Small business is at the center of the interests of modern society, affects the life of the entire population. Few sectors of the economy could function without its endless stream of products and services. And what is especially important, its activity initiates inventive and innovative activity: research shows that the main ideas and inventions are more often coming from small than from large enterprises. Creativity of small enterprises will promote the dissemination of new products and services for consumers.
Contrary to popular belief, small businesses thrive in the shadow of big business. One study shows that, as a rule, small-scale production is more profitable than large processing companies.
Most people would like to do business on their own, but only a few do it. Of those who do it. Also, few succeed. However, the opportunity to become a successful entrepreneur is very real. Chances are favorable for those who strive for difficult goals. Such people also, most likely, are innovative, take a reasonable risk, are self-confident, hardworking, know how to set goals and are responsible.
Other social factors also seem to affect entrepreneurial success. Psychologists say that entrepreneurs more often had parents who set high standards of children’s performance, helped develop self-reliance skills and were not in favor of strict discipline.
Opportunities and trends
Although small businesses thrive in almost every branch, in some it takes a stronger position than in others. The requirements of each major group of industries – initial financial investments in personnel, materials and equipment determine how sustainable the small business will be in them. Judging by the number of employees, small businesses predominate in three of the four main groups of industries: wholesale, retail and services. Less strong is the position in production, mainly because of the large cash needed to start the business.
Life in the next century will be very different from today’s life. The rapid growth of knowledge will constantly cause changes, at an increasing rate and mainly due to computerization. Ambitious entrepreneurs need to understand the trends in the industries in order to better prepare for the use of emerging opportunities in high-, medium-, low- and non-tech industries.
Search for a new business
Future entrepreneurs can do their own business in one of two ways: acquiring an existing enterprise or creating a new enterprise. But before choosing one of the ways, entrepreneurs should answer the question: “What business should I do?”. A reasonable answer will require entrepreneurs to carefully consider both their own capabilities and industry trends.
Drawing up a business plan
One of the most important steps on the way to creating your own enterprise is the development of a business plan by a beginner entrepreneur. The business plan allows you to assess opportunities, costs. Difficulties and requirements for those who decided to start their own business, create an enterprise and ensure its functioning.
To compile a business plan, the entrepreneur must collect information. The plan will be successful or unsuccessful, depending on the completeness of the information collected by the enterprise. But first of all, the entrepreneur should obtain information, on which the drawing up of operational plans for his enterprise related to production, marketing, organizational structure and legal form depends on. Operational plans, in turn, are the basis for drawing up a financial plan.
All new enterprises need the services of lawyers, and a beginning entrepreneur should not neglect the legal aspects of business. An entrepreneur should apply to a lawyer a few months before the start of the operation of the enterprise, and before choosing a lawyer to collect credible recommendations. This lawyer must necessarily have experience working with new enterprises.
One of the first decisions of the entrepreneur is connected with the choice of the legal form of organization of the enterprise. On whether he chooses a single possession, partnership or corporation, the amount of taxation, the possibility of bringing to justice, the probability of automatic liquidation with the death of the founder, as well as a variety of financial and managerial issues, largely depends.
Location of the enterprise
The entrepreneur often allows his preferences and preferences to influence the choice of place. However, one should not give them too much will, so as not to miss the shortcomings of a particular place. Moreover, an entrepreneur should study his markets with close attention to all details.
Financing the activities of a new enterprise is often tied to an entrepreneur with severe trials. This is due to the inability to reasonably assess their needs for money, as well as the lack of ideas about where it is more expedient to obtain the necessary funds.
Drawing up a business plan is not yet a guarantee that the entrepreneur will receive the necessary funds. The creditors and investors, however, increases the chances of the entrepreneur. Nowadays, investors and creditors rarely satisfy the demands of entrepreneurs if there is no cash estimate in the business plan.
There are many sources of money. To obtain the share capital, you can use:
- companies for risky capital investment;
- companies for investing in small businesses;
- large enterprises;
- friends, relatives, and most importantly, the entrepreneur’s own means.
To obtain loan capital, you can use:
- commercial banks and other private lenders, including financial and insurance companies, friends and relatives;
In general, entrepreneurs are left alone. They can not afford to use the help of specialists that large corporations have at their disposal, so they should be resourceful and use the help they can get.
The organizational plan should consist of two parts, one of which is devoted to the internal, and the other to external assistance. In determining internal assistance, entrepreneurs must determine who does what, who has what authority, and who obeys whom.
In the process of selecting suitable employees, entrepreneurs should take into account not only job descriptions, but also the presence or absence of such features as flexibility and willingness to perform various types of work.
Accounting allows entrepreneurs to make better decisions, supplying them with the information needed in the management of the firm. Among other things, accounting allows entrepreneurs to find out how profitable their enterprise is and how reasonably they have disposed of the money resources entrusted to them by investors and creditors.
The accounting system does not need to be improved. There is no most perfect accounting system applicable to any business – large or small. The final product of accounting is the following financial statements:
- a profit and loss statement that shows how profitable the enterprise is during a certain period;
- balance sheet, indicating the financial well-being of the company at the moment;
- cash budget, predicting outflow or inflow of cash in the enterprise.
In order to disassemble the accounting system for your company, an entrepreneur should apply for help to an accountant. Then he must give the accountant freedom of action so that he can make changes in the accounting system as the enterprise grows and attract new funds, preparing special financial reports for future investors and creditors.
The goal of marketing is the movement of goods or services from the entrepreneur to consumers. To do this, the entrepreneur can use a wide range of methods, each of which is closely related to the others:
- marketing research;
- sales channels;
- personal sale;
- sales promotion;
Marketing research is perhaps the most important of these tools. Prior to the formation of its marketing mix, the entrepreneur must first obtain information about the market that interests him, which will help him answer the following questions:
- What products or services should you sell?
- Where to sell and at what price?
- What are competitors selling, who are they and how strong?
Answers to these questions give the entrepreneur reliable information about what should be the marketing mix. This complex is a combination in different proportions of sales channels, prices, advertising, personal sale, promotion and publicity in such a way that they provide the maximum profit with minimal operating expenses.
Procurement and inventory
The question of how successful entrepreneurs are in purchasing and managing commodities, can determine whether a business is profitable or unprofitable. Along with finance, marketing and production, procurement activities are one of the most important functions of the manager. On average, more than 50% of every dollar of sales is spent on the purchase of materials and services.
Entrepreneurs should plan and control purchases with the same attention that they pay to other areas of the enterprise. Their task should be to purchase goods and services of the right quality, at the right time, at the right supplier and at an affordable price.
As a rule, the turnover of inventories is the optimal criterion for the effectiveness of the enterprise’s activity in the management of purchases and inventories. The turnover indicator, equal to the average for this industry, indicates a fairly favorable management of purchases and stocks.
In most branches of the economy, inventories and their acquisitions are of equal importance. Without sufficient reserves, the enterprise can lose customers and not provide the promised services. And in order to plan and manage their stocks, entrepreneurs must balance the conflicting interests, such as obsolescence of goods, a reduction in investments in inventories and the provision of high-quality services.
Entrepreneurs should protect themselves and their businesses from unforeseen developments that may paralyze activities or stop the growth of an enterprise.