Creating, Financing and Marketing a Business
This paper will focus on the total creation of a new business. First, will be a look at the pros and cons of a partnership as a form of ownership. Next is a review of the different funding options for a small business. Then a description of how managerial accounting can help with cost, incremental analysis and budgeting. Finally is a review of a marketing strategy and how social responsibility and technology play roles in that marketing.
Partnership as a Form of Ownership When starting a business there are advantages and disadvantages to owning that business with a partner(s). Some of the advantages of owning a business with partners are shared financial resources; the more partners the less financial burden on any one person in the partnership. There is also the advantage of shared responsibility and work load, in a sole proprietorship all the work and responsibility falls to the one owner, in a partnership the stress and responsibility is shared between all the partners. The biggest advantage in a partnership might be capitalizing on complementary skills. One partner might be strong creatively and weak with planning and organizing another partner could complement those skills. There are also disadvantages to owning a business with a partner. One of the biggest disadvantages would be unlimited liability. In a sole proprietorship you are solely responsible for the mistakes that you make within the business, in a partnership you also take on the responsibility of the mistakes that your partner makes. In a partnership there is also the potential for disagreements for the direction of the business or how it should be run. It is also difficult to withdrawal from a partnership, even if a partner withdrawals they remain personally liable for any debts or obligations the business had at the time of the withdrawal.
One of the biggest challenges to starting a business is funding. Personal resources are among the most common used for start up businesses, including credit cards and borrowing money from family and friends. There are also personal loans and in rare instances commercial loans from banks. Angel investors are wealthy individuals that invest in promising start up companies to make money for themselves. These types of investors are rare and usually invest in companies with the potential to grow very quickly over the first few years and eventually go public. Finally venture capital firms fund high potential businesses for a share of the ownership, sometimes as high as 60% (Kelly, McGowan 2012). Once funding is established it’s important that it is managed effectively.
Managerial accounting is detailed data used by managers to help them make business decisions. Managerial accounting includes things like product costing, incremental analysis and budgeting. Data provided to managers about product costing can be invaluable. This information provides managers with the cost of producing the businesses goods and services, which helps managers set prices and determine the best mix of products.
Incremental analysis helps businesses make decisions about the financial impact of different alternatives in decision-making situations (Kelly, McGowan 2012). For instance, should a business make the parts and components of a product themselves, repair existing equipment or buy new, or sell a product line. Managers can use the incremental analysis to determine how each alternative will affect revenues and costs for the business. Budgeting is another tool that managers can use to determine what resources will be needed in order to meet the business goals. For example managers can use the cost of turnover and benefits to determine their budgets, and provide better 'pride in work' or even higher wages so they can prevent turnover. Once the major decisions have been made