Small Business Management
The process of new business creation always encompasses a huge risk. In fact, it requires the abilities of the entrepreneur to overcome the resistance of the external and internal factors that inevitably arise at the birth of a new company. While creating a business, a person should consider that it is not only the possibility to enjoy the benefits of this initiative but also the responsibility for the efficiency of its operation, development and survival in the competitive market environment. Practically, almost anyone can become a businessman. The key for the success lies in the ability to determine the specifics of the personal entrepreneurial skills and expertise. However, the successful businessman should possess the willpower, commitment and always be focused on the search of new and creative ideas. People passionate with the business who see it as a sense of their lives can create and develop the efficient enterprise. Based on collective and individual experiences received through the interview of the small business owners/managers in the local community, the following paper is aimed to provide the overview of the successful recommendations and strategies necessary to establish the efficient business.
Recommendations for the New Business Establishment
The idea to create the own business is supposed to be one of the most crucial landmark decisions that can be taken in the life of a person. Based on collective and individual experiences received through the research process, the steps have been created and recommended to be done in order to create a successful company.
- Find Inspiration. Every business should be started with an idea. An individual may have dreamed for years to open a business though he/she might have recently embraced the desire. The source of inspiration can be found everywhere, namely in the publications of the official authorities, scientists, business opinion leaders, consumer reviews, competitors’ overviews, research and development activities, etc. However, it should be noted that people always serve as key drivers for the idea implementation. To start a business, it is important to make sure that the idea corresponds to personal abilities and value system. In addition, the good idea should contribute to the following factors:
- The high level of profitability and the return investment rate.
- The possibility of selling products or provision of the services to the maximum extent.
- The low level of capital intensity.
- The appropriate risk rate (Longenecker, Petty, Palich, & Moore, 2008).
Thus, regardless of the source of inspiration, the first step of the business creation implies the decision of the business idea. The example of Viet Nguyen, the owner of the local Tea Caf? in Norman Oklahoma, proves that creation of business may sometimes make the person switch from his original business major.
- Conduct the Research. Since the idea has been chosen, it is time to relate it to the real life environment and opportunities. The analysis of the market environment as well as the research of the tastes and desires of the target market audience can help identify the potential of the business idea success or failure.
The successful small business should be able to satisfy the needs of the customers suggesting the innovative or other beneficial solutions. The questions to answer in the research include the following aspects:
- Is there any need for this product / service in the market?
- Who are the potential consumers?
- Are there any companies offering similar services or products?
- How strong is the competition within the industry?
- How your business will fit in the market? Which niche or segment will it cover?
The aforementioned questions will help to create an initial view of the market as well as to define the steps for the further actions.
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- Make a Plan. It means that to bring the idea to life, it is important to create the precise plan of the actions. A business plan that meets formal requirements is necessary to attract investments (Richbell, Wardle, & Watts, 2006). However, even if an employer does not plan to use someone else's capital, the business plan will help him/her articulate the goals as well as define means and tools aimed to achieve them. It must identify the key objectives as well as the action plan, providing the particular attention to marketing and financing.
- Create Marketing Plan.
The establishment of the effective business requires the conduction of the market research based on the evaluation of the new enterprise’s market opportunities, the demand for the produced products or the provided services as well as the definition of the key ways to promote and advertise the business among the consumers (Kotler & Armstrong, 2007). In fact, the following basic elements of marketing plan should be clearly defined and explained:
- The marketing goals and objectives as well as strategies aimed to achieve the former.
- The pricing policy and channels of distribution.
- The methods of sales promotion and organization of the customer after-sales service.
- The advertising strategy as well as the tools for creating the customer’s awareness and loyalty.
- The strategy of market penetration and expansion;
- The estimated predictions of the potential sales through the specified planning periods.
- Plan the Finances. Starting a small business does not demand much money; it still requires the initial investments. Practically, the following sources can be used to find start-up capital:
- Personal savings;
- Business loans and grants;
- The assistance of the business angels.
- Choose the legal form for the new business. Business owner can register the business as the sole proprietorship (SP), to create a LLC (limited liability), LLP (limited liability partnership) or a closed joint stock company (JSC and JDC) (Stanworth, Purdy, Stanworth, Watson, & Healeas, 2004). The legal form has an impact on the variety of aspects of the business performance and development starting from the rate of the personal responsibility of the owner and ending with the tax payment method. The example of Mr. Nguyen’s Tea Caf? proves that the sole proprietorship is supposed to be the most popular and appropriate form for the small business enterprise.
- Select and register the company’s brand name. The name of the business will play a crucial role in all aspects of its further operation and development. Thus, it is necessary to select the best of all possible variants of the business brand names. The selected name should be checked whether it has ever been registered previously. If it has not, the newly created brand name can be used. However, a domain name should be registered once the name of the company is chosen. For example, Mr. Nguyen’s Tea Caf? has become quite popular brand name in the local community.
- Obtain the necessary licenses and permits. The establishment of any business requires the specific paperwork which always takes time and efforts. However, it is quite important to deal with it. The establishment of the businesses frequently requires the specific licenses or permits. Thus, before the business is started, an employer should reveal what legal papers are required to open it.
- Find the place. It is important to create the equipped workplace, no matter where the enterpriser chooses to work: at home, at the office or any other rented premises. The next step is to supply the equipment and make sure that the location is suitable for business. For example, Mr. Nguyen’s Tea Caf? is located in the crowded place which is supposed to be quite important for the attracting of the target audience.
- Select the accounting system. The efficient accounting system will help to set budgets, manage the business and pay taxes. In fact, depending on the business specifics as well as the available financial resources, the variety of options can be used. For example, an employer can do the accounting him/herself, hire an accountant or use the services of the accounting firm.
The steps listed above can be general recommendations which will help to make the right decisions in the process of the business establishment, contributing to its success and long-term development.
Opportunities and Threats
The establishment of the business requires the precise analysis of the abovementioned aspects since even the well-developed plan or strategy can fail due to the variety of the unpredictable events or risk factors (Mirton, 2012). Thus, the evaluation of the possible opportunities and threats implies the vital importance in the process of the small business establishment.
In fact, risk refers to any event that might happen or not happen. The efficient risk analysis implies the evaluation of all aspects which can become the cause of the perceived risks origin. They include the external and internal factors of risk occurrence, its consequences as well as the consideration of all ways and methods to prevent and minimize the likelihood of the risk occurrence. To reduce the risk and enhance the reliability of the business project, it is essential to conduct the analysis of the business sensitivity towards the risk factors. This means that the degree of the influence of the risk factors on the effectiveness of the business performance such as payback period of capital investment or profitability should be determined. Thus, based on the results of the sensitivity analysis, the founder of the business should plan the process of the business establishment and operation, introducing the prevention actions to reduce the risk. The example of Mr. Nguyen proves that risk factor may include even the differences in the personalities and character traits of the staff members. The success of Mr. Nguyen’s Tea Caf? has been significantly contributed by his ability to manage and overcome the obstacles. Nowadays, 85% of the Tea Caf? employees demonstrate the high level of the professional ethics.
The key components essential for the establishment of the successful business in the modern market implies the knowledge of not only formal aspects of company’s organization and registration but also of the clear understanding of its further follow-up. The well-composed strategic development plan is supposed to be an important component of the business success in the long-term perspective.
In fact, the development of the specific business implies not only analytical but also creative processes based on the consideration of the general laws of business, specific conditions, personal experience, and knowledge of the entrepreneur. However, it should be mentioned that the success of the new company on the market also depends on the idea of the business itself. However, the business success implies not only the definition of the business market place but also the search of the specific niche which has not yet been occupied or underutilized by the competitors. It usually includes the limited scope of business activities focused on the particular customers, allowing the businessman to provide the most effective way to realize the business potential.
Based on the collective and individual experiences received through the interview of the small business owners/managers in the local community, the paper above provides the specific general recommendations aimed to establish the efficient small business. However, despite the latter, it should be mentioned that each business has its unique way of development, which can differ from the recommendations proposed above.