Developing a Small Business Structured Approaching

7/24/2019 Developing a Small Business Structured Approaching

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Developing a Small Business

A Structured Approach

1. The Business Idea

a. Gaining the support of your family

b. Skills required to run a business

c. Sort of business you want to start

d. Starting your business

i. New business

ii. Franchise businessiii. Existing business

e. Inesting in your business

i. Financial

!. "ash

ii. Non#financial

!. $ssets

2. Complying with Legislation

a. %ealth and Safety at &ork $ct

b. 'ata (rotection $ct

c. Form of business

i. Sole trader

ii. (artnership

iii. "ompany

!. (riate company limited by shares

a. )embers* liability is limited to the

amount unpaid on shares they hold

+. (riate company limited by guarantee

a. )embers* liability is limited to the

amount they hae agreed to

contribute to the company*s assetsif it is wound up

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,. (riate limited company

a. No limit to the members* liability

-. (ublic limited company

a. "ompany*s shares may be offeredfor sale to the general public and

members liability is limited to the

amount unpaid on shares held by

them

d. "hoosing a usiness name

i. "heck to see if it is already being used

e. (rotecting business ideas

i. (atentsii. "opyright

!. (aintings

+. (hotographs

,. &ritings

iii. /rademarks

f. Inland reenue

i. National insurance contributions

!. "lass 0ne 1 applies to all employed people

and is paid by both the employer and the

employee

+. "lass /wo 1 paid at a flat rate by all self#

employed people whether they are sole

traders or partners

,. "lass /hree 1 (ayable by the self#

employed as a percentage of profitsbetween a minimum and maximum leel

ii. Self assessment tax returns

iii. 2alue $dded /ax 32$/4 registration

!. !5.67 # standard rate charged on most

goods and serices

+. 67 # reduced rate charged on domestic

fuel and power by charities

,. 87 # 9ero rate where no 2$/ is charged

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g. /rading laws

i. "onsumer (rotection $ct !:;5

ii. /rade 'escriptions $cts !:


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you offer that are not? or cannot be? offered

by you competitors

i. Indications for the future 1 what the business

will do.c. )arketing ob@ecties

i. Sell existing products to existing markets

ii. Extend existing products into new markets

iii. 'eelop new products for existing markets

i. 'eelop new products for new markets

$. De%ining Business Strategya. (ES/E analysis

i. (olitical 1 health and safety legislation

goerning conditions in the workplace and

consumer protection legislation coering

labelling and packaging

ii. Economic 1 effects of inflation? interest rates

and exchange rates

iii. Social 1 changing demographic trends in your

customer base

i. /echnological 1 deelopment of Information

/echnology has affected the ways in which

business is conducted including the use of

faxes and email and the opportunities created

by the Internet

. Enironmental 1 consider genetic engineeringthe process of manipulating genes of a plant or

animal to produce desirable characteristics

b. >esource audit

i. (hysical >esources

!. (lant and machinery

+. /ools and equipment

,. 2ehicles

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ii. %uman >esources

!. Skills of each indiidual

+. Estimate of their adaptability under

changing circumstancesiii. Financial >esources

!. Finance from own resources

+. Finance from borrowed funds

c. "hoice of strategy to an existing business

i. &ithdraw from the market entirely

ii. "onsolidate the existing position within the

market

iii. Increase market positioni. Introduce new products or serices

d. Implementing the strategy

i. (lanning and allocation of resources

!. (hysical

+. %uman

,. Financial

ii. Structure of the business

!. For a new business it is likely to be

uncomplicated

iii. )anagement of the people and systems in the

business

!. )anaging your staff

+. "ontrol and information systems

e. Strategic threats

i. New entrantsii. Substitute products

iii. (ower of suppliers and buyers

!. Sole supplier of a particular product will

be in a strong position

+. uying power has an impact in the

grocery market.

i. "ompetitie rialry

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&. !"taining 'ight Support

a. usiness links

i. (roide a ariety of adice and guidance tobusinesses

b. Enterprise agencies

i. Not#for#profit organisations that proide

adice? counselling? information? training and

practical help to businesses

c. "hambers of "ommerce

i. Information and eents

ii. /rainingiii. Export assistance

i. "ost saings on bulk purchasing power

d. Federation of small businesses

i. Free serices to members including

!. /elephone helplines

+. Export information and guidance

,. =egal assistance

-. /axation adice

(. )ar*et 'esearch

a. Segmentation

i. Geographic

ii. 'emographic

iii. 0ccupation and social classi. $"0>N segmentation

!. $ "lassification 0f >esidential

Neighbourhoods which analyses

households on the basis of the type of

property

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$"0>N )ain "lassification %eadings

$ )odern family housing for manual workers

)odern family housing for higher incomes

" 0lder housing of intermediate status' 2ery poor quality? older terraced housing

E >ural areas

F Arban local authority housing

G %ousing with most oercrowding

% =ow income areas with immigrants

I Students and high status non#family areas

B /raditional high status suburbia

C $reas of elderly people

b. "ompetitie adantage

i. Financial

!. Efficiency saings which lead to lower

costs of production

+. =ower selling price to the consumer

ii. 'ifferentiation in serice!. =onger opening hours

+. Improed deliery serice

,. )easurable difference in the quality of

serice

-. %igher quality product

iii. "ompetition

!. 'irect 1 generated by businesses that

offer the same products or serices asyou in the same market

+. Indirect 1 businesses that although

operating in different markets and with

different products may pose a threat if

they can easily diersify into your

market

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,. Industry 1 businesses that operate in

the same product area but which sell in

different markets

-. =inked 1 businesses that offer the sameserice but delier in a different manner

c. S&0/ $nalysis 1 encourages you to think about the

positie sides of your business as well as the negatie

sides. It should also be used to assess your competition.

i. Strengths

ii. &eaknesses

iii. 0pportunities

i. /hreatsd. Anique Selling (oint 3AS(4

i. "rucial element in defining your competitie

adantage. Dou must establish what makes you

different from your competitors.

!. &ill the customers in the market

perceie this as an adantage

+. Is it significantly different from what

my competitors are offering

,. &ill my customers actually beliee in this

AS(

-. &ill my customers receie some benefit

from this AS(

6. &ill this AS( motiate customers

sufficiently to make a purchase

e. "ritical Success Factorsi. Examples include

!. 'eliery times

+. Speed of serice

,. uality of the product

-. "ompetitie pricing

+. Identi%ying ,our -roducts

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a. oston "onsulting Group 3"G4 )atrix 1 established

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therefore relates only to products and markets and gies

you four alternatie courses of action

i. Selling existing products to existing markets

ii. Extending existing products into new marketsiii. 'eeloping new products for existing markets

i. 'eeloping new products for new markets

/hese four options are set out in a four#box matrix that plots

your existing and potential products against your existing and

potential markets as follows

A5S!66 )atri-resent products 5ew products

-resent

mar*ets

)arket (enetration (roduct 'eelopment

5ew

)ar*ets

)arket Extension 'iersification

)ar*et -enetration1 increasing the existing share in the

existing market to facilitate further growth)ar*et 7tension1 taking existing products into new markets

-roduct Development1 offering new products or modifying

existing products into the existing markets

Diversi%ication1 either with related products and markets or

unrelated products that are totally unconnected with the

existing products and markets

d. >ight (roduct into the >ight )arket

i. Existing products into existing markets

ii. Existing products into new markets

iii. New products into existing markets

i. New products into new markets

!. >elated diersification 1 the

deelopment of new products that are

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complementary to the existing product

range

+. Anrelated diersification 1 products that

take the business outside of the industryin which it normally operates

e. (roduct management 1 relates to the oerall brand

image of your product.

8. The 'ight -rice

a. Importance of price to the consumeri. Asers 1 the person who will actually use the

product

ii. 'eciders 1 the person who will actually take

the decision to make a purchase but who does

not necessarily buy the product themself

iii. uyers # the person who actually buys the

product

i. Influencers 1 people who hae some influence

oer the decision to purchase

b. Selecting the right price

i. "osts

ii. "ompetitors

iii. usiness ob@ecties

c. (rice as an effectie marketing tool

i. =inking price with promotion!. =oss leaders 1 products sold at low prices

that indiidually make a loss? but entice

the consumer into the shop? after which

they may well buy other products at the

same time

+. 'iscounts or sales 1 these are often used

to dispose of excess stock

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,. Short term interest free credit 1 this is

often used to tempt the consumer to

Hbuy now and pay later*

-. )aintenance or other serice guarantees1 these can either be sold alongside the

product or offered on a free basis.

ii. /arget market pricing

!. )arket segment 1 if you hae segmented

your potential market on? for example? a

nationwide basis? it is possible to charge

different prices according to location

+. "onsumer group 1 differential pricingdepending on the consumer? is a ery

common pricing structure

iii. 0pportunist pricing 1 sometimes a product can

be priced with no relationship to its true alue.

i. $dded alue pricing 1 inoles a different

price for products that increasingly offer

further features and benefits as in the retail

clothes market

. =inked product pricing 1 where one product

requires another product as matter of course?

the pricing of both constituent parts can be

manipulated

i. 'ual charging 1 the most common example of

this pricing strategy is in the rental industry.

For example? in car rentals a basic charge perday is often made with a further charge

depending on the mileage drien.

9. 7mploying sta%%

a. >ecruitment and selection

i. &riting a @ob description

ii. )ethods of recruitment

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!. Newspaper adertisements

+. "areers serices

,. >ecruitment agencies

-. /he Employment Serice and Bob centreiii. )aking a selection

b. Employer >esponsibilities

i. 'iscrimination

ii. Equal 0pportunities

iii. %ealth and Safety

c. Employee >ights

i. /erms and conditions of employment

ii. Fair and unfair dismissaliii. Notice periods to terminate employment

i. )embership or non#membership of a /rade

Anion

. redundancy payments

i. National )inimum wage

ii. )aternity and parental leae

iii. Stakeholder pensions

ix. Statutory sick pay

x. Statutory maternity pay

xi. &orking time regulations

d. /ax and National Insurance

i. Income tax and National Insurance are

deducted at source under (ay $s Dou Earn

3($DE4 scheme

e. Staff $ppraisali. )otiating staff

ii. Identifying any deelopment or training

requirements

iii. (lanning for growth

asics of Staff $ssessment

&hat are you going to assess

a. "ommunication skills

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b. /echnical knowledge

c. Standard of customer serice

d. Effectieness at soling problems

%ow often will you carry out an assessment

a. /hree months initially

b. %alf yearly or annual assessments thereafter

%ow will you make the assessment

a. $ppropriate grading from one to fie

i. Ansatisfactory

ii. elow standardiii. Satisfactory

i. Good

. 0utstanding

Structuring the assessment

1:. 'ight Location

a. Importance of location

i. 'epends upon the type of business

!. >etailers

+. &holesalers

,. )anufacturers

-. Serice businesses

b. )ethods of distributioni. Selectie distribution 1 selectie about how

you distribute the products

ii. Exclusie distribution 1 associated with

products perceied to be of high or unique

quality

iii. Intensie distribution 1 aims to make your

products as widely aailable as possible

c. >ight distribution method

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i. >eliability 1 delier the right products at the

right time

ii. Suitability 1 products are packaged in such a

way that they will not be damaged in thedistribution process

iii. Functionality 1 consumer will be concerned

about what happens if the product fails to

function in the future

d. Effectie supply chain

11. Business -romotiona. Importance of promotion

b. )arketing promotion mix

i. $dertising

!. /eleision

+. >adio

,. (osters

-. (ress

ii. (ublic relations and publicity

iii. Sales promotions

!. /rade 1 incenties to wholesalers or

retailers 1 financial such as discounts or

non#financial incenties such as proision

of free display materials

+. "onsumer 1 money#off ouchers

,. Internal 1 offered to sales staff 1bonuses for exceeding sales targets

i. (ersonal selling

. Asing the Internet

c. Ealuate promotion options

i. &hat exactly are you selling

ii. &hat are the market conditions

iii. &hat are your marketing ob@ecties

i. Is the adertising going to be cost effectie

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12. -ro%essional ;elp

a. $ccountants

i. "omplying with legislationii. Establishing internal control systems

iii. $ssisting with pricing and profitability

decisions

i. >aising finance

. )anaging the growth of your business

b. Solicitors

c. "onsultants

i. Strategyii. 0rganisation design and deelopment

iii. uality management

i. )anufacturing systems

. usiness planning

i. Financial management

ii. (ro@ect management

iii. Information technologyinformation systems

ix. %uman resource management

x. )arketing

xi. 'esign and creatiity

xii. /ransport management

1. 6inancial 6orecasts

a. "ash flow Forecast 1 used to pro@ect the flow ofcash into? and out of? your business.

i. Income from sales

ii. 'ealing with credit sales

iii. 0ther income

!. Introduction of new capital

+. =oans or grants receied

,. >eceipts from sale of fixed assets

i. (ayment categories

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!. (ayment to creditors

+. Salaries and wages

,. "apital expenditure

-. =ight? heat and power6. >ent and rates


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iii. usiness ackground and %istory

!. &hen the business was started

+. %ow it has deeloped since then

,. $ny significant achieements-. $ny accreditation gained such as quality

standard awards

i. /he product or serice

. 0perations

i. )arket analysis

!. 0erall si9e of the market

+. )arket trends

,. 'irect competitors-. )arket segmentation

6. (ricing expectations

eleant legislation such as health and

Safety

:. Enironmental concerns

!8. >eleant independent market

research information if aailable

ii. )arketing strategy

!. S&0/ $nalysis

+. "ustomers and markets

,. (roduct

-. (rice

6. (romotionisk ealuation

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1(. 'aising 6inance

a. Inesting your own moneyi. Financial

!. 'irect in@ection of cash

ii. Non#financial

!. $ssets such as motor ehicles? tools and

equipment

b. Short term finance

i. 0erdrafts

ii. /rade creditiii. Factoring 1 organisation that takes oer the

running of your sales ledger and will issue

statements and debtor reminders according to

an agreed timetable

$dantages

Improes cash flow

>emoes the need to chase unpaid inoices

Simple process

'isadantages

"ustomers know that you are using the factor 1 stigma

"an proe costly in oerall terms

'ifficult to extricate yourself from the factoring arrangement

i. Inoice discounting # similar to factoringexcept the control of the sales ledger is

retained by you and therefore you need to

control the debtors and chase for late

payment. Inoice discounting is not eident to

your customers.

c. =ong term finance

i. =oans

!. 2ariable rate loans

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+. Fixed rate loans

ii. %ire purchase

iii. =easing

!. Finance lease 1 the lessor pays for theasset and becomes the owner

+. 0perating lease 1 lessor is responsible

for sericing? maintaining and updating

the equipment

,. "ontract hire 1 similar to an operating

lease 1 for example to finance a fleet of

motor ehicles

i. Soft loans 1 loans aailable on generous terms

and at lower rates of interest than would be

charged commercially. /hey are proided

through local Enterprise $gencies

d. Gaining Equity Finance

i. usiness angels

ii. 2enture "apital

!. Seed capital 1 new high technology

product

+. Start#up capital

,. Expansion capital

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d. (rofit and =oss $ccount most important account for

all businesses

e. "omputer#based $ccounting Systems

i. =ess time spent Hdoing the books*ii. $ccurate

iii. Ap#to#date

i. Faster production of annual accounts

. "ost saings on book#keeping and accountancy

charges

Software (ackages

Sage/$S ooks

(egasus

Intuit

18. 6ranchises

a. $dantages

i. /ried and tested

ii. rand image

iii. =ess risk

i. "omprehensie training

b. 'isadantages

i. No room for indiiduality

ii. 'ifficult to dispose as there are limitations on

any re#sale

iii. 'ifficult to enforce exclusie territory rightsc. /ypes of franchise

i. Bob franchise 1 purchasing a @ob for yourself 1

for example mobile car mechanics and

domestic carpet cleaners

ii. usiness franchise 1 purchase of a complete

business 1 for example fast food operation

iii. Inestment franchise 1 substantial inestment

1 for example hotels and restaurants

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d. Franchise costings

i. 0ngoing costs

!. )anagement fees

+. Serice charges,. >oyalties

19. 7isting Businesses

a. 2aluing

i. alance sheet

ii. Fixed assets

!. =and and buildings

+. (lant and machinery

,. /ools and equipment-. )otor ehicles

iii. "urrent assets

i. =iabilities

. Goodwill

b. )anaging the purchase

c. Financial considerations

i. 0wn capital

ii. 2enture capital

iii. ank loan

2:. 4uality Standards

a. uality and business ob@ecties

i. >educe product returns

ii. Increase customer satisfactioniii. Inest in new technology

i. Andertake market research

. >educe the costs of production

b. uality and competitie adantage

i. Free deliery

ii. Free maintenance for a limited period

iii. Free appliance fitting

i. Free telephone support

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c. "ustomer "omplaints

d. uality )anagement System

i. IS0 :88!+888

21. ;andling -ro"lems

a. "risis )anagement plan

i. External crises 1 outside of the control of the

business 1 fire? flood? bomb alert or explosion

ii. internal crises 1occur within the business 1

power or machinery failure? computer crash?

data corruptionb. Insurance

i. Employer*s liability

ii. Fire

iii. /heft

i. "onsequential loss

. (rofessional indemnity

i. Cey person

c. (ersonal insurance

i. $ccident and sickness

ii. "ritical illness

iii. 'eath

Documents

Developing a Small Business Structured Approaching