Planning, Organizing, and Managing a Small Business

Why Is Planning So Important to Small Businesses?

To become an effective business owner-manager you must look

ahead. In selecting the business to enter, you are doing just that—
planning for the future.
Planning
is the process of setting objectives and determining actions to reach them.
Planning steps
 Why Small Business
Owners Need to Plan

Planning is one of the most difficult activities you must do. Yet it is
essential that you do it because, before taking action, you must
know where you are going and how to get there.

Outsiders who invest or lend money need to know your chances of

success. Plans provide courses of action, information to others,
bases for change, and a means of delegating work.
 Why Small Business
Owners Need to Plan

In summary, well-developed plans can

(1) interest moneyed people in investing in your business
(2) guide the owner and managers in operating the business
(3) give direction to and motivate employees, and
(4) provide an environment to attract customers and prospective employees.
The Role of Strategic Planning
Strategic planning provides comprehensive long-term
direction to help a business accomplishes its mission.
 The Role of Operational Planning

Operational planning sets policies,

procedures, and standards for achieving
objectives.
The Role of Human resource Planning
 

Human resource planning is the process

of converting the business’s plans and
programs into an effective work force.
 The Role of Financial Planning
Financial planning involves determining what funds are
needed, where they can be obtained, and how they can be
controlled.
 

Financial planning should involve at least the following:

1. Estimating income and expenses.

2. Estimating initial investment required.

3. Locating sources of funds.

Planning to Operate the Business

planning to operate the business—should include

Choosing your location
Planning operations and physical facilities
Developing sources of supply for goods and materials.
Planning your human resource requirements
Setting up the legal and organizational structure.
Determining your approach to the market
Establishing an efficient records system
Setting up a time schedule
 ESTIMATING INCOME AND EXPENSES

Income from sales (also called revenue) can be estimated by studying

the market, and expenses (also called costs) can be calculated from past experience and
other sources, such as knowledgeable people, a library, or a trade association. After all
costs have been estimated, they can be totaled and subtracted from the estimated sales
income to obtain the expected net profit (or loss)
while total expenses do move up and down with sales volume, they do not vary as much.
variable expenses
Some expenses, such as materials, which rise in direct proportion
to increases in sales volume and drop as sales volume drops

Variable expenses change in relation to

volume of output: when output is low, the
expenses are low, and when output is high,
expenses rise.
fixed expenses
such as depreciation on buildings, which do not vary in value as sales volume
rises or falls. Also, there are some expenses, such as supervision, that combine
variable and fixed costs

Fixed expenses do not vary with output, but remain the same.
Example of variable expenses
1. Direct Materials Cost
2. Supplies and Packaging Materials
3. Piece Rate Labor
4. Commissions
5. Shipping Costs
Examples of fixed expenses

1. Mortgage(s)
2. Rent.
3. Property taxes (if paying monthly)
4. Stratup fees.
5. House / tenant insurance.
6. Utility bills (cable, cell, electricity, water, etc.)
7. Lease / car loan payment.
8. Vehicle insurance (if paying monthly)
What Is the Difference Between Industry analysis,
Competitive analysis, Environmental analysis, a
SWOT analysis, Workforce analysis,
Transportation planning and supply chain
analysis?
Industry analysis
is a tool that facilitates a company's understanding of its position relative
to other companies that produce similar products or services.
Understanding the forces at work in the overall industry is an important
component of effective strategic planning.
Competitive analysis
Identifying your competitors and evaluating their strategies to determine
their strengths and weaknesses relative to those of your own product or
service. A competitive analysis is a critical part of your company marketing
plan.
 environmental analysis
surveys the business landscape to determine how external variables will affect its
decision-making.
A SWOT analysis reviews the business’s strengths, weaknesses,
opportunities and threats.

As is the case with an environmental analysis, a SWOT analysis

also surveys external circumstances. However, this type of analysis
also takes into consideration internal components. Within the
strengths and weaknesses section of the SWOT analysis, the
company assesses factors unique to the organization.  
Workforce analysis is the foundation of any good workforce plan.
Transportation planning is the process of
defining future policies, goals, investments,
and designs to prepare for future needs to
move people and goods to destinations
 supply chain analysis 
is a tool for identifying growth opportunities related to a given
industry within a region
Tips to Increase Profits in Your Business
Lead Generation
The process that you use to attract interested prospects to your
business. If five out of ten prospects who come into your place
of business end up buying from you and you can increase the
number of people coming in from ten to 15, you can make more
money and increase profits by 50 percent.
Lead Conversion
The process by which you convert leads into paying customers.
This is the measure of the effectiveness of your sales efforts. If
you can increase your conversion rate from one out of ten to two
out of ten, you can double your sales and increase profits.
Number of Transactions
The number of individual sales that you make to each customer
that you acquire. By increasing the frequency of purchase by ten
percent, you increase your sales and increase profits by the same
percentage. What are some things that you could do to get your
customers to buy more from you and to buy more frequently?
Size of Transaction
The size of the sale and the profit that
you earn from each. You should be
continually looking for ways to up-sell
each customer so that he or she buys
more each time.
Profit Margin Per Sale
Profit margin is the gross profit that you make from the
sale of each product or service. By continually seeking
ways to raise the price or to lower the cost of the product or
service without decreasing the quality, you can increase
profits per sale.
Every dollar you raise a price, if you hold costs constant,
flows straight to the bottom line as profit. Every dollar you
reduce expenses, if you hold sales and revenues constant,
also goes straight to the bottom line as net profit.
Cost of Customer Acquisition
The amount that you have to pay to acquire each
paying customer. You should be continually
seeking creative ways to improve your advertising
and promotion so that it costs you less to buy each
customer. This can impact and increase profits of
your business dramatically.
Increasing Customer Referrals
The customers who come to you as the result of referrals from
your satisfied customers. Developing one or more proven
referral systems for your business can have an inordinate
impact on your sales and your business will make more
money.
Eliminate Costly Services And Activities
Many companies get into a routine or rhythm of
offering expensive services to their customers that they
could easily discontinue with no loss of customer
satisfaction.
Look at the little services that you offer to your
customers. Is there anything that you could reduce or
discontinue altogether?
Reduce Your Break-Even Point
This is the number of items that you must sell each month to break-
even or start making a profit.
You use this break-even point to evaluate the potential effectiveness of
any advertising or any other expense that you incur to increase sales.
Every expense to increase profits must be seen as an investment with
an expected rate of return that is greater than the cost.
Raise Your Prices

In many situations, you can raise your prices by 5 or 10 percent

without experiencing any market resistance. If your products and
services are of good quality and your people are friendly and
helpful, a small increase in your overall prices will not drive your
customers away.
Developing a Successful Business Plan
What Is a Business Plan?
The business plan is probably the most useful and important document
you, as a current or prospective small business owner, will ever put
together. It is a written statement setting forth the business’s mission
and objectives, its operational and financial details, its ownership and
management structure, and how it hopes to achieve its objectives.
What Is the Purpose of a Business Plan?
A well-developed and well-presented business plan can provide you
with a “road map to riches”—or at least a pathway to a satisfactory
profit. There are at least five reasons for preparing a business plan,
which include the following:
1- It provides a blueprint, or plan, to follow in developing and
operating the business. It helps keep your creativity on target and
helps you concentrate on taking the actions that are needed to
achieve your goals and objectives.
2- It can serve as a powerful money-raising tool.
3- It can be an effective communication tool for
attracting and dealing with personnel, suppliers,
customers, providers of capital, and others. It helps
them understand your goals and operations.
4- It can help you develop as a manager, because it provides
practice in studying competitive conditions, promotional
opportunities, and situations that can be advantageous to
your business. Thus, it can help you operate your business
more effectively.
5- It provides an effective basis for controlling operations
so you can see if your actions are following your plans.
What Is Included in a Business Plan?
Regardless of the specific format used, an effective plan should include at
least the following:
1. Cover sheet.
2. Executive summary.
3. Table of contents.
4. History of the (proposed) business.
5. Description of the business.
6. Description of the market.
7. Description of the product(s).
8. Ownership and management structure.
9. Objectives and goals.
10.Financial analysis.
11.Appendixes.
How to Prepare a Business Plan?
 
You should start by considering your business’s background, origins,
philosophy, mission, and objectives. Then, you should determine the means
for fulfilling the mission and obtaining the objectives. A sound approach is to

(1) determine where the business is at present (if an ongoing business) or

what is needed to get the business going

(2) decide where you would like the business to be at some point in the
future

(3) determine how to get there; in other words, determine the best strategies
for accomplishing the objectives in order to achieve your mission.
THANK YOU,,,