Good business management is essential for the success of any business organization. It is a creative force which helps in the optimum utilisation of resources of an organisation. The process of managing a business comprises several intertwined elements by which the goals and objectives of the organisation are achieved. Managing a business includes a wide range of activities, from day-to-day operations to long-term planning. It is important that you understand what you are responsible for, and what you can do to make your business run efficiently. An entrepreneur with good managerial skills can convert the disorganized resources of men, money, material and machinery into a productive business enterprise. Managing human resources and managing relationship with the customer's are the most important elements in the whole process of business management. This section highlights what you need to know such as budgeting, protecting your business, hiring and training employees and marketing and sales.
1. Running a business:
Setting goals and successfully managing the ups and downs of daily operations is what constitutes the backbone of any business A small business owner faces challenges unique to the size and function of the business. He has to handle all the challenges of selling, delivering, financing, managing and growing the business with little or no staff, while trying to make it a success. The most important of all is to retain the interest of all stakeholders like customers, vendors and team to build momentum in a short span of time. Running a small business can be hugely rewarding both personally and financially.
(a) Managing Business Finances & Accounting
Managing the finances of the firm in an efficient manner is the most important aspect of managing a business. It means controlling and managing the firm's financial resources. You have to understand the financial concepts and learn about tasks like budgeting, financial analysis and book keeping.
(i).Budgeting and forecasting:
Effectively managing your business' finances is critical to your long term success. Good budgeting and financial forecasting skills can help you control the financial health of your business.
What is a budget?
A budget is a detailed statement of expected revenues and expenses. Your income will include revenues from sales, interest, accounts receivable, and any other revenue sources. Your expenses will include costs such as your payroll, inventory, and insurance.
Budgets are often based on an organization's fiscal year and then broken down by month. On reviewing your budget on a regular basis, and adjusting it as needed, will help you keep an accurate picture of your finances. Developing good budgeting skills can help you:
- Forecast future revenues and expenses
- Identify opportunities for cost cutting
- Ensure you have enough cash on hand to cover upcoming expenses
- Determine a break-even point
- Find opportunities to be more efficient and productive
To be effective, your budget needs to be based on realistic figures and assumptions. Developing a sales forecast can help you build a comprehensive budget.
What is forecasting and why is it important?
Accurately forecasting future sales is a key part of creating a strong budget. Forecasting is not an exact science, but basing your figures on past sales and well-researched assumptions can help you realistically predict future performance. When you are developing your forecast, you may want to look at:
- Past sales figures broken down by month
- New sales contracts and contracts that will not be renewed
- Predictions for changes in the size of your market or in the economy as a whole
If you are a new business, you will need to conduct market research and analyze the sales of similar businesses in your area. Forecasting can help you:
- Make strategic decisions such as when to introduce a new product
- Identify the best time of year for you and your employees to take a vacation
- Calculate how profitable the boom time must be for the business to survive a slump
Financing is important to starting or growing a business. A solid budget tells investors or lenders that you have a well thought-out strategy and plan. A reasonable forecast tells them that you have researched your business strategies and are aware of the pitfalls and how to deal with them. If you want your business to be successful, you will need to develop good budgeting and forecasting skills, or work with someone who has those skills.
(ii) Bookkeeping and accounting
The process of recording and summarising financial transactions is known as 'bookkeeping'. When the data is produced in reports for the use of individuals or companies outside the organisation, the process is called 'financial accounting'. Bookkeeping and accounting are part of running any business. For proper management of a company's finances, the knowledge of accountancy, particularly the principles of double entry book keeping is an essential requirement. Besides, every company is statutorily required under the Companies Act, 1956 to keep and maintain books of accounts. Such books are necessary because they give a true and fair view of the state of affairs of the company. For auditing these books of accounts, it is mandatory for the companies (under the Act) to provide for compulsory appointment of an independent person as the 'auditor' of the company. It is the duty of the auditor to check the arithmetical accuracy of books of accounts and submit its report on the accounting standards and goodwill of the company.
This whole process of financial management gives the true financial position of the company. A good financial standing of a company so indicated reinforces its credit worthiness and competitive position in the market. In a nutshell, the important part of running a business is establishing good financial procedures and systems to monitor the financial health of your business and ensure you meet your tax obligations. They could include:
- Developing good financial procedures
- Obtaining finance
- Financial forecasts
- Reviewing your finances
- Providing credit to customers
- Getting paid on time
It is thus essential for smooth and successful functioning of the enterprise in a profitable manner on a long term basis.
(iii) Marketing and Sales
In order to successfully grow your business, you’ll need to attractand then work to retaina large base of satisfied customers. Marketing emphasizes the value of the customer to the business, and has two guiding principles:
- All company policies and activities should be directed toward satisfying customer needs.
- Profitable sales volume is more important than maximum sales volume.
To best use these principles, a small business should:
- Determine the needs of their customers through market research
- Analyze their competitive advantages to develop a market strategy
- Select specific markets to serve by target marketing
- Determine how to satisfy customer needs by identifying a market mix
Marketing programs, though widely varied, are all aimed at convincing people to try out or keep using particular products or services. Business owners should carefully plan their marketing strategies and performance to keep their market presence strong. A good market strategy helps a business focus on the target markets it can serve best
Most small businesses don’t have unlimited resources to devote to marketing; however, you can still see excellent returns while sticking to your budget if you focus on target marketing. By concentrating your efforts on one or a few key market segments, you’ll reap the most from small investments. There are two methods used to segment a market:
- Geographical segmentation: Specializing in serving the needs of customers in a particular geographical area.
- Customer segmentation: Identifying those people most likely to buy the product or service and targeting those groups.
Marketing mix' is a term which is used to describe the combination of the four inputs that constitute the core of a company's marketing system. These inputs are:
- Products and Services: Product strategies include concentrating on a narrow product line, developing a highly specialized product or service or providing a product-service package containing unusually high-quality service.
- Promotion: Promotion strategies focus on advertising and direct customer interaction. Good salesmanship is essential for small businesses because of their limited advertising budgets. Online marketing is a cheap, quick, and easy way to ensure that your business and product receive high visibility.
- Price: When it comes to maximizing total revenue, the right price is crucial. Generally, higher prices mean lower volume and vice-versa; however, small businesses can often command higher prices because of their personalized service.
- Distribution: The manufacturer and wholesaler must decide how to distribute their products. Working through established distributors or manufacturers' agents is generally easiest for small manufacturers. Small retailers should consider cost and traffic flow in site selection, especially since advertising and rent can be reciprocal: a low-cost, low-traffic location means spending more on advertising to build traffic.
The aforementioned steps combine to form a holistic marketing program. The nature of the product or service is also important in citing decisions. If purchases are based largely on impulse, then high-traffic and visibility are critical. On the other hand, location is less of a concern for products or services that customers are willing to go out of their way to find. The Internet makes it easy for people to obtain goods from anywhere in the world, so if you’re worried about reaching a certain market, selling your product online may do wonders for your business.
If your business involves selling a product, you are probably looking for ways to improve sales. A sales strategy will focus your efforts on your most important customer audiences, existing or potential. Here are the most important things to keep in mind when designing a sales strategy.
- Create a sales plan. Having a document that outlines your sales goals and strategies will help you to stay on track and assess your progress. As you begin to define your sales plan, keep these things in mind:
- Sales goals: These goals should be specific and measurable, not something like selling a million units. Base them on the nature of your product and try to break them down into manageable parts. For example, sell 50 units to end-users in 30 days and sell 100 units to local independent retailers in six months.
- Sales activities: These are your tactics -- how you plan to make the sale. You may say you'll sell direct-to-consumer through a website or via craft shows, for instance. Or this part of the plan may include activities like developing a sell sheet to send to independent retail stores.
- Target accounts: Your sales plan should also include the accounts you want to sell to. If it's end-users, for example, plan how you're going to reach them through eBay, classified ads or your website.
- Timelines: Put dates to all of the above elements so you can define your steps within a realistic timeline. Don't forget that your timelines should be fluid--if you're underachieving, your sales plan can help you figure out why and define the corrective steps you need to take.
- Expand to new markets. Once you have established success in your current market, consider expanding to include other markets. This will open doors to bigger buyers.
- Get the correct buyer: One of your biggest challenges is finding the right buyer within a large organization, so do your homework. If you're experiencing roadblocks, consider hiring a distributor or manufacturer's rep who already has established relationships in your industry
- Be prepared: Develop a presentation and have professional-looking sell sheets ready. Your product should also have packaging that's ready to go.
- Know your target: Understand what products they already carry and how yours will fit in. Don't waste your time pitching to a retailer who's unlikely to carry your product.
- Be patient: It can take up to a year or longer before you see your product on store shelves, so don't get frustrated. And if the final answer is no, try to turn it into a learning experience.
(iv).Human Resources Management
Manpower management is an integral part of the process of the management of a business. It is a pervasive function and is performed by all managers at all levels in an organisation. Today human factor is considered to be the most important resource because the effective utilisation of the other resources of the organisation depends upon the management of the personnel of the organisation.
Human Resource Management is the process of recruitment, selection of employee, providing proper orientation and induction, providing proper training and the developing skills, assessment of employee (performance of appraisal), providing proper compensation and benefits, motivating, maintaining proper relations with labour and with trade unions, maintaining employees’ safety, welfare and health by complying with labour laws of concern state or country.
(i) Orientation or Induction
is the first important step in the process of human resource management. It involves familiarisation of the newly appointed employees to the work environment of the organisation as well as to the fellow employees. The new employees should be oriented to the organisation and to its policies, rules and regulations. An induction or orientation programme is designed to achieve the following objectives:-
- To build up the new employee's confidence in the organisation and in himself so that he may become an efficient employee.
- To develop among the newcomers a feeling of loyalty towards the organisation.
- To foster a close and cordial relationship among the employees.
- To ensure that the new employees do not form a false impression and negative attitude towards the organisation or the job.
- To give the employees the necessary information like facilities, rules etc about the organisation.
The information provided to the new employees, during the orientation process may include:-
- Brief history of the Company
- Operations and products of the company
- Company's organisational structure
- Location of departments and employee facilities
- Personnel policies and practices
- Rules and regulations
- Employee activities
- Grievance procedure
- Safety measures
- Standing orders.
This orientation programme need not be given on the same day when the employees join the organization and it may be given after sometime.
(ii) Health and safety
of the employees are important aspects in an organization's smooth and effective functioning. Maintenance of occupational safety and health is very closely related to productivity and good employer-employee relationship. The organization should evolve a structured approach for the identification of hazards, their evaluation and control of risks.
the newly recruited employees is the next important step in the human resource management process. Training is the process of increasing the knowledge, skills, aptitude and abilities of an employee for doing the specific job in an efficient manner. The purpose of training is to enable the employees to get acquainted with their present and prospective jobs. It makes new employees more productive and efficient in the minimum of time and makes the old employees familiar with new machines and techniques by refreshing their knowledge.
The main advantages of training are:
- Higher Performance
- Lesser learning period
- Uniformity of procedures
- Manpower development
- Economy of materials and equipment
- Less supervision
- High Morale
- Participative Management
(iv) Trade unions
are voluntary organizations of workers formed to protect their rights, interests and thus enhancing their welfare by applying collective action. The trade unions are formed not only to cater to the workers' demand, but also for inculcating in the workers the sense of discipline and responsibility. The following are the important functions of a trade union:
- to secure fair wages for workers and improve their opportunities for promotion and training.
- to safeguard security of tenure and improve their conditions of service.
- to improve working and living conditions of workers.
- to provide them educational,cultural and recreational facilities.
- to cooperate in and facilitate technological advancement by broadening the understanding of the workers.
- to help them in improving levels of production ,productivity,discipline and high standard of living.
- to promote individual and collective welfare and thus correlate the workers' interests with that of their industry.
Companies provide their employees and workers with a variety of benefits. These benefits are basically forms of value or services that are provided by an employer to his employees for their contribution in the performance of the organisation. Such benefits are an important component of a company's remuneration package for attracting and retaining its employees. The benefits serve as incentives to the employees and encourage them to work harder for the organisation. These also help in building up employee job satisfaction.
These benefits may be financial or non-financial, long term or short term, free or at concessional rates. They may include educational, residential, medical, or recreational facilities. Such facilities may be provided individually or collectively and inside or outside the organization. Thus the employee benefits are the comforts and the facilities given to employees to enable them to work in a healthy and peaceful atmosphere.
The employee benefits of a company generally includes:-
A remunerative wage structure
Bonus to the employees
(c)Social security benefits in the form of provident fund, gratuity, medical facilities, compensation and insurance policies;
(d) Different types of Leaves
(e)Voluntary Retirement Scheme.
Risk, insecurity, unforeseen dangers and disasters are incidental to any form of business. This makes insurance is indispensable for any business organisation.
The person/business that gets its life/property insured is called 'Insured/Assured'. The agency which helps in entering into an insurance arrangement is called 'Insurer' or 'Insurance Company'. The agreement or contract which is put in writing is called a 'policy'. An insurance policy provides the following benefits to a business concern:-
- Protection: - it provides protection against risk of loss and a sense of security to the businessmen.
- Diffusion of risks: - as the burden of loss is spread over a large number of people.
- Credit standing: - of the firm is enhanced as the businessman can easily transfer some of his risks to an insurance company.
- Continuity and certainty of business:-if all the risks were to be borne by the businessmen themselves, the business operations would have been uncertain and halting in character.
- Better utilisation of the capital of the firms: - as the Insurance companies take over the risk, it enables the business firm to invest and optimally utilise its capital.
Thus the aim of insurance is to compensate the owner against the losses arising from a variety of risks which he anticipates to his life, property and business.