Who needs a Business Plan (BP)!? Of course, everyone, everyone who runs a business or a project needs a business plan. Who has a business plan? No, I mean a real one, written down in all those chapters, with cash flow and all those other financial tables? And up-to-date? Okay, let’s not dwell on the details of what makes a business plan and why it is not up-to-date. A business plan (BP) is simple and easy as all the things so far. Will be interesting to see when we come to the more tricky things. The BP is easy and simple!(?) Let’s startâ€¦
Economic recession – A chance for small businesses
This report is aimed at outlining the chances of forming a small business, which rised in the recent economic recession and, in addition, it describe a new kind of entrepreneurs. I will concentrate on the recent increase in small businesses, the chances and challenges for the “new entrepreneurs” and the problems of starting a business.
Furthermore, I will discuss the benefits and drawbacks of a sole proprietorship, a partnership and a private limited company in order to give advices what might be the most suitable legal form for a small business. Finally, an example of such a small business will be given.
The last few months have shown the world once more that a secure job cannot be taken for granted. A lot of people lost their jobs as a consequence of the recession and have not had a chance to get a new employment so far, which made their financial situation serious and critical.
The question arises how there can be an increase in small businesses in this situation. The answer is easy: “Necessity is the mother of invention”. This means many people have no other choice but to look for their own profits. A possible solution to their financial worries is to set up their own business, which has nowadays become much easier.
The internet enables quick and infinite seeming information as well as the possibility to handle most of the bureaucratic matters quickly. An immense number of privately operated internet shops and internet services are the consequence. (cf. The New York Times, August 23, 2009, “ On to plan B: Starting a business”)
A closer view on the new entrepreneurs, their chances on the one hand but also their risks and problems on the other hand has to be taken in order to obtain a proper insight into this topic. Of course, internet brought many advantages in the field of information and market access but also some severe problems.
In the last decades the market entrance barriers decreased for small businesses that provide their products via the internet. The World Wide Web enables entrepreneurs to contact millions of possible clients. Modern databanks enable to analyse the behaviour of buyers and generate tailor-made advertisements for every single costumer.
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More innovations of the modern electronic-society are legal forms that can be filled in via e-mail, permissions that are sent as virtually signed documents, accounting that can be made by a complete inexperienced person, further she or he is able to handle a SAP-programme.
The list could be continued much further but I hope I have demonstrated what is meant.
In my estimation the “electronic revolution” and digitalisation is a severe problem for some business starters. Not every former employee or new entrepreneur is able to find alone his way through the jungle of forms. It is annoying and frustrating when computer programmes are always answering with error messages and the user does not understand the details.
Also finding the correct Website or platform to sell your product, or to know how you can reach your possible clients is much more than an easy and quick “click”. So if the new facilities of modern technologies are really able to open us new chances or if they are only a new problem depends always on the knowledge of the user.
So not only the idea is needed to set up a business, also the financing is necessary. Managing finances and debts causes problems for many people. One additional problem, which refers to financial belongings, is the liability. Being liable with your personal possessions means a great mental pressure, especially for those who form a small business out of a financial problem, due to unemployment.
To sum up the chances, risks and problems of forming a small business it could be said that there are two main points. Firstly the internet, which has simplified much but has also brought up a long list of problems, especially if someone is not used to electronic work.
Secondly, there are the financial questions, the raising of capital and the private liability.
To make clear what is meant without getting lost in endless definitions and case studies, I will give a few examples. If someone cannot raise enough capital, it would be best to form a partnership to generate the necessary liquid assets. A partnership can also bring the benefit of synergy.
Drawbacks might be that there are more people who decide and the risk of the end of partnership through the quitting of one partner. A self-assured entrepreneur is maybe brave enough to start a sole proprietorship and does not worry about finance and liability. In addition, a sole proprietorship is surely the simplest legal form.
A drawback of this form might be that expanding is not unproblematic. One more possibility is to form a private limited company, which is maybe only a fitting form for experienced entrepreneurs. In such small businesses, which are formed out of necessity or occasion due to the economic recession, I would not see it as a good fitting legal form for new entrepreneurs.
Before I conclude this topic I will give an example of a small business set up by a new entrepreneur. His name is Mr. Dominik Schweer and he founded a sole proprietorship called “Der Kaffeefreund”. Mr Schweer former worked as an educator and started his plan B by opening the first bike-café of the city of Münster.
A Danish lorry-bike was converted by a do it yourself enthusiast in the UK. A gas operated espresso machine was installed and so the coffee to go can now be sold everywhere. The whole process from the idea to the opening day was documented by the ZDF under the title “Geschäftsidee auf drei Rädern” as a part of the series “Plan B – Ich werde selbstständig”.
For me this is an idea, which can be extended. If I would start a business tomorrow in Graz I would take the idea of the mobile coffee shop and start a franchise system. I would extend the product setting with small meals and snacks.
On the whole, I believe that it is not a coincidence that there is an increase in small businesses nowadays. The recession plays its part but as well the modern society along with the desire for self-realization, which is maybe inspired by the dream of a self-made millionaire, being part of that phenomenon.
Nevertheless many of those small businesses fail due to financial or other problems, sometimes only because the entrepreneur was overtaxed of being responsible for all business belongings.
The New York Times, August 23, 2009, “ On to plan B: Starting a business”