The Process of Business Creation

Business creation is an economic activity, and a fundamental element in market economies. It contributes to job creation, income growth, adaptation and innovation. But the start-up process is costly in time and money, and about two-fifths of all nascent ventures do not reach profitability. Policy makers have a strong interest in boosting participation in business creation and increasing the proportion of start-ups that become profitable. Nonetheless, efforts to increase business creation may significantly increase social costs.

Starting a business involves many activities and steps, including carrying out a market study, drawing up financial forecasts and choosing a legal form. Entrepreneurs are also required to constantly innovate to keep their businesses up to date. The Dyson vacuum cleaner, the ride-sharing companies Uber and Lyft or Gillette’s Mach3 razors are some examples of successful innovations.

The process of business creation starts with the idea. This can be an inspiration for entrepreneurs who want to capitalize on current trends, or it can come from a specific project the entrepreneur is passionate about. Once the idea is validated, the entrepreneur can start carrying out his or her penetration strategy in the target market.

The research literature provides a great deal of systematic information about the start-up process and the characteristics of those who engage in it. This information is highly relevant for adjusting public policies to facilitate entrepreneurial activity.