Creating, Financing, and Marketing a Business

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Partnership, as a form of business, can be considered as a logical continuation of sole proprietorship. This legal form of business means combining the capitals of two or more individual persons or entities under risk sharing, profits and losses based on equality, joint control of business results, active participation in the process of its leading. The relationship between the parties are regulated by a contract.

It would be reasonable to consider the benefits of the partnership to a sole proprietorship.

Firstly, the growing financial capacity of the firm as a result of the merger of several capitals. Banks boldly give credits to such firms. Secondly, the management of the firm can be improved. Specialization in management appears, i.e. allocation of administrative functions between partners. In addition, such company is able to hire professional managers. Thirdly, greater freedom and efficiency of business operations. Fourth, as a sole proprietorship, partnership enjoys tax benefits, since the taxable income of  each participant is taxed as his individual income.

However, this form of business organization has some weaknesses, since sometimes partnership can not overcome the shortcomings of sole ownership, but also creates new problems.

1. Unlimited liability of any partnership can threaten all partners as well as the sole owner. The collapse of one of the partners may be a reason of a company’s  bankruptcy  in general, since members are jointly liable.

2. Lack of management experience and the incompatibility of the partners' interests can provoke an ineffective activity, while collective management can provoke an inflexible management by the company.  

3. The unpredictability of the process of activity and company’s results increases economic risk and reduces confidence in achieving the expected benefits.

All firms for their existence and development need capital, which can be provided by financing.

Financing is the receiving of funds required for business operations. In the theory of financial management there are two main types of financing: internal and external.

Internal financing is such kind of financing, where funds are generated within the firm. It is firm’s own funds. In this case, the funds can come from the following sources: income, the sale of liquid assets, reducing working capital, credits from suppliers, receivables, and amortization.

Income is the main source of financing for small business. However, it is usually that income is not enough for financing. That is why, small firms should use another form of financing. The sale of liquid assets can be useful in such case. If the firm is able to successfully sell utilized assets, such as vehicles, equipment, facilities, such firm can receive the necessary money.

If  some firm tries to sell short-term assets (stocks, finished goods, work in progress, goods, etc.), It is also possible to obtain some money. Cash within the firm may appear by using the sale of receivables.  

Businessmen have often times when they have to wait for the receipt of payments, but money is needed immediately to conduct financial transactions. In this case, businessmen can sell their own debts to specialized institutions, which are  called factoring firms.

Resorting to factoring, businessmen have the opportunity to transform the current debt in cash at the right time, getting up to 80 % of the amount of debt maturity, and thereby improve their financial situation. At the same time businessmen are  released from the risk of possible defaults, which are taken by the factoring company. In addition, it reduces the losses of receivables accounts.

Worn parts of the capital are gradually accumulated in  cash in a special sinking fund, which is formed by the annual amortization and used for the expanded reproduction of fixed assets. Therefore, amortization can be considered as another internal source of financing.

External sources of financing for small businesses may be commercial banks, non-bank financial institutions (insurance companies, trust companies, investment funds, investment companies, pension funds), private firms, government and regional programs, sale of shares, funds from family and friends, and others.

Each type of external financing falls into one of the two categories: financing by obtaining loans and financing by issuing shares. Typically, financing through loans usually requires a collateral (car, house, land, jewelry, etc.). Financing through the issuance of shares generally does not require collateral and gives the investor the right to share ownership.

According to a definition of managerial accounting, it is the “process of identifying, measuring, analyzing, interpreting, and communicating information in the pursuit of a company's business goals” (The Free Dictionary, n.d.). Managerial accounting includes cost accounting, or it is better to say, cost accounting is a component of managerial accounting.

Cost accounting helps to provide a focusing, understanding, and controlling of such an important area of general business environment as cost, while managerial accounting is concerned on a wider picture of business processes in the company. Managerial accounting is used for providing very important information for making important operations and strategic decisions.

Managerial accounting is applied for making operational and strategic decisions by internal users. “Management accounting is used for internal managerial decision making, project selection, budgeting, performance evaluation and strategy” (Difference Between Cost Accounting & Management Accounting, n.d.). That is why, managerial accounting is very useful and can help companies with product costing, incremental analysis and budgeting. The main task of managerial accounting is a detection of the weakness of the company and possible sources for improving the current situation. That is why, managerial accounting can help the managers identify ineffective costs, additional opportunities to improve the process of budgeting and company’s effectiveness in general.

 Marketing strategy is the process of planning and realization of different marketing acts, which are made for achieving company’s goals. Marketing strategy is animportant part of general company’s strategy, which is determining the main directions of company’s activity on the market against consumers and competitors. Marketing strategy depends on current company’s state on the market, estimation potential perspectives of market’s changes, future actions of competitors, company’s goals, and existing limitations on the market. However, it would be reasonable to give a more clear definition of marketing strategy. One of the best marketing strategy’s definitions is the following, “A marketing strategy is a process or model to allow a company or organization to focus limited resources on the best opportunities to increase sales and thereby achieve a sustainable competitive advantage” (Easy Marketing Starategies, n.d.).

The development of marketing strategy is the difficult process, which consists of several stages. So, the development of marketing strategy includes such stages as: researching the market’s state, estimation the current state, analysis of competitors and estimation of company’s competitiveness, determining the goals of marketing strategy, market’s segmentation and selection of the target segments, analysis of the strategic alternatives and selection of the marketing strategy, development the positioning, previous economic estimation of selected strategy, and determination of control’s instruments.

Since 1990s the concept of social marketing was becoming more popular. According to this concept, the company should satisfy customers’ needs better than its competitors with simultaneous improving the life’s level of the whole society. It means that company has to find a “golden mean” between such goals as receiving profit, satisfying some customers’ needs, and improving life’s level of society.

As it is known, there are a lot of negative consequences of entrepreneurship, such as pollution of environment, depletion of natural resources, and others. That is why, companies should use  environmentally-friendly technologies, which would not pollute our environment. Also, social activity is very important in this marketing concept. For example, a company can provide $20 million for the fight against cancer or for restoring the environment.

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