Managing and Running a Small Business: A Comprehensive Guide

This comprehensive guide explores the key aspects of managing and running a small business, covering topics such as resource allocation, customer relationship management, financial planning, and legal considerations. It provides practical insights and real-world examples to help entrepreneurs navigate the challenges of starting and growing a successful business.

Managing and Running a Small Business
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Managing and running a small business
Contents
Introduction....................................................................................................................................4
TASK 1...........................................................................................................................................5
P1. Discuss the main considerations a small business or social enterprise needs to address
when planning and allocating resources to achieve business objectives...................................5
M1 Apply relevant tools and techniques in a structured and analytical way to plan and
allocate resources in an organisational context...........................................................................6
M2 Assess the importance of planning and allocating resources to achieve the business
objectives........................................................................................................................................7
D1 Critically analyse the application of appropriate resources to demonstrate links
between resource allocation and achievement of business objectives.......................................8
TASK 2...........................................................................................................................................9
P2 Explain and evaluate different processes of customer relationship management for a
small business or social enterprise...............................................................................................9
P3. Explain how a small business can develop transnationally and determine the benefits
and drawbacks.............................................................................................................................10
M3 Apply and evaluate the elements of the customer relationship management process in
relation to achieving business objectives...................................................................................11
M4 Evaluate the potential to develop transnational operations using the stage model of
internationalisation, assessing both benefits and challenges...................................................12
D2 Critically evaluate the customer relationship management process at all stages and
provide recommendations for overcoming challenges of developing transnational
operations.....................................................................................................................................13
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TASK 3.........................................................................................................................................14
P4. Produce an annual itemised monthly cash flow forecast showing fixed and variable
costs set against income for a specific organisation..................................................................14
P5. Explain how break- even analysis could be applied to an organisational situation........15
P6. Interpret key financial statements for an organisation in relation to how they
contribute to the successful management of the organisation.................................................16
M5. Quantitative and analytical techniques to provide an appropriately detailed cash flow
forecast and break-even analysis................................................................................................17
D3. Produce an accurate cash flow forecast and break-even analysis with a critical
evaluation of how key financial statements contribute to the successful management of the
business.........................................................................................................................................18
TASK 4.........................................................................................................................................19
P7 Discuss key legislation and regulations that have implications on small businesses or
social enterprises..........................................................................................................................19
M6 Evaluate the implications of key legislation and regulations in an organisational
context...........................................................................................................................................20
D4 Critically evaluate key legislation and regulations that affect small businesses or social
enterprise organisations, taking future developments and changes into account.................21
Conclusion....................................................................................................................................22
Reference......................................................................................................................................23
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Managing and running a small business
Introduction
Anyone maybe passionate about setting up a small business but no matter how enthusiastic he is,
won't be successful unless there is a clear business strategy to set up a small business.
Any business starts with an idea but a businessman needs something more than just idea to
realize his business dreams. Hard work, intelligent decisions, dedicated employees can help a lot
to be successful in small businesses. There will be a constant competition to retain the existing
customers and stitching the new ones in the Marketplace, so a businessman can never simply rest
on his laurels. Constant research on the market, making superior quality products and effective
customer relationship management can help an entrepreneur to be successful in his business
venture. The company selected in this study is GlaxoSmithKline which is effectively performing
in the UK market.
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Managing and running a small business
TASK 1
P1. Discuss the main considerations a small business or social enterprise needs to address
when planning and allocating resources to achieve business objectives.
Identifying the important resources is the trickiest part of a business. To figure out which type of
resources is exactly needed for the business, proper business planning is very crucial. Some basic
resources are crucial to start a small business that will survive for a long period of time. The
most important one will always be the sound knowledge needed to start a particular type of
business as opined by Cabanillas et.al (2013). The Other factors which are equally important to
turn a small business venture into a successful one are discussed below-
 Starting a small business or social enterprise is not a very simple task and cannot be just set up
like that. The most important resource is the workforce for any organisation. So, the main
consideration will be appointing the right kind of employees.
 The good support system is another important resource for a small business venture. The
entrepreneur first uses every opportunity to talk with another businessman who is already
established and running a successful business in the same category. The cat is valuable and was
advice about the business and its loopholes. The social networking sites can work wonders for
any small business entrepreneur.
 Another important resource is to arrange the capital to start the business. One must have
adequate personal savings to start the business; otherwise, he arranges bank loans to finance the
business.
Once the Businessman is ready with his basic resources he is already on his way to start a
successful small business.
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Managing and running a small business
M1 Apply relevant tools and techniques in a structured and analytical way to plan and
allocate resources in an organisational context
Resource allocation is a process to decide where the resources are to be used in the production of
goods or services. Resource allocation is optimum when they are used to produce that kind of
goods or services which matches the needs of the customer and also lower the possible cost of
producing them.
GlaxoSmithKline uses some relevant techniques to plan and allocate their resources. They are:
 Strategic relocation and rearrangement of their resources so that the excess one can be used
effectively in future. Their workforce can be occupied optimally by this strategy.
 They diversify responsibilities among the employees. They recognize as well as nurture the skills
of their employees and motivate them properly.
 They always try to have optimum utilization as their default status. This implies that they have
healthy resource allocation habits.
Trial and error is the secret which the resource managers of GlaxoSmithKline exhibit prior to the
effective allocation of the resources. They are very unconventional in their way to practice
resource allocation which has definitely rewarded them in terms of handsome profits.
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Managing and running a small business
M2 Assess the importance of planning and allocating resources to achieve the business
objectives.
To achieve optimum resource allocation, it is very important to determine how much resource is
actually needed for a particular production as compared to how much resource is available in the
market. Therefore, production must be based on the available resources as opined by. In
accordance to Singh and Abid (2017), a clear understanding of the scope of the business must
determine the amount of the allocated resource. Identifying the demand for the resources helps to
prepare estimate regarding cost, time and process of production. A clear understanding of the
scope of the business must determine the amount of the allocated resource. Identifying the
demand for the resources helps to prepare estimate regarding cost, time and process of
production.
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Managing and running a small business
D1 Critically analyse the application of appropriate resources to demonstrate links
between resource allocation and achievement of business objectives.
According to Metz (2012), the resource allocation is one of the most essential aspects in an
organisation it is very important for the management of the firm to effectively allocate all the
resources in an effective and in the required manner. It is also necessary for the company to deal
with all the activities of the business, therefore to carry out the work in the appropriate manner, it
is essential for the company to allocate the resources in the proper and in the desired way.
Effective allocation of resources and growth in business are interrelated. If a business process is
not defined properly the allocation of resources may not be utilised optimally to attain the
business goal. With a well-defined structure in terms of time and cost the business objective
varies with the resource allocation process. Strategic allocation of resources let the entrepreneurs
look for better replacements and also helps to find more efficient employees. One of the main
hindrances to the resource allocation process is the convoluted process on which the
entrepreneurs cling on.
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Managing and running a small business
TASK 2
P2 Explain and evaluate different processes of customer relationship management for a
small business or social enterprise.
As per the view of Metz (2012), Customer relationship management helps to manage customer
communications and other customer-related sales efforts. Well executed customer relationship
management practices can improve the sales efficiency by improving the customer experience.
The important processes of customer relationship management are,
 Consolidating the customer data with their contact information including their history of
purchasing and communication into a single location which can be accessed easily by the sales
team.
 By analysing the data and the insights provided by customer relationship management team
suggests the appropriate time to catch up with the customers, the crucial customer behaviours
that lead to more sales, the situations where deals get struck. Successfully utilising the
information leads to more efficient process to accelerate sales.
 For a small business, it is quite easy to personalize the sales experience for every customer. This
process helps to anticipate their needs which in turn help the entrepreneur to plan the future
business strategy.
 If the potential customers of any small business are looking for their stuff online, it will be
worthy for the entrepreneurs to have an attractive website where the customers can easily access
all the related information via mobile phone or computer. The sites must be user-friendly and not
hard to navigate. The company must encourage the customers to share their social media pages.
A proper and effective customer relationship management process must set up goals and
milestones. Once they are set up the entrepreneur will be able to track his progress.
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Managing and running a small business
P3. Explain how a small business can develop transnationally and determine the benefits
and drawbacks.
Primarily transnational businesses carry out business activities across the international
boundaries. They are different from International, multinational or Global Business models.
Transnational businesses are very much extensive in nature. These small business ventures have
headquarters in one country and a network of independent subsidiaries in the other countries
where the company expands its horizon as per the view of Wartini (2013). Any small business
venture can expand transnational by getting a permanent business license, hiring a local team and
sufficient amount of capital. The location of the business must be set in a busy commercial area
of the chosen foreign country. Armed with sufficient amount of cash the company can also
acquire a local business for fast and easy growth. Any independent company wander can grow
transnational by getting a lasting business permit, employing a nearby group and in an adequate
measure of capital. The area of the business must be set in the occupied business zone of the
chosen remote nation. Furnished with an adequate measure of money the organization can
likewise obtain a neighbourhood business for quick and simple development.
Like any other business venture, this process also has its share of benefits and drawbacks which
are discussed hereafter.
Benefits:
The most obvious benefit is that it expands the market for the entrepreneurs and enables his
brand to be recognized globally. As the organisational structure is decentralized it helps to curtail
cost by using local resources. The products can be manufactured by local manufacturing plants.
The distribution cost can also be lowered by marketing the finished goods to the nearby local
markets.
Drawbacks:
There are many inherent risks which are involved in the transnational business strategy. Losing
control over a decentralized business is one of them. Also, the political situations and the legal
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Managing and running a small business
requirements can play tricky roles. The cultural diversity can also hinder the business process.
The worst situation is where the company fails to build its brand image due to heavy expense.
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Managing and running a small business
M3 Apply and evaluate the elements of the customer relationship management process in
relation to achieving business objectives.
The key elements of customer relations management initiative are people, process, and
technology the Customer Relation Management process combines and organises the business
goals with technology. The customer relationship management process evaluates and adjusts
customers need with the business process. It also improves the efficiency of the employees
provided them with shared, diverse and relevant data about the customers.
As per the view of Payne (2012), it is the primary and ultimate goal of any business organisation
to get close to their customer more than their competitors. They must be able to read the mind of
their customers and predict their needs well before the customers realize it themselves. The
customer relationship management initiatives help them to analyse the customer's behavior so
they can strategically develop products and services according to their needs. In order to survive
in a competitive market, the business organisation must become customer-centric.
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Managing and running a small business
M4 Evaluate the potential to develop transnational operations using the stage model of
internationalization, assessing both benefits and challenges.
According to Storey (2016), the transnational business operations help a small business
organisation to introduce new diversified products and upgrade the older ones according to the
market they are operating in. The transnational business operations are cost saving because
certain business activities like manufacturing the product and other corporate functions can be
distributed to certain countries where cheap labor, resources can be allocated. As the business is
decentralized local people can be involved in in the packaging and delivering a process which
can be very cost effective in the countries which offer cheap labors. The product, which the
company producers in another country It also varies according to the taste of the consumers
there. In this way the brand identity is standardized. Although the product structure may be
similar; but somehow the quality of the product differs in different countries.
The business can be engaged within the bundling process which can be exceptionally financially
savvy in the nations which offer modest works. The offerings and the services which are been
made by another nation is likewise shifts as per the essence of the purchasers there. Along these
lines the brand personality is institutionalized. In spite of the fact that the item structure might be
comparative, however, by one means or another, the nature of the item contrasts in various
nations.
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Managing and running a small business
D2 Critically evaluate the customer relationship management process at all stages and
provide recommendations for overcoming challenges of developing transnational
operations.
According to Storey (2016), the customers are the main players of any business and therefore
they should be given the prime importance and it is the main objective of any business company
to keep them satisfied and happy with their products and services. Other than customer relations
the customer relations management Solutions can also be used to configure the customer related
workflow. In a way, it automates the business process. The main hurdles of any transnational
business venture are the non-cooperation of the people and the government of the foreign
country. Therefore, to set up a business in a foreign land the entrepreneur must be on good terms
we the people and also be in the good book of the government. The CRM process is basically
having following stages such as-
 Marketing- In this stage, the management of the firm is creating awareness about the products
and services of the company. This is a very important stage as with its assistance the people of
the society will get to know about the offerings and services that s been provided by the
company for the end users. This is very effective and appropriate approach that can be used to
attract and draw the attention of the people.
 Selling- This is the next stage where the selling of the goods and the offerings are get done in an
appropriate and in the required manner. The revenue here will get an increase in the marketing
stage is helping the people to make their purchases and this is directly assisting the company to
enhance their profitability.
 Services- The services are the aid and assistance that the customers are getting which is one of
the most essential factors of the CRM practices. It is very necessary for the organisation to
consider more in this aspect as this is making the client get connected more with the services of
the company.
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Managing and running a small business
TASK 3
P4. Produce an annual itemised monthly cash flow forecast showing fixed and variable
costs set against income for a specific organisation.
Fixed costs are those costs which do not change with the change in production or sales.
Variable costs are directly proportional to the number of sales or the production.
Here is the annual itemized monthly cash flow forecast showing fixed and variable costs set
against income for GlaxoSmithKline.
Cost Category Fixed cost (in €) Variable Cost (in €)
Personnel 65
Travel 70
Equipment 40
Supply 45
Indirect cost 20
Other administrative
expenses
30
Total 105 165
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It can be estimated from the above table that the organisation needs to concentrate on buying
more equipment and must curtail the travel expenses. The usefulness of the cash flow forecast
depends on the accuracy. It is very important to update them on the actual business performance
on monthly basis. This will ensure that the given information is correct and allows the
organisation to prepare the future forecast figures accurately. The organisation can identify the
bills which it need to pay and when to pay. It is also helpful to give reminders about the annual
expenses like fees related to accounting or the business taxes. The cash flow forecast can also
detect the current market condition and trends. A new competitor in the market can lower the
forecast figures that they may gain some market share.
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Managing and running a small business
P5. Explain how break-even analysis could be applied to an organisational situation
The break-even analysis determines when a company will be able to generate enough revenue to
earn a profit. This data is often used for future financial projections. The application of break-
even analysis is discussed here.
 Break-even analysis helps to determine the point of profitability. Which appropriate approach the
point of profitability can be determined very easily. Without using it one cannot fathom out
weather gear generating any profit or not.
 If an entrepreneur has adequate knowledge about the break-even point for all his products and
services it will be easier for him to earn a profit. Although the process is simple for a few
numbers of products and services and becomes little complicated for a huge number of products
or services.
 If the profitability of a company depends on the success of maybe one or more than one
products, then the breakeven point for each product will provide a fixed timeline for the
company. This is used to implement and affect the financial strategy that can easily fit into the
projected costs and profits.
As per the view of Grant (2016), if an entrepreneur fully understands every detail of break-even
analysis then he will have a firm grip on calculating accurate numbers which are important while
relying on tools and resources provided by others.
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Managing and running a small business
P6. Interpret key financial statements for an organisation in relation to how they
contribute to the successful management of the organisation.
In this article, the financial statements of GlaxoSmithKline will be considered to determine their
contribution to managing the organisation successfully.
The complete financial statement gives an overview of the financial condition of a business. The
financial statement of GlaxoSmithKline is comprised of four basic reports, which are as follows.
● Income statement: The revenue, all the expenses and the profit and losses generated in the
interim period are considered as the income statement. Income statement of GlaxoSmithKline
shows the profitability of the company clearly.
● Balance sheet: The balance sheet is formatted in such a structure that total assets equal the sum
of total liabilities and equity. The information about the liquidity and the capitalization of
GlaxoSmithKline is clearly shown in the balance sheet which gives us a positive picture about
the liquidity and capitalization of the organisation. The assets and the liabilities of the company
will get to know effectively so that it can be able to manage all its sources in the proper required
way
● Statement of cash flows: Statement of cash flows is presented to issue a financial statement to
outside parties. The cash inflows and outflows of the company are given in the statement which
provides a useful comparison to the income statement.
● Statement of retained earnings: In the reporting period changes in equity is presented by the
statement of retained earnings. The statement of GlaxoSmithKline shows the sale or purchase of
the stocks, dividend payments and changes offered by the profit and losses. This is only included
in the audited financial statement package.
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Managing and running a small business
M5. Quantitative and analytical techniques to provide an appropriately detailed cash flow
forecast and break-even analysis.
Cash flow forecast helps the entrepreneur to visualize certain scenarios. They can provide
important information to take appropriate decisions like the number of employees to be recruited,
variation in the price of the products, to submit tenders for important contracts, to change the
location of the business or to change existing suppliers.
Cash flow forecasting on a regular basis provides the relevant information to make better
decisions. The process helps to choose the right option for the growth of the business. A strong
and flexible relationship with the suppliers can effectively manage the cash flow. The forecasting
helps to identify those potential suppliers who are important for a steady cash flow gives the
entrepreneur that opportunity to strengthen the relationship with those suppliers.
The break-even analysis effectively lowers the risk in any business. As per the view of Pei and
Yoon (2012), finding the breakeven point helps for entrepreneurs to fix the price of the product
in a more accurate way. The break-even analysis helps to cover the fixed costs of a business. In
this way, the missing expenses can be identified and can effectively lower the unpleasant
surprises in business
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Managing and running a small business
D3. Produce an accurate cash flow forecast and break-even analysis with a critical
evaluation of how key financial statements contribute to the successful management of the
business.
Financial statements are written records which informed about the financial activities of a
business. Financial statements are helpful in understanding the opportunities in investments. The
four financial statements are generally prepared by the business organisations for use by the
investors, creditors and other stakeholders. These four financial statements are actually
summaries the business activities.
The cash flow forecast made by the organisation shows that it is a growing organisation
maintaining a healthy relationship with the suppliers. It can also be stated that the organisation
needs to appoint new employees. The entry of other players in the same segment can also be
noticed by this cash flow forecast.
With the break-even analysis it can we estimated that the organisation has lower risk in this
segment of the business. The prices of the organisation must be lowered to sustain its current
position in the market as there are new entrants in the same segment. The fixed cost is covered
by the break-even analysis and all the missing expenses are identified. The administrative
expenses may be increased to accelerate the business process. The inclusion of trained
professionals in the organisation can enhance the relationship with the customers as better
service than the other players is always beneficial.
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Managing and running a small business
TASK 4
P7 Discuss key legislation and regulations that have implications for small businesses or
social enterprises.
Some important legislation which has a major impact on small businesses are
 Corporate laws which include the company law, security law, foreign exchange management
law, regulations issued by various regulators.
 Business laws which include the contract law, sale of property laws, sale of goods law, foreign
trade law and also measurement laws.
 Finance laws including goods and service tax law, customs law, Income Tax law, excise law and
wealth tax law.
 Labour Law which includes minimum wages, provident fund laws, and pension laws.
The response of the small businesses to regulation is very different from the big business houses.
The small business faces competitive disadvantages in the market due to strict regulations. The
state regulations and also local regulations can be a huge burden on the small businesses. The
most adverse effect of government on any small business is in the form of different taxes. These
business taxes are complex in nature which is very cumbersome for the small businesses to
handle. As opined by Gong and Janssen (2012), the government regulations on small business
may come in the term of regulating the marketing in certain areas, approving the products and
services as well as general public welfare. It is really difficult to summarise the entire regulations
to which any particular business may be subjected.
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Managing and running a small business
M6 Evaluate the implications of key legislation and regulations in an organisational
context.
While running a small business the entrepreneurs must be aware of the various laws and their
impact on business. As opined by Schaper et al (2014), the legislation policies help the
organisation to execute their business without any headaches. The mandatory legislative policies
should be followed strictly in order to do smooth business functions. The business organisations
must be aware of the in-depth and detailed information on the existing laws and may take advice
all guidance from the professionals. They should strongly follow the advice or guidance on the
permitted standard of the products. The social behaviour of any small business organisation can
be changed by the regulatory policies of the government. The entrepreneurs me lose interest in a
particular sector if the tax and duties hinder the process of business. If the tax rate is high on the
imported goods it may encourage the local production but the high tax rate for raw materials can
hinder the domestic production of any business.
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Managing and running a small business
D4 Critically evaluate key legislation and regulations that affect small businesses or social
enterprise organisations, taking future developments and changes into account.
Legislations and regulations can affect the small business or social enterprise organisations in a
big way by limiting the market as opined by Haidar (2012), therefore accurate strategies must be
followed by the organisation to smoothly conduct the business process. The organisation must
hire efficient professionals to look after the legal aspects for the smooth operation of the business
process. The business organisation must be updated about the changes in the existing laws and
should follow the advice of the professionals about the standard of the products.
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Conclusion
The small business can handle customers in a better way than the big business. Customers can
get in touch with the organisation more easily. So, a personal bond is developed between the
customers and the company which helps to retain existing customers. Just like the customers, the
hardworking and dedicated workforce is the backbone of any business organisation. With the
help of these two pillars, any small business can flourish and may turn into a big venture in the
future. The management of the business and all its activities are very important as with its
assistance the people and the working condition of the firm could be get done in a well-managed
way. The resources are to be managed and handled in the proper and in the appropriate manner.
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Reference
 Cabanillas, C., García, J.M., Resinas, M., Ruiz, D., Mendling, J. and Ruiz-Cortés, A., 2013,
December. Priority-based human resource allocation in business processes. In International
Conference on Service-Oriented Computing (pp. 374-388). Springer, Berlin, Heidelberg.
 Gong, Y. and Janssen, M., 2012. From policy implementation to business process management:
Principles for creating flexibility and agility. Government Information Quarterly, 29, pp. S61-
S71.
 Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
 Haidar, J.I., 2012. The impact of business regulatory reforms on economic growth. Journal of the
Japanese and international economies, 26(3), pp.285-307.
 Metz, A., 2012. The social customer: How brands can use social CRM to acquire, monetize, and
retain fans, friends, and followers (Vol. 1). New York: McGraw-Hill.
 Pae, J. and Yoon, S.S., 2012. Determinants of analysts’ cash flow forecast accuracy. Journal of
Accounting, Auditing & Finance, 27(1), pp.123-144.
 Payne, A., 2012. Handbook of CRM. Routledge.
 Schaper, M.T., Volery, T., Weber, P.C. and Gibson, B., 2014. Entrepreneurship and small
business.
 Singh, O.P. and Abid, M., 2017. Characterization of Model of Alocation of Service Resources.
International Journal of Statistics and Systems, 12(3), pp.535-542.
 Storey, D.J., 2016. Understanding the small business sector. Routledge.
 Wartini, S., 2013. The Role of The Host State to The Protection of Human Rights and The
Environment from The Violation Done by Transnational Corporations. Jurnal Hukum IUS QUIA
IUSTUM, 20(4), pp.501-522.
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