Small business management is a process that refers to the process of coordinating and aligning all the aspects of a small business, be it managing supplies, employees, business finances, its roadmap, or performing daily tasks. Managing a small business is a hectic task that presents complex and unique challenges for the owner and demands mature responses. Besides knowing the basics of small business principles, you also need to understand human resource management, financial management, and the laws and regulations related to business.
What is a Small Business?
Before discussing small business management, it is necessary first to comprehend what is a small business. As per US Census Bureau, about 99.7% of companies in the United States of America are small businesses. There is not a unified definition and consensus of what a small business is. Still, the Small Business Administration (SBA) considers a small business company if it has fewer than 500 employees.
Except for the number of employees, the SBA also considers other factors to determine whether a company is a small business or not. For instance, is it independently owned? Does the business have a headquarter? Is it a minority player? Does the company operate in the US? Is it a profitable venture? These are some additional questions used by SBA.
Now a question arises that why businesses are categorized. The management and operational issues of small businesses are different from large companies, which is the answer to this question. Another benefit of defining yourself as a small business is that you can get business loans and win contracts from the government.
Moreover, you can also get help and access to tools that will lend you a helping hand in competing with those large businesses. If we compare small businesses with large corporations, the former has a limited budget, far less bureaucracy, and dealing only in a small geographical area. Their focus is mainly to use innovative and creative methods to create better products and services and provide high-quality customer service. Let’s now come to what small business management is.
What is a Small Business Management?
From creating a business, managing employees, determining funding requirements, advertising and managing your time, and overseeing the market, small business management means coordinating all aspects of the business to ensure that it achieves success and keeps growing.
But there is a list of things you should know about small business management, which is given below:
• Create a Business Plan:
To create an effective business plan, you should outline your objectives and goals and provide a succinct description of your business, services, and products. Further, the market details you want to enter should also be included. Sales plans, marketing, and financial projections are also necessary to create a compelling and vibrant business plan. Review your business goals daily to know what’s been achieved, what’s changed, and what needs to be overhauled and revamped.
• Separation of Personal and Business Finances:
Another essential thing to keep in mind is that it is imperative to keep separate personal and business finances. As taxes for business and you are calculated separately, personal account and business transactions should be kept separate to maintain business calculations.
• Determine Funding Requirements:
When you start a new business, funding the operations of the company is what is the most important and is your topmost priority. Be it a personal investment, business incubators, angel investment, government grants, or bank loans. It is necessary to comprehend the criteria they use to evaluate these funding sources’ business and the pros and cons.
• Right People for the Right Job:
Another essential thing to keep in mind is to hire the right people for the right job. If you want your business to expand and thrive, you need to employ high-energy trainable, and motivated people who are looking for the success of your business rather than making a quick buck. In addition to this, as a small business owner, you need to know how to get valuable and industrious employees by offering them perks and privileges such as handsome salaries, happy hours, flexible schedules, and team-building activities.
• Training of Your Employees:
After hiring the right people, another critical task is their training. Even if you hire the most innovative people in the world, they will take time to figure out how to put things together and use them to achieve long-term goals and understand the ins and out of business. This is why it is vital and of great benefit to training your employees as a small business. To achieve this, create a training plan that makes your employees feel more empowered and competent in their jobs.
• Keep Track of Your Finances:
When you start a new business, except separating personal and business finances, it is also necessary to keep track of your finance that comes in and goes out in the industry. At the start of your business, it is easy to track this money, but keeping track of this money becomes more complex, and a headache as your business grows. Therefore, you should manage this by hiring either a full-time, on-staff accountant or have software that helps you keeping track of your money and save your precious dollars.
• Invest in Marketing:
The modern world is a world of competition. As a businessman, you need to compete with this. Today brands and other businesses try to get the attention of consumers. So, small businesses need to get the attention of customers by investing in marketing. Show and offer them something valuable and give ear to their feedback and recommendations. Except that, research the different small business marketing and advertising options before selecting a marketing model for your business.
• Learn to Delegate:
Time management is vital for everyone and in this regard for small businesses. One part of time management is to delegate your work and responsibilities to the excellent and diligent employees you have hired and trained. Tasks you are not very good at and don’t enjoy doing should be delegated to others.
Duties of a Small Business Manager
In a small business, business activities are either managed by the owner himself/herself or by hiring a business manager who is an expert in this field. In either case, managing a small business requires a variety of knowledge and understanding of the industry. It is the manager’s duty to oversee employees’ activities: hiring, evaluating, and training. Moreover, ensuring that business is on the right track and thriving is also the manager’s job.
Following are some key responsibilities of a small business manager:
- Recruit, hire and train new employees
- Oversee the daily activities of employees
- Manage inventory and make purchases decisions
- Ensuring the smooth running of the critical day-to-day operations
- Design and implement the company’s budget
- Handle production, administration, and marketing functions
- Ensuring the financial goals and objectives of the business
- Set goals and oversee its daily updates to achieve those goals
After discussing small business management’s critical responsibilities, let’s now throw light on problems faced by business managers. Listed below are some main problems of a small business manager.
• Health Care:
Managing the health care of your employees is one of the most challenging aspects of a small business. Although your employees’ health care is no doubt critical, yet increased health care cost makes it difficult for the manager to manage finance. If the government is serious about its citizens’ health care, even then health care costs of employees give a financial blow to the business owner. The example case is the “Obamacare” that is beneficial and useful for workers, but business managers are the main person who is responsible.
• Government Regulations:
Complying with the government regulations is also something to worry about for a small business manager. Each year, the government comes with tighter regulations. In recent times, one of these regulations is related to the environment. For example, in the US, the Clean Air Act of 1990 compels you to remove your vehicle’s contribution to gas, smog, and other chemicals and air pollutants that are damaging the ozone layer. Although this Act is not a bad thing, yet factually speaking, it becomes difficult for small business managers to follow the rules primarily owing to lack of environmental-protection know-how and proper vehicles.
Another set of regulations that can create a problem for small businesses is related to the advertisement. In this regard, matters become worse when the copywriters enjoy artistic license and put fraudulent claims in the copy. The Federal Trade Commission applies these regulations to both print and online advertisements. (In advertising, no doubt honest is the best policy. Not only to save your hide but also to provide the service that your customers are demanding; when they see that your business is “the real deal” your ads claim, it will increase the number of your lifetime customers who will buy your product again and again.)
• Cash Flow:
From online invoice software to effective cash flow management and a better budgeting system, cash flow can be managed. However, there is no denying the fact that virtually all small business owners face the problem of cash flow. Keep strict track of your money. By managing where cash is going and where it is coming from, this problem can be overcome. In “How to Get Rich,” Felix Dennis faced the problem of getting a loan from a bank. The solution to this problem was that astute track of his income and expenses should have been kept. The bank was impressed by this highly professional bookkeeping, and he finally got the loan for his business. Thus, cash flow is a problem faced by small business owners, but the strict track of money flow can be a great help in overcoming this problem.
• Not Diversifying Client Bases:
I advise you to have a good, long look at your customer list. If your clients are responsible for more than half of your income, it is high time to either work better deals for your other clients or generate more clients. When you have your riding one “whale,” that whale would dash off doing business with others. As a result, this will leave you in the ocean, downing your other clients or “small fish” and their income as well. Simply putting, relying on one client is a recipe for disaster. This is one of the major problems that small business managers face.
• Growth and Quality:
At a specific time, a business may expand beyond growth expectations. But small business managers who have not planned for this growth and increase in service/product and customer production tend to fall by the wayside. As demands for your business increase, it is more likely that you cannot meet up, need especially without the proper system in place. You will fall short and come up short of those demands. This will entice you to decrease the quality of your service and product to meet the demand. This is why you must meet the rising demand without sacrificing the quality of your product or service that made you such a hit in the first place.
• Hiring New Employees:
Experienced and diligent employees play an essential role in meeting financial and management goals, but hiring new employees is a problem to be faced by small businesses. Their hiring and training become a hectic task. In addition to this, the cost of their equipment, taxes, benefits, bonuses, perks, etc., continue to rise. Small businesses especially face a credit problem in this regard. All these problems come into play before determining the position’s salary. There is no denying that a business can’t run successfully without employees: either a small business or a big company. Home-run businesses are an exception to this.
To conclude, small business management manages all aspects of your business, be it your time, resources and employees, and effectively as possible. The responsibility lies in the business manager to overcome the problems faced by a small business, such as hiring employees, cash flow, government regulations, healthcare, etc. By learning new and innovative business activities, you can overcome these problems, make your business thrive, and achieve your financial and management goals.