Managing and Running a Small Business

This document discusses the management and operation of a small business, including cash flow forecasting, break-even analysis, and laws affecting small businesses. It provides insights into key financial statements and the importance of effective business planning.

MANAGING AND
RUNNING A SMALL
BUSINESS

TABLE OF CONTENTS
INTRODUCTION.......................................................................................................................................2
LO 3............................................................................................................................................................3
P4 Annual itemized monthly cash flow forecast showing fixed and variable cost set against income for
Oldham consultancy limited....................................................................................................................3
Main sources of finance for startups:-......................................................................................................3
P5 Application of break-even analysis on organisational situation..........................................................5
P6 Key financial statements for Oldham consultancy limited in relation to its contribution for
successful management of the business...................................................................................................6
LO 4............................................................................................................................................................7
P7 Discuss different laws and regulations that affect to small business and explain advantage and
disadvantage of each law.........................................................................................................................7
CONCLUSION...........................................................................................................................................9
REFERENCES..........................................................................................................................................10
INTRODUCTION
Managing and running a small business requires confidence of the managers. It also
requires an effective business plan that can guide the firm to manage the business more
effectively (Steingold and Steingold, 2019). Present study is based on a small consulting firm in
Oldham that was established in the year 2005. Report will include different factors that help the

business to allocate its required resources so that they can achieve the desired business goals.
Report will evaluate different processes that customer relationship management implements for
its business and the ways in which CRM process work. Report will identify the way a small
business develop transnationally and the respective advantage and limitations to develop the
business transnationally. Report will produce a cash flow forecast and what are the benefits of
forecasting techniques. Report will also highlight the way in which break even analysis could be
implemented to the small business. It will interpret all the respective financial statements that
contribute for the successful management of the business. Finally, report will discuss some key
legislations that business is required to implements for organisational growth.
LO 3
P4 Annual itemized monthly cash flow forecast showing fixed and variable cost set against
income for Oldham consultancy limited
Main sources of finance for startups:-
For starting a new business, firm is required to have different sources from which it can
extract funds and can invest for the business. These sources are as following:-
 Personal investment:- The personal investment includes own saving and other assets that
a person can use to start a business.
 Friends and family:- Another source is borrow money from relatives who are ready to
invest in your new business.
 Angel investors:- There are many wealthy investors who are ready to invest in your
business directly and not only funds these leaders are having experience in technology
and management, so they also gives best advice to the startups (Yoo and Pae, 2017).
 Venture Capital:- There are venture capitalist in market who are ready to invest for the
startups in exchange for the equity and also expects high return on their investments.
 Business loan:- There are different financial institutes and banks who are the common
source of funding for startups and small businesses.
Cash flow forecast:-

Cash flow forecasting helps the business to have control and save time for other
activities. With the less time consumption, small business becomes more powerful. This
forecasting helps in visualizing different scenarios that can be utilized take big decision for the
organisation. Better informed decision is in hand with the use of cash flow forecasting and
business grows in right direction with the help of it.
Cash flow from operations
Net earnings 2000000
Additions to cash
Depreciations
Decrease in account receivable
Increase in account payable
Increase in taxes payable
10,000
15000
15000
2000
Subtractions from cash
Increase in inventory 30000
Net cash from operations 2012000
Cash flow from investing
Equipment 500000
Cash flow from financing
Notes payable 10000
1522000
Forecasting and budgeting:-
There are different forecasting and budgeting techniques that business uses to forecast the
overall income and expenses of the business of Oldham consultancy limited.
Budgeting forecasting techniques are as following:-
 Creating a Master Budget:- It is the easiest way to forecast any small business as this
static financial document is useful to identify what will be the actual performance of the
business over year. Here, financial data is been gathered from each team and with the use

of current and past data, overall budget is set in order to achieve the business
expectations(Saarinen, 2017).
 Bottom-up budgeting:- This budgeting allow the department managers to create their
own budget and that is then approved by the upper management. This method is useful as
the departmental managers are more aware about their actual performance.
 Zero based budgeting:- This budgeting identify and eliminates the waste as in this
method, all the expenses have to be justified for each new period. This starts with zero
base and the specific needs and associated cost are calculated for every business
function(Henttu-Aho, 2018).
P5 Application of break-even analysis on organisational situation
Break even analysis is a method that most of the business uses for determining the
relationship that is between different associated costs, business revenue and also profits at
different business results. With the help of break-even analysis business is able to determine the
a point where the revenue of the its production become equal to the costs that were involved
during the period. There are three elements that are back of this analysis are as following:-
 Fixed cost- there are some cost in the business process that stay same for in all conditions
and there is no effect of business sells on its. This cost includes salaries and wages of
working people, rent and insurance of the organisation.
 Variable cost:- This cost is totally based on the sales of the business and may include
material payment processing fees. This cost varies from time to time and totally depends
on the business conditions.
 Average Price:- This cost is associated with the average amount at which the price of
competitors with respect to offerings lies.
It is a simplified calculation and is most important for planning the profitability of the
business. The basic formula that is been used to calculate break even analysis is:-
Break-even point= Fixed costs/ (Average price-Variable costs)
This is the situation where the business neither loses its money nor makes any money as
the condition is in a balanced form and the associated costs are been covered. This analysis is

helpful for the business in order to generate business revenue in order to cover up all its
expenses and that leads to business profitability (Morano and Tajani, 2017).
Break even analysis generally allows the business to determine the point of probability
that is the amount of revenue business is required to generate in order to cover all its
expenses. This highlights the products and services of the businesses that have generate more
profits so that business can enhance them and can work effectively on those offerings which
are not working out. This analysis is also important as it helps the business to price its
offerings in a better way. The managers at Oldham consultancy limited are required to
identify their respective fixed cost, variable cost and the total cost so that business is able to
analyze the lowest possible cost for its manufacturing of products.
Finally, business is able to analyze different information and accordingly can implement
the best possible strategy for its business. This strategy is helpful for the business in their
near future as the break-even analysis helps the business to find a timeline of all the
respective products and services and accordingly prepare effective financial strategies that
fits the business costs and profits that are been projected by the managers at Oldham
consultancy limited.
P6 Key financial statements for Oldham consultancy limited in relation to its contribution for
successful management of the business
There are some key financial statements that are used different market analysts, investors
who are willing to invest on small businesses and also creditors, so that they can analyze about
the financial health of the business and what is the potential of the organisation to earn money.
Basically there are four types of financial statements that are as following:-
 Statement of financial position:- This is also known as Balance sheet that states the
financial position of the organisation and are having three major elements that are assets,
liabilities and equity.
 Income Statement:- This is also termed as profit and loss statement that reports the net
profit and loss of the business in specific time period. The major elements that are used in
this statement is income that is what business have earned over the year and another
element is expense that is the cost incurred by the firm.

 Cash flow statement:- This statement represents the movement of cash or balance of the
business over the given time period. There are four major segments in cash flow
statement that are operating activities, investing activities and financial activities of the
organisation. The operating activity represents the cash flow that comes from the primary
business activities and the investing activity generally represents the cash flow from the
purchase and also sales of business assets. Here, the financial activities are the raising and
repaying of the share capital and also debt(Do and et.al., 2018).
 Statement of changes in equity:- This is also termed to be statement of retained earnings
and helps the business to understand the movement of equity over the given time period.
There are different components that are involved such as net profit, share capital,
dividend payments etc.
LO 4
P7 Discuss different laws and regulations that affect to small business and explain advantage and
disadvantage of each law.
In order to start small business, it is very important and effective to understand all the
legislations and laws. Those can affect to business in negative and positive manner. Oldham
consultancy limited is marketing consultancy firm which is providing guidance to people who
started their business in negative and in positive manner. There are various common laws which
may affect to business need for comply with such as contract, marketing and employment. Those
are as follows:
Employment and labour law 2020:
This is very important and effective laws which are need to consider within the business
and for starting new business. There are various laws which are include within employment and
labour law such as wages and hours, workplace safety and health law, equal opportunity,
employee benefits security. This is law very important to understand by Oldham as well as small
firm. This law is beneficial for both employee and management because this provide safety to
employer and security to employee (Williams and Horodnic, 2016). As per this, worker has right
to know, participant and refuse unsafe work. Advantages: This involving issues and consultancy
changes in employment and labour laws. This offers interesting task but offer opportunity for
growth at workplace in effective manner. The main advantage of this law is human component

with unique strategy. Protect to business and employer with employees and increase growth rate
at market place. Disadvantages: This law is changed themselves so lawyers in the field stay
informed. Less job security to employees and to businesses. The biggest disadvantage with this
law is insecurity with employees because as per this law employee have right to take advantage
of compensation.
Antitrust laws:
Any time company conspires with its competitors, third party vendors. There are various
issues involves within antitrust law such as conspiring to fix market price, price discriminations,
monopolization and conspiring to allocate markets and customers. As per this law company
chance to secure because in the market have various competitors who affect to small firms in
negative manner (Hillary, 2017). Like: agreement between competitors to divide customers and
market are illegal. This provision applies in the competitors do not dominate in the small
business.
Environmental laws:
For the small businesses need to comply with environmental protection law which is
depending on the type of industry. In this company need to use eco friendly products and raw
material for producing their product for attracting customers. For that here is taking great
example of small business which is EPA is the great resources for make sure the business
compliance with the environmental law. Advantages and disadvantages environmental law are as
follow: advantage: This helps to protect business with any environmental section. This
knowledge is protecting business in positive manner. On the other side, disadvantage is if
company have not any knowledge of environmental law then it is affect to business in negative
manner.
Licensing and permits:
Licensing and permission for the business starts is very important and effective for
business (Kusakina and et.al., 2016). This is important to have licence for starting business at
market place. Every state government have their own requirement for businesses which is
important to understand in proper and effective manner. Licence is the legal document which is
provides permission to operate their small business at market place like Oldham firm.
Advantages and disadvantages of licensing and permits laws are as follows: advantages: These
creates an effective opportunity for passive income as well as create new business opportunity.

This reduces risk for the parties and creates an easier entry into the foreign markets. This creates
the self employment opportunity and offer to freedom to develop a unique and effective
marketing approach. Disadvantages: this increases the IP theft and creates dependency on the
licence. This added competition in the market place and offers limited time for working.
Those are the law and regulations which are important to have knowledge with small
businesses. With the help of those regulations, small business has opportunity to increase their
sales and enhance their business at market place.
CONCLUSION
From the above report it is been concluded that the there are some relevant tools and techniques
that helps the business to allocate its resources and also to structure its organisation. Further it is been
concluded that CRM process is helping the small businesses in managing their customers base and
making them satisfied with their respective services. There are different benefits of transnational
operations as it brings huge scope for the organisation. However, there are several limitations while
having transnational business practices. Report concluded that the cash flow statements help the small
businesses to forecast their business so that effective strategies can be built for their business profitability.
Business can use break even analysis for determining the relationship that is between different
associated costs, business revenue. Report also concluded that there are different financial statements
that contribute in different ways for successful management of the business. Finally, report concluded that
the small businesses are required to use key legislations and have to apply them within the business as it
helps the business to work more ethically and effectively.

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