Different Business Types

There are different types of business that you will have to choose from when you are considering business ownership.

Sole Proprietorship

A sole proprietorship is a business that has only one owner. There can be many benefits and pitfalls to running your business as a sole proprietor.

The Benefits

• You can keep more of your business monies earned.
  
  
• There are fewer hassles than there might be with other proprietors.
  
  
• You can run the business in any manner that you please.
  
  
• It is the least costly way of starting a business.
  
  
• It is easier to get your business started and apply for your permits, licenses, etc.
  
  
• Dealing with the issue of taxes is less complicated and cheaper.

Pitfalls

• It is more costly when the business is faced with losses.
  
  
• All responsibility falls solely upon the owner’s shoulders.
  
  
• All of the costs that go along with maintaining the business, such as keeping it running smoothly, are solely the owner’s.
  
  
• All decisions are made at the owner’s discretion.
  
  
• Basically, everything is the owner’s responsibility.

There are many reasons why you should consider running a business on your own; however, you do have other options.

Partnership

There are many types of partnerships that you can delve into. The most commonly chosen are general partnerships and limited partnerships. General partnerships can be entered into with a mere oral agreement or you can have lawyers draw up legal and binding partnership documents.

If you are considering the idea of having a partnership you should know that signing a legal partnership agreement is the best way to go about it. The legal fees for these documents are more costly than a sole proprietorship.

When you decide to enter into a partnership, you should be certain to add only the specifics of the agreement that you can both agree to.

Here is a list of some of the other things that you should have in place in a partnership agreement.

You need to know the following:

• The type of business that you plan to run.
  
  
• The correct amount of equity that both parties will invest.
  
  
• How you will divide your profits and losses.
  
  
• How much you are each compensated.
  
  
• How you will divide your profits and losses.
  
  
• How long will you plan to be in business together?
  
  
• Set up provisions for any changes made and closing down.
  
  
• Dispute settlement clause.
  
  
• Restriction of authority and expenditures.
  
  
• A reasonable settlement in case one partner dies or is incapacitated.

As you can see, there are many things to consider when starting a partnership. As with running a sole proprietorship, there are a lot of benefits and pitfalls as well.

Benefits

• The cost of investing in the business is cheaper since they are divided among two people instead of one.

• The money needed to process legal fees and everything else that requires money is cheaper.

• There is assistance in dealing with the everyday tasks like, merchandising, employee issues, general dealings with the public and all general business concerns.

• With two people running the business, each can have more time with their families and friends.

• A partnership generally makes the profits and revenue much higher.

• Losses are shared by both and are thus actually easier to deal with.
  

Retail Franchises

Franchises are businesses that you can buy into that are already on the market. They are generally already popular. The good thing about buying into a franchise retail business is that you already know that it is a popular idea. It can cut some of your work in half. Of course, you will still need to ensure that you are buying into a viable choice for your locale.

Online Retailing

These are more centered around selling products and services on the Internet. It is a cheaper method of beginning your retail outlet as there is not a necessary need for leasing a new property, You can simply display pictures of your products and post them online for people to purchase by credit card. However cheaper it may be, online retail chains do not have a better record of success than the standard retail outlet. It is just a cheaper way of having one.

General Merchant Store

When most people think of opening a retail business this is what they are talking about. This is an actual store set up on a leased piece of property. You will have to go through a great deal of research and finances in order to open one of these, but the benefits can be outstanding.

Knowing which of these types of businesses you would feel more comfortable investing in is a good way to begin. You may not want to buy into a franchise, but then again, you might. In order to know which of these best suits you, you have to know yourself and your abilities pretty well first.

If you do choose to buy into a franchise, you should be fully aware of what that company is about, and how you can best add your own personal touch to it.

Starting a retail business from an established idea is a sure-fire way to start because as there are already established stores on the market, you can be sure to add what you think would make a good impact on the existing market. You can also change what you think needs to be improved as a consumer.

It gets pretty tricky though when you are trying to open a retail outlet that hasn’t already been on the market before. If you plan to begin your very own retail concept, you must spend an extra amount of time on your business plan if you are to convince the loan officer, and your potential customers that you are providing a service that they will indeed need.

It is very difficult to offer a product that hasn’t been on the market yet or if you are planning on beginning a business that is selling something that is not generally available. For this type of venture you will need to thoroughly assess your potential market first.

Know Your Market

Before you decide to start any retail business, you must know what the market is for your specific type of business.

Generally when a person decides to open a retail business it is because they have observed a need for a certain type of product in their neighborhood. To get the precise amount of knowledge to be successful, you will need to do your research. Part of this research is in knowing what the market is like.

You will obviously want to know what the consumer demand is. That just means you will want to know what the consumers need so that you can provide it to them. You certainly don’t want to open a store in an area that already has 12 just like it because then you are lessening your chances of success.

 80% of new retail businesses will fail within their first year of business.

You certainly do not want to be a statistic. Naturally, choosing the right market to start your business in is just the first step in choosing the right retail outlet to invest your time and money in. You will also want to know what your competition is.

In order for you to properly assess your potential market you will want to do your research.

Here are some of the popular ways that companies use to gather critical information.

Surveys

Companies will often use market research surveys when they want to test the market with their customers. You can conduct question and answer periods with consumers, written surveys that ask your consumers what they want and how they would like to receive it; you can conduct hidden surveys, which is where your consumers do not know that they are being monitored.

Surveys are a very popular method that companies use to get consumer opinions. They are also used in order to get a consumer’s opinion about their competition’s products and services also. When you conduct a survey it is good to offer some sort of incentive or gift from the people that are volunteering their time. You can get a better response that way.

Product Testing

Product testing takes place when one company offers their product against another company so that they can attempt to convince consumers that theirs is better. Of course it would serve you best to advertise the results if they are positive.

Product testing is also a way for a new company to learn what is wrong with their merchandise before it reaches the market. It is a good way to get the general opinion of your potential consumer before you officially open for business. It helps get the “kinks” out first.

Offering A Pre-opening

This is a lot like hosting a sneak preview to a movie. This is where you can invite a select number of people into your retail outlet so that they can catch a glimpse of what you are hoping to accomplish.

You must understand that this is not the same as actually letting people into your leased property. This is more of allowing them to see what your idea is and offering a look at it in its expected reality. To do this, you would have to project a video replication of your store’s concept. This gives potential consumers a chance to see your idea before them, without you having to spend all of the money that it takes to begin a business first.

This is becoming a popular way for people to get an idea of their business as well as for you to get the consumer’s reaction to your idea without having to make it a full realization first. You can also make a computer generated CD-ROM and give your presentation to consumers to take home.

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