Business Creation: A Step-by-Step Process

Posted on Mar 20, 2025 in Business Administration and Management (BAM)

Process of Business Creation

The process of creating a business involves several key stages:

  1. Study of the Business Idea: Initial conceptualization of the business.
  2. Feasibility Study and Analysis: Comprehensive analysis of market, economic, and technical aspects.
  3. Definition and Execution of the Business Plan: Creating a detailed roadmap for the business.
  4. Decision to Create (or Not Create) the Business: Based on the feasibility study and business plan.
  5. Choice of Legal Form: Selecting the appropriate legal structure (e.g., sole proprietorship, partnership, corporation).
  6. Formal Constitution and Obligations to Public Administrations: Registering the business and fulfilling legal requirements.
  7. Start of Business Activity: Commencing operations.

Developing the Business Idea

The first step is to develop a viable business idea. This can be achieved through the following process:

  1. Brainstorming (Idea Generation): Proposing many ideas without any initial filtering.
  2. Initial Filtering of Proposals: Rejecting unfeasible or impossible ideas.
  3. Comparison of Ideas: Studying the advantages and disadvantages of the remaining ideas.
  4. Evaluation of Ideas: Assessing each idea based on various aspects, often using a numerical rating system.
  5. Selection of the Business Idea: Choosing the idea with the highest score, defining its unique value proposition and competitive advantage.

Assessing Viability

The feasibility study analyzes internal project data and external factors to determine the potential for success. Several types of viability are considered:

Commercial Viability

Verifies if the product or service has market potential. Key elements of analysis include:

  • General Environment: Studying the broader economic and social context surrounding the business.
  • Competition Analysis: Studying existing businesses offering similar products or services.
  • Consumer Analysis: Understanding consumer behavior and purchasing habits.
  • Location Study: For many businesses, particularly retail, physical location is crucial.

SWOT Analysis

A complementary tool for assessing viability. It involves analyzing:

  • Weaknesses: Aspects where the competition has an advantage.
  • Strengths: Aspects where the business excels compared to the competition.
  • Threats: External obstacles and difficulties.
  • Opportunities: Chances to exploit added value or a comparative advantage.

Economic Viability

Checks whether the business activity will generate profits. It’s necessary to estimate:

  • Fixed Costs: Costs that do not vary with the volume of production.
  • Variable Costs: Costs that vary in proportion to the volume of production.
  • Product/Service Price: The selling price of the business’s offering.

Break-even point calculation: q = Fixed Costs / (Price – Variable Costs)

Financial Affordability

Determined by planning and the relationship between:

  • Investments: Assets like machinery, premises, and furniture.
  • Financial Resources: Capital provided by partners, loans, and credits.

Environmental Sustainability

Respect for the environment is crucial for a viable and sustainable business. Business ideas originating from environmental respect can have significant potential.

Other Viability Considerations

  • Technical Viability: Checking the availability and suitability of technology, machinery, and production equipment.
  • Legal and Regulatory Viability: Verifying that the project complies with all applicable laws and regulations.

The Business Plan

After checking all viability aspects, a document describing the business initiative and project features is created. This report should include:

  1. Project Introduction: Mission, vision, and values.
  2. Market Study: Detailed analysis of the target market.
  3. Marketing Plan: Strategies for product, price, promotion, and distribution.
  4. Operational Plan: Description of the manufacturing or service delivery process.
  5. Legal Aspects: Choice of legal structure and compliance with regulations (including health and safety).
  6. Economic and Financial Plan: Investment needs, cash flow forecasts, and financing plan.

After drafting and formulating the business plan, the entrepreneur makes the final decision to create the business or not, based on the preceding studies.