Essential Elements for Establishing a New Business / Problems before Starting a New Business/Fundamental Factors For Commencement of a New Business:

A man desirous to start a business has to consider carefully many factors. Before starting and during the conduct of the business, a businessman comes across to the variety of problems. Some of the major problems faced by businessman are following:

 1) Selection of Business:

Before taking into consideration the establishment of the business, the first important question is the selection of the suitable business proposition. Once a business is established, it becomes very difficult to introduce basic changes in the nature of the business. The selection of the business depends upon personal aptitude of the businessman , his personal ability , expected amount of profit , amount of capital needed to start the business , chances of expansion in the future , prevailing level of competition etc.

2) Detailed Analysis:

Before starting a business, the businessman must analyze the practicability, the profitability, the nature of demand, the degree of competition, expected changes in technology, purchasing power of consumers, factor market etc.

3) Selection of Size of Business Unit:

The size of the business means scale of business. Before establishing a business, the businessman must take into consideration the decision regarding the size of business. Size of business matters in term of cost and operating expenses. Initially neither the size of the business must not be too small that adequate advantages of business opportunities are not obtained nor it must be too big that the resources of the business are not effectively utilized.

4) Selection of Form of Business Organization:

The powers and responsibilities of the businessman are determined by the form of organization which he chooses. The selection of the form of organization depends upon nature and size of business. If business is to be taken on small scale, sole proprietorship is ideal but it much increases the liability of the businessman. If the resources and abilities of a businessman are insufficient, he may select to join hands with other persons and form partnership. Again if the financial liabilities are to be kept limited, the form of Joint Stock Company would be more suitable.

5) Provision of Capital:

Capital is the life blood of business. Before starting a business, the capital requirement must be carefully assessed. Capital requirement are concerned with fixed capital, working capital and payment of expenditure relating the establishment of business. A businessman may meet entire capital requirement from his own capital, borrow money form financial institutions or in the case of company, get the capital form public.

6) Study of Government Policy:

Before starting a business, it is also essential to have full knowledge of the government policy relating the establishment, running and regulation of the business in all democratic countries of today.

7) Selection of Place:

A business man has to take with utmost care the decisions regarding the selection of a suitable place for his business. The success of a business depends very much on the suitable place.

8) Selection of Staff:

No businessman is much efficient that he can do all his business alone. In a business, varieties to work such as buying, selling, correspondence, maintaining accounts etc are to be done. So another problem of a new business is to secure adequate staff- skilled , semi-skilled and unskilled.