ENTERPRENEURSHIPCompany TrendsThis involves thestatistical analysis of historical data over a period of time. If the data analyzedshows increase, decrease, or constant figures, then there exists a trend.Different businesses of different sizes predict their future performance usingsuch data.There are differentaspects of a company’s trend.
They include:1. FinancingThere are various sources of finance in the businessmarket. Funds may be raised through i. Retained earnings- the amount of earnings retained withinthe business has a direct impact on the amount of dividends.
Profit that isre-invested as retained earnings is profit that could have been paid asdividends. ii. Bank borrowing-Banks are an important source of finance tocompanies. Short term lending may be in the form of 1. An overdraft which a company should keep within a limitset by the bank. Interest is charged on the amount by which the company isoverdrawn daily.2.
Ashort-term loan, for up to five years3. Medium-termloans are loans for a period of from three to ten years. The rate of interestcharged on medium-term bank lending to large companies will be a set margin,with the size of the margin depending on the credit standing and riskiness ofthe borrower.
A loan may have a fixed rate of interest or a variable interestrate. iii. Capital markets-capital markets are markets for buying and selling equity and debt tools. Thiscan be done by a company selling its shares to the general public or to anothercompany. This is another source of finance trend a company can use.
2. Structured FormalitiesMaking the right choicefor your business will generally depend upon the type of business, how thebusiness is to be run, how many shareholders the business will have, and thefinancial situation of the business. A business can be: sole proprietorship, a partnership,or corporation depending on the owners preferences and the type of business. Differentbusiness have varied structures vary but there are some criteria that one canuse to find which one works best.They include:· Capital Investments· Tax payment togovernment· Varied liabilities· Expenses and proceduresCapita InvestmentsDesigning a business asa corporation allows the business to sell shares of ownership in the businessthrough stock market. This is different than the other business structures,which do not allow the selling of portion of the business through the sale ofstocks. This is because it may allow owners to attract more investors andretain employees more easily by offering stock.
If you desire thelimited personal liability that comes from a corporation, you could insteadform your business as a Limited liability company. A limited company providesmany of the advantages of a corporation while remaining more flexible.Tax PaymentThere is a tax benefitto forming your business as a corporation. The owners do not pay taxes on anyprofits that the corporation keeps, and the corporation pays taxes at a lowerrate than some individuals. This means that a corporation and its owner may payless in the form of taxes than if the owner had organized his business as asole proprietorship, or any of the other business structures.
A corporation is aseparate tax entity, it must pay taxes on any profits that remain within thecompany during a tax year, and also on any profits that it pays out in the formof dividends to shareholders. Different LiabilitiesVarious types of businesses come with differentliabilities. Limited liability companiesallow business owners a type of “limited liability,” where anyoneseeking affirms against the business will find it hard placing personalliability to the owner. Unlike, when given the chance to organize your businessas a partnership or as a sole proprietor, you could be personally responsiblefor anything the business did erroneous. In a partnership, everypartner can be held personally liable for any claims against the business.Basically every partner has some percentage of liability therefore liability isdistributed across board.
Expenses andProceduresSole proprietorships and partnerships do not have alot of paper work as compared to limited companies and corporations. They arequite difficult and expensive too to establish and maintain. In order to establish acorporation or limited liability company, you must file “Articles ofIncorporation” with your lawyer and pay fees associated with theincorporation.
In addition, when deciding to form a corporation or Limitedliability company, the owners of the business must decide which officers toelect to run the company. The officers must include at least a president, vicepresident and secretary. Limited liability companies and corporations must keepspecific and detailed records of any important business decisions, and followmany other formalities that are associated with the business formality. 3. Cultural DynamicsThe surrounding community culture in which anentrepreneur opens a business will determine the business operations. Thebusiness should not go against the cultural practices of the community.
Forexample one should not open a pork butchery in an Islamic community. 4. Disruptive innovationsThis is a business strategy in which a new market iscreated and value which disrupts the existing market.Disruptive innovation describesa process by which a product or service takes root earlier in simpleapplications at the base of a market and then relentlessly moves up market,eventually removing established competitors. Companies pursue suchinnovations which helps them succeed in the market.By charging the highest prices to their mostdemanding and sophisticated customers at the top of the market, companies willachieve the greatest profitability. Some characteristics of a disruptivebusiness at initial stages are described below Characteristicsof disruptive businesses1.
Lowergross margins2. Smallertarget markets 3. Simplerproducts and services In the long run the company will produceproducts or services that are actually sophisticated, very expensive, and very complicatedfor many customers in their market. References 1. Haines Watts https://www.
hwca.com/app/uploads/2015/02/Sources_of_Finance.pdf2. Ronstadt, R.C. (1984). Entrepreneurship, Dover, MA: LordPublishing Co., pg.
283. Dr. Anrug Pahuja, Rinku Sanjeev(March, 2015) Introduction toEntrepreneurship, https://www.researchgate.net/publication/301659818_Introduction_to_Entrepreneurship
