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Establishment phase (Alternative names (Start-up, birth, beginning,…
Establishment phase
Alternative names
Start-up, birth, beginning, commencement
Goals
Survival, and setting a firm foundation for future growth
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Marketing
Highlight product advantages by accentuating the product’s strengths. Undertake inexpensive promotion strategies
Profit
Usually slow to begin with, occasionally a loss. Sometimes all the profits are put back into the business to ensure its survival.
Financial management
Greatest source of start-up capital is from the owner’s personal savings. This can be supplemented with a loan from a financial institution, although such finance is often difficult to obtain because of the high risks involved.
Cash flow
Sometimes erratic, with a period of constant cash outflow in the early stages
Costs
Very high fixed costs. Major cost items include premises, equipment, raw materials and insurance.
Customers
Establishing a customer base large enough to sustain future viability is important. Need to develop a positive relationship with customers. Attempt to accurately forecast customers’ needs.
Management
Informal, with all decisions being made by just one or two people. Decisions are often made ‘on the run’.
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Failure rate
Very high, up to 33 per cent within the first year of trading
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Risk level
Extremely high, especially within the first few months. High degree of uncertainty