Focus of the week- Business
Topic- 5 Factors you must consider before choosing the type of business you should venture
Writer- Iyere Joy
There are several form of business organizations. Some types of enterprises are operated more successfully under one form of organization than, under another. The form of the organization must fit the particular need of the business to be successful. Below are some of the factors that influence a businessman in deciding the best form of organization.
Financial involvement
The choice of the form of business venture by a business man depend on the money he has to inject in to the business to successfully run. Where the financial burden is less involving, he can then finance it alone. But where the requirement is highly demanding, then he has to decide on the alternative sources to financing. This presupposes that he can opt for partnership or corporation.
Risk element
Amount of risk involved in the proposed business also determine whether a business man can venture into it or not. If the risk estimated is relatively low, the businessman can absorb it alone. Where the estimated risk is very high, there arise the need to opt for partnership or corporation to distribute risk. In the risk involved extends only to the amount of investment of the individuals.
Ease of formation and management
An important factor which influence the choice of business organization can be set up and the operation commenced. A business organization like the sole proprietorship is very easy to organize, in the sense that very little or no requirement which must be fulfilled are imposed as a condition precedent.
The extent of control desired
Where the prospective business man want to have absolute control over the operations of business, sole proprietorship will be most preferable or at worse, partnership . in this case he can act as an accountant, a marketing manager, a public relation officer, purchasing manager, a well owner. He will thus control all phase of his business operation and organization.
Where he want highly eroded control, or little control over the operation of the organization joint stock company would readily come to mind. This is where is completely divorced from management.
Flexibility in operation
Where flexibility in operation is to be guiding principle, sole proprietorship is the most preferred . This is because he can responds to changes in the market conditions in whatever manner he deems fit and at a very short notice. With this, the sole proprietor can take advantage of profit opportunity. But where corporations are involved, the organization can only pursue those affairs that are allowed in the memorandum of association. If a business desires this element of flexibility, the corporation is not usually the best organization to adopt.