessions to pay them. Owner (personally) can also be directly taken to court if unincorporated. 

2) Hard to raise capital. For example, banks are less likely to lend to sole traders than larger companies as the sole traders have higher chances of going bankrupt

3) Owner may not have enough experience to run an enterprise on their own.

4) Harder to compete with larger companies that may have more capital, market share, etc.



Partnership:

Usually owned by two or more people but capped to a limited number of people. In countries the limit is usually 20.

Pros:

1) Relatively easy to start up but need legal contract called deed of partnership. 

2) Having more people makes it easier to raise money and each member can specialise and share the decision making. Could be able to negotiate better with suppliers, etc.

3) Usually no need to publicly disclose records and accounts. 


Cons:

1) Normal partnerships have unlimited liability but some countries allow limited partnership (limited liability) and owners can be personally sued.

2) Partnership may not be big enough to gain enough economies of scale.

3) Any decision made by one person binds all and if partners leave in any manner, the whole system is dissolved. 

4) Profits have to be split and disagreements can make things difficult


Limited Company and Co-Operative

Limited company:

Limited liability which means that the owner does not have risk to their personal assets. When the company is still private so the public cannot randomly buy shares and don’t have to share too much in terms of records. When the company is public, the public can buy shares and trade them on places such as stock exchanges and there are a lot of legal boundaries, a lot of documents to share, lots of minimum capital requirements. 

Pros:

1) Limited companies have it easier when trying to raise money compared to limited partnerships and is a nice to have when trying to be a very large enterprise

2) Limited liability and huge economies of scale and will continue even if the owners die. 

Cons:

1) Records have to be public and original shareholders can lose control of the company as the public buys available shares or the board of directors vote them out. 

2) Minimum capital requirements and profits have to be shared with shareholders (lot of people)

3) If not a public limited company, shares cannot be sold and bought freely so a bit harder to raise capital. 

4) Huge size means companies may be inflexible and cannot be so personalised in their service. 

Co-operative

There are two types.

1. Consumer: Owned by members and can also be called a retail cooperative. These are members of the public who use the co-operative, have shares, and one vote at shareholder meetings. The profits are not distributed equally but to how much the shareholder  shops at the establishment


2.Worker: Owned by the workers of the company. And profits are shared with them. 

Pros:

1) Limited liability, and as the workers are shareholders with voting rights, they have less reasons to fight with each other and have more reasons to work harder. 

2) Business is run with customer interest rather than shareholder interest when it is a consumer cooperative and thus may be more ethical than other businesses. (Ethical concerns also apply to the worker company)

Cons:

1) Shares are not usually traded on exchanges and thus limit the capital that can be raised. 

2) Normal workers may lack experience to run a company so they might have to appoint managers. 

Franchise and Social Enterprise.

Franchise

A larger company allows people to purchase the right to sell a particular product or service. The person who is purchasing this right is known as the franchisee and the larger company is the franchisor. The franchisee sells the products and takes advantage of the combined marketing from the larger franchisor and other franchisees. 

Pros:

1) Can sell well known products and brands

2) Ad costs are lower with shared advertising

3) Less risky as there is already a successful business with an established audience

4) Things like training and admin can be taken over by franchisors and save cash for the franchisee. 

Cons:

1) Franchisees have to make payment to franchisor regardless of whether they are profitable or not and this might even be a periodic recurring payment. 

2) You may have to pay a percentage of sales to the franchisor and they also have very strong control in things that can range anywhere from the branding, to operation area, supply, products, etc. 

3) The franchisor has the power to cancel any agreement at any time with the franchisee. 

Social enterprise

Basically a company that makes money and then reinvest the profits for the betterment of society. They try to maximise social impact rather than shareholder profits. An example can be a charity, schools, hospitals, etc. 

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