Selection of Line of Business

The first procedural decision involved in setting of a new enterprise is to select the nature and type of business. The entrepreneur has to decide the type of business in terms of industrial, trading or service. Then he has to select the types of goods and services he will produce or distribute. He has to consider several factors, e.g. nature and source of raw materials, types of technology used, source of supply, distribution policy etc. after deciding the nature of business activity the promoter has to analyse and forecast the profitability of the proposed business on the basis of probable operating costs and sales revenues. Operating costs imply the cost of procuring different inputs while sales revenue depends upon the size of the market probable market share of the proposed undertaking, expected growth of total market, sales efforts and policies etc. a market survey may be carried out to estimate these factors. Marketing research is conducted to ascertain the number, location, needs etc. of consumers.