Managing and Running a Small Business

This document discusses the main considerations of small businesses and social enterprises when allocating resources, different processes of customer relationship management, ways to develop transnationally, and more. It includes a cash flow forecast, break-even analysis, and key legislation and regulations for small businesses.

MANAGING AND
RUNNING A SMALL
BUSINESS

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Main consideration of small business or social enterprise needs to address when allocating
resources.................................................................................................................................1
TASK 2............................................................................................................................................3
P2. Different processes of customer relationship management in a small enterprise............3
P3. Ways in which business entities can develop transnationally and its advantages as well as
its disadvantages.....................................................................................................................4
TASK 3............................................................................................................................................5
P4. An annual itemised monthly cash flow forecast showing fixed and variable costs.........5
P5. Way of break-even analysis is applicable in JS Supermarket..........................................7
P6. Interpretation on key financial statements for an organisation for contribution in
successful management..........................................................................................................8
TASK 4..........................................................................................................................................12
P7. Key legislation and regulations which have major implications on small business
companies.............................................................................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

INTRODUCTION
Small medium enterprises are working as independent entity and non-subsidiary
business entity within which they are having moderate turnover and employees when compared
to huge business organisations. In this report all the concepts of small business has been included
in which company taken as base is JS supermarket which is running their small business in
London, UK. Within this report social enterprise plan and their resources are enumerated in order
to achieve business objectives in effective manner. In this report various processes of customer
relationship management has been included which entails about development of break-even
analysis within various organisational situation. Along with this the report includes various
legislations that are helpful for enhancing performance of small medium enterprises. Further
various techniques are included by which can flow can be managed in small medium enterprise.
JS supermarket was found by Ramchandran Jalatheepan in the year of 2014 and they are dealing
in food and grocery items for a major objective of enhancing profitability (Burns, 2016). In the
present case customer base of JS supermarket is decreasing which is adversely affecting market
image of the company and competitive edge. So for the major purpose to overcome form these
situations an effective marketing plan is prepared by the company in order to deal with dynamic
business environment and to archive business sustainability.
TASK 1
P1 Main consideration of small business or social enterprise needs to address when allocating
resources
In the current business scenario, UK is very supportive for small and medium enterprises as they
help the economy to grow. The major reason for this is Brexit agreement in which UK is willing
to enhance their global economy in prominent manner (Crane and et. al., 2019)(Bhat and Darzi,
2016). So in order to grow in their business small business do require technological aspects in
the business so as to bring innovation in business and meet emerging needs of customers. In this
context JS supermarket is making an effective plan so as to achieve business objectives:
(a) Financial resources:
This is known to be essential factor for the business as these resources are helpful
for the business in receiving high efficiency. This resource safeguards raw material and
1

manufacturing process, in with the context of JS supermarket this dimension is highly for them.
Financial resources convey financial position of the company which help them to get grip over
the business in effective manner. JS supermarket is facing problem of decreasing customer base
which is having negative impact on business performance eventually. Being small medium
enterprise investors cannot be involved in the business so loans can be taken from bank or other
financial institution. Further in order to have overall business growth additional expenditure is
required to be controlled by them.
(b) Human Resource
This resource is essential for the business in order to smoothly execute business
plan and receive distinct competitive edge in the market. For JS supermarkets they are required
to invest in human resource department in order to make their workforce effective and efficient.
So for this the company is having responsibility to appoint skilled employee by which they can
help the company is its progress and growth. Along with this human resource department is
required to introduce robust strategies by which employee retention can be enhanced and goals
and objectives of business can be achieved.
(c) Goal, vision and target
In order to get success and growth the business is required to set their objectives
in desired way. Within this the major objective of JS supermarket is to enhance their customer
satisfaction and increase customer base as well which is the prominent dimension of enhancing
their profitability. On the other hand they are targeting young people as this age group are prone
to use new things. On the contrary JS supermarket is requisite to hold value in their business by
which they will be able to attain their goals in early time.
Gantt chart: A gantt chart is known as the basic idea which is used in production control
tool by production managers. This chart was propounded by an American engineer named Henry
Gantt which is used in project management and to manage whole situation of project in
systematic manner with the help of graphical representation. With the help of Gantt chart, JS
supermarket can examine prevailing position of task completion.
Critical path analysis: By using this tool, business entities are taking their required
paths which are fitting in their budget. With the help of this tool manager of JS supermarket can
meet their business objective in stipulated time with high efficiency and effectiveness.
2

TASK 2
P2. Different processes of customer relationship management in a small enterprise.
In current growing world customer relationship management is a crucial term which is
helpful in achieving growth and success. Customer relationship management is an approach
which is used by managers in order to communicate with their customers and convey
implemented strategies to them in effective manner. This report includes strategies which are
undertaken by JS supermarket in order to maintain effective relations with their customers and
sustain them for long time in order to make their customer base stronger and enhance sales
(Baran and Galka, 2016).
JS supermarket is using two different approaches named customer relationship manager
and corporate social responsibility. CRM is an approach which is used in order to understand
emerging needs of customers in prominent manner and meeting them with product offering. For
this change management can be implemented by managers of JS supermarkets as according to
demands and market policies. Similarly CSR is another dimension which is used by JS
supermarkets in customer relationship management. Within this JS supermarket include interest
of society and other stakeholders in their decision making so as to get high competitive edge
within market and to enhance their customer base. Here are some techniques which are used by
JS supermarkets within CRM approach which are elaborated as under:
Customer portfolio analysis: Customer portfolio analysis is a tool which can be used by
JS supermarkets in order to examine customer behaviour and standards. This approach is helpful
for the managers in understanding buying behaviour of customers so as to modify product
offerings as well. This tool is proven to be the most advantageous method in getting knowledge
about customer nature and behaviour. With the help of this tool judgement for JS supermarket
can make effective decision for business which could be helpful for business growth. By this
product and services can be altered in most prominent way in order to deal with dynamic market
and emerging needs of customers.
Customer intimacy: Customer intimacy is the approach by which customer relation
management can be specifically established within employer and managers of JS supermarket.
This is helpful tool in analysing employee behaviour according to customer needs. JS
supermarket is having high emphasis on maintaining effective relationship with their clients as in
3

this process they takes feedbacks on continuous basis by which loyalty can be created by them
(Mars and Fedor, 2019).
P3. Ways in which business entities can develop transnationally and its advantages as well as its
disadvantages.
Transactional operations are a process which includes business development with the
major concern of maintaining relations at global level. This process is helpful in analysing and
examining existing situation of the business which could have high impact on its decision
making and business performance (Bhandarkar and Dewey, salesforce com Inc, 2016).
Within this concept it has been analysed that with the help of critical decisions
performance of the product can be improvised. This process has proven to be providing high
advantages in maintaining current market position and sales ratio of small medium enterprises.
This feature is helpful in managing overall productivity of the business. In JS supermarkets
transactional sales procedure is utilised in order to enhance coordination and to recognise global
market opportunities as well. This tool is used by manager of JS supermarket in targeting their
customers so as to supply them desired quality products. By using this method demand of
customer can be easily recognised within prevailing culture and belongings. Advantages and
disadvantages of this approach are enumerated as under:
Advantages of transnational approach:
 This approach is highly useful for JS supermarket in introducing any change in their
production process which may add high value to the business. The major aim of this
approach is to attract high customers from overseas market. Transactional approach is
having prominent role in recognising market opportunities for small scale business within
marketplace by which business can be promoted at global periphery by JS supermarkets.
 This is an effective tool for JS supermarket as by this they can sell their goods at global
level and enhance their profitability and performance as well.
Disadvantages of transnational approach:
 This approach is having immense benefits over growth and business expansion for JS
supermarket but at the same time this requires highly systematic strategies and business
policies which could lead the business to development stage (Greenwood, Hanson and
Stein, 2016). This process needs to invest high amount of capital and other resources in
4

order to execute plans so as to have business expansion. So this process can be used by JS
supermarket in their expansion process.
 This process of expansion involves undertaking various business standards in order to
achieve goals and objective of business. This includes policies of society of the country
in which business is operating. This process involves high time and high investment
TASK 3
P4. An annual itemised monthly cash flow forecast showing fixed and variable costs.
Cash flow forecast can be used as the prominent business strategy in current case. This is
the most effective strategy can be used by JS supermarkets in order to evaluate their income. It is
a useful tool for the business in having control on extravagant expanses. There are different
sources in which cash flow can be calculated which are enumerated as under:
Equity finance: Equity financing is the activity in which business get their funds form
investors. Within these investors signs a deal in order to share profits and losses from the landed
money. As JS supermarket is small and medium enterprises so this option is not valid for them
whereas they can borrow money from family and friends (Morano and Tajani, 2017).
Bank loan: Bank loan is the most common borrowing method which can be used by JS
supermarket and all other business entities that are willing to expand their business. This could
be helpful for JS supermarket in raising funds in order to have smooth functioning. Within this
interest amount is to be given to the bank on the rendered funds.
Budgeting, planning and forecasting: This factor assists manager of JS supermarket in
order to examine decisions regarding monetary sources. This helps the business in providing
long term and short term benefits to the business and all the plans. For this following steps are to
be followed by JS supermarkets:
Measure moving average: This process is helpful in managing and examining market
image of JS supermarket. Similarly this is helpful for the business in collecting all the
information regarding goals and objectives of the company.
Time series data: This tool is used by the manager of JS supermarket in order to
determine production schedules which could be advantageous for the employees to complete the
process on timely manner and to estimate overall prices (Milne and Parboteeah, 2016).
5

Balance Sheet
Year 2017 (value in £) 2018 (value in £)
Fixed assets 150 200
Stock 25 30
Debtors 60 45
Bank 15 25
Total 250 300
Creditors 150 200
Bank overdraft 100 100
Total 250 300
Profit and Loss Account
2017 2018
Sales 15 25
Cost of sales 20 15
Gross profit 35 40
Overheads 5 5
Net. profit 30 35
Cash flow Statement
Cash
distributed Jan Feb March April May June July August September Oct. Nov. Dec Cash distributed
Variable cost
Direct
material 1500 1250 1250 1300 1450 1580 1650 1458 1589 1685 1985 1785 1500
Direct labour 1250 750 500 500 1350 1400 1435 1445 1474 1458 1568 1589 1250
Overhead 1000 500 500 700 2700 2850 2950 2987 2250 1850 1650 1250 1000
6

Fixed cost
Selling and
distribution 750 750 750 800 850 950 850 650 720 715 785 795 750
Total cost
use 4500 3250 3000 3300 6350 6780 6885 6540 6033 5708 5988 5419 4500
Cash
surplus/
deficit
28000 2625
0 24250 21950 1802
0 13190 8355 3915 32 -3426 -7114 -10580
28000
P5. Way of break-even analysis is applicable in JS Supermarket.
Break-even point is proven to be the most effective tool in order to relate profit, cost and
business expenses at different levels of output. This is the most advantageous way to determine
profits for JS supermarket for their acquired sales in a particular time period. This process is
helpful for the managers as this understand and examine revenue for various stages and parts.
This method can be applied in two unrelated situation or at nonlinear cost as well. Break even
analysis is also known as cost profit volume analysis (Batkovskiy and et. al., 2017). This method
is having an algebraic equation which represents break even analysis. Manager of JS
supermarket takes help form this algebraic equation and evaluate various situations thereon.
Break even analysis can be calculated as under:
TFC = Total fixed cost(Edwards, 2016)
P= Price
AVC = Average variable cost
Break-even point = TFC/ (P- AVC)
Furthermore, for a detailed understanding, it can be understood with an example:
AVC= 8
TFC= 50000
P= 20
Hence, Break-even point in this situation,
= 50000/ (20-8)
=2777.78
7

P6. Interpretation on key financial statements for an organisation for contribution in
successful management
Balance sheet 2017
All numbers in thousands
Period ending 8778500
Current assets 725400
Cash and cash equivalents 7100
Net receivables 531300
Other current assets 43069
Total current assets 4188300
Property plant and equipment 34200
Goodwill 155800
Intangible assets 133800
Other assets 1015000
Deferred long-term asset charges
Total assets 14554400
Current liabilities
Accounts payable 869800
Short/current long-term debt 790800
Other current liabilities 576000
Total current liabilities 539300
8

Long-term debt 3617300
Other liabilities 1906100
Deferred long-term liability
charges 137700
Total liabilities 6530900
Stockholders' equity
Misc. Stock options warrants 8004400
Common stock 7612100
Retained earnings 4700
Treasury stock 2217600
Capital surplus 19100
Other stockholder equity -85000
Total stockholder equity -1745000
Net tangible assets -4962400
Interpretation
From the aforementioned balance sheet, it can be concluded that an average level of
profitability is enjoyed by the company. The overall profit of the company is 16.06% whereas
operating profit is 17.89%. The rate of return on asset is valued at 2.87% which is termed as
moderate rate of return. So it can be concluded from the above balance sheet that liquidity of the
entity is high .
Profitability ratios:
Gross profit ratio: This ratio is used to calculate net profit of the business. So JS supermarket
has earned gross profit of 44.98 million. With the help of this formula gross profit can be
calculated in an easy manner (Nalbandian-Sugden, 2016).
Gross profit ratio= (gross profit ÷ sales) * 100
 Net profit ratio: Net profit ratio is calculated with the help of net profit and total sales.
Net profit is calculated from deducting all indirect expenses and adding indirect income
in gross profit.
Net profit ratio= (Net profit ÷ sales) * 100
9

 Operating margin ratio: Operating profit ratio is calculated with the help of EBIT and
total sales.
Operating margin ratio= (EBIT ÷ sales) * 100
Liquidity ratios:
 Current ratio: Current ratio is the tool by which liquidity of a business can be
calculated. This includes current items i.e. current assets and current liabilities. Current
assets are those assets which are convertible into cash within a year and current liabilities
are those liabilities which can be paid off within a gap of one year.
 Quick ratio: Quick and current ratio are used to determine liquidity but the only
difference in quick asset is that it does not include stock of the business.
Cash flow statements
Particular Amount
All numbers in thousands
Period ending 30/11/17
Net income 416900
Operating activities, cash
flow provided by or used in
Depreciation 492500
Adjustments to net income 168300
Changes in accounts
receivable
-27500
Changes in liabilities -54100
Changes in inventory -
Changes in other operating
activities
-34600
Total cash flow from
operating activities
961500
Investment activities, cash
flow provided by or used in
Capital expenditure -260200
10

Investments 14500
Other cash flow from
investment activities
-400600
Total cash flow from
investment activities
-646300
Financing activities, cash
flow provided by or used in
Dividends paid -
Sale purchase of stock -1035700
Net borrowings 813300
Other cash flow from
financing activities
-92500
Total cash flow from
financing activities
-329300
Effect of exchange rate
changes
9000
Change in cash and cash
equivalents
-5100
Period Ending 9/30/20
17
9/30/20
16
9/30/2015
Net Income -2,372 1,173 -4,662
Operating Activities, Cash Flows Provided By or Used In
Depreciation 5,151 2,082 733
Adjustments To Net Income -3,589 -832 3,069
Changes In Accounts Receivables -2,393 -100 223
Changes In Liabilities 2,806 -514 -870
Changes In Inventories - - -
Changes In Other Operating Activities 619 -1,086 857
Total Cash Flow From Operating
Activities
222 723 -650
11

Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures -250 -120 -186
Investments - - -
Other Cash flows from Investing Activities -25,356 -9,395 -2,576
Total Cash Flows From Investing
Activities
-25,606 -9,515 -2,762
Financing Activities, Cash Flows Provided By or Used In
Dividends Paid - - -
Sale Purchase of Stock 1,000 1,000 9,774
Net Borrowings 24,641 5,388 -598
Other Cash Flows from Financing
Activities
- - -
Total Cash Flows From Financing
Activities
25,641 5,388 9,176
Effect Of Exchange Rate Changes - - -
Change In Cash and Cash Equivalents 257 -3,404 5764
Interpretations: From the aforementioned cash flow statement it can be concluded that
961400 funds form operational activities was obtained by JS supermarkets. Whereas from
financing activities total funds generated was -329300 and from investment activities total funds
gathered was amounted -646300.
TASK 4
P7. Key legislation and regulations which have major implications on small business companies.
Businesses are having impact on country’s economy whether it is positive or negative. In
UK businesses are facing so many issues with applied legislative laws by government by which
complications have been faced by businesses. These laws are made in order to give business a
direction to conduct in ethical manner so it could not harm society and their stakeholder. Some
major laws instigated by government are enlightened as below:
Consumer law, 2015: Consumer law is made in order to provide safeguard to individuals
and to protect them from being trapped in any unfair business practices. With the major view to
retain customers businesses are required to obey this law. There are so many consumer rights
which are included in this act such as sale of goods acts which enable the consumer to stay in
12

legislative boundaries and perform trade activities in desirable manner (Howells, Twigg-Flesner
and Wilhelmsson, 2017). This act stimulate practices of providing better quality services to
customers by which high customer satisfaction can be enjoyed by JS supermarket.
Competition law, 1998: As according to this law, prices of competitors of homogenous
products and services are required to be same so as to decrease price rivalry. This law is helpful
in eliminating any unnecessary business practices which are adopted by some businesses in order
to earn additional profits. This is a mandatory law which is enforced by UK government for
countries operating in that country.
Employment law, 1996: This law is enforced in order to protect interest of employee
who is working in a business to have their personal and professional development. This law
involves elimination of any discrimination in workplace. So for JS supermarket manager this law
is mandatory to be enforced so as to give equal rights and opportunities to all of their employees
irrespective of their age, gender, religion rather than on the basis of their calibre and capabilities
(Hodges, 2018).
CONCLUSION
From the above detailed report it can be concluded that small medium businesses are
having prominent role in improving a country’s economy and its overall development. There are
various resources which are needed to be taken care by small medium enterprises as this helps
them in minimising their cost and achieving their business objective in early manner. In order to
remain in the marketplace, approaches of customer relationship management are to be followed.
This is advantageous for the business in long run and earning high customer base with high
profitability. Similarly small medium enterprises are required to operate at transactional level so
as to enhance their global presence and to enhance market capture. Cash flow statement is a tool
by which examination of overall cash inflow and outflow can be enumerated by which actual
profit position can be determined. Break even analysis is helpful tool for the business in
recognising their fixed cost application and point of earning profit out of total sales. At last there
are some legislative laws which are essential to be enforced by business in order to safeguard
interest of employees and customers. This stimulates high customer loyalty and high employee
efficiency due to which sustainability and desired profit can be earned by entity.
13

14

REFERENCES
Books and Journals
Baran, R.J. and Galka, R.J., 2016. Customer Relationship Management: the foundation of
contemporary marketing strategy. Taylor & Francis.
Batkovskiy and et. al., 2017. Statistical simulation of the break-even point in the margin analysis
of the company. Journal of Applied Economic Sciences, Romania: European Research
Centre of Managerial Studies in Business Administration. 12(2). p.558.
Bhandarkar, M.P. and Dewey, M.K., salesforce com Inc, 2016. Multiple stakeholders for a single
business process. U.S. Patent 9,244,599.
Bhat, S.A. and Darzi, M.A., 2016. Customer relationship management. International Journal of
Bank Marketing.
Burns, P., 2016. Entrepreneurship and small business. Palgrave Macmillan Limited.
Crane and et. al., 2019. Business ethics: Managing corporate citizenship and sustainability in the
age of globalization. Oxford University Press, USA.
Edwards, J.B., 2016. Modern gross profit analysis. Journal of Corporate Accounting & Finance.
27(4). pp.45-55.
Greenwood, R., Hanson, S.G. and Stein, J.C., 2016. The Federal Reserve’s balance sheet as a
financial-stability tool.
Hodges, A.C., 2018. Principles of employment law.
Howells, G., Twigg-Flesner, C. and Wilhelmsson, T., 2017. Rethinking EU consumer law (p.
358). Taylor & Francis.
Mars, K. and Fedor, K., 2019. Transactionality of Digital Transformation within an R&D
Organization. International Journal of Open Information Technologies. 7(5).
Milne, A. and Parboteeah, P., 2016. The business models and economics of peer-to-peer lending.
Morano, P. and Tajani, F., 2017. The break-even analysis applied to urban renewal investments:
a model to evaluate the share of social housing financially sustainable for private
investors. Habitat International, 59, pp.10-20.
Nalbandian-Sugden, H., 2016. Operating ratio and cost of coal power generation. London: IEA
Clean Coal Centre, pp.46-82.
Online:
Break Even Analysis. 2018. [Online]. Available
through:<http://slideplayer.com/slide/8932099/>
15