How to Start a Small Business: Part I (By Dr. Johnson Mganga)

 This is my first article in this website; however, I will be releasing a lot of business related articles down the road. Moreover, I am a business owner and I am ready to share a lot of my both academic and practical experiences with you. As a starting point of view, let me take this opportunity to welcome all of you who  are enthusiastic to explore a lot regarding a business arena.

Ironically, some of you might have a lot of business related questions to ask such  as; is this a right moment to a successful business? Definitely, statistics showed that both either yes or no answers might be the correct answers; subject to many factors. You can start a business at anytime and you can own as many businesses as you can. What is needed most is comprehensive personal preparations and high level of business strength. Remember there is no adequate powerful weapon to guarantee your business success like having sufficient knowledge and personal confidence of what you are planning to perform.

Study showed that private sector is a backbone of both developed and developing countries around the world. With this fact in mind, I am highly encouraging most of my fellow Tanzanians to think the need of starting businesses.  Please, allow me to underline this point: I mean to start businesses NOW!. The good news is; anybody is allowed to start any form of business at anytime. In capitalistic economic they call this philosophy as “free entry free exit market economy”. No matter your background, whether you are an employee, unemployed, student, just to name a few; there is a good number of different kinds of businesses around the world that will suite your desires and the nature of your professional.

When you talk about starting a business, many times most of you start thinking about what will be a size of the starting capital, how business management will be, or what kind of a business to start. Of course, you’re right about that.

However, you might be wrong when think that all kinds of businesses require huge amount of capital or complicated management style to start. Based on my personal experience, I have divided businesses into two primary groups –regular business and smart business. Personally, I like the former group since it requires less management team, less starting capital, and less operating expenses. Put all these advantages into account, smart business are ideal to most educated people, students, and workers who have less time to inject into the business arena.

Smart businesses are easy, simple, and smooth to operate; however, are difficult to allocate and sometimes needs a lot of know-how. At this point, I do encourage those who have less business background to seek expertise for more consultations. Although this is a new vocabulary in our culture; as an experienced business owner with business professional background, I insist, do not send your hard working money into business arena if you do not havesatisfactory business plans that is prerequisite to maximize high chances of your business success. Once prepared and executed accordingly, business plan will be your guiding instrument of your business.

Advantages of becoming a business owner

A lot of people have decided to join the business arena due to many reasons; however, below are some of the advantages that majority of them are claiming to be influenced into:

1. Freedom: Freedom is one of the psychological needs of human being and most of us we are pleased once we get a chance to explore this kind of life style. being your own boss means less or zero existence of negative rules that in turn give you an opportunity to implement your own rules and procedures for personal benefits.
2. Vision: Being a business owner will give you a chance to show and to prove to the members of the society your constructive ideas on anything. As a business owner, you will be able to put your vision into practice and if possible you will generate a lot of success for doing that.
3. Control: Once you start a business, automatically the business will grand you a control power you have been waiting for a long time. You will have a controller of all departments within your working place. Moreover, you will not be worrying of losing a job again since no singly employee in your company will dear to fire you out of the job.
4. Flexibility: Once you become managing director of your business, you will gain more capability of trying more ideas at the right time and with less resistance. What works in one company does not necessarily work in another company or what works yesterday does not guarantee to work today. Most business owners believe that being more flexible is a key weapon to test business ideas and visions for the benefits of the business. Remember, with advanced technology, your will be able to operate your business in anywhere even working at home.
5. Choice: Being a business owner, you will be granted the right to choice a right location for your business, a capability to generate and prosper business brand of your choice, build a desirable business culture, choice a management style, supply you business with the right software, or choosing a dressing code for your business.
6. Many Holidays: The success of your business will depend on many things; including how you plan your works. With articulated business planning, you will be able to have many holidays compare with those who are working in others working place. Moreover, you will be able to work while enjoying a vacation somewhere.
7. Choosing a Team Mates: As a boss, you will get a capability of hiring only employees that you believe are capable and willing to transform your vision into the next projected levels. Having right employees is essential for survival of any business. Moreover, right employees are required since will facilitate meeting your projected short-and long-term plans that in turn will elevate business return of investment (ROI).
8. Working at Home: Depending with nature of business and availability of advanced technology, once used effectively, together will allow you to work at home in most of your time. This kind of working option is highly being used in most countries around the world and has being brought a lot of satisfactions to most participants.

Starting and managing a business takes motivation, desire and talent. It also takes research and planning.

Like other major projects, starting a business needs significance preparations in order to maximize possibility of prosper and maximize return of your investment. Starting and managing a business takes motivation, desire and talent. It also takes research and planning.

The first milestone of starting a business is having comprehensive prepared business plan. Having a well prepared business plan before starting any kind of business is not a matter of choice, but necessary. Every business has to have a business plan that will be used to direct where the business is going on. Like a chess game, success in small business starts with decisive and correct opening moves. Although initial mistakes are not fatal, it takes skill, discipline and hard work to regain the advantage. To increase your chance for success, take the time up front to explore and evaluate your business and personal goals. Then use this information to build a comprehensive and well­-thought-out business plan that will help you reach these goals. The process of developing a business plan will help you think through some important issues that you may not have considered yet. Your plan will become a valuable tool as you set out to raise money for your business. It should also provide milestones to gauge your success.

However, preparing a business plan is a sensitive and broad topic that needs a lot of time to explore. Therefore, I will prepare a full article in a new future just for this purpose.

 Getting Started

Before starting out, list your reasons for wanting to go into business. Some of the most common reasons for starting a business are:

• You want to be your own boss.
• You want financial independence.
• You want creative freedom.
• You want to fully use your skills and knowledge.

Next you need to determine what business is “right for you.” Ask yourself these questions:

• What do I like to do with my time?
• What technical skills have I learned or developed?
• What do others say I am good at?
• How much time do I have to run a successful business?
• Do I have any hobbies or interests that are marketable?

Then you should identify the niche your business will fill. Conduct the necessary research to answer these questions:

• Is my idea practical and will it fill a need?
• What is my competition?
• What is my business advantage over existing firms?
• Can I deliver a better quality service?
• Can I create a demand for your business?

The final step before developing your plan is the pre-business checklist. You should answer these questions:

• What business am I interested in starting?
• What services or products will I sell? Where will I be located?
• What skills and experience do I bring to the business?
• What will be my legal structure?
• What will I name my business?
• What equipment or supplies will I need?
• What insurance coverage will be needed?
• What financing will I need?
• What are my resources?
• How will I compensate myself?

Types of Business Organizations

When organizing a new business, one of the most important decisions to be made is choosing the structure of a business. Factors influencing your decision about your business organization include:

Legal restrictions

• Liabilities assumed
• Type of business operation
• Earnings distribution
• Capital needs
• Number of employees
• Tax advantages or disadvantages
• Length of business operation

Types of business formations 

Sole Proprietorship

This is the easiest and least costly way of starting a business. A sole proprietorship can be formed by finding a location and opening the door for business. There are likely to be fees to obtain business name registration, a fictitious name certificate and other necessary licenses. Attorney’s fees for starting the business will be less than the other business forms because less preparation of documents is required and the owner has absolute authority over all business decisions.

Partnership

There are several types of partnerships. The two most common types are general and limited partnerships. A general partnership can be formed simply by an oral agreement between two or more persons, but a legal partnership agreement drawn up by an attorney is highly recommended. Legal fees for drawing up a partnership agreement are higher than those for a sole proprietorship, but may be lower than incorporating. A partnership agreement could be helpful in solving any disputes. However, partners are responsible for the other partner’s business actions, as well as their own.

A Partnership Agreement should include the following:

• Type of business.
• Amount of equity invested by each partner.
• Division of profit or loss.
• Partners compensation.
• Distribution of assets on dissolution.
• Duration of partnership.
• Provisions for changes or dissolving the partnership.
• Dispute settlement clause.
• Restrictions of authority and expenditures.
• Settlement in case of death or incapacitated.

Corporation

A business may incorporate without an attorney, but legal advice is highly recommended. The corporate structure is usually the most complex and more costly to organize than the other two business formations. Control depends on stock ownership. Persons with the largest stock ownership, not the total number of shareholders, control the corporation. With control of stock shares or 51 percent of stock, a person or group is able to make policy decisions. Control is exercised through regular board of directors’ meetings and annual stockholders’ meetings. Records must be kept to document decisions made by the board of directors. Small, closely held corporations can operate more informally, but record-keeping cannot be eliminated entirely. Officers of a corporation can be liable to stockholders for improper actions. Liability is generally limited to stock ownership, except where fraud is involved. You may want to incorporate as a “C” or “S” corporation.

Conclusion

Although I just started by directing my first articles focusing on new business owners, I want to convey a message to old business owners both local and international alike that I have a lot of material to share with you in a near future.  Thank you for reading my article. Let me say, this is just a starting point; indeed, expect more from my upcoming passages.

By Dr. Johnson Mganga

Chef Executive Office of Tropix Group

To be continued!

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