Everyone is talking about small businesses. In 1993, when it was allowed, more than 90,000 new firms were registered by individuals. Now, less than three years later, official figures show that only 40,000 of them still pay their dues and present annual financial statements. These firms are called “active” – but this is a misrepresentation. Only a very small fraction really does business and produces income https://www.industryspotlightreport.com/.
Why this reversal? Why were people so enthusiastic to register companies – and then became too desperate to operate them?
Small businesses is more than a fashion or a buzzword. In the USA, only small businesses create new jobs. The big dinosaur firms (the “blue-chips”) create negative employment – they fire people. This trend has a glitzy name: downsizing.
In Israel many small businesses became world class exporters and big companies in world terms. The same goes, to a lesser extent, in Britain and in Germany.
Virtually every Western country has a “Small Business Administration” (SBAs).
These agencies provide many valuable services to small businesses:
They help them organize funding for all their needs: infrastructure, capital goods (machinery and equipment), land, working capital, licence and patent fees and charges, etc.
The SBAs have access to government funds, to local venture capital funds, to international and multilateral investment sources, to the local banking community and to private investors. They act as capital brokers at a fraction of the costs that private brokers and organized markets charge.
They assist the entrepreneur in the preparation of business plans, feasibility studies, application forms, questionnaires – and any other thing which the new start-up venture might need to raise funds to finance its operations.
This saves the new business a lot of money. The costs of preparing such documents in the private sector amount to thousands of DM per document.
They reduce bureaucracy. They mediate between the small business and the various tentacles of this squid called The Government. They become the ONLY address which the new business should approach, a “One Stop Shop”.
But why do new (usually small) businesses need special treatment and encouragement at all? And if they do need it – what are the best ways to provide them with this help?
A new businesses goes through phases in business cycle (very similar to the stages in human life).
The first phase – is the formation of an idea. A person – or a limited group of people join forces, centred around one exciting invention, process or service.
These crystallizing ideas have a few hallmarks:
They are oriented to fill the needs of a market niche (a small group of select consumers or customers) , or to provide an innovative solution to a problem which bothers many, or to create a market for a totally new product or service, or to provide a better solution to a problem which is solved in a non-efficient manner.
At this stage what the entrepreneurs need most is expertise. They need a marketing expert to tell them if their idea is marketable and viable. They need a financial expert to tell them if they can get funds in each phase of the business cycle – and wherefrom and also if the product or service can produce enough income to support the business, pay back debts and yield a profit to the investors. They need technical experts to tell them if the idea can or cannot be transformed to reality and what it requires by way of technology transfers, engineering skills, know-how, etc.
Once the idea has been shaped to its final form by the team of entrepreneurs and experts – the proper legal entity should be formed. A bewildering array of possibilities arises:
A partnership? A corporation – and if so a stock or a non-stock company? A research and development (RND) entity? A foreign company or a local entity? And so on.
This decision is of cardinal importance. It has enormous tax implications and in the near future of the firm it greatly influences the firm’s ability to raise funds in the foreign capital markets. Thus, a lawyer must be consulted who knows both the local applicable laws and the foreign legislation in markets which could be relevant to the firm.
This costs a lot of money. One thing that entrepreneurs are in short supply of – is money. Free legal advice will be highly appreciated by them.
When the firm is properly legally established, registered with all the necessary authorities and has appointed an accounting firm – it can go on to tackle its main business: developing new products and services. At this stage the firm should adopt Western accounting standards and methodology. The Macedonian accounting system leaves too much room for creative playing with reserves and with amortization. No one in the West will give the firm credits or invest in it based on local financial statements.
