Unit II Financing and Managing the Venture

A business without a funding source will flounder under the weight of its own debt. Funding is
the fuel on which a business runs. A business can take different avenues to attain funding, and
more than one option can be used.

Sources of Capital/funds:

1. Business Angels

2. Venture Capital

3. Crowd Funding

4. Enterprise Investment Scheme

5. Personal Savings

6. Assistant of Government

7. Bank Loans and Overdraft

8. Financial Bootstrapping

9. Buyouts
1. Business angels

Business angels (BAs) are wealthy individuals who invest in high growth businesses in return
for a share in the business. Some BAs invest on their own or as part of a network. BAs are often
experienced entrepreneurs and in addition to money, they bring their own skills, knowledge
and contacts to the company. These are the professional investors who invest either just a part or
their entire wealth as well as time in the growth of innovative companies.

2. Venture capital

Venture capital is also known as private equity finance. Venture capitalists (VCs) look to invest
larger sums of money than BAs in return for equity (the value of the shares issued by a
company). Venture capital is most often used for high-growth businesses destined for sale or
flotation on the stock market.

3. Crowd funding
Crowd funding is where a number of people each invest, lend or contribute small amounts of
money to your business or idea. This money is combined to help you reach your funding goal.
Each individual that backs your idea will usually receive rewards or financial gain in return.

4. Enterprise Investment Scheme (EIS)

Some limited companies can raise funds under the EIS. The scheme applies to small companies
carrying on a qualifying trade.

There are potential tax advantages for individuals who invest in such companies, such as:

 the buyer of the shares gets income tax relief at 30 per cent on the cost of the shares
 Capital Gains Tax (CGT) on the sale of other assets can be deferred if the gain is
reinvested into EIS shares
Certain conditions must be met for a company to be a qualifying company and for an investor to
be eligible for tax relief.

5. Personal investment/ Personal Savings

When starting a business, your first investor should be yourself—either with your own cash or
with collateral on your assets. This proves to investors and bankers that you have a long-
term commitment to your project and that you are ready to take risks.

6. Assistance of Government

Government agencies provide financing such as grants and subsidies that may be available to
your business. Getting grants can be tough. There may be strong competition and the criteria for
awards are often stringent. Generally, most grants require you to match the funds you are being
given and this amount varies greatly, depending on the granter. For example, a research grant
may require you to find only 40% of the total cost.
Generally, you will need to provide:

 A detailed project description

 An explanation of the benefits of your project

 A detailed work plan with full costs

 Details of relevant experience and background on key managers

 Completed application forms when appropriate

Most reviewers will assess your proposal based on the following criteria:

 Significance

 Approach

 Innovation

 Assessment of expertise

 Need for the grant

7. Bank Loans & Overdraft

Bank loans serve as a long-term mode of financing entrepreneurial business. Overdraft (drawing
more money than the account holds.) facility is for a short-term span. Under a bank loan, the
financial institution shall specify the loan tenure.

As well as the timing, amount of repayments and interest rate. The entrepreneur gives some
collateral in exchange for the bank loan. It serves as the ideal choice for financing fixed asset
investments. They offer a lower interest rate compared to a bank overdraft. However, they do not
rank high in the department of flexibility.

A bank overdraft can be of assistance when the bank balance of entrepreneurs fall below the
minimum level. And they can borrow some money from the bank itself in exchange of a high-
interest rate. They are thus ideal for dealing with seasonal cash flow fluctuations or when the
business faces a short-term liquidity crisis.

8. Financial Bootstrapping (using existing resources)

Bootstrapping refers to the process of starting a company with only personal savings, including
borrowed or invested funds from family or friends, as well as income from initial sales.

Here the goal remains to build a sustainable business comprising of committed employees as well
as a growing customer community without having to seek out the assistance of a bank loan.

Various examples of financial bootstrapping are sweat equity, owner financing, joint utilization,
minimization of accounts payable, delaying payment, minimization of inventory, subsidy finance
etc.

You can take the example of gym owner David Osorio of Crossfit South Brooklyn who started his
Crossfit affiliate with just a handful of clients back in 2007.

But over the due course, the bootstrapped operation brought 600 members and 20 employees
under its wings and even got a dedicated space in Gowanus, Brooklyn.

9. Buyouts

This form of corporate finance can alter the form of a company’s ownership. After the company
attains a private status by being freed (release) from the regulatory burdens of operating as a
public firm, the ultimate goal of buyout remains to build its value.

Selling off non-core assets (Non-core assets are assets that are either not essential or simply
no longer used in a company's business operations. Non-core assets are often sold when a
company needs to raise cash.), refocusing on the mission of the company, streamlining processes,
freshening product lines and replacing existing management might thus serve as essential parts of
the buyout drive.
 Record Keeping

Record-keeping is a primary stage in accounting that entails keeping a record of monetary

business transactions, knowing the correct picture of assets-liabilities, profits, loss, etc. In
addition, it assists in maintaining control of the expenses to minimize the expenditure and have
important information for legal and tax purposes.

Steps/Components to Recordkeeping Method

1. Identifying the transactions (identify the business transactions from the source documents)
2. Recording in the journal (Record business transactions and arrange them in the order according
to their Occurrence)
3. Classifying the nature of the transaction (Group the transactions of similar type at one place)
4. Posting to ledger
5. Balancing of accounts
6. Preparing a financial statement (identify the financial strength of and weakness of the business
through profit & loss a/c and Balance sheet)
7. Interpreting the financial statements (useful to the users to take correct decisions)
8. Communicating it to stakeholders

Recordkeeping Examples

ABC Limited is a sole proprietor firm operating small shops in Atlanta. It is trading in clothes
and has its main inflow and outflow as follows:

 Inflows: Sale proceeds from Customer

 Outflows: Material Purchase from vendors and payment of related expenses

For recordkeeping purposes, ABC Limited will have to maintain daily cash books for
maintaining the petty cash and bank balances. At the end of the year, they have to prepare a
profit and loss account and Balance sheet to verify the profitability during the year. It is one of
the simplest ways of maintaining business transaction records.
 Advantages of Recordkeeping

 Permanent and Reliable Record – It helps maintain the permanent record of all the
transactions, which will help ensure the reliability of data.
 Arithmetical Accuracy of the Accounts – Continuous recording of transactions will assist in
identifying any arithmetical inaccuracies that might have occurred—for example, excess
payment to suppliers or double treatment of any transactions.
 Net Result of Business Operations – The profit earned during the given period will be based
on ongoing business operations.
 Ascertainment of Financial Positions – It helps identify the business’s financial position.
 Calculation of Dues – All the outstanding liabilities and dues at a given time can be calculated
based on the accurate financial statements prepared.
 Control Over Assets and Borrowings – It features better control over assets, and borrowings
can be undertaken; this will help manage the funds and various positions of business.
 Identifying Dos and Don’ts – Financial statements help find things that went south and need to
be rectified to ensure better operations in the future.
 Taxation – It is highly recommended and needed by tax authorities. To complete their
assessments, business people have to appropriately maintain the records, which will help
determine the tax liability over them.
 Management Decision Making – Management is highly dependent on the financial records to
plan the business operations. Moreover, they also need continuous reporting by the middle
level about the progress made in finance terms. The financials maintained by the organization
governs all the strategic decisions.
 Legal Requirements – There is a massive requirement of statutes, local GAAPs, IFRSs, etc., to
maintain the proper books of account and ensure transparency.

Disadvantages of Recordkeeping

 Clerical – Recordkeeping is a highly tedious and perpetual job for large organizations. It
becomes tough for them to maintain the same.
 Manual and Monotonous – It is a highly manual job. The same work needs to be carried out
every time the transaction occurs. This makes it a highly monotonous job.
 Subjective needs to be Checked before Analysed – Various accounting aspects like
depreciation, stock valuation, etc., require assumptions that make the accounting highly
subjective. The viability of such assumptions needs to be verified before analyzing the financial
statements.

Recruitment

Meaning:
Recruitment is a positive process of searching for prospective candidates and stimulating them
to apply for the vacant position in the organization. When more persons apply for jobs then
there will be a scope for recruiting better persons.

Challenges faced by entrepreneur while recruiting/hiring new employee

1. Attracting the right candidates

Finding the right candidate that fits the job can be a difficult and tedious task. Hence, we
recorded it in recruitment challenges.

The options are limited when you try to locate the right person in a pool of unqualified
talents and in the end, you often end up settling for a candidate that is the best person at the
time despite them not the best fit for the job. To avoid such situations, the best way is to
form a smaller pipeline of more qualified talent over a larger number of applications.

2. Engaging qualified candidates

Engaging qualified candidates is one of the recruitment challenges. It is important to reach

out to the right candidates and be noticed by them. A well-qualified candidate is swamped
with emails from multiple recruiters. You have to make your email stand out in the sea,
especially when the candidate has several offers under their belt.

3.Hiring fast

While hiring, the recruiters try to fill up job positions as fast as possible because a vacant
position costs them money and it also delays operations, but some industries take a longer
time to hire which makes the recruiters frustrated.

The reason behind a longer duration for recruitment can also be a result of a shortage of
qualified candidates which leads to a real struggle for the hiring the right candidate

4.Building a strong employer brand

Having a strong employer brand is important as it attracts better and top candidates/talent,
engages them, and has better chances to make a quality hire and avoid a bad hire. Hiring is a
complex process and requires a continuous, collective effort. And for enhancing the
employer brand, recruiters have to ensure that candidates are getting good recruitment
experience whether they are hired or not.

5. Creating an efficient recruiting process

The recruitment process can be tricky, so it is mandatory to have an efficient recruiting
process to hire the right candidate. Hiring teams have to communicate proficiently and fast
to easily evaluate candidates, and they should be aware of all the steps during the process.
Their main task is to coordinate all this communication which is not always easy.

6. Recruiting fairly

A company must provide equal opportunities to all candidates to hire the best person for the
job. Also, it is a legal obligation and is a good way to hire a person without the interference
of stereotypes. Many companies struggle to bring diverse candidates on board, and
unconscious biases are one of the reasons behind it. This leads to an inclusive workplace and
diminishes your company's image.

7. Ensuring a good candidate experience

During the hiring process, it is beneficial to provide a good candidate experience as it

increases the chances of the candidate accepting the offer and a bad experience makes them
less likely to accept the job. Positive candidate experience also enhances employer brand
and acts as an integral factor when candidates weigh in on job offers. This makes more good
candidates apply to your job posting.

8. Using data-driven recruitment

The recruiting process can be improved and upgraded using recruitment data and metrics,
which helps in making more informed decisions. But the drawback is that maintaining these
data can be tiresome and require a lot of time. Keeping a track of data through spreadsheets
is one way as it simplifies the data but it requires tons of manual work and can be prey to
human error. So, it is not a very reliable method. It is hard to organize data accurately and
efficiently and keep it updated.

Recruitment Process

1. Identify the hiring needs

 2. Prepare job descriptions
3. Devise recruitment strategy
4. Screen and shortlist candidates
5. Conduct interviews
6. Evaluate and make the offer
7. Onboard the new employee

Step 1: Identify the hiring needs

What are your existing hiring needs? May be an employee just left or a new job position just
opened. Once you identify the vacancies that exist, you can then define the job specifications
such as skills, knowledge, experience, etc.

You can determine your hiring needs by checking

 Any gaps in performance, skills or proficiencies that you need to fill

 A sudden increase in workload that your team cannot seem to handle
 Any employees who will be leaving the company soon

Step 2: Prepare job descriptions

Once you know the skills, knowledge and experience gaps you need to fill, define the job role,
responsibilities and duties.

A complete job description helps you know what to look for in potential candidates. It also
serves as a checklist for candidates to tick before they decide they are suitable for the role and
apply- which means, more relevant candidates.

The elements that should be included in a job description are

 Title
 Responsibilities
 Necessary qualifications and skills
  Compensation, benefits, and perks
 Location

Step 3: Devise your recruitment strategy

This is where you decide how to attract and retain the ideal candidates. Here you should
consider whether you can find a possible candidate from within the company itself or whether
you need to hire from outside.

In your strategy, you need to consider

 The geographical area you’ll be targeting

 The method of recruitment (employee referrals, social media, video interviews, etc.)
 Creating relevant job ads
 Channels for posting job ads (social media networks, job boards, company websites, etc.)

Step 4: Screen and shortlist candidates

Your recruitment strategy was a huge success and have accumulated a sky-high pile of
application. What’s next??

Here are the steps we follow when we face this exact challenge

 First, we sort through the applications to find the ones with minimum qualifications
 Then we separate resumes with the preferred credentials. Here we consider the
applicant’s experiences, certifications, domain and technical competencies, and skills.
 Those candidates who have the minimum qualifications and the required credentials will
be shortlisted.
 If there are any concerns regarding their application, we’d make a note so we can get it
clarified during the interview.
 Step 5: Interview Process

After the application form or the job advert, this is where your potential candidate will come in
direct contact with you. So it’s time to make a good impression on them as a potential
employer.

Step 6: Make the offer

This is the time to check with the candidate’s references. And if everything checks out, you can
make the offer.

However, there’s a chance that the first promising candidate you have selected might not accept
it. In which case, you need to be prepared to extend the offer to the second best or third best
candidate.

Step 7: Employee Onboarding

Then comes employee onboarding. This is where you make the new employee settle in. This
does not only include showing the new person around the office and introducing them to others.

This also includes helping them understand their responsibilities and providing the necessary
resources and training to help them learn.

Objectives/Importance of recruitment

 Refine the quality of your candidates.

 Create a pool of qualified candidates.
 Find candidates who fit your company's culture.
 Streamline the recruitment and hiring processes.
 Reduce employee turnover.
 Encourage leadership development.
 Improve your brand's perception.
Sources of Recruitment

Internal Sources

Internal sources of recruitment refers to the recruitment of employees who are already a part of
the existing payroll of the organization. The vacancy for the position can be informed to the
employee through internal communication.

There are different types of internal hiring in the organization and they are as follows:

1. Promotion: Promotion is referred to as the change of designation of the employee. It

involves shifting of the existing employee to a higher position within the organization and
providing that employee with more responsibility and a raise in pay.

Promotion helps in motivating the other employees of the organization to work hard so that they
also become eligible for promotion.

2. Transfer: Transfer refers to the shifting of an existing employee from one department to
another department in an organization.

3. Employee Referrals: It can happen that the organization in an effort to cut down costs on
hiring is looking for employee referral. The employees are well aware of the job roles in the
organisation for which manpower is required. These employees will refer potential candidates
by screening them based on their suitability to the position.

External Sources of Recruitment:

1. Press advertisement:
A wide choice for selecting the appropriate candidate for the post is available through this
source. It gives publicity to the vacant posts and the details about the job in the form of job
description and job specification are made available to public in general.

2. Campus interviews:
It is the best possible method for companies to select students from various educational
institutions. It is easy and economical. The company officials personally visit various institutes
and select students eligible for a particular post through interviews. Students get a good
opportunity to prove themselves and get selected for a good job.

3. Placement agencies:
A databank of candidates is sent to organizations for their selection purpose and agencies get
commission in return.

4. Employment exchange:
People register themselves with government employment exchanges with their personal details.
According to the needs and request of the organization, the candidates are sent for interviews.

5. Walk in interviews:
These interviews are declared by companies on the specific day and time and conducted for
selection.

6. E-recruitment:
Various sites such as jobs.com, naukri.com, and monster.com are the available electronic sites
on which candidates upload their resume and seek the jobs.

7. Competitors:
By offering better terms and conditions of service, the human resource managers try to get the
employees working in the competitor’s organization.

Motivating and leading teams

Keeping your team motivated is challenging, yet it's a task you need to prioritize for the well-
being of your company. Without your team, you can't run your business; thus, it's essential that
you find new and innovative ways to motivate them on a daily basis.

You need to make sure you are leading them towards a common goal about which they feel
passionate. To do so, you need to operate in an honest and transparent way that makes them feel
 valued. The easiest and most obvious way to do this is to tell them when they're doing a good
job.

5 ways to motivate the team

1. Schedule team-building activities.

To motivate your team, you need to offer them more than just a salary and some vacation time.
You need to be sure that your employees can work as a team to achieve a common goal and
there is no better way to do so than with team-building activities. Team-building activities have
a number of benefits, some of which include:

 Getting everyone out of the office to do something they find fun or exciting

 Contributing to society or a charitable cause

 Getting to know each other on a more personal level

Your team-building activities should bring your employees together and also:

 Help them develop better communication skills

 Push them out of their comfort zones

 Develop team values

 Increase their ability to solve problems

2. Support them.

Without your support, your team cannot thrive. You need to give them the tools they need to
achieve the goals that you have set for them. Support comes in various forms and although
some of your team members may simply need additional information about a project, others
may require more in-depth training to succeed.
 Your support system needs to have the right balance of immediate and long-term support. For
example, you may find that offering regular briefings will help with productivity in the long
run. On the other hand, checking in with those who have tight deadlines and making sure they
have what they need is a good way for you to offer immediate support.

3. Let them work remotely with flexible hours.

We live in an age where working remotely has become increasingly popular. In fact, studies
show that allowing your employees to work remotely can:

 Increase their productivity

 Drive their efficiency

 Lower their stress levels

 Boost their morale

 Increase their engagement

 Reduce your employee turnovers

By letting your employees work flexible hours on a remote basis, you are contributing to a
global phenomenon that many believe will be the future of work. This is a particularly big
motivator for younger employees who, by being offered a fun, flexible, and casual working
environment, have a more positive view of their bosses and the company for which they work.

4. Make the break room enjoyable.

The staff room is a place where your team members go to unwind, grab a coffee and have a
break. It should be somewhere they enjoy spending time; otherwise, they won't have anywhere
to escape to when they are finding their work challenging, leading to a dip in motivation and
lower quality of work.

You need to create a space where your team can undertake activities that will momentarily take
their mind off the stresses associated with their job tasks. Consider creating an area where
 employees can play games in groups of two or more that require some form of physical activity,
such as table tennis.

With this, you'll be:

 Boosting morale

 Creating an immediate escape for employees who are struggling

 Enabling authentic team building

 Contributing to your employees' overall physical health

The break room should be somewhere your team can go to unwind from the eight or nine hours
they spend at their desks each day.

5. Show your appreciation.

When the company achieves a milestone, it's important you inform your employees and
celebrate that milestone together. However, this is not just about celebrating company
milestones. You should show your team members that you value them personally by celebrating
things like birthdays, weddings, births, and promotions, to name a few.

Employees value small gestures. The regular "thank you" or "good job" can go a long way. It
pushes them to continue striving for a high quality and efficient work ethic. You can also show
your appreciation by taking your employees out of the office for after-work drinks or a team
meal.

Financial Controls

Financial controls are the procedures, policies, and means by which an organization monitors
and controls the direction, allocation, and usage of its financial resources. Financial controls are
at the very core of resource management and operational efficiency in any organization.
 The following is a step-by-step approach for implementing a financial controls checklist in a
business:

1. The first step is to assess the company’s current performance in terms of sales, profitability,
and cash available.
2. The next step is to detect anomalies (deviations) in budgets, financial reports, and balance
sheets that could prevent the company from achieving its goals.
3. Further, it requires correcting discrepancies and deviations in financial accounts to bring
the business operations back on track.
4. Then comes regularly updating all of the information, including resource management policies
and procedures, in financial documents.
5. The next stage necessitates a thorough examination of the organization’s operational policies,
such as profitability, expenses, and production volume.
6. The next phase is to improve operating standards and decision-making processes by ensuring
sales, profits, surpluses objectives are met.
7. Finally, it requires making forecasts and setting goals for different scenarios based on the above
steps, including investment and production planning.

Importance Of Financial Controls

Any business or firm, irrespective of its size, operates under a set of principles, guidelines, and
measures. There are many reasons why internal financial controls are a crucial part of strategic
business planning:

1. Encourage employees to communicate with one another and motivate them to adhere to the
company policies for overall process improvement
2. Examine budgets, balance sheets, and financial statements for irregularities and take corrective
measures
3. Improve the efficiency, profitability, and security of the business operations against fraud and
theft
4. Manage financial resources, which are critical for other resources needed for the successful
operation of the business
5. Monitor and measure total cash inflow and outflow, resulting in the process efficiency

Marketing and Sales control:

1. Analysis of Competitor Offerings and Strategies

A small business owner needs to know how his products, services and marketing strategy
compare to local, regional, national and international competitors to retain existing customers
and attract new ones. Competitor analysis involves checking out the new products or services
offered by your competitors, examining their marketing strategies and determining whether
they are succeeding or failing with their businesses. Use this information to adjust your
strategies accordingly. For example, you could hire a mystery shopper to shop at your
competitor's store to acquire information or visit businesses similar to your own in other
regions and speak with their owners to get ideas.

2. Existing Customer Analysis

Another way to monitor and evaluate your marketing is to perform an existing customer
analysis to provide a detailed picture of the types of customers buying your products or
services. An analysis involves gathering data about your customers during or after check out
and then tabulating this information in a spreadsheet for comparison. For example, you might
gather data about your customers such as their geographical location, average age and sex. In
addition, you might gather spending habits data such as average purchase amounts, amount
and type of foot traffic before and after advertising and coupon or discount usage.

3. Testing Research with a Focus Group

Once you identify a target customer base, you can determine the potential success of a new
product or service, the marketing methods needed to promote and sell it and the financial
impact of a planned marketing strategy through prerelease group testing. One example of
testing research involves communication with a focus group of 10 to 15 people from your
target customer base. Ask them to discuss in general the products and services they like and
dislike to help you brainstorm ideas for the future, or ask them to try one of your new products
or services and provide feedback.

4. Customer Opinions and Feedback

Customer feedback is a marketing control technique similar to testing research, but instead of
gaining insight into future products and services, you evaluate customers' opinions of existing
products or services and the marketing methods you currently use. Customer feedback might
involve inviting your customers to complete a survey, offer opinions through a suggestion box
or respond to specific questions in-person or over the phone after they've purchased a product
or service. Other customer feedback methods include asking your employees for feedback and
maintaining a list of the types of products or services customers have inquired about that you
don't currently offer.

5. Cost Analysis and Comparison with Budget

Small-business owners use cost analysis to create an overall picture of the cost of existing
marketing strategies to reduce costs, weed out products and marketing strategies that aren't
working and create a new budget to use moving forward. To perform a cost analysis, look at
the current costs involved with all aspects of your business including inventory, distribution
and the current costs of your marketing strategies. After you determine the costs, compare the
numbers with your existing budget and the costs of alternative marketing methods.

E-Commerce and Entrepreneurship:

Ecommerce, also known as electronic commerce or internet commerce, refers to the buying
and selling of goods or services using the internet, and the transfer of money and data to
execute these transactions.

Benefits of E-commerce

1. E-Commerce Helps You Reduce Your Costs

To have an online store it is not necessary that you have all your products presented in a
physical space. In fact, there are different companies that operate online where they only show
all their inventory through their electronic commerce.

This implies not only saving by not needing a rental or purchase of premises, but also
everything that involves electricity, the Internet, etc. Or if you want to have one so that
customers have a physical space, it does not have to be as large as everything you offer. In
either case, you will be reducing your costs.
2. E-Commerce Helps Businesses Go Global

Directly related to the previous point, this fact allows you to put your products for sale
anywhere in the world. They will not have the explicit need to travel to where you are to see
what you have to offer.

If you are running a physical store, it will be limited by the geographical area that you can
service, but owning an eCommerce website will give you the opportunity to increase your
outreach. It’ll offer your products & services to customers around the whole world, regardless
of the distance and time zone.

Furthermore, this eliminates all kinds of geographical and linguistic tango barriers. Your e-
commerce translated into different languages will allow them to buy from different countries.

With eCommerce and mobile commerce as well, the entire world is your playground. Your
products or services are within reach for a lot of customers who might be sitting in another
corner of the world.

So, if you want to grow your online business worldwide, it is a great idea to start creating your
own online store and localize it in different languages.

3. E-Commerce Can Be Done With Fewer Overheads & Fewer Risk

Starting an online store can mean significantly lower start-up costs compared to a brick-and-
mortar retailer. The retailer or the online business owner doesn’t have to take into consideration
the high expenses of shop rental, hiring a salesperson to woo the customer, utility bills, security
measures, etc.

This, in turn, will enable you to sell your products at competitive prices. Also, having an online
store enables you to enjoy increased profitability with less risk.

4. E-Commerce Can Broaden Your Brand & Expand Your Business

Having an eCommerce store can be used to broaden your range of products/services for sale,
expand your business, bring you more customers, and diversify your sales. It’s the ideal way to
take your brand from a traditional brick & mortar store to an innovative, well-loved one.
With E-Commerce, there is no need to have more than one branch, just one singular online store
allowing you to fully reach customers without having to worry about moving locations, you can
just manage your online business from home.

5. E-Commerce Offers Better Marketing Opportunities

Your eCommerce site is the best marketing tool that you would ever have. Thanks to the
internet, now anyone can market through online tools like social media marketing, email
marketing, search engine marketing, pay-per-click ads, and SEO help you build very useful
links with marketing automation.

For example, with good SEO, your online store will appear in the top results of SERPs. Also,
social media networks will provide you with a platform to engage and build trust with your
customers through reviews and ratings, as well as keep them informed with regular posts about
your products and offers.

6. Online Store Will Stay Open 24*7/365:

Also, one of the great importance of e-Commerce that e-Commerce retailers can enjoy is store
timings are now 24/7/365 as the e-Commerce stores are open 24 hours a day, 7 days a week,
compared to the regular stores.

In this way, retailers can increase their sales by boosting their number of orders. However, it is
also helpful for customers as they can purchase products & services whenever they want no
matter whether it is midnight or early morning.

7. E-Commerce Is Easier & More Convenient

People’s lives are hectic; getting to a physical store means taking a lot of time and effort. So,
starting an online store that means you can fit into your customers’ busy lives, making the
products they want accessible when they want them.

The enjoyable thing about eCommerce is buying options that are quick, easy, convenient, and
user-friendly with the ability to transfer funds online.
“In online shopping, your item is always one click away as opposed to physical shopping where
you may be forced to wait for weeks or months before an item you ordered is
available,” says Heritage House, which sells boy suits online.

Thanks to eCommerce’s convenience, consumers can save lots of time, and effort as well as
money by searching for their products easily and making purchases online.

8. Personalize Your Shopping Experience

If there is one of the clear advantages of having an online store, is to be able to know (and
monitor) what your consumer does. Physically, it would be very uncomfortable for a potential
buyer to enter your store and you were all the time behind him asking what he wants or why he
does not buy your product.

E-Commerce allows you, for example, to know at what point in the process you left the
purchase halfway and even remember that you left it in the middle by sending an email.

This, in addition, can help you to improve your shopping experience for another occasion:
shortening the steps to complete the order or offering those buyer products with similar
characteristics.

9. Improve the Image of Your Business

Among the advantages of having an online store, there is no doubt that it also includes
improving the image of your company. Offering a good online sales platform to users will give
your company a great corporate appearance.

Not only will it prove to be up-to-date, but it will also show interest in facilitating consumer
purchases. For example, it prevents you from traveling to the physical place of sale and allows
you to compare prices from home.

In addition, thanks to what we have mentioned as loyalty or feedback, you can even implement
improvements in your products that customers will value positively
10. Easily Receive Feedback on Products

Have you always wanted to know what consumers think of what you sell in order to offer more
or improve it? Well, the online store will allow you to receive that feedback so you can
implement improvements in your business. Through star ratings, with the possibility of leaving
comments.

In addition, the customer will feel heard after their purchase. There is no better way to thank
you for your confidence in purchasing your company’s products. What’s more, if you offer the
quality you will have nothing to worry about.

Enabling a direct channel where others see what they can expect from a given asset is a great
public exercise of trust in your business.

It’s a lucky day for business owners to have a platform like Ecwid to create their online
store without programmers and designers, sign up now and start creating your online
store!

The Role of E-Commerce in Business and Selling in 2022:

We could see that the role of eCommerce has begun to be very important since the COVID-19
pandemic because, during the lockdowns, everyone has changed their ways of shopping and
started to get almost everything online!

Here is the role of eCommerce in business and selling:

 Point of purchase marketing or point sale: It is more than displaying items in ideal
areas, with eCommerce you can level up your POS systems such as sales analytics,
comprehensive inventory management, 24/7 customer support, and payment processing.
 Lead generation: eCommerce responds to the changes that happen as the consumers
changes and evolve their needs.
 Data gathering and analysis: In order to understand your customers, you need to gather
data to help you better understand them, therefore, you need to integrate an analytics
platform into your eCommerce website.
  eCommerce and content marketing: Because today’s customers expect more from
businesses and brands, you need to have helpful information beyond those available on
your products page. you need to attract them, make them engaged, and inform and
entertain them.

E-commerce Business Models

Electronic commerce, or eCommerce, is a business model that lets businesses and consumers
make purchases or sell things online. There are six major eCommerce business models:

 Business to Consumer (B2C)

 Business to Business (B2B)
 Business to Government (B2G)
 Consumer to Consumer (C2C)
 Consumer to Business (C2B)

Business to Consumer (B2C)

As the name implies, business to consumer (B2C) is when a company markets its products or
services directly to end users. It is the most widely known form of commerce.

In eCommerce, there are five different B2C business models: direct sellers, online
intermediaries, advertising-based, community-based, and fee-based.

1. Direct selling is the most common model. It is when consumers buy products from online
retailers.

2. Online intermediaries are online businesses that bring sellers and consumers together and
take a cut of each transaction made.

3. In the advertising-based model, information is given away for free and money is made
from advertising on the site.
 4. Facebook is an example of a community-based site that makes money from targeting ads
to users based on their demographics and location.

5. Finally, the fee-based model involves companies that sell information or entertainment to
consumers for a fee, like Netflix or subscription-based newspapers.

To implement the B2C eCommerce model successfully, businesses must rely on having a
platform that can be adjusted quickly and adapt to new customer needs without causing delays
in service.

B2B (business-to-business), a type of electronic commerce (e-commerce), is the exchange of

products, services or information between businesses, rather than between businesses and
consumers (B2C). A B2B transaction is conducted between two companies, such as
wholesalers and online retailers.

B2B ecommerce is the process of marketing and selling products between two businesses
online.

The goal is simple: expand customer reach and reduce cost-to-serve to drive more revenue for
your business.

Types of B2B

Supplier-oriented

This model is common for B2B retailers where there are many buyers and few suppliers.
Businesses will often join supplier directories or set up an online sales portal to meet demand
and sell at scale. Suppliers using this model control pricing and the customer experience, which
helps build long-term relationships with B2B buyers.

Buyer-oriented
Buyer-oriented marketplaces exist where there are many buyers and fewer sellers. Buyers in
this case have their own online marketplaces. They invite suppliers and manufacturers to show
their products and accept bids from different sellers.

If you’re a wholesale supplier, these B2B marketplaces are a good way to advertise your
products to buyers and retailers with less marketing effort.

Intermediary-oriented

The intermediary-oriented marketplace involves a third-party that matches buyers and sellers.
The intermediary controls the product catalogs and product information, which means you have
to follow specific guidelines. It also owns the buyers orders, contact information, and
relationship.

Examples of intermediary-oriented marketplaces, also known as “horizontal marketplaces,”

include B2B ecommerce sites like Amazon Business, Alibaba, AliExpress, Rakuten, or
TradeKey.

Business to Government:

B2G stands for Business-to-government, implying the relationship between a business to

government agencies and government institutions. B2G is defined as a sales model when
companies sell products, services and information to governments or government agencies
(such as federal, state, or local agencies).

It should be noted that the B2G ecommerce model has the same definition as B2A (business-to-
administration). Both the abbreviations refer to the enterprise specializing in distributing
products and services to the state.

Example: A small-scale organization offering IT services to a regional government

institution would be an example of business to government service. It comprises all types of
contracts covering goods, services, and data between all business sizes and all government
levels including state, local, and federal.
Consumer-to-Business (C2B)

The consumer-to-business (C2B) e-commerce model allows businesses and consumers to have
a mutually beneficial relationship. It is the opposite of the traditional business setup: In this
relationship, the consumers create value that an organization uses to engage in a business
process or gain a competitive advantage.

The C2B model sometimes caters to independent workers and freelancers who accomplish paid
tasks for a business. Independent workers are people who offer their services or products on a
website specifically created for the purpose of C2B e-commerce.

Example: Freelancers, and Contractors

Benefits of consumer to business

There are many benefits to both consumers and businesses in the C2B e-commerce model,
including:

 Flexibility: Businesses and sellers can define their own revenue parameters, such as the
duration of services, how often payment gets collected or product supply dates. This
offers more scheduling flexibility for freelancers to enjoy while providing their services.
 Higher earning potential: Sellers have unlimited earning potential; they can work as
much as they want and provide their services and product to as many businesses as they
choose.
 Wider reach: Businesses have the opportunity to prioritize how they hire sellers, which
gives them the ability to hire from specific regions, such as where the average income or
cost of living is lower, thereby reducing their costs.
 Variety of work: Sellers have the opportunity to gain valuable work experience with
different businesses across multiple projects, and they have the opportunity to be paid
well for their services.
 Independence: Consumers can provide their products or services to a business without
having to create a business or go into business for themselves.
Consumer to consumer
Consumer to consumer, or C2C, is the business model that facilitates commerce between
private individuals. Whether it's for goods or services, this category of e-commerce connects
people to do business with one another.
C2C business examples include Amazon, Alibaba, and the online sites of brick-and-mortar
stores such as Target and Walmart. C2C – Consumer-to-Consumer. Consumers sell to other
consumers with the aid of an online intermediary who takes a cut. C2C eCommerce examples
include eBay, Amazon Marketplace, and Mercari.
Internet Advertising:
Internet advertising is a set of tools for delivering promotional messages to people worldwide,
using the Internet as a global marketing platform.
Advantages of the Internet Advertising

2. Target marketing- a major advantage of advertising through Web is the ability to

target specific groups of individuals with a minimum of waste coverage. Through
internet advertisements can be targeted to specific customers as per their age, sex,
income, education, hobbies, interests and geographic locations.
3. Message tailoring- as a result of precise targeting, messages can be designed to
appeal to the specific needs and wants of the target audience. The interactive
capabilities of the Net makes it possible to carry on one-to-one marketing with
increased success in both the business and the consumer markets.
4. Interactive capabilities- because the Internet is interactive, it provides strong
potential for increasing customer involvement and satisfaction and almost
immediate feedback for buyers and sellers.
 5. Information access- perhaps the greatest advantage of the internet advertising is
its availability as an information source 24 X 7. Internet users can find a plethora
of information about almost any topic of their choice merely by clicking on the ad.
They can gather a wealth of information regarding product specifications, costs,
purchase information, and so on. Links will direct them to even more information,
if it is desired.
6. Enhancing client engagement- marketers aim is to interact effectively with their
customers and to improve their experience with their brand. This is made possible
through interactive internet ads.
7. Sales potential- Internet advertising campaigns focus on growing sales through the
brand’s website and partner networks. Such campaigns can also simultaneously
pursue conversion and branding objectives. The sales potential of this medium is
increasing over the years.
8. Creativity- creatively designed internet ads can enhance a company’s image and
positively position the company or organisation in the consumer’s mind.
9. Exposure- for many smaller companies, with limited budgets, the World Wide
Web enables them to gain exposure to potential customers that would have been
impossible. For a section of the investment that would be required using traditional
media, companies can gain national and even international exposure in a timely
manner.
10. Stressing brand message- many marketers supplement a traditional ad campaign
with a digital one in order to increase the likelihood that the message will resonate
with their audience and add to their brand image.
11. Complements IMC- the net, both complements and is complemented by other
IMC media. As such, it serves as a vital link in the integrative process.
Disadvantages of Internet Advertising
1. Measurement problems- one of the greatest disadvantages of the Internet is the lack of

reliability of the research numbers generated. A quick review of forecasts, audience

profiles, and other statistics offered by research providers will demonstrate a great deal of
variance-leading to a serious lack of validity and reliability.
2. Websnarl- at times, downloading information from the Internet ads takes a long time.

When there are a number of users, the time increases, and some sites may be inaccessible
due to too many visitors. For many users who expect speed, this is a major disadvantage.
Broad band is helping to reduce this problem.
3. Clutter- as the number of ads proliferates, the likelihood of one’s ad being noticed drops

accordingly. The result is that some ads may not get noticed, and some consumers may
become irritated by the clutter.
4. Potential for deception- the Centre for Media Education has referred to the Web as “a

web of deceit” in regard to attempts of advertisers to target children with subtle

advertising messages. In addition, data collection without consumers’ knowledge and
permission, hackers, and credit card theft are a number of problems confronting the
Internet.
5. Privacy- like their direct marketing counterparts, Internet marketers must be careful in

not impinging upon the privacy of users.

6. Limited production quality- although it is improving, net advertising does not offer the

capabilities of many competitive media from a production standpoint. While the advent
 of advanced technologies and rich media, it is narrowing the gap, the net still lags behind
some traditional media in this area.
7. Poor reach- while the Internet numbers are growing in leaps and bounds, its reach is still

far behind that of television. Majority of Indians do not have an excess to Internet, and
are computer illiterate. So the medium is not able to reach to the masses.
8. Irritation- Numerous studies have reported on the irritating aspects of some Web tactics.

These studies have shown consumers’ discontent with clutter, e-mail spam, and pop-ups
and pop-unders. These irritating aspects will deter visitors from coming to the websites
and looking at internet ads
New Venture Expansion Strategies and Issues:

Definition: The Expansion Strategy is adopted by an organization when it attempts to achieve

high growth as compared to its past achievements. In other words, when a firm aims to grow
considerably by broadening the scope of one of its business operations from the perspective of
customer groups, customer functions, and technology alternatives, either individually or jointly,
then it follows the Expansion Strategy.

The reasons for the expansion could be survival, higher profits, increased prestige, economies
of scale, larger market share, social benefits, etc. The expansion strategy is adopted by those
firms that have managers with a high degree of achievement and recognition. They aim to grow,
irrespective of the risk, and the hurdles coming in the way.
The firm can follow either of the five expansion strategies to accomplish its objectives:

1. Expansion through Concentration

2. Expansion through Diversification
3. Expansion through Integration
4. Expansion through Cooperation
5. Expansion through Internationalization

1. Expansion through Concentration-

The Expansion through Concentration is the first level form of the Expansion Grand strategy
that involves the investment of resources in the product line, catering to the needs of the
identified market with the help of proven and tested technology.
Simply, the strategy followed when an organization coincides its resources into one or more of
its businesses in the context of customer needs, functions, and technology alternatives, either
individually or collectively, is called expansion through concentration.
2. Expansion through Diversification –
It is followed when an organization aims at changing the business definition, i.e. either
developing a new product or expanding into a new market, either individually or jointly. A firm
adopts the expansion through diversification strategy, to prepare itself to overcome the
economic downturns.
Generally, the diversification is made to set off the losses of one business with the profits of the
other; that may have got affected due to the adverse market conditions.
3. Expansion through Integration
Expansion through Integration means combining one or more present operations of the
business with no change in the customer groups. This combination can be done through a value
chain.
The value chain comprises of interlinked activities performed by an organization right from the
procurement of raw materials to the marketing of finished goods. Thus, a firm may move up or
down the value chain to focus more comprehensively on the needs of the existing customers.
4. Expansion through Cooperation-
The Expansion through Cooperation is a strategy followed when an organization enters into a
mutual agreement with the competitor to carry out the business operations and compete with
one another at the same time, to expand the market potential.
 The expansion through cooperation can be done by following any of the strategies as
explained below:

1. Merger: The merger is the combination of two or more firms wherein one acquires the assets
and liabilities of the other in the exchange of cash or shares, or both the organizations get
dissolved, and a new organization came into the existence.The firm that acquires another is said
to have made an acquisition, whereas, for the other firm that gets acquired, it is a merger.
2. Takeover: Takeover strategy is the other method of expansion through cooperation. In this, one
firm acquires the other in such a way, that it becomes responsible for all the acquired firm’s
operations.The takeovers can either be friendly or hostile. In the former, both the companies
agree for a takeover and feel it is beneficial for both. However, in the case of a hostile takeover,
a firm tries to take on the operations of the other firm forcefully either known or unknown to the
target firm.
3. Joint Venture: Under the joint venture, both the firms agree to combine and carry out the
business operations jointly. The joint venture is generally done, to capitalize on the strengths of
both the firms. The joint ventures are usually temporary; that lasts till the particular task is
accomplished.
4. Strategic Alliance: Under this strategy of expansion through cooperation, the firms unite
or combine to perform a set of business operations, but function independently and pursue the
individualized goals. Generally, the strategic alliance is formed to capitalize on the expertise in
technology or manpower of either of the firm.
 5. Expansion through Internationalization
The Expansion through Internationalization is the strategy followed by an organization when it
aims to expand beyond the national market. The need for the Expansion through
Internationalization arises when an organization has explored all the potential to expand
domestically and look for the expansion opportunities beyond the national boundaries.
However, going global is not an easy task, the organization has to comply with the stringent
benchmarks of price, quality, and timely delivery of goods and services, that may vary from
country to country.