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STARTING PUSH-CART VENDING BUSINESS.
Term Paper ID:23258
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Essay Subject:
General & specific needs & obstacles: capital, expenses, location, regulation, organization.... More...
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10 Pages / 2250 Words
9 sources, 19 Citations,
APA Format
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Paper Abstract:
General & specific needs & obstacles: capital, expenses, location, regulation, organization.
Paper Introduction:
Starting a small business can be a daunting proposition for many individuals. Those who have worked for other organizations may have a misguided sense of what it takes to succeed in business (having been insulated from all of the decisions which affect a business) while those who are just entering the business world may lack the general business knowledge which can contribute to success. Despite these risks, the prospect of owning one's own business and being one's own boss has a strong allure for many individuals. This research examines the issues associated with starting a small business and the factors which may contribute to or hinder a new enterprise's success.
The business being considered is a push-cart vending service featuring hot dogs to be sold outside. This business was chosen because of the low start-up costs (the cart), the low labor invol
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L.A. Other cities havestudied the Los Angeles vending zone project and have developed their ownplans based on Southern California's experience and the local area's needs(Glover, 1993, p. Loans areavailable from the Small Business Administration as well as from localbanks which can help fund small companies, and many local chambers ofcommerce are willing to work with new businesses to help them getestablished. When starting a business, the entrepreneur must decide the type oforganization that the company will have. Glover, K. R7. Once looked down upon bymore traditional businesses, push-carts are now located in trendy shoppingmalls as well as in busy pedestrian areas in cities. (1994, 19 August). 78). Communities want to attract businesses that can help foster astrong economic environment and make certain areas attractive for shoppers. This plan should includethe type of business that is being started and projected costs and revenuesfor the first five years. 17-18. Kansas has put together a small book on how to start a business inthat state which is available from First Stop Clearinghouse. In addition, the new business owner shouldcontact the city government in the city where the business will operate toget specific information about regulations and licenses required for thatcity. However, bymaking use of the resources available to the small business owner (bothlocally and nationally), the push-cart operator may well be able to developa small profitable business. He no longer had thecredibility of a corporation behind him. In addition, the newbusiness owner should set up a calendar which identifies important dates,such as when taxes are payable, when licenses need to be renewed and othersuch information (Burngen, 1994, p. Push-cart vendors have a particular stake in forming a close alliancewith the local governments where they operate because of the licensing andtax situations, but all small business owners should take an interest inthe government regulation (local and otherwise) which affects theiroperations. However, he learned that while at Heinzhis proposals were generally "rubber stamped," as an independent businessowner, his proposals were given great scrutiny. 78), and more than half of these will fail within thefirst five years. These individuals may well find thatthey do not have all of the skills that they need to succeed as anentrepreneur, even if they were successful in their former jobs. For example, it may be exempt from sales tax on selling hot dogsbut required to pay sales tax on prepackaged potato chips (Burngen, 1995,p. Requirements for starting andoperating a small business. This isparticularly true for those individuals who were specialists in thecorporate world, but who now must become generalists in order to run theirbusiness. Burngen, J. The effort has been good for thevendors, who have been able to increase their sales, and good for the city,which has license and tax requirements for the peddlers which help increasethe revenue that the city receives. Sole proprietorships are, as their name suggests, owned bya single individual who reports the income as part of a Schedule C onincome taxes. In many cities, the push-carts areset up near civic centers and major shopping areas; some cities now havethese types of peddlers inside shopping malls (Feder, 1995, p. The business being considered is a push-cart vending service featuringhot dogs to be sold outside. 69). Since business with vendors will be conducted at the vendor'ssite, and since customers will not be coming to the office to transactbusiness, this is one expense that this type of company does not need totake on. The education of a big company man.Inc., pp. Location is critical to the push-car operator, and prospectiveoperators should check into the regulations regarding zoning and otherrestrictions which may dictate where the push-carts can be operated. DenverBusiness Journal, pp. Toovercome these weaknesses, Jim Halloran, a professor of entrepreneurship atMuhlenberg College, recommends that new business owners take classes insmall business management and entrepreneurship offered at local colleges(Whittemore, 1995, p. Vendors along the famed Venice boardwalk on thebeach operated illegally, but the regulations were rarely enforced, much tothe consternation of businesses operating in fixed locations. 1B, 3B. The push-cart would be operated in Wichita. 1B). In Denver, businesses have worked withthe city rather than against it in order to develop regulations which arefriendly to the push-carts, but which help protect "permanent" businessesat the same time. Career moves. This business was chosen because of the lowstart-up costs (the cart), the low labor involved (family members can beused in addition to the owner) and the lack of overhead needed for officesand other related items. In addition to controlling the image that the street vendors bring tothe city, regulating vendors also brings them out from an undergroundeconomy that operates on a cash-only, tax-free basis. Olgeirson, I. Profits are taxed as regular income, and the owner is liablefor business expenses. Figuring expenses can be an important part of the business plan, andis often the place where new business owners make the most mistakes.According to Brodsky, some businesses fail not because they areundercapitalized, but because they fail to use the available capitalwisely. 21). Feder, B. In Los Angeles, for example, street vending was illegal until 1993when special zones were created (the only legal street vendors were thoseselling printed material). Thus while a marketing executive understands the importance ofbuilding an image for a product and how to promote the product, he may notbe at all able to understand how to obtain financing for a new venture orhow to attract qualified employees or set up a benefits program. In this way, theentrepreneur can develop a sense for how much money will be needed, andwhere expenses can be trimmed. (1994, July). While the government regulations that affect small businesses can benumerous, there are also agencies within the government and in the localcommunity which can help the small business owner get started. Why start-ups fail. Some entrepreneurs begin their businesses because they have been laidoff by larger companies and have been unsuccessful at locating otheremployment (Whittemore, 1995, p. Location is also a critical issue because push-carts are encounteringsignificant resistance from established merchants who are concerned thatthe carts take business away from them, cause unnecessary pedestriancongestion, and generally hurt the image of the shopping areas (Houston,1993, p. The low start-upcosts and low overhead associated with the push-carts makes them popular,but they also have limited revenue generating abilities and may requirelong hours on the part of the operator. 27. Ifthe push-carts cannot be placed in a high-traffic area, they are almostcertain to fail. References Brodsky, N. This could be aneffective form of organization for a family that wants to operate severalpush-carts or which uses several family members, each of whom has put moneyinto the company, to run the operation. Planning, pp. Kilmer had the advantage of having worked for a largeorganization where he was required to produce plans and forecasts, and hedid the same for his own company. 64-69. 25). Streetwise. In fact, some "permanent" businesses, such as localcoffeehouses, have developed their own push-carts to participate in thistype of boom and take advantage of the popularity that outdoor vendingenjoys. In Kansas, for example, all businesses are subject to particular taxliabilities, licensing and other laws at the local and regional level. In Denver, Colorado, the city is working to encourage push-cartvendors in the downtown area as part of the effort to revitalize thedowntown (Olgeirson, 1995, p. These projections should be monthly for thefirst year, then annually for the remaining years. Kansas City Business Journal, pp. Business is on a roll. For example, a company which does not have much interaction withcustomers in the office does not need a lavishly appointed office, butinstead can make do with a small office in a low-rent area with a smallreception room. These fees should also be included in the annual operating budgetfor the company since few are one-time fees only. 27). In Brodsky's view, many entrepreneurs, eager to impresseither their friends or to feed their own ego, spend too much on officefurnishings that they don't need and that their customers never see (1995,p. 25). The push-cart business is rapidly becoming a popular way forindividuals to enter the small business arena. The advantage of the push-cart is that it can move to wherecustomers are, but there are advantages to be gained from having the cartset up where the customers congregate. The push-cart operation being proposed here would be operated as asole proprietorship. Another critical factor in the success of a new business is itslocation. (1993, May). S13). (1995, July). Like many first-time businessowners, he found that raising capital was difficult, and he had to strugglewith the challenge of how much equity to give up in order to attractinvestors. J. In addition, the carts are generally subject to a largedegree of regulation and licensing, particularly when food is involved, andthe paperwork can be a significant obstacle to overcome. Inc., p. officials ponder creation of streetvending zones. NewYork Times, pp. S14). Other types of licensesor permits that are require include a business license for the city orcounty where the business is conducted (Burngen, 1994, p. (1995, 22 May). This research examines the issues associatedwith starting a small business and the factors which may contribute to orhinder a new enterprise's success. Houston, L. S14). In 1993, thecity created vending zones which designated the type and number of peddlerswho could operate in specific geographic areas, and which gave the citymore control over how peddlers affected the city (Glover, 1993, p. 17). By looking into the localresources, the entrepreneur can find hidden sources of capital and talentwhich can help make the new enterprise a success (Whittemore, 1995, p. A corporation can have either a few or many owners, each of whom ownsshares, or a portion of the entire company. 2 -22. Los Angeles Business Journal, p. While this is less critical for a manufacturing organizationthat sells to retailers, it is of great importance to a street vendingoperation. Those who have worked for other organizations may have amisguided sense of what it takes to succeed in business (having beeninsulated from all of the decisions which affect a business) while thosewho are just entering the business world may lack the general businessknowledge which can contribute to success. He was able to raise thenecessary capital and succeeded in maintaining more than 5 percent controlof the business, but even after several years, it is unclear whether hisventure will be successful in the long run (Posner, 1994, p. When additional capital is needed, partnerships can be useful sincemore than one individual has an ownership stake in the organization. S14). Push-cart peddlers who sell foods must generally have healthinspection notices posted on their push-carts, and must make their push-carts available for inspection on a regular basis. For example, the corporate world encourages specializationand helps employees become experts in very narrow areas. (1995, December). 25. (1995, 13 May). The advantage of a corporation is that it is a separate legal entitythat protects its owners from being responsible for the firm's obligations,but the disadvantage is that ownership can quickly be diluted. However, fewcorporate employees, even those at the highest levels of an organization,understand the "big picture" that is the cornerstone of success for a smallbusiness. In some cities this type of peddling is illegal, but othercities have taken a proactive approach toward building strong relationshipsbetween push-cart vendors and the city government. In order to understand how much capitalization is needed,entrepreneurs need to develop a business plan. Starting a small business can be a daunting proposition for manyindividuals. Wall Street Journal, p. In addition to former corporate executives and otherslaid off during economic downturns, entrepreneurs also come from the ranksof recent immigrants and from newly graduated business majors who are eagerto put their education to work for them. While push-carts do little to enhance the job market since they aretypically run by the same person who owns them, they can attract customersto a shopping area that might not have many food outlets or that is tryingto compete with more modern shopping malls. No off-site office is needed because the homeoffice can be equipped with a separate phone line (if necessary) andcomputer. 78). S13-S14. Eachpartner is liable for the company's obligations. In other cities, push-carts are allowed in some venuesbut not others, while in still other cities, push-carts are allowed in thecity without restriction. G. If the licensing, tax situation or zoningregulations are not favorable to the business, that can (and should) bedetermined at the earliest possible time. Most city governments are eager to assist new businesses becausethey help the local economy, and the city government can be a strongresource for the new business owner (Burngen, 1994, p. In some cities, push-carts are illegal and the regulations arestrictly enforced. How much? Inaddition, zoning laws determine where certain types of businesses (such aspush-carts) can operate. The little pushcarts that could. S13). This book isa good starting point for those interested in opening a business in Kansas,and should be one of the first steps that a new business owner takes whenpreparing the business plan. More than 12 million individuals have started their own businesses(Whittemore, 1995, p. Once the new business owner has determined the regulations that affectthe business in question and has decided to proceed with the business, itis recommended that he obtain the necessary forms and pay the requisitefees. Kansas does not require registration of soleproprietorships, nor does a fictitious name statement have to be filed.However, the company would have to follow state procedures for registeringthe trademark or logo of the operation if it wishes to protect these. It is suggested that the would-be business ownerresearch the regulations for the particular type of business being proposedbefore continuing with the operation; this can be the initial phase ofwriting the business plan. Posner, B. Corporations are required toregister with the state in which they operate, and Kansas has a $75 filingfee for registering and a name registration fee of $2 (Burngen, 1995, p.S14). There are three basic types oforganizations: sole proprietorship, partnership and corporation (Burngen,1994, p. Gupta, U. 78). Nation's Business, p.78. Unhappy in the corporate world,this long-time Heinz executive left the food processing giant to start hisown company marketing spaghetti squash. Theowner would also need to contact the state sales tax office in order todetermine whether it would be subject to sales tax on the items that itoffers. Whittemore, M. The experience of Jim Kilmer illustrates the learning experience thatcan occur on-the-job in a small business. It is important that the would-be peddlerdetermine which regulations apply specifically to push-carts beforeentering into the business, but the small business owner also needs to beaware of other regulations that apply to all businesses in a given locality(Burngen, 1994, p. In the case of an outdoor vending machine business, the ideal solutionis to create a home office where the business owner can take care ofadministrative functions. (1993, 19 July). 25). By legitimizingbusinesses which can realize strong cash flows and making them subject tosales tax, the vending zones were designed to help increase the revenuethat the city could realize from their activities. This is the most common type of organization forpeddlers (Glover, 1993, p. Raising capital is a critical part of starting a new business, andmany companies fail because they are undercapitalized (Gupta, 1995, p.R7.). O. (1995, 21 April). Despite these risks, theprospect of owning one's own business and being one's own boss has a strongallure for many individuals. However, the personal characteristics that might make someonesuccessful in the corporate world may not help them in the world of thesmall business. S13).
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