Economic Factors to Consider When Starting your Own Business
Added on 2021-06-14
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Surname 1Student’s Name:Professor’s Name:Course:Date:Economic Factors to Consider When Starting your Own BusinessStarting a business seems to be easy. However, there are many factors to consider before venturing into any business. Different economic factors affect various businesses differently. It isessential to address the issues before starting off to avoid unforeseen events that may ruin your firm. There are significant factors that must be considered when starting your own business.To begin with, the business location must be considered. The position of a business determines its success. When venturing into a production business, one should locate the business near the source of raw material (Prokop 201). Nearness to raw materials is vital in reducing operational costs associated with transportation. Moreover, it helps to ensure continuous operation of the business. Businesses should be located near the market. The consumers can easily access the products which increase their satisfaction. Besides, close to the market allocation is vital for perishable goods. The efficient allocation also helps to obtain the labour required. Therefore, one must consider business allocation when starting a business. Additionally, one must consider the competition. The level of competition in the market is fundamental when starting a business (Rogerson 84). Low level of competition may mean success while a high level of competition will require a lot of effort to thrive in the market. With stiff competition in the market, it would be wise start a different business or produce differentiated products. The high competition calls for investment in the advertisement. When starting a business, the existing competitors may engage in price discrimination strategies to
Surname 2prevent entry of new firms. Hence, the level of completion in the market is a substantial factor that should be looked into when starting your own business.Furthermore, capital requirement is essential. Whether it is a small or a large business, sufficient capital is required. There are different sources of funds in case one does not have enough funds to run a business (Nour 2). External sources of funds should be carefully selected. Entrepreneurs prefer sources that do not dilute ownership in the business. Dilution of ownership leads to division of profits which reduces the returns. On the other hand, borrowing from financial institutions is risky. Default increases the level of interest charged while failure to repaya loan results to receivership as the lenders attempt to recover their funds. Therefore, capital must be considered when beginning your business. Another economic factor to consider is the target population. Target population are the likely customers or buyers of a particular product in the market (Sekaran and Rogers 240). The product must be tailored to fit the target market. Target customers influence the level of sales. High level of sales reciprocates to higher revenue. For example, an insurance business should target the working people. The reason for this is that the working class have an income to purchase the insurance services. Also, the working persons make rational decisions concerning their income. Target population cannot be ignored when starting a business.Moreover, demand is central to starting a business. Demand is the quantity of goods bought at various prices (Welch and Gerry 80). Consumer preference for a specific product affects the amount a firm can sell in the market. Products with low demand lead to poor performance in a business. A successful organisation produces goods or services with high demand. Demand can be increased by improving the quality of goods. Product innovation and
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