Industry and risk analysis Essay

Discuss the future outlook and industry trends related to the new venture

The new the venture is a healthy snacks business that target mostly, commuters in the transport industry and also households within the country. In Kenya through improved infrastructure transport industry has been growing steadily. This has been evident in major towns and cities such as Nairobi, Kisumu, Mombasa, Thika, Nakuru and Eldoret just to mention but a few. In addition to this, food industry has become a giant sector in this era of increased urbanization coupled with globalization.

As population growth increases and demand for food also rise, food industry has played a great role in that it has made food available all the year round even when food crops have failed. It has been able to achieve this through technological innovation in food processing and preservation which has increased the shelf life of food stuffs.

For this reason, people have been able to access foods from many outlets even in regions where certain types of foods are not grown. Food industry is increasingly becoming a very important sector in any economy simply because it has made food available in ready to eat form; some of the processed foods take lesser time to prepare as they are precooked during processing and have made some foods which are only found during certain seasons to be available during all the year round.

In relation to transport industry which is growing steadily, it is projected that the industry of new venture will also grow. There is marked by economic growth in the country and this translates that potential consumers have relatively high purchasing power.

Also, this is very important because with growing economy of the country people are able to transact as they move from one point to another. Though the country had experienced political instability three years ago, there seems to be a stable political climate with ushering in of new constitution in the country.

Snacking is very common with commuters. Commuters will tend to have snacks in bus terminals as they are about to travel while others buy food snacks to eat when on transit. This is a clear indication that provided the business will offer products that are tailored to meet consumers’ needs there is market for these products and that the future outlook of the business is bright.

Discuss the legal or concerns related to the venture idea

A sole proprietorship kind of business in Kenya does not have many legal formalities. To start with there need to be a business name which should be applied at a registrar of business so that certificate of registration can be issued. The business needs to apply for trading license from city council because it will be situated at Nairobi City in the central business district.

This is necessary because it will enable the government to earn revenue. In addition, business needs to conform to public health laws such as Food and Drug Act that governs business that deal in food commodities for sale to the public of Kenya.

Discuss the approach to raising capital for the venture

There are number of approaches which can be used to raise capital for this new venture. In order to be able to have a breakthrough in raising business capital, a business plan should be prepared. Business plan acts as financial tool which provide adequate information to facilitate secure capital particularly in form of loan from financing institutions.

The first approach to consider when raising the capital for the business is bootstrapping. This is where one uses any resources at disposal to get business started. Basically, this is in formed of home-equity loans and personal loans. Another approach is use of family and friends. Though this approach is not formal, family members and colleagues can help to raise needed capital.

Using personal loans is another approach to raise business capital. This can be in form of re-investment into the business. A step further can be taken for more capital if it is needed. This can be through cash out credit card transfers or home equity loans. However, when using such methods to have initial capital for a start up business it can be extremely risky and therefore need to be done with a lot of care ( Berkery, 2007).

Suppliers can also be used to provide business capital. This is in form of product development which necessitates customization with such suppliers for them to be able to respond positively. By guaranteeing that business will be able to pay for their material they have provided perhaps by holding inventory they may agree to support business through raw materials for making business products.

Some large suppliers may have some funds that have been kept aside purposely for investing in rising up businesses that would facilitates expand their investment portfolios and businesses. Besides this , they help business have steady follow of supply of the products they supply because they understand new venture vertical market well and may have competitive rates for their products (Pride, Hughes & Kapoor, 2008).

Bank loan is another alternative approach though not that relatively easy to obtain especially for start up business. Most of the bank will often take into consideration those businesses which have been operating for at least two years. This is due to the fact that they prefer seeing assets which are tangible that can be used as collateral.

If such methods mentioned above do not work or fail to raise the needed capital to start the business, selling partial business ownership can be a last resort. This involves selling business ownership in form of ownership interest or stock. Lastly, venture capitalists can be potential sources of business capital. They are wealthy persons who specialize in providing start up capital for coming up business in form of equity capital (Berkery, D. 2007).

Discuss the obstacles to raising capital for the venture

One of the challenges in raising capital for the business is that when you sell the ownership interest or shares of stock as a proprietor you sell the equity and you are bound to loose control of the business because you are not sole decision maker in matters of running the business. Another obstacle is that when one opts for using family and friend as a way of raising business which is an informal way, it may bring problems in future. It is not advisable to mix business and social relationships because this may interfere with business policy.

Even though venture capitalists are potential sources of business capital, they are not easy to find. Also, personal loans to provide start-up capital for the business can be a reasonable option. Nevertheless, it can be extremely risky because in case business run at a loss one is bound to incur all the risk alone and this means that the proprietor will loose all that had been invested in the business (Sutton, 2009).

References

Berkery, D. (2007). Raising venture capital for the serious entrepreneur. Columbus: McGraw-Hill.

Pride, W. M., Hughes, R. J., & Kapoor, J. R. (2008). Business. Florence: Cengage Learning.

Sutton, G. (2009). The challenges of raising money with equity financing. Retrieved on May 2, 2010 from: https://www.allbusiness.com/

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