Producing A Profile Of Small Business Business Essay
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The Micro and small enterprises plays important role in the growth of the countrys economy hence it becomes vital to understand the concept of SME and further there is need to support and understand these businesses. Small businesses with less than 10 employees dominate numerically in UK accounted for approximately 95% of all the business in UK during 2008. Most of the people who run such small businesses are self-employed. These small businesses contribute a lot to the UK economy. At the same time it gives opportunity for people to use their local skill and utilize for growth of the business. For example a person running a restaurant or a café which offers local taste. These small business enterprises are image of local culture, local population and it inherits lot information about a place. Various government regulations necessitate work and expenses that many small businesses cope with and entrepreneurs suggest that small businesses start up with benefit if they could tender for government contracts and support. These small businesses have high potential to improve UK economy if they are made to operate in suitable and economic environment. As per UK section 382 and 465 of Companies Act 2006 it explains a SME for the purpose of accounting requirements. As per the Act having turnover not more than 6.5 Million Pound and not more than 50 employees can be considered as Micro Small Enterprises. The purpose of this report is to design a suitable training program to serve the knowledge of how to produce small businesses. This training module will focus on small business by identifying its Strength, Weakness, Opportunities and Threat. This training module will also provide wide scope on Micro and Macro Analysis where political, economical, social, legal and technological situation will be explained. This training module aims to provide detail knowledge on performance analysis of the SME. It will also account competitor, financial analysis. This training module is committed to provide good knowledge on every aspects of SME. This training module will also explain about importance of stakeholders, investors, financial institutions who can be of great help.
Producing a profile of small business
Starting a business needs a serious consideration on its aims, objectives which may be long term, short term, it can be for profit or for no profit no loss in case of NGO's. Before starting a business it is important to understand the nature of business, type of investment required, type of product to be delivered to customer, whether product has a demand or not, there is a need to understand who are our customers, we need to understand the existing competitors. It is important to understand the Micro and Macro part of the business it includes SWOT Analysis wherein Micro can be considered as strength and business of the organization while Macro are opportunities and threats. SWOT Analysis should be carefully done to ensure that business will have minimum risk once started.
Understanding SWOT Analysis
SWOT Analysis consists of Strengths, Weakness, Opportunities and Threats.
Strengths - Strength means characteristics of business which provides advantage to the organization over others. It could be product portfolio, brand image, financial stability of the organization. Before starting the business one should understand the strength of its business, product or services. It is strength of the organization which is given importance in the market and should be different from others so that a business can achieve competitive advantage over others. Strength should always be considered as positive aspect of the company and should be used maximum to exploit the market and get better business.
Weakness - Weakness is a characteristic of business which puts the company in disadvantageous position over others. Weakness could be limitation for the organization. For example a company may have limited financial resources which might limit the company or future expansion, weak brand image in the market, poor customer service, less trained employees, complex management or some legal abiding. All these weaknesses can affect the business on large and one should try to overcome these weaknesses so that business can run smoothly.
Opportunities - Opportunities are possibilities or certain elements of market that could be exploited to its advantages. Advantage can be anything which could make the business more beneficial as compared to others. For example usage of high technology as compared to competitors can be taken as an opportunity to grab better business, having good product knowledge or expertise can be considered as opportunity. Less competitors in the market can be considered as opportunity, niche market for innovative product can be considered as biggest opportunity. Opportunities can be used as to get competitive advantage in the market.
Threats - Threats are basically troubles or fear factors which could affect or damage the business. One should work hard to minimize the effects form these threats. For example new entry by some other company in same product range can be considered as a threat, increasing competition, and substitute product. Threat should be properly assessed for trouble free business operations.
Analysis of the business using comparative measures of performance
Performance measurement is the vital tool in understanding the status of the business. Performance measurement can be simple comparison with competitors or company working in the same product line, internal performance measurement for example performance of staff, sales volume, production, customer service can be vital parameters of performance measurement.
Finance: Finance plays crucial role in running a business or it can be considered as backbone of the business. It is finance which helps a individual to start up the business. Hence it is important to analyze financial performance parameters such as Return on Investment (ROE), Breakeven Analysis, Liquidity, Profitability, Asset Valuation, Depth Analysis, and Analysis on operating expenses. Using the above ratio analysis technique one can understand the financial health of the business and can gradually increase or decrease expenses depending upon the available funds. For every business man return on investment plays important role. Hence it should be understood that when will the business provide return on the money invested.
Sales: Sales indicate the real status of business. It determines success and failure of business leading to loss or profitability. Sales can be analyzed on monthly or quarterly basis so that necessary improvements can be made to improve the sales by grabbing better marketing shares, improving customer service, changing the price, improving the quality of the product or making other necessary changes to improve the sales. Sales should always be monitored so that necessary modifications in the business plan could be made and apply management skills to improve the business. The management of the business organization should give importance to their internal customers like employees, suppliers, distributors and external consumers to improve the sales.
Marketing: Marketing is important for any product to reach to the customer through proper communication. Marketing team can improve the sales; it can improve the brand awareness, product awareness in the mind of consumers. Marketing is necessary for business expansion and getting better consumer share. Its marketing department which utilizes different advertising channels to promote the products and brand. With effective marketing organization can develop good relations with its consumers, customers. Marketing and Finance both if use effectively can make the business a real success. There can be many types of marketing like online marketing, direct marketing, marketing can be with business to consumers, and it could be between business to business for the purpose of achieving business objectives.
Use of technology:
Technology allows a business to get competitive advantage in the market with advanced technology. Quality of products can be improved, production can be increased, and usage of good technology can lead to reduction in cost involved in manufacturing units. Hence understanding technology with existing competitors can analyze the real performance of the business.
Strengthening and maintaining existing performance
It is important to improve and maintain the existing performance so that existing weaknesses can be converted into strength and threats could be converted in to opportunities. It is mandatory to check the business performance regularly so that new existing opportunities can be exploited for the purpose of profitability.
Keeping ongoing records:
It is important to document every small business activity so that one can easily track the business activity. Performance measurement will be easy in case everything is documented. By having good data it can be audited to find deficiencies and improve on the same. These records can be used for future references and also for making necessary improvements. It is therefore mandatory to record every small transaction for successful running of the business.
It is important to regularly monitor business performance so that any deficiency could be handled well in time. Customer Service can be improved, employee training can be provided. Regular monitoring on the business gives clear idea on the status of the business. Monitoring business gives opportunities for a business man to understand the business on regular basis.
Business should be flexible in nature and should easily accept changes as per need of the market. For example due to advent of new technologies all the businesses are rapidly changing due to usage of new technology. Hence a business should be in position to accept changes such as new technology, training modules, new ways to run the business and other necessary changes which is necessary to survive in the business.
Market Research should be conducted to understand the potential requirement of the market by customers, understanding the competitors, their strategies. It is mandatory to recognize likes and dislikes of our customers, feedback of customers on our product/services or feedback of consumer on customer service provided by organization.
Business Plans and Associated Action Plans:
Business plans and targets remain important parts of every business. These business plans can be short or long term in nature. Management needs to develop plans to ensure the goals of the business are achieved.
To increase market share: Market share can be increased by effective marketing and promotional activities. It is important to make the product reachable to the consumer by utilizing the best distribution and retail network.
To grow it size and sell abroad: Increasing consumer base directly reflects the growth of organization. Organization should also expand, try new markets, it should also look for developing markets where the products or services have better scope.
To survive in the market:
The key tools to survive in the market include quality products/services, excellent customer services. Customer friendly employees who are highly trained and most important attractive prizes will make the business survive in the market.
To improve its image: The image of the company should improve so that it could have a better consumer share. The brand image once established will give better bargaining power in the market. It will give good share of consumers and also will help for launching new products or services.
To motivate its employees:
Employee should be given good training. They should be properly reimbursed. They should be clearly communicated for their job responsibilities. It is important to make friendly relations between employee and management. Monetary and Non-Monetary benefits should be provided for better motivation and retention of the employees.
To maximize profit:
Maintaining high profit is a difficult task due to intense competition it is difficult for organization to maintain prizes on high and get better margins. In majority of market penetrating pricing strategies are used to survive in the market. Launching a new or innovative product can lead to monopoly and lead better profitability. Increasing product quality can help in improving the profit.
Analyzing the impact of proposed changes on the business and the stakeholders:
Changes in the management of the business will have some positive or negative impact. Initially it would be difficult for management to adapt but over a period of time things will get used too. Changes are mandatory due to changing market and economic situation hence it should be focused to make changes for right direction and benefit of the organization.
Any changes in business strategy effecting financial expenses will lead to massive changes in the business. For example additional funding for the business will improve the infrastructure, it will increase the efficiency of the business, increase budget for marketing and promotional strategies will help in improving the brand awareness, increasing the consumer base, management focusing on reducing the operating expenses will lead to improved profitability.
All the above changes will lead to extra work for existing Managers, employees. For example introducing a new technology in the market will require training for the Managers. Hence it will lead to further extra responsibilities for Managers and employees to handle the new changes.
Any changes in the business should not affect the moral of the existing management, staff of the business. It should be ensured that employees are well communicated on the need for changes, it impacts and affects the business. There should be good discussion with the employees and Managers so as to maintain better transparency.
Changes will require new infrastructure, new machines, new furniture's, new staff. Organizations have to buy new things to match with the technological aspects of the business. The production areas will be improved for better technology.
Importance of Performance Measurement
Performance Measurements is the vital part in the business. Performance Measurements plays important role in representing the clear picture of the business. It gives good information on assumed data and real data. It gives regular check for the business to perform and improve. The measurement should be done as mentioned below:
Comparison of actual figures with proposed targets- Comparison with actual figures becomes the first step and time to time comparison gives good information on business activities and management can easily make changes to improve the performance.
Comparison of present figures with the past data- The old data can be beneficial in learning new lessons and these data can be used to compare the business, performance and other crucial factors of the business.
Survey of consumers, market research, feedbacks from Managers, customers, suppliers and employees- Information received from market research, Mangers, Employees, and customers will allow management to make necessary changes to improve the quality of product as per customer likes and dislikes, training of employees if required or any other strategy changes.
Conduct Ratio Analysis- Ratio Analysis will give comparison of Financials. It is the best financial indicator in the business.
Comparison of performances with existing competitors- Competitor Analysis gives real time check of our business activity in the market. Competitor Analysis also protects the business from possible threats.
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