What Is Business Creation?

Business creation is the beginning of a firm’s life course. It may be a short, intense, and hectic period or it may take years of trial and error development to arrive at a useful product or service.

New business creation is a risky and demanding activity that can be very costly for those involved in it. Almost all start-up firms fail, and only two-fifths of those that do reach profitability are still operating after a few years. Even so, many people consider it worth the effort and risk to create their own businesses.

Some observers believe that downturns are good times for people to start new businesses because they are less competitive, and inputs (labor, supplies) are cheaper. However, most people only want to start a business if they are certain that it can be successful and last in the long run.

Identifying potential customers, creating a business plan, and taking steps to make the business official are some of the important steps to starting a new business. Market research is another crucial aspect of this process and can help to determine if there is enough demand for your new product or service before investing the time and money to create it.

While there is a lot of anecdotal and statistical evidence about the success stories of individual entrepreneurs, systematic data on the business creation process have only recently become available. These data provide substantial and valuable information about the business creation experience that is directly relevant to those interested in adjusting public policy to facilitate entrepreneurial activity.