skills required for small business management

8/8/2019 Skills Required for Small Business Management

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Skills Required for SmallSkills Required for Small

Business Management Business Management

Objectives: outline the skillsObjectives: outline the skills

required for managing a smallrequired for managing a smallbusiness.business.



Skills Required for Small BusinessSkills Required for Small Business

Management Management Market ResearchMarket Research

Forecasting of SalesForecasting of Sales

Costing and PricingCosting and Pricing Employee RelationshipEmployee Relationship

Promoting and AdvertisingPromoting and Advertising

Developing and Presenting a Business PlanDeveloping and Presenting a Business Plan



PricingPricing

A skill that small business need to have is A skill that small business need to have ispricing. The pricing is only compoment of pricing. The pricing is only compoment of

the marketing mix through which profitsthe marketing mix through which profitsare made.are made.

Pricing may be seen as the process of Pricing may be seen as the process of deciding on what to ask for a product ordeciding on what to ask for a product or

service.service.



PricingPricing Before setting the final price, theBefore setting the final price, the

owner/manager must understandowner/manager must understand the market environment,the market environment, cost of the product cost of the product the features of the product the features of the product

and customer benefits of the particular product,and customer benefits of the particular product, and the goals of the business.and the goals of the business. customers perception of the price.customers perception of the price. In addition, a balance must be struck betweenIn addition, a balance must be struck between

factors that might drive a price higher such asfactors that might drive a price higher such asinflationinflation

and other forces that may drive the price downand other forces that may drive the price downsuch as increased competition.such as increased competition.



In a nutshell, owner/managers shouldIn a nutshell, owner/managers should

consider pricing objectives and constraintsconsider pricing objectives and constraintsfirst, then choose among the generalfirst, then choose among the generalpricing approaches such as cost pluspricing approaches such as cost plus

pricing.pricing. The owner/manager must make sure that The owner/manager must make sure that

he charges for the product or serviceshe charges for the product or servicescover expenses and leave extra (profits).cover expenses and leave extra (profits).



CostingCosting

Businesses sell their products/services inBusinesses sell their products/services inorder to makeorder to make profitsprofits..

The profit on each product sold can beThe profit on each product sold can be

defined as the difference between thedefined as the difference between theselling price of the product and the totalselling price of the product and the totalcost of making the product.cost of making the product.

Cost therefore plays a very important roleCost therefore plays a very important rolein deciding on the price of the product.in deciding on the price of the product.



CostingCosting The owner/manager should do a cost The owner/manager should do a cost

analysis in order to determine the actualanalysis in order to determine the actualcost of providing the goods/servive so that cost of providing the goods/servive so that

the selling price that is therebythe selling price that is therebydetermined will cover both cost anddetermined will cover both cost andrealise profits. Example of costs include:realise profits. Example of costs include:

ProductionProduction CostsCosts

Administrative Costs Administrative Costs

Storage CostsStorage Costs



Marketing ResearchMarketing Research

Market research is the process of defining aMarket research is the process of defining amarketing problem and opportunity,marketing problem and opportunity,systematically collecting and analysingsystematically collecting and analysing

information and recommending actions toinformation and recommending actions toimprove an organisations marketing activities.improve an organisations marketing activities.

Although marketing research isnt perfect at Although marketing research isnt perfect at predicting consumer reaction, it can reduce riskpredicting consumer reaction, it can reduce riskand uncertainty to help owner/managers takeand uncertainty to help owner/managers takemore effective marketing actions.more effective marketing actions.



The purpose of market research is to helpThe purpose of market research is to help

companies make better business decisions about companies make better business decisions about the development and marketing of newthe development and marketing of newproducts. Market research represents the voiceproducts. Market research represents the voiceof the consumer in a company.of the consumer in a company.

A list of questions that can be answered through A list of questions that can be answered throughmarket research:market research:

What is happening in the market? What are theWhat is happening in the market? What are thetrends? Who are the competitors?trends? Who are the competitors?

How do consumers talk about the products inHow do consumers talk about the products inthe market?the market?

Which needs are important? Are the needs beingWhich needs are important? Are the needs beingmet by current products?met by current products?



FORECASTINGFORECASTING

Forecasting is another skill that owner/managers of Forecasting is another skill that owner/managers of small businesses should have in order to managesmall businesses should have in order to managetheir enterprise effectively and efficiently.their enterprise effectively and efficiently.

Forecasting is the art and science of predictingForecasting is the art and science of predictingfuture events. Therefore, the owner/managerfuture events. Therefore, the owner/managershould be able to predict future events in order toshould be able to predict future events in order tomake plans.make plans.

It may involve taking historical data and projectingIt may involve taking historical data and projectingthem into the future with some sort of mathematicalthem into the future with some sort of mathematicalmodel.model.

It may be a subjective or intuitive prediction of theIt may be a subjective or intuitive prediction of thefuture .future . Or it may involve a combination of these, that is, aOr it may involve a combination of these, that is, a

mathematical model adjusted by themathematical model adjusted by theowner/manager's good judgment.owner/manager's good judgment.



Employee RelationshipEmployee Relationship

DiscussionDiscussion



PromotionPromotion Another skill that small businesses must have is how to Another skill that small businesses must have is how to

promote the business.promote the business.

PromotionPromotion is one of the 4 Ps of is one of the 4 Ps of marketingmarketing. Recall that . Recall that the other three parts of thethe other three parts of the marketing mixmarketing mix areare product product management management ,, pricingpricing, and, and distributiondistribution..

Promotion involves disseminating information about aPromotion involves disseminating information about aproduct product ,, product lineproduct line,, brandbrand, or company., or company.

Promotion is all of the tools available to thePromotion is all of the tools available to theowner/manager for 'marketing communication'.owner/manager for 'marketing communication'.

Marketing communications has its own 'promotions mix.'Marketing communications has its own 'promotions mix.'Think of it like a cake mix, the basic ingredients areThink of it like a cake mix, the basic ingredients arealways the same. See marketing communicationsalways the same. See marketing communicationsprocess diagram below below.process diagram below below.



Promotion is comprised of subcategories:Promotion is comprised of subcategories:

Personal sellingPersonal selling

Advertising Advertising

Sales promotionSales promotion

PublicityPublicity andand public relationspublic relations



The Promotions Mix.The Promotions Mix.

Let us look at the individual componentsLet us look at the individual components

of the promotions mix in more detail.of the promotions mix in more detail.Remember all of the elements areRemember all of the elements are'integrated' to form a specific'integrated' to form a specificcommunications campaign.communications campaign.



1. Personal Selling.1. Personal Selling.

Personal Selling is an effective way to managePersonal Selling is an effective way to managepersonal customer relationships. The salespersonal customer relationships. The salesperson acts on behalf of the organization. Theyperson acts on behalf of the organization. They

tend to be well trained in the approaches andtend to be well trained in the approaches andtechniques of personal selling. However salestechniques of personal selling. However salespeople are very expensive and should only bepeople are very expensive and should only beused where there is a genuine return onused where there is a genuine return on

investment. For example salesmen are ofteninvestment. For example salesmen are oftenused to sell cars or home improvements whereused to sell cars or home improvements wherethe margin is high.the margin is high.



2 . Sales Promotion.2 . Sales Promotion.

Sales promotion tend to be thought of as beingSales promotion tend to be thought of as beingall promotions apart from advertising, personalall promotions apart from advertising, personalselling, and public relations. For example theselling, and public relations. For example the

BOGOF promotion, or Buy One Get One Free.BOGOF promotion, or Buy One Get One Free.Others include couponing, moneyOthers include couponing, money--off off promotions, competitions, free accessories (suchpromotions, competitions, free accessories (suchas free blades with a new razor), introductoryas free blades with a new razor), introductoryoffers (such as buy digital TV and get freeoffers (such as buy digital TV and get freeinstallation), and so on. Each sales promotioninstallation), and so on. Each sales promotionshould be carefully costed and compared withshould be carefully costed and compared withthe next best alternative.the next best alternative.



3 . Public Relations (PR).3 . Public Relations (PR).

Public Relations is defined asPublic Relations is defined as 'the deliberate,'the deliberate,planned and sustained effort to establish andplanned and sustained effort to establish andmaintain mutual understanding between anmaintain mutual understanding between anorganization and its publics'organization and its publics' (Institute of Public(Institute of PublicRelations). It is relatively cheap, but certainlyRelations). It is relatively cheap, but certainlynot cheap. Successful strategies tend to be longnot cheap. Successful strategies tend to be long--term and plan for all eventualities. All airlinesterm and plan for all eventualities. All airlinesexploit PR; just watch what happens when thereexploit PR; just watch what happens when thereis a disaster. The preis a disaster. The pre--planned PR machine clicksplanned PR machine clicksin very quickly with a very effective rehearsedin very quickly with a very effective rehearsedplan. See below.plan. See below.



Sponsorship.Sponsorship.

Sponsorship is where an organization paysSponsorship is where an organization paysto be associated with a particular event,to be associated with a particular event,cause or image. Companies will sponsorcause or image. Companies will sponsorsports events such as the Olympics orsports events such as the Olympics or

Formula One. The attributes of the event Formula One. The attributes of the event are then associated with the sponsoringare then associated with the sponsoringorganization.organization.

The elements of the promotional mix areThe elements of the promotional mix arethen integrated to form a unique, but then integrated to form a unique, but coherent campaign.coherent campaign.



4. Advertising.4. Advertising.

Advertising is a 'paid for' communication. It is Advertising is a 'paid for' communication. It isused to develop attitudes, create awareness,used to develop attitudes, create awareness,

and transmit information in order to gain aand transmit information in order to gain aresponse from the target market. There areresponse from the target market. There aremany advertising 'media' such as newspapersmany advertising 'media' such as newspapers(local, national, free, trade), magazines and(local, national, free, trade), magazines and

journals, television (local, national, terrestrial, journals, television (local, national, terrestrial,satellite) cinema, outdoor advertising (such assatellite) cinema, outdoor advertising (such asposters, bus sides).posters, bus sides).



Developing a Business PlanDeveloping a Business Plan



What Is A Business Plan?What Is A Business Plan?

The primary value of your business planThe primary value of your business plan

will be to create a written outline that will be to create a written outline that evaluates all aspects of the economicevaluates all aspects of the economicviability of your business venture includingviability of your business venture includinga description and analysis of your businessa description and analysis of your business

prospects.prospects.



W hy W rite a Business Plan? W hy W rite a Business Plan?

The preparation of a written business plan is not The preparation of a written business plan is not the endthe end--result of the planning process. Theresult of the planning process. Therealizationrealization of that plan is the ultimate goal.of that plan is the ultimate goal.

However, the writing of the plan is an important However, the writing of the plan is an important

intermediate stageintermediate stage -- fail to plan can mean planfail to plan can mean planto failto fail..

For an established business it demonstrates that For an established business it demonstrates that careful consideration has been given to thecareful consideration has been given to the

business's development, and for a startup it business's development, and for a startup it shows that the entrepreneur has done his or hershows that the entrepreneur has done his or herhomework.homework.



Purpose of the Business Plan Purpose of the Business Plan

A formal business plan is just as important for an A formal business plan is just as important for an

established business, irrespective of its size, as it is for aestablished business, irrespective of its size, as it is for astartup. It serves four critical functions as follows:startup. It serves four critical functions as follows:

Helps management or an entrepreneur to clarify, focusHelps management or an entrepreneur to clarify, focusand research their business's or project's development and research their business's or project's development and prospects.and prospects.

Provides a considered and logical framework withinProvides a considered and logical framework withinwhich a business can develop and pursue businesswhich a business can develop and pursue businessstrategies over the next three to five years.strategies over the next three to five years.

Serves as a basis for discussion with third parties suchServes as a basis for discussion with third parties suchas shareholders, agencies, banks, investors etc.as shareholders, agencies, banks, investors etc.

Offers a benchmark against which actual performanceOffers a benchmark against which actual performancecan be measured and reviewed.can be measured and reviewed.



6. Business Plan Outline6. Business Plan Outline

Use the outline below as the "road map"Use the outline below as the "road map"for your plan and then write up eachfor your plan and then write up each

section concisely but comprehensively.section concisely but comprehensively. Only address matters of real substanceOnly address matters of real substance

and major significance within the mainand major significance within the mainsections of the plan.sections of the plan.



1. Introduction 1. Introduction

Introduce the plan. Explain who wrote it,Introduce the plan. Explain who wrote it,when and for what purpose. Give contact when and for what purpose. Give contact details.details.

2 . Executive Summary 2 . Executive Summary

Write this last.Write this last.

Present the highlights of the plan.Present the highlights of the plan.



3 . Heirarchy of Objectives.3 . Heirarchy of Objectives.

What are the central purposes and activities of What are the central purposes and activities of the planned business? What are the business the planned business? What are the business

Vision Vision

MissionMission ObjectivesObjectives

Values Values

StrategiesStrategies

GoalsGoals

ProgramsPrograms



4. Present Status 4. Present Status

Summarize achievements andSummarize achievements andperformance (financial, sales,performance (financial, sales,technical etc.) to date.technical etc.) to date.

Introduce the stakeholders in theIntroduce the stakeholders in thebusiness.business.



5 . Product/Service Offerings 5 . Product/Service Offerings

K eep descriptions short and confineK eep descriptions short and confinethem to broad groups.them to broad groups.

Explain briefly what makes themExplain briefly what makes themspecial.special.



6. Profiles of Target Markets 6. Profiles of Target Markets

Size, segments, trends, competition andSize, segments, trends, competition and

customer profiles.customer profiles.

7 . Marketing Strategies, Sales Plans &7 . Marketing Strategies, Sales Plans &Projections Projections

How will the business market itsHow will the business market itsproducts/services and sell to customers?products/services and sell to customers?

What sales will be achieved in its mainWhat sales will be achieved in its main

markets?markets? How will it deal with competitors ?How will it deal with competitors ?

Indicate costs.Indicate costs.



8 . Technology and R&D 8 . Technology and R&D

If relevant, explain progress, plans, resourcesIf relevant, explain progress, plans, resources

and highlight any technological advances.and highlight any technological advances.9 . Operational/Manufacturing Plans 9 . Operational/Manufacturing Plans

Cover distribution & service activities and/orCover distribution & service activities and/ormanufacturing.manufacturing.

Highlight major elements only. IndicateHighlight major elements only. Indicateorganization, resources, costings etc.organization, resources, costings etc.

10. Management & Administration 10. Management & Administration

Introduce the proposed management team,Introduce the proposed management team,structure etc.structure etc.

Indicate administrative arrangements andIndicate administrative arrangements andspecify overhead costs.specify overhead costs.



11. Financial Projections 11. Financial Projections

Use simple tables to present keyUse simple tables to present keyfinancial projections e.g. summaryfinancial projections e.g. summary

P&L, cashflows, balance sheets andP&L, cashflows, balance sheets andkey ratios. Place the detailed analyseskey ratios. Place the detailed analysesin appendices.in appendices.



12 . Funding Requirements & Proposals 12 . Funding Requirements & Proposals

If applicable, summarize funding requirements,If applicable, summarize funding requirements,possible sources, likely terms, and, for investors,possible sources, likely terms, and, for investors,the projected return on their investment. Bethe projected return on their investment. Berealistic!!realistic!!

13 . Implementation 13 . Implementation

Explain the major decision points, time scale andExplain the major decision points, time scale andactions required by management and others toactions required by management and others toprogress the plan.progress the plan.

14. Conclusion 14. Conclusion

Indicate why the business will succeed and whyIndicate why the business will succeed and whyit should be supported.it should be supported.



Appendices Appendices

Use appendices at the very back of theUse appendices at the very back of theplan to present important backgroundplan to present important backgrounddata and detailed plans.data and detailed plans.

This will avoid disrupting the flow of theThis will avoid disrupting the flow of theplan or cluttering it with excessive detail.plan or cluttering it with excessive detail.

skills required for small business management

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