Small Business Start-up: Factors and Risk Analysis

This report examines the crucial elements involved in launching a small business, using the hypothetical company 'Peach Fashion' as a case study. It begins with an overview of small businesses, their characteristics, and the components entrepreneurs must consider, such as financial requirements, market research, and business planning. The report then outlines the research aims and objectives, including identifying internal and external factors, risk factors, and strategies to mitigate those risks. A literature review explores the impact of internal factors (human resources, raw materials, and funds) and external factors (customers, competitors, and marketing). The report also discusses the risks associated with starting a business, such as financial constraints and market volatility, and suggests risk management strategies like insurance and building a strong brand reputation. Furthermore, the report covers marketing strategies, including competitive advantages, market segmentation, and the importance of market existence, providing a comprehensive guide to small business start-up and success. The report concludes with recommendations and a conclusion.

How to start small
business?

Table of Contents
INTRODUCTION...........................................................................................................................3
Overview of the topic.............................................................................................................3
Background of company.........................................................................................................3
Research aims and objectives.................................................................................................3
How to achieve objectives......................................................................................................4
Background of the problem....................................................................................................4
TIMESCALE...................................................................................................................................4
BACKGROUND SEARCH (LITERATURE REVIEW)................................................................5
To examine the impact of internal and external factors over the start of a small business....5
To identify the risk factors which are associated with the start of a small business..............6
To investigate the ways to overcome from the suitable risk factors which are associated with
the start of a small business....................................................................................................6
MARKETING STRATEGY............................................................................................................7
IMPACT ANALYSIS......................................................................................................................8
CONSTRAINTS..............................................................................................................................9
RECOMMENDATIONS AND CONCLUSION..........................................................................10
Recommendations................................................................................................................10
Conclusion............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Overview of the topic
Small business is a privately owned enterprise that functions with less employees, less
investment, less raw materials and at the small locations and areas(Adams and Burd, 2019). The
small business produce the good and service they offer as very small scale and for the small
localities. There are the several characteristics involved in the small business such as have one
owner with limited area to cover and utilize the instant available resources. The small business
labour intensive and easily adaptable to the changes and uncertainties. In the small business the
management is handled by the owner itself as there are very few man force.
Background of company
To open or to start the new small business a entrepreneur is required to consider various
components such as financial requirements, market research, customers needs, location, a
effective business plan, business structure, market segmentation, competitors, legal policies etc.
(Lisi, 2019). For this, a new venture is opening by the name of “Peach Fashion” a small clothing
business operating in the clothing sector of UK. The company is recently opened and is located
at the small area in London, UK. The company is a small business with hardly 10 employees.
The company design, manufacture and distribute all its clothes on its own with the help its
employees. The company has its own sewing machines and other required equipments to develop
its clothes. Hence, Peach fashion is a small business with its retail counter to offer latest fashion
clothes to the consumers at affordable price.
Research aims and objectives
Research aim
The main aim of this research is “to determine the factors and risk which is associated
with the start of a small business”.
Research objectives
 To examine the impact of internal and external factors over the start of a small business.
 To identify the risk factors which are associated with the start of a small business.
 To investigate the ways to overcome from the suitable risk factors which are associated
with the start of a small business.

How to achieve objectives
In order to attain the above mentioned objective about the research the researcher has put
the following mentioned research questions.
Research questions
 Describe the impact of internal and external factors over the start of a small business?
 What are the risk factors which are associated with the start of a small business?
 Explain suitable ways to overcome from the suitable risk factors which are associated
with the start of a small business?
By answering the various research questions, the researcher will be befitted in achieving
the objectives to start the small business that will help him to successful start a small business
that will yield the profitability and productivity (Mand, Atri and Gill, 2018).
Background of the problem
To start a small business of its own the owner of the entrepreneur may face the several
problems that can lead to low productivity and profitability along with no long term
sustainability and successfulness. To start of a small business, the one can face problem of
funding that is from to get loan or investor to invest capital in business, problem of required
location to set up a business in correct market, issue of hiring low cost labours, problem of
getting adequate amount of raw material and search of distributors, other market research for
promotions and marketing, problem in acquiring and attracting customers for the small business
etc. Hence, to start a small business these problems are required to be mitigated to convert a
business into successful small business.
TIMESCALE
Gantt Chart: It is the simple visual representation of the various task as per the provided
scheduled time period (van Stel, Kaciak and Cieślik, 2020). A Gantt chart is useful for the
businesses of the all sizes in planning and organising the various tasks to show what work is
scheduled at what specific time and day so that the tasks are completed before the time or on the
time.

BACKGROUND SEARCH (LITERATURE REVIEW)
To examine the impact of internal and external factors over the start of a small business
According the perspective of Vanessa, (2021), For a new small business to be successful
in the market place, an organisation and its owner must fully recognise and evaluate the internal
and external factors that can influence and impact on the growth and development of the small
business (Coffey, 2020). The business is required to analyse and understand all the internal and
external factors of the environment that can create a positive or a negative impact on the
operation and profitability of the small business.
The internal factors

 Human resource: The small organisation has very small workforce so it is important for
them to hire useful and proper employees required for the task completion. The human
resource of the Peach fashion will be the main contributors in the success of the
organisation. Availability of raw materials: This is the important factor for the organisation to consider
as the streamline flow of raw material within the organisation of Peach fashion can only
lead to successful production. The lack of raw material may hinder the productivity of the
organisation. Therefore, this internal factor is essential to be understand and managed.
 Funds and capital: The money is the most important internal factor of small business as
they have very less investment to start of the business therefore the proper management
of funds to carry forward their business for long term. the peach fashion requires the
adequate funds to buy the cloths, threads, needles and other materials required in
producing and designing the end product for the consumers.
The external factors Customers: It is very important for the small organisation to have the loyal and
trustworthy customers to set their position in the market (Brandão, Cavalheiro and Joia,
2018). The recently formed small business organisation peach fashion must look at their
target customers for increasing the profitability. Competitors: For the small business to start they always look at their competitors in the
particular area to plan their marketing strategies and to develop their products to gain
competitiveness. The peach fashion is also need to design such clothes with low price
strategy so that they can grab the market.
 Marketing and media: The small business are not so much adaptive with technology
rather more focused and oriented towards the labour (Churchill and Mishra, 2018).
 Therefore, there marketing and media selection is important external factor to attract the
customers towards their new venture and to set their footprint in the small location and
among the customers.
To identify the risk factors which are associated with the start of a small business
According to the perspective of Fraser Sherman, (2019), no matter how well the person
analyses all the internal and external factors but there is always risk associated with starting a

new small business. The below mentioned risks are the most common risk that organisation is
always attached with to start a small business: Big financial risk: The small organisations always have the risk regarding the funds. The
firms have very minimal cash reserve in their accounts therefore it very important for
them to carefully invest their money. The low finance decreases the long term survival of
the company. Changing rules and legal risk: a small business always set up their business with
fulfilment of all the legal policies and structure. The risk occurs when there is any change
in the legal laws regarding operation of the small business or any property rights issue.
The company always works under the legal risk related to tax, intellectual property,
environmental policies etc.
 Fickle customers and other market risk: When the small organisation is set up to do to
business with the other competitor firms of the market they always have a risk of getting
valuable customers. There also the market risk like competitors slicing out the market
share.
To investigate the ways to overcome from the suitable risk factors which are associated with the
start of a small business
According to the perspective of Hassan Mansoor,(2020) To start a small business the
venture always have risk which can hinder there success, growth and profitability but there are
always ways to mitigate and overcome from those suitable risk to climb the ladder of success.
The risk management is essential for the entrepreneurs to start a new business venture (Fourati
and Attitalah, 2018). The risk management can only execute well when the employees and owner
work collaboratively. As the owner of the small business Peach fashion one can do following
things to reduce the risk: Get insurance: The legal insurance of the business and its belongings is the best way to
reduce the financial risk. As the insurance protect the small business from the any change
in legal actions, natural calamities, or any accident. The insurance allows the owner to
claim entire amount that has been lost. Limit the business loan: the small business organisations should always get the limited
loan which they are capable of paying to the bank (Hien and Cho, 2018). The loans must

also be taken at low interest rate with proper management and planning to avoid the risk
of failure or debt.
 Build reputation: to reduce the risk of fickle customers and competitors the small
organisations are required to build up high reputation and brand image in the small
market place that will build trust of the customers for the company and also retain them
for long term success of the small organisation. The reputation brings the value to the
organisation and so let the owner to increase its product prices.
MARKETING STRATEGY
Marketing strategy means the plan which is made for achieving the marketing goals of
the business. This strategy provides the idea to the companies about which product and services
they have to offer as the market research is already conducted in the beginning. With the
preparation of marketing strategy, the business can make decisions in many areas.
Competitive advantage- Competitive advantage means to perform best in the market
compared with that of competitors which influences the consumers to buy their product. Small
business can gain competitive advantage in the market only when they would be able to identify
what their customer wants. To expand the business and to move ahead from the competitors the
small business can lower down their prices and can provide different variants of products. The
small business can concentrate on niche market which will help them to focus on particular
segment of market which will help them to serve the customers in a great way. This will also
help the business to identify which market will be best suited for them.
Market segmentation- Market segmentation means to divide the market into groups with
similar characteristics of consumers which are taste, lifestyle, demands etc. (Colombelli,
Paolucci and Ughetto, 2019). Use of market segmentation method helps the businesses to
identify and understand the target audience efficiently. With this, the small business can easily
adopt the marketing strategies which will be suitable according to the audience. When this
strategy is used by small business it will enable them to increase their competitiveness which
will help in increasing the ROI of the business. When consumers identify that the products are
beneficial and also suiting them then they will be more loyal towards the product.
Market existence- Existing in the market is essential for the business to stay for the
longer time(Raharja,2020) . Small business can exist in the market only when they are able to
satisfy consumer needs. Meeting the requirements of consumers and providing them with good

qualitative products will help the business to grow and will lead to exist in the market. Branding
and advertising the products will help the business to create awareness about the product. But to
exist in the market for longer term the business has to take some sought of risks which will
enable to identify new opportunities. Consumers only want that the business must provide them
various types of products at low price but not compromising with the quality. When these things
are handled by small business effectively then the results would be outstanding.
IMPACT ANALYSIS
The start of small business in the world has impacted the society in a very effective
manner. The society has foster itself in each and every manner in the form of development. The
small business organisation captures the large part of society in the UK market in the diverse
different sectors like clothing, food, etc. The society gives the opportunity to small business for
making some innovations in products which motivates the business to work for it. Society
includes different people with different wants which influences the small business. Every
business has to satisfy their needs and have to develop the trust which will play important role in
the survival and existence of the business (Muhammad, Waite and Wyre, 2019). It is essential for
the business to understand the society because the existence of competitors can become a
challenge. This thing makes important for business to influence loyal customers before it
becomes the priority to other business. If the small business does not do such things, then it will
reduce the sales and the business would not be able to earn much profits. On the other side,
employees also impact the business as their contribution of work can make the business to
achieve their goals. Employees helps in creating positive environment within the business which
increases the morale to do the work effectively. Also, it is in the hands of employees to influence
the consumers to purchase the product because it doesn't matter which business it is the views
and opinions of employees are likely to make some impact on the consumers. It has been said
that when employees are given with right tools and proper guidance then they can help in
reducing the costs which will lead to increase in revenue and sales. Thus, small business has to
take employees and society into consideration to grow the business.
CONSTRAINTS
Arranging of finance- Finance is the blood of any business and to start any business
finance is required. The requirement of money is required on the basis of type of business that

the owner wants to start which can be of wholesale, retail, production or anything (Baraldi and
et. al., 2019). There are many areas by which small business can acquire the money which can be
either taking bank loan, crowdfunding, venture capital and many more. These sources of finance
can help the business in arranging the finance which helps the owner to operate their activities
effectively. These finance will also help the business to achieve their short term and long term
goals.
Finding a location- Business location mean that area where it will be easy for the
business to carry their operations and for the consumer to receive products and services easily.
But to find the perfect location is always a hurdle for the business because ultimately they have
to make sacrifice in one or the other thing. Business wants that location where the transportation
cost is low to purchase and deliver the raw material, also for delivering the product to consumers.
Not just this the business also wants that area where they can create monopoly of the product
which means no other competitor selling the similar product. But such places are difficult to
found to carry the activities.
Government approval- Sometimes it is difficult for the business to start their own
business as government does not approve it or sometimes businesses have to follow some long
procedure to conduct their operations. Many economists have also said in their interviews that
government regulations create hurdles for the small business. Government approves the business
only when they know that business is carrying its operations within the rules and regulations
otherwise it would not be easy for the business to get the government permission.
Resistance from local business- When any business has to establish its operations in the
market they have to face some resistance from the local business. This constraint is caused
because they know that establishment of new business will diversify their consumers and when
consumers will be distributed it can decline their sales. Also the existing business have already
set up their market and when new business arrive it will lead to increase in competition. Local
businesses have already created their monopoly and when suddenly some new business comes it
creates difficulty.
Resistance from local people- Local people resists for any new business to set up in the
market because it creates confusion in their mind as to which product will be better for them
(Mergemeier,Moser and Flatten,2018). Not just this, some consumers produce products which
are of low price and when any new business establishes their operations and too of high price

then local people usually don't accept it. The products which are offered by the new business
does not match with the lifestyle of individuals which is also the reason of resistance.
RECOMMENDATIONS AND CONCLUSION
Recommendations
When any business is established their owner always want that their business must grow
and expand in the market. Growth of the small business is largely dependent on whether they are
able to satisfy the needs of consumers (Yin, Moon and Lee, 2019). This can be established only
when they conduct proper research in the market. Making innovations in the quality of the
products and providing variety is what consumer requires. But in this employees also plays
important role as they have the responsibility to attract the consumers for the product thus,
helping the business to increase their revenue. Also, the business has to make those products
which are in trend and have to boosts their marketing skills. To prepare products and to make
market research business has to develop strategic plan which will provide the roadmap to the
business. Nowadays, market demands new and innovative products and also requires those
business who can adopt to such changes. When such factors are adopted by the business it
enables them to stay in the market for longer term. Commitment with the consumers will help
the business with full support as they will also be benefited with the variety of products.
Conclusion
From the above report it can be concluded that, the needs and wants of consumers are
changing which makes the market demand dynamic. To ensure that such needs are satisfied
small business has to come up which will enable them to handle such market demands. There are
several ways by which small business can come up those are- sole proprietorship, franchising or
either with collaboration. Establishment of such business will be beneficial for the society in
huge manner as they will provide employment opportunities, provides variety of products
required by consumers. Development of such business helps the government to contribute in
their taxes and they often have the ability to adapt to changing economic climates of the country.

REFERENCES
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