Q 1. What factors should an entrepreneur consider before choosing a form of ownership?

 
Ans: One of the first and most important decisions a business owner makes is selecting the
organizational form under which he or she will operate. The following are some common
organizational types (also called “legal structures.

Cost of Start-up:

Setting up a business can involve little more than printing some business cards, or it may
entail hiring a corporate attorney to draft corporate charters, agreements, and articles of
incorporation.

Control vs Responsibility

One of the primary reasons people give for wanting to start their own business is the desire
to be independent and “be your own boss.” Different legal structures provide the owner
with more or less control and authority. There are trade-offs in each case, though, because
with autonomy and control come responsibility.

Profits to Share or Not to Share

Many first-time business owners look to people like Bill Gates, Oprah Winfrey, or Ben &
Jerry and aspire to their level of wealth and success. How a business’s profits are shared (or
not shared) is determined by the legal structure. Some owners are willing to share the
profits in exchange for assistance and support establishing and running the business. 

Taxation

When planning to start a new business, many people instinctively seek the advice of an

attorney as the first step in the process. However, legal advice is not actually what’s needed
initially. Instead, no matter how large or small your business is going to be, it’s much more
important to first get the advice of a seasoned tax professional, such as a CPA.

Entrepreneurial Ability

At some point you’ve probably known someone with a particular knack for something (like
fixing cars or baking bread) and said, “You should start your own business!” But if you are a
talented cake decorator, say, does that necessarily mean you have the requisite knowledge,
skills, and abilities to open and run a successful commercial or retail bakery? It’s often easier
said than done.

Risk Tolerance

Everyone’s tolerance for risk is different. Some people enjoy the rush of skydiving and
rollercoasters, while others prefer to stick to the carousel or keep their feet on the ground.
In business, one’s degree of risk tolerance should be compatible with the form of ownership
being considered.

Financing

Few business owners start a business with lottery winnings or many years’ worth of savings.
Many seek funding from a bank, venture capitalist, private investor, or credit union in order
to get their businesses off the ground. Lenders may be one of the greatest influences on the
choice of business ownership—even more decisive than the owner’s preference or
ambition. 

Continuity and Transferability

Finally, business owners need to consider if they want their business to outlive them (or
carry on after they leave). If an owner is looking to start a business that can be passed on to
his or her children or other family members, then the legal structure of the business is
extremely important. 

Q 2. Why it is important for entrepreneurs to define their target market as part of their
marketing strategies? 

Ans: Identifying a target market allows marketers to focus on those most likely to

purchase the product. Limiting the population funnels research and budgets to the
customers with the highest profit potential.

Know Your Base

Business owners sometimes start out targeting everyone in the hopes that they'll
eventually be interested in their offerings. That wastes precious resources. Even targeting
narrower markets, such as soccer moms or NASCAR dads, sometimes can paint too broad
a target. Drilling down into specifics gives business owners the tools to tailor marketing
campaigns that reach those most likely to buy. 
Find Your Market

Established small businesses should start with their existing customer data. Look at your
sales data to see what’s moving well. Survey your customers to get demographic
information and ask about how they make purchasing decisions – if you combine this with
a customer loyalty program that gives them a reason to participate and incentivizes them
to return, so much the better. If you’re starting your business from scratch, get ready to
do some market research. 

Avoid Inefficiencies

If you try to reach everyone with the same message, you’re going to waste a lot of money
reaching people unlikely to be interested in what you’re offering. A small business or sole
proprietorship usually can’t compete with larger firms casting a wide net with that
strategy. Find your niche, however, and you can do very well dominating that sector.

Change with the Times

As your business grows, continue to analyze sales data and customer information. Your
target market today might not be interested tomorrow, and you might find more
customers coming from unexpected places. If your tutoring business notices a growing
trend of high school students as customers, that’s a sign your target market should include
younger students looking to get ahead as well as college students trying not to fall behind.
Let your data guide the expansion of your business as your market grows.

Wrong Target

Market research is a complex discipline, and even the experts can get it wrong. If you
target an unprofitable segment, your business won’t achieve financial success. Similarly, if
you target a segment that doesn’t find your product appealing, your campaign will fall flat.
Thorough research and analysis can decrease the chances of failure, but some degree of
risk is always present.

Too Narrow or Too Wide

If the segment you target is too narrow, you limit your potential revenue. For example, if a
business targets a group that is too small to provide sufficient revenue, the business won’t
be a financial success no matter how successful its marketing efforts are. It’s also possible
for a campaign to fail because the target segment is too wide. For example, a business
might target all high-income earners without realizing that single people generally aren’t
interested in its products. As a result, the business wastes money advertising to people
who will never be a source of revenue.
Lack of Information

Segmentation requires specific knowledge about the target segment, which might not be
available in some cases. The segment you target must be accessible, identifiable and
measurable, notes the book “Marketing.” Accessible means you can reach the people with
a form of advertising you can afford. Some population segments are widespread, for
instance, meaning reaching everyone would require a campaign that spans a sizable
region. Identifiable means you have access to data, such as locale or media consumption
habits, that allows you to single out that group from the herd. 

Expense

Market research is expensive. Surveys, focus groups and statistical analyses typically
require expert consultants. In some cases, a more cost-effective approach is to choose
mass marketing. Rather than spend money on market research, a company might fund a
one-size-fits-all campaign, knowing an advertisement with broad appeal is bound to reach
some members of a profitable segment.

Know Where You Are Now

If you don't know where your business currently stands, making plans to expand
internationally is difficult. Without a clear idea of your customer base, for example, you
can't decide which markets make strategic targets for your international expansion plans.
You may think that you know your business, but you should start by gathering other
information to ensure you have the complete picture before writing.

Talk to Your Team

Don't make planning a solitary effort. Other employees should know what you have up
your sleeve, especially your sales and customer relations people. They can give you
valuable information about consumer reactions to your products, which can influence
what international market you aim for first and the messaging you use to attract new
customers. Accounting and finance needs to get involved too, especially with planning the
marketing budget and projecting whether defined sales targets are realistic.

Relate It to Now

You're not rewriting your business plan. Think of your international marketing plan as an
addendum, not a do-over. Create objectives that take advantage of strengths and
downplay weaknesses while taking your mission statement into account. For example, if
your business is about providing a luxury experience to high-end customers, looking
towards the developing world doesn't make much sense. 
Define Some Goals

Objectives need to be defined in concrete terms, and you should write out smaller sub-
goals about how you'll accomplish each one. Quantify objectives in terms of metrics like
market share or sales volume, suggests an "Entrepreneur" article about the ingredients of
successful marketing plans. 

Q 3. Why are proforma financial statements important to a made by a start up?

Ans: When you plan to start a company, you need pro forma financial statements. Pro
forma financial statements include an income statement, cash flow statement and balance
sheet.

No pro forma financial statements = low probability of success

The reason this path has low probability of success is not because you don’t have a great
idea! Your idea is probably fantastic but it’s even better when you can back it up with
financial assumptions that make sense.

Pro forma financial statements = high probability of success

Investors take their risks with those that have a reasonable chance at being successful and
returning their investment, plus some, to them. Investors want to know when to expect a
return on their money. Pro forma financial statements tell them that.
Business Start-up Budget

 A start-up budget is like a projected cash flow statement, but with a little more guesswork.

Your lender wants to know your budget - that is, what you expect to bring in and how much
to expect to spend each month. Lenders want to know that you can follow a budget and
that you will not over-spend

Startup Costs Worksheet

A startup costs worksheet answers the question "What do you need the money for?" In
other words, it shows all the purchases you will need to make in order to open your doors
for business. This could be called a "Day One" statement because it's everything you will
need on your first day of business.

Profit and Loss Statement/Income Statement

After you have completed the monthly budget and you have gathered some other
information, you should be able to complete a Profit and Loss or Income Statement. This
statement shows your business activity over a specific period of time, like a month, quarter,
or year
Break-Even Analysis

A break-even analysis shows your lender that you know the point at which you will start
making a profit or the price that will cover your fixed costs. The break-even analysis is
primarily for businesses making or selling products, or to set the right price for a product or
service.

Beginning Balance Sheet

A startup balance sheet is difficult to prepare, even if there isn't much to include.
The balance sheet shows the value of the assets you have purchased for startup, how much
you owe to lenders and other creditors, and any initial investments you have made to get
started. The date for this spreadsheet is the day you open the business

Sources and Uses of Funds Statement

Large businesses use Sources and Uses of Funds statements in their annual reports, but you
can create a slightly different simple statement to show your lender what you need the
money for, what sources you have already, and what's left over to be financed

Optional: A Business Requirements Document

 A business requirements document is similar to a proposal document, but for a larger, more
complex project or start-up. It gives a complete picture of the project or the business plan. It
goes into more detail on the project that will be using the financial statements. 

Include Financial Statements in Your Business Plan

You will need a complete Start-up business plan to take to a bank or other business lender.
The financial statements are a key part of this plan. Give the main points in the executive
summary and include all the statements in the financial section

Finally, Check for Mistakes!

Before you submit your Start-up business plan and financial statements, check this list.
Don't make these common business plan mistakes!

Check all numbers for accuracy and consistency. Especially make sure the amounts you are
requesting are specific and that they are the same throughout all the parts of your business
plan.