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Wednesday, March 22, 2017

 

Quick Guide To Small Business Success

What it takes to have a successful small business


 
Everyone who starts a small business has high hopes for success, but the fact is most new small businesses will ultimately fail.

All in all, there are just four broad requirements that can almost guarantee your small business success:

  1. A few personal traits shared by most successful small business owners
  2. A viable market that you can tap 
  3. Planning and organizing 
  4. Monitoring and controlling 
Personal traits required for small business success

People with very different personalities have succeeded in business. Hence, one cannot say that there is an entrepreneurial personality.

But there are certain traits that are essential for entrepreneurial success. Here are a few of those traits:
  • A self-starter - This is the essence of entrepreneurship. Employees have a boss to tell them what to do and how to do it. Entrepreneurs must decide what to do and learn the how.
     
  • Persistence - Unless you are able to persist against all the frustrations and adversities that are inevitable while doing a competitive business, you are not likely to see small business success.
     
  • Learning through doing - Without observing the results of your decisions and actions, and learning from your mistakes and successes, your persistence might actually make the situation worse. You might be persisting with wrong actions.
     
  • The habit of planning and organizing - If you don't have the habit of working out the details involved in achieving what you want, and then going out and organizing all that is needed, you might be floating around aimlessly. Aimless activity do not lead to business success.
A market you can tap

First, there has to be a market for what you plan to offer or there will be no business. Second, existing competition in this market must be something that you could handle or you will find yourself driven out of the market.

Whether the market is competitive or otherwise, you simply must know your customers. If you don't know such things as their age, gender, occupation, needs, likes and dislikes, you simply cannot hope to write sales messages that will appeal to them.

Next, you'll need a clear idea about what your customers expect from your kind of product or service. These customer expectations will form the basis on which you develop your sales messages. You can also gain a competitive advantage if you can meet any expectation that isn't currently being satisfied properly.

Finally, you have to know the places your customers frequent, the materials that they read, and the programs they attend or listen to. You communicate your sales messages to the customers at these places, or through these materials or programs. Select the most appropriate medium to communicate.

Planning and organizing for small business success

Although a bit of of forecasting is involved in planning, plans are primarily an expression of your vision. You have some ideas about the business you want to do, the results you want to achieve and the way you would go about these.

Business planning involves evaluating these ideas against the prevailing business realities, including the market, the resources required, and the resources available to you.

The plan also needs to include an estimate of outside assistance that you will need. It will explain your background, what you plan to do, as well as the resources requirements and how you would arrange these.

It will also indicate in detail how you plan to achieve profitability - how you will achieve required volumes, the prices you will be able to charge, and the costs you will incur.

An essential element of the business plans would be estimating cash flows. Initially, there would be cash outflows for establishing the business.

Once operations start, there would be cash inflows from sales. However, until the sales reach a certain level, the inflows would be insufficient to cover all the outflows. There would also be the problem of credit - the credit you receive could be less than the credit you have to extend to customers.

A cash flow statement showing inflows and outflows month by month, incorporating all the above factors, would show how much external financing you would need and when. The same statement would indicate when you would be able to repay the borrowings.

Plans alone would achieve nothing. It is organizing that creates the business. With the clear ideas provided by the plans, you go out into the world of government, investors, bankers, suppliers of equipment, merchandise and services, employees and customers. You would work with them to translate the plans into an operating business.

Monitoring and control of your small business

You have the plans to show how profits are to be achieved. Now you have to compare your actual performance against the plans:
  • Are costs within allowable limits?
  • Are sales growing at planned volumes and realizing estimated prices?
  • Are credit sales being collected in time? 
  • Are unsold stocks accumulating? 
  • Is there any significant change in market conditions? 
Inevitably, there will be variations between planned and actual results. Your task then becomes identifying the factors that caused the variance and taking the necessary actions to ensure profitable operations.

For example, if costs increase, you might have to increase your selling prices. If local demand declines, you would explore new markets.

Effective control is exercised not by bossing people around, but by setting standards, checking performance against those standards, and taking appropriate action in time.

Conclusion

Small business success is achieved by:
  • Assessing yourself to improve your success traits
  • Assessing the market for demand and competition 
  • Meeting customer expectations and publicizing this fact
  • Making detailed plans and implementing these  effectively
  • Controlling performance through monitoring and timely action.

About the author:

Gopi Nathan is a qualified management accountant who worked in finance positions before starting out on his own as a computer applications developer.


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