Business Research On Start-Ups

37

Requirement

Business Research On Start-Ups

Solution

Introduction 

In today’s business environment, one of the most trending business structures is start-ups. Startups are small and independent companies which are generally financed by founders or individual financers. Usually, the business ideas of these start-ups are different from the products and services which are being offered by the current business environment. Major sources of finance of these business structures are through small bank loans, venture capitalists, government grants, financing by founders, etc. friend and families of the founders of start-up also provide finance to the business (Lennon, 2013). Usually initial capital is not that high and when a company starts to earn income such income is reinvested in development and growth of the business. Hence at the initial level of the business start-ups have to plan out their expenses in control. At starting level these businesses have to predefine their expenses such as direct expenses, indirect expenses, tax expenses etc. Here we are conducting a business research on the relationship between the cost of doing business, company tax rates, and business start-ups. In this research paper, we will conduct a literature review of views represented by the researcher on this subject matter. We will conduct a critical analysis of each of their views and present our own views on this topic. After that, we will prepare some research questions which could help us in determining the views of other business experts on the subject matter. At last, we will discuss some of the limitation of the research proposal prepared by us.

Project objective                     

The main objective of this project is to evaluate the current trend of business start-ups in Australia and study the impact of tax structure and costs on start-ups. There are limited sources of revenues for start-ups at the initial level and hence it is important to study the impact of tax structure and cost of doing business on these start-ups. Therefore to evaluate this relationship we will prepare a research proposal (Liamputtong, 2013).  

Project scope        

The scope of this research proposal is restricted to start-ups in a business environment. But this research is prepared to analyses of the impact of given factors on all the start-ups working in all over the world. This research proposal is not restricted to start-ups in Australia only. We will discuss the paper issues by authors all over the world in relation to our topic. Hence we can say that the scope of this project is broad in start-ups business industry (Best & Kahn, 2016).  

Literature review 

This literature review is divided into two categories i.e. Relationship between costs of doing business and business start-ups and Relationship between company tax rates and business start-ups.     

Relationship between costs of doing business and business start-ups  

Cost of doing business can be defined as the overall cost incurred by a business organization in manufacturing and selling its products and services. Cost of doing business depends on various factors such as the size of the business organization, customer base, type of products and services offered, cost of input goods etc. In this section of the report, we will analyze various views on the cost of doing business and business start-ups.  
The most important cost that is incurred by an entrepreneur in start-ups is business research cost. The first requirement of initiating is start-up business is searching for a business idea. Generally, the business idea behind a start-up is different from current business concepts in market or such are present in inferior quality. If an entrepreneur already has a business idea then he does not need to incur research cost. But when an entrepreneur is looking for a business idea then he has to conduct a large amount of deterring the trend and taste of customer is the market. For example, if an entrepreneur wants to start a food truck then he would conduct a research on kind of food that is preferred by the people around the prospective location. The cost incurred in this stage depends upon the scope of research conducted by the entrepreneur. The larger the scope the accurate will be the determination of taste and preference of the customers (Storey, 2016). Hence it could be said that cost of doing business in business start-ups starts with research and analysis cost. In my opinion, also the cost of research and analysis is directly related to the performance of start-ups. If an entrepreneur selects an unpopular business idea then the chances of failure of such business will be high as compared to the popular business idea.  
It is true that in recent times there is a boost in a number of start-ups in the country. But it is also the fact that the success rate of these start-ups is not very impressive. Many start-ups fail to convert their business into a success. There are various factors which contribute to such failure such as lack of further finance, change in customer preference, excessive variable cost etc. Here we will discuss the role impact of cost in business on business start-ups. One of the major factors that result in failure of a start-up business is that management of Start-up Company is not able to control the variable cost incurred. Hence we can say that there is a direct relationship between the cost of doing business and business start-ups. These costs should be controlled at every level possible by the management of the company. Financers of the company generally put on providing further finances to such start-up companies. This clause states that further finances will be provided if the company is showing signs of financial development and growth. Hence at the initial level, the company should control the cost incurred by them on non-productive factors. For example, renting a large space where we can manage our work in more small and affordable space is waste of resources and money. The excessive cost incurred on this space could have been used by the company in more productive manner (Lechner and Gudmundsson, 2014). I agree with this point of view as it is very difficult to acquire initial finance for a start-up company and cost saved at initial level can be used as an internal source of finance for growth and development of a business.              
As the business grows there is an increase in indirect and variable costs for an organization. For example, a small paper company can afford to deliver the paper to their customers at the initial level. But as the business will grow and a number of orders increase, they have to hire a delivery man and purchase a delivery vehicle. I similar manner there are various costs that are essential for business start-up companies. Hence a start-up company should keep track of all the expenses and categorize them between essential and non-essential expense. The entrepreneur should not compromise on essential expenses as they are significant and any cut back in this expense can harm the company in long run. Company should implement resources management to form a strategy on the cut back on non-essential expense (Blackburn et.al, 2013).  
Control on the cost of business is not only important for enhancing the financial performance of the company but it can also be used as a tool to gain a competitive advantage over other companies in the industry. All business organizations have limited resources according to nature and size of their business. One factor that can give a competitive advantage to a company is through cost management. For example, the customer will prefer project at a lower price if the quality of such project is same even if one vendor is more popular than others. Hence we can say that cost of doing business has a direct and significant impact on business start-ups.                                             

Relationship between company tax rates and business start-ups

Company tax rates have a direct and significant impact on the performance of small business organizations such as business start-ups. Generally, the start-ups are formed as a company to take advantage of separate legal entity concept. According to this concept, an entrepreneur will not be personally liable to pay off its creditors in case of failure and closure of the business. To take advantage of this concept start-ups are usually formed as company and company tax rates are applicable to such start-ups.
Generally, the tax rates applicable to the company are higher as compared to individuals and business partnerships. This is because the main source of income for any government is through corporate taxes. It is normal for large-scale organizations to pay off taxes at a higher rate as the income of these organizations is very high as compared to small scale companies. For any country, small-scale organizations are the main source of generation of employment and bringing innovation in the business market (Bloch & Bhattacharya, 2016). On one hand, small business organizations are finding the scope for growth and development and on another hand, they have to pay 30 percent of the profit to the government in for of taxes. This corporate taxation on small-scale companies such as start-up companies can be a hindrance to their growth and development. I agree with this point as it is very harsh to tax small scale organization and large-scale organization. There should be separate tax rates or tax brackets as per the revenue generated by such companies. Especially in the first-year operation, there should be a relaxation on taxes as the burden of tax can slow down the growth rate of development of start-up companies. Hence from this evaluation, we can say that there is the negative impact of corporate taxes on growth and development of business start-ups (Dixon and Nassios, 2016).
On 1 September 2016, a proposal was put to decrease the rate of corporate taxation from 30 to 25 percent for the small business organization. 5 percent cut back on taxation will provide a relief to the start-up companies in Australia. This proposed amendment to the bill was passed in 19th May 2017. It is expected that in future this rate would further decrease below 27.5 percent. As per this amendment, this reformed rate will be applicable to entities with revenue of less than $10 million. Various experts have presented their views on this reform to cut down corporate taxes for small organizations (Australian Government, 2017).
This rate cut back is done by the government to increase the overall revenue of the country. There are cases where an Australian small company tends to transfer their profits to the countries where tax rates are lower. This decision is not taken to promote and enable small business organizations to grow and develop in a business environment. It is also seen that this small cut in the tax rate would not have major overall impact small-scale companies as evident from the history of other counties. Various other countries have taken this initiative and it has not shown major impact on the economy.             
According to another expert, the small business organization would have preferred a cut back in policies and procedures rather than a decrease in tax rates. To avail this reformed tax rate, small business owner have to comply with a lot of procedures. This would result in a waste of a lot of time and effort. Majority of start-ups have 4 o 5 employees. If these employees are also are indulged in complying these policies and procedures than there can be a loss of revenue for the business. One positive that can be listed out in this policy of the government is that the scope of small business has been increased. The revenue limit was small business was set at $1 million in 2001 and it was continued till 2016. Now with this reforms business organization earning total revenue of up to $10 million will fall into this category. In my opinion still, this reform will affect only a small segment of business start-ups. This is still unjust for some small business owners. For example, an organization earing 15 million dollars per year would have to pay tax at the same rate as an organization earing $500 million. As per my view, the taxing of companies should be according to income generated by the company. Different tax rates should be applied to companies earning different revenues in an incremental manner (Mahar et.al, 2016). 
Moreover, corporate taxes play an important role in determining the quality of a business and the chances of establishing businesses. Start ups are thoroughly affected by corporate taxes and this is quite natural as a part of the business procedure. The cost of business is an important aspect when it comes to setting up start ups as finance and capital does matter the most in such respects. In the article, “The Effect of Corporate Taxes on Investment and Entrepreneurship,” Djankov et al. (2010) have pointed out how corporate taxes directly impact on start ups and other forms of businesses. The authors have suggested that effect of corporate taxes on business investment and entrepreneurship is one of the most important factors when it comes to setting up a business. It has often been seen that a entrepreneur despite having ample capital for setting up a business, eventually fails in the long run due to problems related to corporate taxation. Djankov et al. (2010) have suggested that “corporate income taxes might differentially affect investment in different sectors, as well as influence the allocation of resources between the formal and the informal sectors.” This is a truth that has been revealed on many occasions. The impact of taxation on start ups is not a new phenomenon and it has been an age long aspect of importance that entrepreneurs cannot overlook or undermine. It has been seen that there are several potential determinant of investment and entrepreneurship (in terms of star ups). Tax rates, including additional taxes imposed on the firm and also the VAT and the personal income tax, the measures of the cost of tax compliance, estimation of tax evasion, property rights’ security, economic development, tax regulation, trade openness, inflation, etc are some of the factors that are directly related to the success or failure of a start up to a large extent. Djankov et al. (2010) have noted that “Some of these factors affect some measures of investment and entrepreneurship, but they do not eliminate the large adverse effect of corporate taxes.” Moreover, there are certain process and problems of business start ups. In this respect, in the article, “The Process and Problems of Business Start-Ups,” Evers (2003) has suggested that entrepreneurship itself is a complex process and the processes like taxation make the process more complex both in the short- and long-run. There is usually not general agreement on the prospect of defining the concepts and variables for explaining the effect of entrepreneurship efforts on start ups. There is little agreement on a stable theoretical perspective in terms of judging the relationship between entrepreneurship and the endeavour of setting up start ups. As Deakins and Whittam have suggested (as cited in Evers, 2003), “the founding of a new organisation is not instantaneous and the process is a largely complex one. It evolves over time, as one must seek resources and compete in the marketplace. In much of the literature, this process of establishing the entrepreneurial start-up is characterized by both uncertainty, in terms of outcomes, success, failure, survival, lack of knowledge and understanding.” It must also be noted that the relationship between corporate taxation and success of a start up is thoroughly integral and intricate. In the article, “The Corporate Income Tax and the Competitiveness of U.S. Industries,” Knoll (2010) has suggested that lower corporate tax rates have been the target of myriads of start ups in the United States. Lower corporate tax triggers business enhancement and this has always been a case in almost every nation where there are ample resources for start ups to flourish. Knoll (2010) has also pointed out that higher corporate tax rates have always been responsible for the reduction in the degree of competitiveness of U.S. corporations. This is a truth when it comes to other start ups in other countries. It has been observed that wherever the rate of corporate tax has been high the competitiveness of the start ups has been low. Moreover, talking about the impact of tax rates on start ups, in the article, “Do tax rates really matter to start-ups?,” Harrison (2012) has stated that the cost to business is thoroughly impacted by taxation and tax rates. What Harrison (2012) has pointed out is that, “Tax rates are a moderate concern – both parties seem to grasp the impact that tax burdens have on small businesses and have collaborated across the aisle to enact entrepreneur-friendly tax laws in the past few years. It remains a key issue, however, because taxes are one of the biggest costs for most businesses, and can be a breaking point for struggling business.” Harrison (2012) has also pointed out an important fact that any tax incentives having potential of reducing tax burdens for startups as well as investors will help in fostering of new start ups (considering the lower cost of business that would be the outcome and result of such strategy. Giving the start up a boost through the process minimizing the tax rate can pave the way for the start ups to grow faster and this would lessen the cost to business. Moreover, it must be said that the cost of business, as it is related to the cost of corporate taxation, has to be balanced in order to help the start ups survive in a competitive market. In a market where the taxation rates are higher than usual, it often becomes tough for entrepreneurs to invest in start ups and this makes the economic situation a vulnerable one. It can be interesting to learn that “Certain changes to the tax code to diminish tax rates for investments made into startup companies (in addition to further lowering capital gains rates compared to earned income tax rates) would probably result in more startups being funded and quickly growing. However, until SarBox (Sarbanes-Oxley) is reigned in some for smaller firms wanting to go public, the IPO marketplace will not be as active as it could be and this exit strategy (liquidity event) is a major consideration for most sophisticated start-up investors” (Harrison, 2012).         
From this discussion, we can say that there is a direct relationship between corporate taxes and business start-ups.

Research question 

Primary question- 
The primary question in our research project is “What is the relationship between the cost of doing business, company tax rates, and business start-ups?” 
Secondary questions-
Doses cost structure of a company can affect the financial performance of the company?
What will be a trend of costs as the business move toward growth and development?  
Will recent cuts in corporate taxes affect the small companies such as business start-ups?       
Is it just to charge large-scale companies and start-ups at sale corporate tax rates? 
What is the impact of corporate taxation at the initial level of business operations?
Recommend some strategies to implement a tax on start-ups for reducing their burden? 
How does taxation rate impact on the cost of business?
How are cost to business and establishment of start ups intricately related?
What is the relationship between company tax rate and establishment of start ups?
Research design and methodology                            
There are two types of researchers i.e. qualitative research and quantitative research. Our research proposal has the quality of both of these research genres. As the relationship between cost of business, taxation, and establishment of start ups is intricate, it is essential to analyze both the subjective and objective views on the concerned issue. It is noteworthy that the concerned intricate relationship is viewed by different stakeholders in different manners and that is the reason why the issue must be evaluated firstly from a subjective perspective and then from an objective perspective. It is due to having a subjective view on the issue that it has been deemed suitable to apply the qualitative research design model. But it also must be noted that there is also a need of having an objective view on the issue of concern. It is due to this need that it has become essential to embrace the quantitative research methodology in the research project. So, considering the facts it must be said that the research is going to be of a mixed genre where there would be an amalgamation of both qualitative and quantitative research designs. 
Qualitative research- 
To conduct the research the researcher has deemed it suitable to apply the mixed research design. This mixed mode would be comprised of both qualitative and quantitative research methodologies. The word qualitative denotes a focus on the qualities of entities and on processes and meaning that are not examined or measured in an experimental way in terms of quantity, amount, frequency or intensity. On the socially constructed nature of reality and on the intimate relationship between the researcher and the study subject that the focus is given by the researcher. Moreover, in the qualitative research it is the situational constraints that usually give shape to the process of inquiry (USC Libraries, 2018). The enquiry is value-based and is more focused in terms of its applicability in the qualitative research methodology. How social experience has been created and given meaning is the basis of obtaining answer to the questions in a qualitative research study (USC Libraries, 2018). One must take into account the fact that “Qualitative forms of inquiry are considered by many social and behavioral scientists to be as much a perspective on how to approach investigating a research problem as it is a method” (USC Libraries, 2018). 
Data collection- 
In this research, data will be collected from primary sources of information. Methods used will be an interview. The objective would be to collect more and more data through questionnaires. 
Sampling technique- we will use systematic sampling to gather relevant and accurate information only. The sample will be selected from the newly establishes start-ups registered in Australia.
Sample size- 
This information will be collected by 50 start-up companies (Tesch, 2013).
Ascertaining the research questions: For conducting the qualitative research, the research question has to be determined first. Focused questions should be used because focus questions are at the core of the actionable qualitative research study. The participants should be asked various questions like why do they think that there is an intricate relationship between cost of business and taxation? How much closely are start ups’ successes related to business cost? Why do they think that lowering the rate of taxation would be helpful for establishing start ups in a more frequent manner?
Designing the research study:
Information would be obtained from the participants and this would be the first step in the research process. The next step would be to ascertain the who, when, where, and how of the study. Some logistical challenges have to be faced by the researcher in the course of collecting data and sustaining the research momentum. The next step in the research would be to determine the venue from which the information would be collected. What would be the research setting that has to be determined by the researcher striving for exploring the concerned intricate relationship. The next step would be to determine the time period in which the research has to be completed. The time tenure of the research study should be determined keeping in mind the value of time and its meaning for the researcher and the participants as well. 
Generating findings:
The information obtained from the research participants would be documented properly. The data would be synthesized and as it is assumed that some responses would be open-ended, treating their pattern properly would be needed. The researcher’s intervention should be almost zero while obtaining the open-ended responses from the participants and this would make the data obtainment process more accurate. 
Validating findings:
Validating the finding would be necessary and in this respect the process of triangulation would be applied. The method would include survey and other resources for obtainment of data. The researcher would also provide supporting evidence to validate the obtained data. This step would help the researcher from avoiding the blame of being biased throughout the research process. 
Reporting:
In a document format supported by a PowerPoint presentation the report would be presented. An inverted pyramid method would be applied to sequence the information collected and to arrange them in an appropriate manner. The main responses would be gathered and following them would be arranged the supporting responses. Confidence intervals would be provided to help the target audience in the process of constructing some specific idea about the importance of the actual research issue. 
Quantitative research –
In the course of conducting the quantitative research, the relationship between independent and dependent variable would be determined within the sample population. The number of participants in the quantitative research phase would be 25 and this small sample size would be needed for proper quantification. The study would be descriptive and it would not entail any experimental process. In the concerned study the associations between the variables would only be measured. 
Data collection-
The here main objective is to collect more data for research. Therefore we would collect information through online surveys and questionnaires. 
Sampling technique-
Sampling will be done through random sampling to save time and give equal chance of selection for each sample of the population. 
Sample size-
The required information will be collected from 100 start-up companies.
Research analysis                                   
The research will be analyzed with the help of expert and extra weight will be given to qualitative data as compared to quantitative data in such process. 
Conceptualizing:
In this phase the literature on the given topic would be explored and then the findings would be conceptualized with the aim of theorizing and reviewing the central ideas in a proper manner. Deductive reasoning would be used in this phase of conceptualization and the process would be firmly ground in previous research studies that had been conducted on the same research topic. 

Review of literature:

The review of literature would be conducted and to contribute to the findings the existing evidence would be interpreted and described. The literature review would provide a firm foundation on which the new evidence would be based. This step would be usually done before the data collection process takes place. 
Formulating hypothesis and variables: Varying levels of abstraction should be measured in a proper manner and the variables would be manipulated and then controlled in the course of the research study. It must be noted that the statements about multiple variables should be formulated. 
Selection of research design: The research study would be based on descriptive quantitative research design. The status of the variable and the phenomenon would be described accurately and hypothesis would be developed after collection of data from the research participants. The data collection process would be observational in nature. 
Data collection:
From the sample population the data would be obtained. Survey with closed-ended questions would be administered and it would also include face-to-face and telephonic interviews along with questionnaires. 
Data analysis: 
Statistics would be used in the data analysis process. The data would be subdivided into discrete and continuous measurements. Variables would be measured and statistical figures would be applied. 
Research Limitation 
Research limitation is the factors in a research which can have opposite impact on the final analysis of the research results. As the sample size would be smaller, it would be difficult to generalize the finding. As qualitative method would also be applied along with the quantitative method; the findings would be difficult to be universalized. Every research has some limitation and in this part of the report, we will list our research limitations. Here are our research limitations- 
Time allotted to complete this research is limited.
Human resource requirement to conduct data collection process is very high whereas we have limited manpower. 
This research is restricted to start-up companies registered in Australia.
Expert opinion is not taken in the research (Silverman, 2016).          
Time schedule (Research plan) 

Conclusion 

The research project is about establishing a clear relationship between cost of doing business, company tax rates, and business start ups. The project would provide the chance to the researcher to indicate the importance of cost of doing business in terms of establishing business start ups. The project will deliver a clear picture on how cost of doing business is related to company tax rates and how these two are related to the cost of establishing start ups. The primary justification behind the project initiation is that, business start ups should be aware of the cost related to the establishment of business and the entrepreneurs must be aware of the importance and impact of taxes on the business and its operations. Such knowledge is essential to ensure that the inception of the start up is heading towards the right direction.From the literature review conducted, we can say that there is a significant relationship between the cost of doing business, company tax rates, and business start-ups. More evidence can be gathered by collecting information from start-ups in Australia in accordance with the research proposal prepared here. We have also discussed some of the project limitations which should be considered by person analyzing the results of the research.

References       

• Australian government.,2017. Australian taxation office. Retrieved from: https://www.ato.gov.au/General/New-legislation/In-detail/Direct-taxes/Income-tax-for-businesses/Reducing-the-corporate-tax-rate/

• Best, J. W., & Kahn, J. V., 2016. Research in education. Pearson Education India.

• Blackburn, R.A., Hart, M. and Wainwright, T., 2013. Small business performance: business, strategy and owner-manager characteristics. Journal of small business and enterprise development, 20(1), pp.8-27. 

• Bloch, H., & Bhattacharya, M., 2016. Promotion of Innovation and Job Growth in Small?and Medium?Sized Enterprises in Australia: Evidence and Policy Issues. Australian Economic Review, 49(2), 192-199.

• Dixon, J.M. and Nassios, J., 2016. Modelling the impacts of a cut to company tax in Australia. Centre for Policy Studies, Victoria University.

• Djankov, S., Ganser, T., McLiesh, C., Ramalho, R., & Schleifer, A. (2010). The Effect of Corporate Taxes on Investment and Entrepreneurship. American Economic Journal: Macroeconomics, 2, 31-64. 

• Evers, N. (2003). The Process and Problems of Business Start-Ups. The ITB Journal, 4(1), 17-41.

• Harrison, J.D. (2012). Do tax rates really matter to start-ups? Retrieved January 22, 2018, from https://www.washingtonpost.com/blogs/on-small-business/post/do-tax-rates-really-matter-to-start-ups/2012/11/02/bf797172-2520-11e2-ba29-238a6ac36a08_blog.html?utm_term=.dbeb89522f31 

• Knoll, M.S. (2010). The Corporate Income Tax and the Competitiveness of U.S. Industries. Penn Law: Legal Scholarship Repository. Retrieved January 22, 2018, from http://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1247&context=faculty_scholarship

• Lechner, C. and Gudmundsson, S.V., 2014. Entrepreneurial orientation, firm strategy and small firm performance. International Small Business Journal, 32(1), pp.36-60.

• Lennon, M., 2013. The startup accelerator trend is finally slowing down. TechCrunch. http://techcrunch. com/2013/11/19/the-startup-accelerator-trend-is-finally-slowing-down.

• Liamputtong, P., 2013. Qualitative research methods.

• Mahar, F., Longridge, J. and He, J.L., 2016. The economic impact of a corporate tax rate cut in Australia. Taxation in Australia, 51(3), p.141.

• Silverman, D. ed., 2016. Qualitative research. Sage.    

• Storey, D.J., 2016. Understanding the small business sector. Routledge.

• Tesch, R., 2013. Qualitative research: Analysis types and software. Routledge.

• USC Libraries (2018). Organizing Your Social Sciences Research Paper: Qualitative Methods. Retrieved January 22, 2018, from http://libguides.usc.edu/writingguide/qualitative