INTRODUCTION TO SMALL BUSINESS MANAGEMENT

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1 INTRODUCTION TO SMALL BUSINESS MANAGEMENT Starting a small business is not an easy decision. Most people are able to relate a story of a small business operation that did not succeed. Success in running a small business is not just about expertise in your area of specialisation. It will also depend on the marketing skills you have as well as the ability to effectively plan and control your business. You will need to be self-motivated and persistent, even when the going gets tough. Support from your family, friends and former colleagues will be essential. The information in this document is designed to provide you with an overview of the personal qualities required for successful small business management. It also lists some of the key questions you should be asking if you are thinking about: Starting Your Own Business Buying an Existing Business Purchasing a Franchise This material is intended as an overview and guide only and should not be used in isolation. CDL strongly recommends if you are considering Small Business Development as a career option, that you contact a range of relevant agencies to receive additional, comprehensive and specialised support and advice. A sample listing of some of the support services available to you has been provided together with other resources you may find useful as you evaluate the pros and cons of operating your own small business.

2 PERSONAL QUALITIES AND ATTRIBUTES Identify those personal attribute that you bring to the role of a Small Business Manager. I have a high degree of self-motivation I am self-disciplined in my work habits I am enthusiastic and passionate about my area of expertise I am hard-working I am persistent even when the going gets tough I like taking responsibility I enjoy a challenge I am able to recognise and manage stress well I do not worry about financial security I am in excellent health My family and friends support the idea I have a positive approach to life I enjoy flexibility in routine and dealing with the unexpected I am a confident person I enjoy setting and achieving goals I like to use my initiative I enjoy using creative ways to solve problems I can keep both feet on the ground I recognise my weaknesses and address them

3 SHOULD I START MY OWN BUSINESS? Managing your own business frees you from having to answer to the boss but you will still have to answer to other people such as clients, customers, and suppliers. You may make a lot of money or you could face losing everything you have. The advantages of starting a small business over purchasing an existing business is that you will have greater control over your ability to save money. The disadvantage is that the cash-flow has to be built up by you. Before making any decision, do your homework! Talk to others small business owners (both successful and unsuccessful) who started from scratch. Find out what they do well and what they would do differently. Do as much research as you can read, surf the net and take a small business management course so that you are certain that you have the necessary skills, experience and personal qualities to make the business succeed. Too often, small business managers seek advice only when they confront problems and that can be too late! How do I know that I have a good idea or opportunity? Who would be my competitors? What would be my competitive advantage over similar businesses? What are the unique selling features of my product or service? What are the risks? Do I have the necessary financial resources? Do I have the necessary technical expertise to run the business or will I need to contract or recruit other people? Have I had any business management training? Have I prepared a financial plan and budget? Do I know what my break-even point is? What would be the statutory requirements and what would be their potential impact on the business? What form of legal ownership would the business take (Sole Trader, Company, Partnership, Joint Venture) and what would be the personal liability I could face? What insurance cover would I need? What type of location would I choose and what are the advantages and disadvantages involved? Who are my potential existing clients or do I have to develop a client base? How many potential clients would I service? Have I written a marketing plan? How would I market effectively to my clients? Do I know how to cold-call effectively and do I like doing it? What would be my advertising and promotion strategies and costs? Why have other similar businesses succeeded? Why have other similar businesses failed? Where do I want my business to be in five years time? What are my total projected costs? Have I written a business plan and have I included a SWOT analysis (strengths, weaknesses, opportunities, threats)?

4 SHOULD I BUY AN EXISTING BUSINESS? The advantages of purchasing an existing business over starting a new one is that you have an established cash-flow and existing systems. The disadvantages include having to pay for goodwill. Do not enter into an unconditional contract to purchase an existing business until you are sure of the return for your labour and financial investment. Consult with your accountant or solicitor or one of the other agencies available to assist you before committing yourself to anything. How does the business match my interests, personality, skills and long term goals? How do I know that the product or service is likely to maintain or improve its marketability? Is the business in a good location? Why? Why Not? Why is the business being sold and how long has it been on the market? Is the seller freely supplying information? Will the seller become a competitor? Is there a restraint of trade in place? Is the price structure competitive? Have accurate and reliable records been kept? Are there one or more persons in the business critical to its success? What do I know about the stock turnover? Will I be able to continue using existing suppliers? Who are they? Are there new developments in the region that could impact on the business? If so, what are they and what would be the impact? What are the business expenses? Have I analysed the business financial records ( Balance sheets, Profit and Loss Statements, Tax Returns, Purchases and Sales Records, and Bank Statements)? What are the company assets? Is equipment leased? What can be sold? Am I buying the shares or the assets? How have they been valued?

5 SHOULD I ENTER INTO A FRANCHISE? A Franchise is a form of business in which a firm which already has a successful product or service. The franchisor enters into a continuing contractual relationship with other businesses (franchisees) operating under the franchisor's trade name and usually with the franchisor's guidance, in exchange for a fee. How long has the franchise been in operation? How successful is it? What is the financial backing of the person or organisation selling the franchise? What business experience does the franchisor have? What marketing and training support and advice is being offered? How many other franchisees are in the business and where are they located? Are they profitable? Can I talk to the people operating them? What fees are required? What do I get for the fees? What are the geographical and market boundaries of operating the franchise? What do I know about the potential or existing customer/ client base? What market research has been carried out? What is the competitive edge of the franchise operation? Who are the competitors? Are they successful? Why? Why Not? What is the market perception and reputation of the existing franchise? Is the Franchisor willing to provide information and answers to these questions? What training and support is offered?