Creating, Financing and Marketing a Business
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A partnership is an organization of more than one person who run a business as co-owners with a view of making profits. A partnership business may be owned by at least two individuals and maximum of twenty persons in the case of a trading business. However, for the partnership that offer professional services such as medical, legal, accounting or consultancy work, the membership may be extended but up to fifty persons (Nickels, McHugh, McHugh, 2005).
Partnership has many advantages that makes it more attractive to the general public. Forming a partnership does not require to register it with your state. Persons who want to form a partnership come together and agree on how the business will run. Normally, partnership business is formed through partnership agreement. It contains rules and regulation of the partnership that governs the business.
Another benefit of partnership is the variety of talent. A partnership brings together a variety of talent since owners have different levels of knowledge, ideas, and experiences. This makes it possible for the business to run more effectively as members share work according to their talent (Nickels et al, 2005).
Members of the partnership share losses based on their partnership agreement. This prevents each member from suffering losses alone. Moreover, in a partnership, members make informed business decisions. This is due to consultancy among the members during the decision making process. Hence, they end up making a better decision regarding the business.
In a partnership, there is also an adequate capital for running the business. All the partners contribute a specified amount of money to the venture. This makes it easy for the business to expand its operations and run efficiently.
On the other hand, partnership business is risky. The action of one partner impacts all the members in a partnership. If one person engages in a legal activity concerning the business, other members will be held liable. Therefore, partnership business is mostly formed by individuals who trust each other. Partnership has unlimited liability. Partners are accountable for the legal responsibilities of the business and may lose their personal property in order to pay out debts (Nickels et al, 2005).
Partnership business is vulnerable to disputes. There is a possibility that members will disagree during decision making process. This may lead to termination of the business. Another disadvantage of the partnership is profits sharing. Profits have to be shared among the partners. Each partner receives a fraction of the total profits and therefore, the effort of hardworking partners may not be appropriately rewarded.
Owner’s equity is the main source of capital for the small business. The capital mainly comes in a form of money the owner has invested in the business and the property set aside for business purposes. Money may also come from personal savings (Scha%u0308fer,1995).
Borrowing and donations from friends and relatives are another common way of financing a small venture. A person may opt to borrow from close relative for the purpose of starting or financing the activities of the business. However, the capital that can be acquired from these sources is usually limited and not sufficient for the business’ requirements.
Another sources of capital are banks and other financial institutions. An individual may apply for a loan from a commercial bank or any other financial institutions to either start expansion or carry out business activities. The decision of the bank on whether to give a credit will depend on the owner’s creditworthiness.
Non-governmental financial institutions act as financial source of capital for small business as well. Some of them give loans to businesses with intentions of enhancing operations in certain fields. Small business ventures acquire goods and services for business in hire-purchase terms. The business benefits from using goods before paying the full price. This enables the business to continue its operations even if it does not have enough money to run the business (Nickels et al, 2005).
Managerial accounting, also termed as cost accounting, is a process of naming, assessing, studying, translating and communicating of information with an aim of achieving the organization’s objectives. Managers gather all the cost information related to production of an output. They analyze these costs and come up with a concrete decision concerning the product. They determine whether it is profitable or not for a company to produce the product. Hence, managerial accounting assists in determining the choice of a product or service that a company should offer.
Incremental analysis is the key tool in decision making. It is a tool used to evaluate the relevant cost and revenue attached to one alternative compared to cost and revenue of another alternative. It is a tool used to make choices between two alternatives. Managers analyze data about the alternatives and determine which one should be taken and which one should be dropped. They determine the difference between the two choices. The deference is what referred to as the relevant amount. Therefore, incremental analysis is a very important tool used by managers in decision making for the purpose of achieving organizational goals (Nickels et al, 2005).
Budgeting is a procedure of identifying, gathering, summarizing and communicating fiscal and non-fiscal information of a particular company. Budgeting in managerial accounting procedures helps professional accountants to determine the path of action and foresee future operations, monetary and non-monetary actions and other behaviors of a firm. The budget permits the organization to set some common future objectives. It ensures that maximized revenue is earned with minimum costs. The company sets both long and short term goals and composes their budget.
Marketing process refers to the flow of provision of goods and services to consumers aimed at satisfying their needs and earning a profit for a company. The marketing process is composed of decisions about product, place, promotion, and price. Product refers to the basic unit that consumers buy to satisfy their needs. The product must be safe to use, be of high quality, and packaged correctly. For example, a product is a pair of shoes and a car. Price refers to the value that the marketer has attached to the product. It should be fairly stated in order for consumers to purchase the item. For example, the price of a car could be $400. The price of a hair cut could be $6. Promotion refers to procedures of making the product known to consumers. There are many promotion tools that the marketer could use to make the product known e.g. advertising. Place refers to the allocation of the product. The product should be available to the consumers in different locations.
Marketing operates in the consumers social networks. For marketing to flourish and be successful, the marketers have to consider family structures, social beliefs, and societal norms. This is because these will define the most appropriate marketing mix. Technological advances are dynamic. The use of the appropriate technology will give the company an upper hand. This is because the company will be able to efficiently reach out to customers (Scha%u0308fer,1995).
Business ownership could be classified into two broad areas: incorporated and unincorporated. The incorporated businesses are owned by a number of registered people through a legal process called incorporation. These include companies, cooperatives and government owned institutions. The latter refers to those businesses owned by one or more people and can be classified into sole proprietorships or partnerships (Scha%u0308fer,1995).
Entrepreneurship is the process of innovating and creating a new business idea that has not been established before. Small businesses create the sources of income in the economy. They are a major employer and a source of income to many people in the American society. Still, small businesses are the backbones to the economy as they support the larger businesses through consumption thereby spurring up the economy.
The accounting process involves the collection, recording, summarizing, examination and the presentation of the accounting information to users in order to help them make informed decisions about the company. The balance sheet gives a picture of firm's finances and position of business at a particular time. The income statement is used to determine the profitability of the business over its accounting period.
Financial management plays a crucial role in a business. Financial manager prepares the statement of cash inflows and outflows that are used to determine investment projects for the business. In addition, financial department assists in the preparation of the budget which defines firm’s financial requirements. Human resource management determines, obtains and rewards the human capital of the business. It is responsible for ensuring that employees have everything necessary to carry out their roles. The information management department in the business ensures that the business has the necessary level of technology in order to have the most efficient operations (Scha%u0308fer,1995).
In modern businesses, there has been an increased automation in business operations. There is management aiding software that helps it make rational decisions efficiently and quickly. The expert management systems and management information systems are among the modern technologies. Other emerging technologies include business intelligence and reasoning.