What are the problems encountered in establishing the business?

The process of starting or launching business involves two aspects like commercial aspect and the legal aspect. The former aspect is decided by the businessman himself. While deciding the commercial aspect he depends on the legal aspects. The problems of starting a business enterprise involves what is to be done and how it is to be done. The following problems are encountered while starting a business enterprise:

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Determination of the objective: The basic problem behind the establishment of a new enterprise is the determination of the main objective. The objectives set for the organisation should be clearly described and it should not be unrealistic. Besides setting up the basic objectives, the determination of subsidiary long-run objectives and short-run objectives also create a number of problems.

Development of an idea: The entrepreneur develops the idea of starting business opportunities. He may visualize the business idea from himself or borrow from some experts. Selection of business has been regarded as one of the significant problem at the time of starting new business.


Product analysis and market research: While selecting the nature and the type of business, one has to decide the types of product be produced or purchased and the type of market needed. The determination of the type of product and market, it require product and market analysis. The product so selected should be attractive in shape, size and colour so that it can satisfy customers at large.

Selection of forms of organisation: After selection of the product and the type of market, the next problem is the selection of the forms of organisation. There are various forms of organisation like sole trader, partnership, company and co-operative form of organisation. The selection of suitable form of organisation depends on nature and size of business, the amount of finance available and the managerial needs.

Determination of scale of operation: The next problem at the time of establishing a business unit is the determination of the scale of operation. Whether business will be carried on large scale or small scale, an experienced person with sufficient capital and hoping certainly of income may enter into large scale production.

Estimating capital requirement: Capital is regarded as the life-blood of the business unit. Before starting the business, it’s capital requirement should be properly decided. The requirement of capital is determined on the basis of requirement for fixed capital, working capital is preliminary expenses. The amount of capital on the above directions are to be determined before starting the business enterprise.


Selection of business Site: Selection of site include plant location, plant building and equipment and lay-out-for the plant. These factors are essential for the smooth conducting of the business.

Selection of staff and other employees: The selection of right man in the right job is an important factor which facilitates smooth functioning of the organisation. Selection of right staff and employee is a problem at the time of starting a new business.

Completion of legal formalities: The businessman has to complete all the legal formalities at the time of starting a new business enterprise. These formalities differ organisation to organisation.

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