Subject: Contemplating Starting a Business
Based on our previous interaction, I am aware of your interest in starting a brick and mortar store for the sale of sports equipment and the current dilemma about Julio being an owner. I also understand that in addition to running a business, you would like to have sufficient time for your training. As such, this memo provides a guide on how you can determine whether to be an entrepreneur or a small business owner and the business form that will best suit your idea. Also, the memo provides a guideline on the financial statements that you will need to manage the venture, marketing strategy that the entity should pursue, whether you will require employees and how to manage and motivate them.
Before you set up the business, it is vital to determine whether you are an entrepreneur or a small business owner to understand the appropriate financial approach. To resolve this, consider whether you plan to start the business with outside funding and grow it to a large venture or a small entity financed through personal savings. If you choose to spend your severance package on funding the idea, your approach will be that of a small business owner.
After selecting the approach that suits you, the next step is to determine the amount of capital required to start the business. It is worth noting that each venture has a varying capital requirement. Therefore, to determine the capital requirement for the current idea, you should create a budget outlining the expenses that you anticipate to incur, such as purchasing the equipment and real estate costs. Developing a budget will help ensure that all costs are captured to avoid underfunding the business.
Ones you have determined the capital requirement, it will be essential to maintain financial statements that will help monitor the venture’s financial position. Some of these statements include an income statement, balance sheet, and statement of cash flows. The three financial statements will help monitor the venture’s financial status and performance from the startup and as it continues to operate.
Based on an analysis of your needs, the best form of business to set up is a partnership due to the nature of formation and capital requirement. Notably, a partnership requires minimum capital; thus, it will be easier to fund with the severance package. Besides, partnerships have relatively lower government regulation compared to larger businesses such as companies; therefore, it will be easier to start the business with minimum regulatory barriers. Furthermore, I am aware that you wish to run the business without encroaching your training time. As such, a partnership is suitable as you can easily hire employees and manage the venture on a part-time basis. While a sole proprietorship may also be a suitable form of business, it may consume your training time as you will need to run the entity on a full-time basis. Therefore, a partnership is ideal because it requires minimum capital, and one has the choice to work on a part-time basis.
Given that Julio also shows interest in the idea, he should assume the role of a partner in the business. Notably, Julio may choose to contribute funds in the creation of the venture and share in the profits and losses of the entity. Julio’s decision to become a partner will not affect the form of business that you set up, as a partnership can have as many as twenty partners.
Given that this will be a startup business, unknown to the majority of members of the public, it will be advisable to indulge in marketing to create awareness about its existence. During its first years of operation, the entity should pursue a word of mouth marketing strategy. Notably, this form of marketing is cost-effective as it relies on the impression that the business leaves among the first few customers. By selling affordable and quality equipment, the business will create a lasting impression among consumers and further attract more buyers. As the venture expands in size, it should pursue other forms of marketing, such as media advertising, to draw consumers in different geographical locations.
Furthermore, the relatively large size of the business and anticipated several internal operations deems it vital for the venture to hire employees to fill different organizational positions. Notably, you should recruit individuals in areas of cashiers, inventory control manager, and equipment handlers. Some of these positions, such as inventory control manager, are very critical as it is essential to manage the inventory appropriately to have a sustainable volume of stock in the store at all times to meet customer demand. If you choose to recruit individuals in the proposed positions, they will be managed by the human resource manager. However, being a startup and relatively small in scale, the owners may assume the role of human resource managers and undertake the staff management activities.
Of course, it will be a top priority to ensure that the employees are highly engaged and motivated to reduce the costs associated with a high employee turnover rate. Therefore, I recommend the use of both financial and non-financial tactics to keep workers motivated. Some of these strategies include offering monetary rewards, creating a friendly working environment, and fostering positive communication among employees.
I hope that the information addressed will be resourceful in helping you kickstart the business.