Key Decisions Needed to Start a Small Business - Essay Example

Expanding a Business Behind every successful business, there is a hidden laid strategy that the business management has to take their business to the highest heights of success. Therefore, my paper will be of importance to every young entrepreneur as it will act as guidance and motivating object to every business activity they indulge into. Moreover, success of a business involves taking risks. Therefore, I have arranged my paper in a simple and clear strategic points that include, activities and critical decisions to start a business, key financial management to consider, marketing strategy, role of pricing, credit and equity financing and finally uses of technology and information resources in management. Necessary Activities and Key Decisions Needed to Start a Small Business a) Developing an Business Idea Starting a business is a common idea that is in minds of many people, but few do because many people fear failing after initializing the business with huge capital. However, I bet the paper will be useful to those who fear to start a business. Foremost, it is important to note that the course of action followed to begin a business often decide whether it will be successful. It resumes with an idea and end with a cautious study of information to set up whether the scheme can be successful. Therefore, every business starts from the idea. The ideas have various sources such as interests, hobbies and business expertise that regularly give entrepreneurs ideas for new businesses while magazines and books suggest new business opportunities. Generally, idea and experience are key objectives here and the experience can be achieved via training in a variety of businesses operations that will prepare the entrepreneur for the task of responsibility for decisions and opportunities to lead people. b) Choose the Right Time and Place Deciding on right place and time in putting ones idea into action is very vital during starting of a business because most retail businesses require good customer traffic to enhance accessibility in order to retain as many potential customers as possible as opposed to a business that accessibility is difficult. On the other hand, place and time are important in acquiring inputs for the business in order to reduce the cost of production and increase the revenue. Therefore, a business should be set up near the sources of its raw materials that may include goods and services. Moreover, the business should be located in a place where it can easily dispose of its waste products in order to prevent environment pollution for the surrounding habitats that may include animals and people. Therefore, deciding on a suitable place will help in reducing cost of transporting finished goods, accessing its raw materials and getting rid of its waste efficiently while timing will help the entrepreneur(s) to initiate their business(es) during a period when customer demand for certain goods or services is high hence making the business successful. c) Seeking Guidance and Assistance Since many small business owners are quite independent, it is advisable that they practice team approach. It is crucial to note that running a business ignoring the help from others is not easy since regardless of how small a business is, there is need for a few part-time or full time staffs to expand or cover extended time. Therefore, choosing members to work with as assistance and seeking guidance from people possessing specialized business knowledge and skills is also essential initial business decisions. d) Research and Preparation Research and preparation are other last activities needed for starting a small business. Preparation will include having adequate information to make best decisions. Therefore, an entrepreneur is required to prepare a presentation that contrasts and compares all activities required to start a business. During the research, information about competitors, customers, government regulations, vital operations and other tasks is needed to make sure that decisions are made independently. Key Financial Management Considerations in Operating a Small Business Managing finance during operation of the business is another key issue that should be handled carefully because finance holds a big contribution to day-to-day operating of the business. Moreover, considering that small business do not enjoy economies of scale that has huge returns on revenue of the business, high financial management is required to support the business operation to achieve growth or expansion. Therefore, to ensure finances is well managed, small businesses are required to have financial statements that are inspected within a set certain duration recurring to ensure there are no frauds, deceit and misrepresentations in every transaction that is performed by the business. a) Documentation of every transaction Keeping financial records would be done according to business acquisition in terms of assets and stock. Determining the value of assets will represent the financial value of a business at every financial statement and will help to measure whether the business is progressing in a profitable operation, or it is making loss. Therefore, financial performance is traceable and whenever the business is making loss, the owner can trace where the loss is coming from and a control measure is implemented to solve the problem immediately. b) Preparing a financial budget Small businesses are often faced with the problem of limited resources and to be able to carry out its daily operation without straining and meeting its objectives, budgeting will provide the best solution and backup. A budget is a quantitative plan of future intentions. Therefore, the process of developing or preparing future plan for certain intentions is required be adopted by a small business owner in order avoid unnecessary financial expenditure. Additionally, proper budgeting should be done in order to ensure adequate circulation of resources within the business. Therefore, it is vital for small businesses to prepare a budget that involve short-term investments since long-term investment involves a lot of funds that may not be readily available, holds capital for an extended period of time and are not easy to avoid once the business have been committed while short-term investment will work the opposite of the long-term investment. Therefore, any slight mistake that could affect the direction of growth and the magnitude of the firm profitability would be easily controlled. Lastly, budgeting will be able to control capital investment decisions. Marketing Strategy for Small Business Guerrilla marketing strategies should act as entrepreneur’s book and each small business owner should often have cross to him or her. It is via marketing that the business can win and retain the perception of the potential customers towards their goods and services. Small businesses are faced with the problem of limited finance, therefore, easy and less expensive strategies intended to make huge profits for small business are required to be adopted and guerrilla marketing should be done intensively in order to attract more customers and establish good relationship with them. Therefore, these guerrilla marketing strategies will involve use of social media, cost sharing advertisement with other small businesses, maintaining good relationship with the clients, offering feedback to the customers as soon as possible and operating government policy. a) Use of Social Media Many people have joined social media such as Facebook, tweeter and other programs where they are communicating online worldwide without incurring any cost of communication. Therefore, small business can quickly post their advertisements such as catalogue of the items they offer with their prices online and by doing so, they are able to win more market segments and penetrate wide in the market. Moreover, they would be able to compete with the large-scale operators in the market. Example of a well-known website is OLX; therefore, small business can sell their products online to a wide market without incurring the cost of advertisement. b) Cost Sharing Advertisement One of the ailing action that is leading to insolvency of many small businesses due to lack of market for their products, is operating as a single unit and yet most have limited resources. Therefore, merging with other small businesses to share the cost of advertisement will be an appropriate step to enlarge the markets for their goods. They will be able to meet the cost of reaching potential customer and attracting new ones by penetrating the market via advertisement. c) Relationship with clients When potential clients are retained properly, there is an opportunity of attracting other clients into the business. Therefore, small business should maintain a mutual relationship with their clients who in return can support them financially and enable the businesses meet the cost of their operations that include marketing their products to the people in the market. d) Instant Feedback to Customers When the businesses offer instant feedback to the customers, it secures its trustworthy from the shareholders. Therefore, small businesses should be able and willing to reply instantly to any complaint about its goods and services that it offers to the consumers and when the business is able to meet the demand of its customers, it markets its name to potential and new customers. e) Observing Government Policy It is the requirement of every business not to go against government policies during its operation. Therefore, marketing strategies should meet government regulations to avoid receiving government order to dissolve the business. Some of these policies include marketing legal products, using favorable advertisement programs and offering health goods for human consumption. Role of Pricing, Credit and Equity Financing in Defining a Business Strategy During launching of a business, the price of goods is a determine factor for the customers. Therefore, favorable price should be set for goods and services reflecting the purchasing power of the customers and the period of sales such as boom or recession. When starting a business, an entrepreneur is supposed to set price reflecting the prices offered by the competitors for every similar good and service. On the other hand, the price of goods will be determined by the cost of production of the good to the finished good that should be higher than the cost of production. On the other hand, credit would be used to attract customers who are credit-worthy while the business can also initially take goods on credit from the manufacturers and pay at a later date depending on the agreement. Additionally, small equity financing is important as it can be used as capital to expand a business especially when it has limited capital for expansion in order to meet the customers demand. When the business as able to make huge profit in the first phase of its operation, it is able to borrow loans from financial banks and Non-Government Organization as it provide credentials of its good performance as it can also use its assets as collateral for borrowing loans to expand its operations. Overall, with the evolution of e-commerce, business operations have ultimately been simplified while the customers have also been able to obtain the businesses features that include location, products offered and their prices within a click of a button. Therefore, the is an encouraging factor to small business owners as marketing of goods and services have become less expensive and this has a positive implication to the cost of production for goods and services they offer worldwide hence promoting globalization. References Gates, B., & Hemingway. C. (1999). Business at the Speed of Thought: Using a Digital Nervous System. New York, the Cambridge Publisher 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 Read More