How to Manage a Small Business?
With the help of an entrepreneurial idea, a business is born. When the business starts doing well and expands its horizons to broaden its focus, it becomes a successful company. Every new business in the world starts like a venture, but it can only be made into a successful company if effective management techniques are implemented. No matter how innovative the entrepreneurial idea is, the business will not survive if effective management strategies are not used for planning.
Market analysis plays a key role in running a successful business. In order to effectively manage the venture, one must understand that all businesses are market driven. To fulfill the goal of effective business management, what comes first and foremost is the realization of the fact that an effective business should always focus in a clearly defined market. Otherwise, the business leaves a door open for competition to invade the market and reduce the business’s share. In addition to this, maintaining competitive edge in the market is very essential for a fledgling business. The business must recognize that all the Product Marketing and Development should be consumer-centric.
Marketing plans also play a key role in a business’ success. When an entrepreneur starts a business, he makes a few assumptions about the market and the customers wants and needs. A marketing plan is supposed to confirm the entrepreneur’s suppositions and, more importantly, challenge them. An in-depth marketing plan may reveal that assumptions originally made may not be as accurate as thought and the results of the search might change a lot of decision parameters.
It is very common among young businesses to amend the original product and change plans after a detailed market analysis is done.
In addition to the above mentioned techniques, financial forecasting plays a vital role in the success of emerging businesses. Poor financial planning and wrong focus of resources id a kiss of death for such young businesses. It is a wrong concept among people that a business should be concerned only about profits. However, in order to survive, it should instead focus on Cash Flows, Capital and Budget management.
The company should know, at least, Cash Flow of the next 12 months. This enables the company to raise this forecasted cash along with the capital required to sustain growth. When the company has a store of cash available at its disposable, it can seize the oppurtunities as they present themselves in the market.
According to Peter Drucker, after a sales increase of 40 to 50%, a new venture outgrows the amount of capital structure that it maintained previously. So in order for it to make it to a higher level, the venture must change its Capital and Financial Strategy. When a company projects its Cash Flows forward to 12 months, it determines the amount of cash that will be left behind after a year of operations, and, in case of a deficit, what is the source that will aid the company in covering this shortfall cash. This shows that Financial Planning is ultimately linked to its Cash Flow budgeting.
With the growth of the business and expansion of its cash flows over time, it is necessary that there be an effective control system implemented over various departments of the business. As the company grows, it expands and so should the control system grow in order to bring additional departments in its scrutiny.
Having the right people working at suitable designations is very important. Experience is one of the most important factors that help to manage the growing business in such a way that the success is not short lived and growth sustainability is the single most important management tool. This, coupled with a very good management structure, will enable the company to make progress by leaps and bounds. But where does the founder, owner or for the purpose of a bigger venture, the CEO stand in all this?? Well, he is responsible for the implementation of results and to put a check on all the happenings of the business. The management and the CEO must have good communication channels for effective operating of the business. CEO-Employee meetings enable the CEO to understand the employee’s problems and then find the proper solution.
The sustainability of a young business and its effective management, thus, depends upon proper planning, sound forecasting, derivation of results from the forecasting and then its implementation. Without these tools, the management of a small growing business would fall apart and tumble like a house made out of cards, but if one implements these techniques, success is a sure-shot and realistic destination of the venture.