Business creation is the process by which a person transforms a creative project or idea into a new economic activity. The process may take a long time and involves many phases before the business is ready to be successful. Several aspects of the process are recorded and formalized in a document called a business plan. A good business plan can help a person make the right decisions to bring a product to market quickly and profitably.
Although start-up efforts can create employment and contribute to the evolution of new economies, only about two-fifths of new ventures reach profitability. In a world where the cost of starting a business is high, and the rewards of success are relatively low, policy makers face a difficult dilemma in encouraging business creation.
Fortunately, there are strategies for overcoming these difficulties. The first step is identifying the most promising business ideas. Many entrepreneurs begin by looking for opportunities to innovate products or services that solve a problem. Others focus on developing businesses that make existing products or services easier to use or obtain.
The most important tool to help with this is market research. A careful analysis of competing companies and a determination of whether a demand exists for the new product can greatly speed up the time it takes to reach the point at which the business begins making money.
The surge in business applications that occurred during the COVID-19 pandemic in 2020-21 could be a sign that this trend has turned around. However, it might also be a temporary blip. Historically, new business applications do tend to rise during recessions, when labor and input costs are cheap and competition scarcer.