Small Business Management

SMALL BUSINESS MANAGEMENT:

1. Introduction.

*Small & Medium Sized Enterprises: EU Definition: http://ec.europa.eu/enterprise/enterprise_policy/sme_definition/index_en.htm

Micro enterprise: 0-9 employees

Small enterprise: 10-49 employees

Medium enterprise: 50-249 employees

*Rise of small business:

-1950s and 1960s - big is beautiful: economies of scale, prevailing ideology, Management theory based on large corporations - McKinsey reports

-70s, 80s, 90s - new entrepreneurial spirit - the 'me' generation: Emphasis on creativity and individuality, make money working for yourself and the economic realities - redundancies, job shortages, short term contracts.

-Bolton Report 1971: Small firms to be 'efficient', 'motivated', 'innovatory' and for independent individuals.

2. Business Start-up

The start up influences can include the personal character traits, the situational factors and the antecedent influences. (Burns (2011)Entrepreneurship and small business - start-up, growth and maturity 3rd ed Palgrave Macmillan)

*Personal character traits of owner-managers and entrepreneurs are: need for independence, achievement, an internal locus of control and the ability to live with uncertainty and take risks.

*The main personal character traits of entrepreneurs are: Opportunistic, Innovative, Self-confident, Proactive and self-motivated, Visionary with flair (instinto) and willing to take greater risks and live with greater uncertainty.

*Situational factors: employment, unemployment, immigration and economic opportunity.

*Antecedent influences: Family, Ethnicity, Gender (Female entrepreneurship grew from 5% to 30% between 1967 & 1997 (McClelland et al, 2005)-domestic roles?), Education, Previous employment, Religion, Social group and National culture.

The reasons for setting up in business can be divided into two factors:

-PUSH FACTORS: Unemployment, Disagreement with management, Does not "fit in" to company and no other alternatives.

-PULL FACTORS: Independence, Achievement / Recognition, Personal development and personal wealth.

Running a business:

*Product / Service * Launch / Development *Marketing *PR / Communications

*Finance * Legal *Operations *Leadership / Management / HR

*Technology *Planning

In the beginning, there are a range of factors in SM start ups: Uncertainty, Feeling of loneliness and lack of direction and lack of theory/transferable knowledge to guide new businesses.

-Areas of uncertainty: Overall outcomes for businesses , Rates of success, failure and survival, the initial processes are 'uncharted territory', real obj. of the business.

Paths to business ownership : You may start a new business, buy an existing business, franchise a business or inherit a business. (Katz, J.A. & Green, R.P. (2011)Entrepreneurial Small Business 3rd ed New York: McGraw-Hill International)

*Advantages of start ups: Can begin with a "clean slate" - no existing problems, Gives the opportunity to use up-to-date technology - no "legacy" resources, Can provide new, unique products or services and Can stay small to limit possible losses.

*Disadvantages of start ups: Has no initial brand recognition, Needs time to become established and provide positive cash flows, Can have problems with finance, Difficult to gain credit with suppliers and financial institutions and limited experience in the workforce.

Getting started: Entry Competencies - BRIE

Boundary - creating a place for your business - in location and in people's minds

Resources, the money, product, knowledge etc that make up the business

Intention, The desire to start a business

Exchange, Moving resources / products / services in exchange for money

Current theories: Human Capital, Life cycle, Complexity.

*Human capital: means that you need knowledge, skills, experience, attitudes and behaviour.

-Therefore business starts up influenced by: Ideas from previous workplaces, Training experiences, Desire to improve on present product/processes, Desire to do things 'differently', 'Bankers rate human experience as an important factor in lending money'.

-The role of self-efficacy: Mixed results, Antecedents and class, Maybe depends on situation

-Finance:Availability of funds and flow of funds into the business is crucial. The knowledge of how to obtain and how to manage funds is equally crucial. As an entrepreneur, we must have ability to be convincing about 'fundability' is equally crucial.

Lenders do not have sufficient information about the potential new business: No trading patterns. and often little experience of the new businesses can work in favour or not in favour of new ideas for businesses. They don't have confidence in the ability of the new business (are new) and d in the integrity of the new business (don't 'know' the owners).

-Business is successful: Profit goes up, market share, break even, consumer awareness and #employee.

3. Legal Framework

Before setting up in business it is vital to think through the legal formalities. Because the decision will affect structure, profits, and strategies and how the business grows.

There are different legal forms of business:

*Sole Trader: Business owned by one individual

-Tax implications: