Techniques and Strategies for Financing and Valuing your Small Business - Research Paper Example

Expanding your Business Introduction The liberalization of business activities in many countries in modern times has seen the development of many business activities. Many people have realized the potential for financial growth and freedom that exists in excellent management and success of business activities. The process of business growth and development is often a multifaceted process that requires blending of various strategies and approaches. Business owners and managers are expected to ensure that they effectively understand the requirements for success in their different economic initiatives. In this regard, they can come up with effective strategies and approaches that can ensure the success of their businesses. For small businesses, it is important that business owners and managers understand ways of managing some of the factors that often cause stumbling blocks to most start-ups. For a long time, research has shown that many small businesses often fail before they reach their third birthday, which means that business managers and owners have a lot to do in realizing that they enable their businesses to succeed. This paper examines some of the strategies that can be used in ensuring the success of small businesses. Financial plan for the business One of the main ingredients that cause the success of most small businesses is an effective strategy for financial management. Having an effective financial planoften means that a business can effectively manage its expenses, which include paying its staff, buying office supplies and other tools and equipment for the business. Additionally, the process involves effective management of income and other kinds of revenue, so that the business can have an effective system by which it can increase its financial strength. In creating an effective financial plan for the business, business managers have to ensure that they put in place effective systems of ensuring stable income for the business, which could be from its sales. By managing the sales revenue, the business can put its liabilities in check so that it has a good working capital and asset base that can give it an upper hand in negotiating for additional finance from financial institutions. Proper financial management requires that the business adopts proper systems for tracking the daily expenses and revenues (Burns (2007). This involves effective systems of record keeping, so that even the tiniest financial matters can be accounted for in the success of the business. The business owners should conduct a periodical auditing of the books of accounts so that any errors can be corrected. Most often, small businesses fail to take off because their managers ignore small mistakes that later become costly for the business as it runs its operations. Guerrilla marketing strategy for the business Guerrillamarketingstrategiesare supposed to act as effective guides to entrepreneurs’ in the journey towards their business success. According to Hodgetts&Kuratko (2008), with effective marketing, a business can effectively manage the perception that its potential customers often have towards the products being developed. Some of the major problems that face small businesses include limited financial resources, which often mean that the businesses cannot effectively develop and implement strategies that can enhance its competitiveness. Therefore, the businesses often need less expensive and easy strategies, which can be used in solving many of problems and challenges that these businesses face. In this regard, the need for guerilla marketing strategies becomes necessary for these businesses. Guerrilla marketing strategies are therefore important for small businesses in attracting customers and establishing proper relationships with them (Hodgetts&Kuratko (2008). The process of developing guerilla marketing for the small business involves high imagination and energy, which focuses on seizing the attention of people in highly memorable and personal level. The advantage with these marketing strategies for small businesses is that can easily be managed by small businesses in reaching their consumers, which is often through notices and posters on the streets and other public places frequented by people. Some of the approaches of managing these guerilla marketing approaches for small business in contemporary times include the use of social media. Small businesses can often use social media platforms in reaching consumers though marketing and advertisement opportunities. They can create links through which they can inform their potential customers about the goods and services they are offering and other special features, which are essential for the business. Choosing the business location An effective business location is supposed to ensure that the business gets the necessary publicity, which is important for attracting clients to the business. The right choice of location can always be a good competitive strategy for the business because customers can often locate the business with ease, which is necessary for building success. Some of the locations that are essential include junctions, and large intersections, because they often tend to have many people and commercial activities. In this regard, the business can be assured of a large audience, which can be essential for its customers and others that would be willing to try out the products and services for the first time. In choosing the location, priority should be given in clients so that the location that is chosen enables them to reach the business without having to spend a lot of money in travelling. Therefore, before starting a business, a business owner should ensure that he had made proper decision on the best and strategic location so that customers can locate the business and make their purchases. Therefore, theseguerrillamarketingstrategies will involveuse of socialmedia, costsharingadvertisement with othersmallbusinesses, maintaininggoodrelationship with theclients, offering feedback to thecustomers as soon as possibleandoperatinggovernmentpolicy. The same is supposed to be the case with business expansions, which often come as the business grows and expands its influence to reach an expanding customer base. Important decisions in starting a business Beforestarting a small business, there has to an effective decision making process which outlines the most essential approaches that can be adopted before the launch of the business. Some of these decisions include management of resources; in this regard, the business owners have to decide on the resources that are needed for the success of the business (Timmons &Spinelli 2005). They should decide on the right people that should be charged with the responsibility of managing these resources for the business to gain stability in its functions. Some of the resources that need to be managed include financial resources, which are very sensitive for the growth of the business. Proper financial management often means that the business should have effective book keeping for all the revenues and expenditures for the business (Kohn & Kohn 2009). In this case, the business can use these records in negotiating for additional funding from donors and financial institutions. Another important decision making aspect concerns methods of production. Here, the business is supposed to ensure that it has an effective understanding of the market so that the products that are developed are those that meet this demand. There should not be underproduction, because it cause a dissatisfaction among the business clients, who demand certain quantities of the products, on the other hand, an overproduction of the products leads to unprecedented loses since the business may not be ready to dispose the excess goods that have been manufactured. The role of pricing, credit and equity financing in defining a business strategy After products and services have been developed, the final step before releasing to the market for the customers to buy is pricing. Favorable prices are known to be effective competitive strategies for businesses, who are often striving to create and consolidate on their market share. Burns (2007) explain that pricing can simply be described as the process by which businesses use in determining what they receive in exchange for the goods and services that they create. Some of the factors that determine the pricing process for the products manufactured include competition, company brand, manufacturing costs as well as the quality standards that have been followed in the manufacture of those goods and services. Pricing for a business’ goods is a very essential component of the marketing mix, making part of the 4ps, with the others being place, product and promotion. Among these marketing mix elements, price is the only one that generates income, with the rest being centered on costs. However, it is important to realise that the other 4ps play a big role in reducing price elasticity, thus enabling price increases that drives the profits and revenues of the business to great heights. According to Burns (2007), equity financing has often been considered the best approach for small business because it reduces the burden of debts, which hampers the success of these businesses at their young stages. Equity financing often arises from individual savings and donations from close friends and well wishes, which may often not require being paid back by the business owner (McKenzie 2008). However, inasmuch as it’s the most effective business approach for most businesses, external borrowing can also be an essential strategy for these businesses, which often require extra financial muscles to challenge other businesses in the industry and increase their growth and expansion prospects. Therefore, the business owners and managers should be well prepared to fulfill the requirements placed by their financiers in order to get these additional funding. References Burns, P. (2007). Entrepreneurship and small business (2nd ed.). Basingstoke [England: Palgrave. Hodgetts, R., &Kuratko, D. (2008).Small business management. Hoboken, NJ: Wiley. Kohn, R., & Kohn, L. (2009).Selling in your comfort zone: Safe and effective strategies for developing new business. Chicago, Ill.: ABA Law Practice Management Section. McKenzie, F (2008). How to Start and Run a Small Business: A Step-by-Step Guide to Setting up a Successful Enterprise in this Rapidly Expanding Market. Oxford: Oxford Press Timmons, J., &Spinelli, S. (2005). How to raise capital: Techniques and strategies for financing and valuing your small business. New York: McGraw-Hill. Read More