Small Business Management Challenges

This assignment delves into the multifaceted challenges encountered by small and medium-sized enterprises (SMEs). Topics covered include effectively managing information systems, navigating mergers and acquisitions, leveraging social media for business growth, ensuring ethical conduct, and understanding entrepreneurial success in the context of SMEs. The provided readings offer insights into these challenges and potential solutions.

Managing & Running
a Small Business

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Main considerations a small business or social enterprise................................................3
TASK 2............................................................................................................................................4
P2 Various processes of customer relationship management\...............................................4
P3 Small business can develop transnationally and benefits and drawbacks.........................5
TASK 3............................................................................................................................................7
P4 Annual itemised monthly cash flow forecast showing fixed and variable costs...............7
P5 Break- even analysis..........................................................................................................9
P6 Financial statements for an organisation.........................................................................12
TASK 4..........................................................................................................................................12
P7 Legislation and regulations that have implications on small businesses........................12
CONCLUSION..............................................................................................................................13
REFERENCES .............................................................................................................................14

INTRODUCTION
Small business firms forms the integral part of any economy as they are the major
sources of employment generation to a large percentage of population in a country. Small
business refers to those which are owned and operated independently with competitively less
investment involved, low risk, less market share and are managed by owners in personalized
manner rather than a formalized management structure (Tricker, 2012).
Unicorn Grocery is a grocery store established in Manchester, UK. It was established in
1996 and has set up as one of the leading independent wholefood groceries in the UK with an
annual turnover of around £7 million.
This assignment will be explain how small business plans out its resource allocation
along with managing its customer relationship management to satisfy the needs and wants of its
customers so as to generate higher profits. Further the cash flow statement, budget and break
even will be prepared and analysed to evaluate their contribution in successful management of
the firm.
TASK 1
P1 Main considerations a small business or social enterprise
For a business to be successful and to commence its operations successfully in long term
it requires to adopt a systematic planning approach which involves examining the future business
scenario, anticipating future profitability, determining and setting up of objectives and making
assessment of financial implication of these activities (Cragg, Caldeira and Ward, 2011). As the
availability of resources with small business is limited therefore to generate maximum output
and attain higher profits in long term a company has to carefully plan out its allocation.
Unicorn Grocery is a small co- operative grocery store dealing in providing fresh, dried
and processed food, beverages and other household, body care and general grocery items. Being
a small firm , they have limited financial, Hr and other resources the only scope for the firm to
attract customers and capture market share is by providing products and services which fulfil the
needs and aspirations of its clients (Yildirim and et al, 2011). The other factors that need to be
addressed for planning out the future course of firm's actions are :-

Financial resources – Finance forms the basic and foremost requirement for any
business as it needed to carry out each and every activity of an organization so that it can
manufacture products and offer services to attain its objectives. The major advantage of
operating a small business is that it requires competitively less capital investment making its easy
for owner to manage day to day activities of the business smoothly with any interruption or
stoppage due to insufficient funds (Winterhalter, Zeschky and Gassmann, 2016). Unicorn
Grocery being a co-operative organization manges and arranges its funds by their own and self
manages their financial resources i.e. Balance sheet, cash flow statement, Profit and loss account
and others which help them to keep a track of funds requirement and to evaluate whether firm is
earning profits or losses. There is requirement of £550 in order to make successful expansion of
business. Financial resources are required to collect raw material, technology, etc. In current
market, technological changes are taking place with rapid speed so it is important for Unicorn
grocery to undertake it in order to become competent in industry.
Skills and capabilities of team members – The Employees are considered as the
backbone of any organisation as they are they serves as a source of creative and innovative ideas
and by utilizing their capabilities a firm is able to achieve its objectives and earn profits. Thus, it
is of critical importance for a firm to have an efficient, proficient and dedicated workforce who
are committed to give their best efforts for attaining firms goals. Unicorn Grocery being a small
business firm needs to hire candidates that proficient in their work so that they can assist the
firm to provide customer satisfaction by providing quality products and services, efficiently
handling their queries and providing them with viable solutions. For starting new business, there
is requirement some technical knowledge, skills, etc. so it is easy to make new and innovative
approaches to attract consumers. So there is requirement of legal advisor. HR manager of
Unicorn grocery has to maintain dynamic environment at organisation. While framing team,
roles and responsibilities are assigned according to their skills and competencies.
Formulating an effective Business Plan:- An efficient business plan helps an
organization to ensure that the operations are conducting as per the set guidelines and that
everyone in working in same direction for attaining company's goals. As a management tool it
also alerts a manager about any deviations or lacking in firm's performance. With the help of
business plan it is easy for managers of Unicorn to understand what has to be done and in what
time. This makes clear understanding about setting aims and objectives in order to achieve

business objectives. Unicorn wants to expand business in Nigeria where scope of grocery store is
increasing in current market.
TASK 2
P2 Various processes of customer relationship management\
Customer relationship management can be describes as approach by which a company
maintains relationship with its present and potential consumers. It includes analysis data
information related to the taste, preferences and requirements of customers and then utilizing it
while formulating various schemes and offers for consumers and preparing practises, policies,
guidelines for organization to deal with them (Brown, 2013). CRM plays a critical role in firm's
success and profitability as it serves as an golden opportunity for a firm to attain customer
satisfaction, thereby capturing market share.
It is the function of HR department who are responsible for implementing this technique
so that a company can retain its present customers and can attract new ones. Unicorn Grocery
being a co operative firm their tries to maintain a healthy and cordial relationship with its
customers by by providing them with as store providing products of best quality at affordable
prices and offering a shopping experience which satisfies customers.
Customer relationship management process:
Assessment of customer value – It involves identifying what are the requirements of a
customer by taking feedbacks, asking for suggestions etc. so that company can provide products
and services as desired by its clients (Cartwright and Cooper, 2012). This serves as an effective
way to retain as well as attracting new consumers by maintaining and enhancing better
relationship with them. Unicorn Grocery to maintain its CRM and to assess what the customers
thinks and aspires for conducts talks and presentations for people wherein they spread word and
awareness about cooperative ownership and alternative business models and to take people
reviews, suggestions to know lacking areas of organization and also asking them to join them
or give their contribution.
Execution of effective communication channels- To maintain a close relations with its
consumers Unicorn Grocery uses various channels of communication from electronic medians
like social media, website promotions to physical promotional activities like schools visits where
in pupils from local school are invited to visit their shops and attend their tasting session of fresh

and organic food items and conduct various activities and discussion focusing on increasing
their awareness bout growing plants, eating healthy food and so on.
There are five steps through which customer relationship management can be done in
better and effective manner. These steps are discussed as under-
Customer portfolio analysis- This is the first step in which information is collected about
consumers. As there is difference in demand of consumers, so it is easy to provide good product
and services to consumers.
Customer intimacy- In this step, policies are framed through which consumer get
familiar environment and they perform activities in better and relevant manner. This is the step in
which information about consumer are collected for providing them satisfied services.
Network development- After collecting information about targeted consumers, there is
requirement of strong bond with consumers. When good relations are fared with people, then
they are ready to avail services from this Unicorn grocery. While expanding at Nigeria with
building relations, it is easy for Unicorn to expand business.
Value proposition development- After analysing customer demand, it is easy for
consumers, to understand changes which are taking place in external market. When goods and
services are offered according to targeted consumers, then it adds value for growth and
development of Unicorn.
Customer life cycle management- At last strategies are framed through which potential
consumer will become consumer. This can be done with regular market analysis and making new
and innovations in services.
P3 Small business can develop transnationally and benefits and drawbacks
With the faster pace of economic globalization, small business no longer can no longer
afford to ignore challenges of international business. Small business been key factor in the
development of economy of a nation needs to develop a transnational approach for commencing
its business operations worldwide (Olszak and Ziemba, 2012). As small scale business are tend
to gaining popularity in global market as they having immense opportunity to grow and develop
by amalgamating its managerial skills with latest market trends and technologies. In this aspect,
it becomes critically essential for management of these small business units to gather and analyse
knowledge about international market scenario, various formalities and legal obligations related

and effective ways for global interaction, so as to attract and cater the needs of consumers
worldwide.
Licensing – It is a business process in which one company grants permission to the other
company to produce its products against fixed payment. If Unicorn grocery uses licensing than
they have to give authority to other individuals to manufacture goods on their behalf.
Benefits – If the firm uses licensing than they can make entry into the foreign market easily and
can earn large return on investment.
Drawbacks – If Unicorn grocery facilitates licensing than their licensee can be a competitor in
future.
Franchising – It is a business arrangement where the franchiser gives right to use its trademark to
the franchisee. If Unicorn grocery uses franchising than they can gain brand loyalty.
Benefits – If the organisation uses franchising than they can carry exclusive rights.
Drawbacks – All the profits will be required to be shared on percentage basis with the other party
which will reduce the profitability of Unicorn grocery.
Strategic Alliances – It is an agreement where two companies will mutually agrees to share the
available resources to achieve a specific goal. If Unicorn grocery uses strategic alliances than
they can grow into a new market.
Benefits – If the firm uses strategic alliances than they can provide both short term as well as
long term benefits.
Drawbacks – Strategic Alliances can have risks to Unicorn grocery, if both parties are not
financially equal.
By using Franchising, Unicorn grocery can earn more profit. It can flourish the growth
and build good brand image which will higher its sustainability for long run. Yes, the business
should look for Foreign investment because It will increase the productivity of the workforce and
income of the target country.
Unicorn grocery is one of the leading wholefood groceries brand in UK having a turnover
of around £7 million. In order to successfully conduct its business activities at transnational level
the HR manger need to apply various techniques to capture the attention of different types of
consumers worldwide in accordance with ongoing trends of a particular nation. It will assist
company assist Unicorn Grocery to build up its brand image in market (Marcotte, 2013). Being a
small business firm having limited resources need to effectively plan out strategies for its

operations with alternatives courses of actions for probable risks that are likely to be
encountered by company while dealing with international clients.
Thus, HR manager of Unicorn Grocery has to develop a global culture understanding,
gain critical international experience, finding out various modes of entry such as through joint
ventures, passive exporting etc., seeking out strategies to manage barriers like language, cultural,
legal, political and various others and gaining knowledge and finding out various internal and
external sources of finance to access foreign customers. It will also include making various
strategies related to marketing, pricing, promotional etc. so as to choose best and most
appropriate tactics that will help firm to successful commence trade worldwide.
However, transnational business is subject to various uncertainties and factors that are
difficult or beyond organization's limit to manage. And thus requires great of understanding
about transnational business environment. Various benefits and drawbacks attached with it is
mentioned follows-
Benefits
Work efficiency- Small business firms generally follows simple flat structure where in
there is proper coordination and informal level of communication among employees and
management (Schaupp and Bélanger, 2013). In this system mangers encourages and supports its
employees to improve their work efficiency so as to attain organizational goals efficiently on
time with maximum output.
Quick decision making – As there is only two levels in organizational structure the
workers and owners, employees directly reports to manger which reduces delay caused by long
hierarchical level of communication leading to quick and efficient decision making. Also
Drawbacks
Lengthy- Transnational business operations are subject to gaining knowledge about
various internal and external environmental, financial and other factors as well as fulfilling
various legal obligation which is quiet lengthy and time consuming process requiring great
efficiency and managerial skills to understand and implement all procedures, process and legal
formalities effectively.
Financial risk- Doing business internationally is subject to higher uncertainties and
greater risks. The most primary risks associated with transnational business operations involves

fluctuations in foreign exchange rates, political risks and so on. Also, international transactions
requires extra precautions to be taken while making payments.
TASK 3
P4 Annual itemised monthly cash flow forecast showing fixed and variable costs
Sources of Funds
There are various different sources of finance which cam provide an opportunity to
Unicorn Grocery management to arrange its finance for conducting its different business
operations. The various sources of funds can be mentioned as under:
Equity finance- It comprises issue of inclination and value shared through Unicorn
Grocery to exchange on the stock trade. It is a compelling wellspring of expanding capital for
long haul (Legg and et al, 2015).
Bank loan- This is an external source of finance through which company can arrange its
funds. Unicorn Grocery can arrange its funds requirement by taking bank loan by comparing
different interest rates charged by them and then selecting the one providing loan at lowest
interest rate payable by firm at regular intervals.
Budgeting and Forecasting
Forecasting refers to anticipating probable future results based on comparative analysis of
present and past financial data and information. It is used by an organization for preparing their
future budget. Budgeting on other hand can be defined as a preparation of detailed financial plan
to spend and invests its funds in most profitable manner (Loscocco and Bird, 2012). Unicorn
Grocery make use of several tools for its budgeting and forecasting activities out of which most
prominent ones are described below:-
Calculating moving average – It assist firm in finding out need and preferences of its
exciting customers in the light of currently prevailing market trends.
Time series Data – This technique helps Unicorn Grocery to put emphasis on
identifying approx time period required to complete a particular project with required
specifications.
Balance Sheet, P&L a/c and cash flow statement of Unicorn Grocery organisations:
Year 2017 (value in £) 2018 (value in £)

Fixed assets 130 210
Stock 20 35
Debtors 70 55
Bank 20 30
Total 240 330
Creditors 120 180
Bank overdraft 90 70
Total 210 300
Working capital 30 80
Profit and Loss Account at the year ended
2017 2018
Sales 20 30
Cost of sales 10 15
Gross profit 30 45
Overheads 6 7

Net. profit 24 38
Forecasted Cash flow of Unicorn grocery
Cash
distributed Jan Feb
Marc
h April May June July
Augu
st
Septe
mber Oct. Nov. Dec Total
Total
revenues 8000 6500 5500 5000 8500 9000 9200 8750 8250 8000 8520 8925
9414
5
Direct
material 1500 1250 1250 1300 1450 1580 1650 1458 1589 1685 1985 1785
1848
2
Direct labor 1250 750 500 500 1350 1400 1435 1445 1474 1458 1568 1589
1471
9
Overhead 1000 500 500 700 2700 2850 2950 2987 2250 1850 1650 1250
2118
7
Selling and
distribution 750 750 750 800 850 950 850 650 720 715 785 795 9365
Total
variable
expenses 4500 3250 3000 3300 6350 6780 6885 6540 6033 5708 5988 5419
6375
3
Fixed
expenses 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000
2400
0
Total cost
use 6500 5250 5000 5300 8350 8780 8885 8540 8033 7708 7988 7419
8775
3
Surplus/
Deficit 1500 1250 500 -300 150 220 315 210 217 292 532 1506 6392

As per above shown forecasted cash flow statement it is identified that Unicorn may get
a surplus of £6392 in coming years, total variable expenses are £63753 and total fixed cost is
£24000. As per estimation, total revenues of the Unicorn Grocery are £94145.
P5 Break- even analysis
Break-even analysis is generally used to determine level of production or targeted sales
volume. It is a representation of sales amount in terms of quantity or revenue that a company is
requisite to cover its total costs i.e. both fixed and variable costs (Trevino and Nelson, 2016).
Unicorn Grocery utilizes this technique to ascertain minimum level of output that a company is
required to exceed so as to earn profit over a particular period of time. It also helpful in finding
out sales volume during a monthly or financial term. Break even is no profit and no loss level
where total profit is zero. Unicorn Grocery formulates various strategies related to sales,finance
etc. in defence to its break even analysis report in order to attain higher sales volume and thereby
earn more profits and diversify its market share (John Wiley & Sons.Wilson and Doz, 2012).
Out of various kinds of techniques utilized by Unicorn Grocery to allocate resources to its
various departments in order to accomplished its goals in an appropriate manner critical path
analysis is the most prominent one.
Critical path analysis- This method is used by the managers of Unicorn Grocery to
determine different ways of accomplishing a project timely in an efficient manner. CPA, Here,
generally longest path is being chosen so that they can get more time to finish their business
operations.

Besides this there are a few other conditions requisite to be followed by firm to gain
knowledge and information about their sales volume attained during a particular period of time.
Under this, Break-even analysis forms the most essential part in reducing the amount of wastage
and achieve improvement in its business operations.
For an instance:
Variable cost is Rs. 8 for every unit where as settled cost is Rs. 16000 and offering cost is Rs. 10
for each unit. The BEP is given beneath as above:
BEP= Fixed cost/development edge per unit or product= 16000/(10-8)= 8000.
P6 Financial statements for an organisation
There are various financial documents and statement that a company is accountable for
preparing get an idea about working of its business operations and to manage and keep a close
check on them (Schaper and et. al.,, 2014). Financial statements are formal records that reveals
the actual position of business, its performance over a set time period, giving an overview of

financial information in a structured manner. Main financial statements prepare by Unicorn
Grocery are mentioned below:-
Balance sheet – It is a financial statement which involves a detailed information about
all the assets, liabilities, equity capital, total debt etc. of an organization. Balance sheet reveals
the true net worth of a business enterprise.
Balance sheet:
ASSETS Amount
Cash/Banks £3,500
Inventory £1,500
Acc Receivable £3,600
Fixed Assets
- Gross £12,800
- Acc Depreciation £2,000
- Net Value £10,800
TOTAL ASSETS £19,400
LIABILITIES
Bank Loans £8,500
Accounts Payable £1,660
TOTAL LIABILITIES £10,160
EQUITY
Capital £8,000
Retained Earnings £1,240
TOTAL EQUITIES £9,240
TOTAL EQUITY + LIABILITIES £19,400
As per above shown figures, assets and liabilities of company can be identified. With the
help of it it is identified that investment of Unicorn Grocery is more in current assets in the form
of accounts receivables. There is provision of retained earnings of £1240 as well, which is
positive aspect for future contingency.

Profit and loss account – Profit and Loss statement helps in ascertaining net profit or
loss incurred by a business during a particular financial year. It includes trading account through
which gross profit or loss is determined. For calculating net profit of a company all the indirect
expenses incurred are deducted from gross profits. Thus, Unicorn Grocery prepares P & L
account to show all the revenues generated and expenses incurred over a particular time period.
Income statement:
Particulars Amount
Sales £15,000
Cost of Goods Sold £11,500
GROSS PROFIT £3,500
Expenses
- Salary £250
- Rent £500
OPERATING PROFIT £2,750
Depreciation £1,200
PROFIT BEFORE TAX £1,550
Taxes - 20% £310
NET PROFIT £1,240
RETAINED
EARNINGS £1,000
DIVIDENDS £240
From the above discussion, it is identified that sales of Unicorn Grocery is £15000. gross
profit is £3500, while net profit is £1240. Expense of depreciation is £1200. At last profits for
shareholders is £1000 which is low and strategies has to be framed for improvement.
Cash Flow statements – Statement of cash flow of a firm give information about how
changes in income and balance sheet impacts cash and cash equivalents. It serves as a basis of
measurement about how well a company manges its cash position and pay off its debts. It gives
detail information about cash inflows and outflows of a n enterprise during a specific period of
time It helps investor to get an idea about the financial position of a firm.

Cash flow statement:
Particular Amount
INITIAL BALANCE £6,800
CASH IN
From Operations £1,500
From Investment £1,100
CASH OUT
From Operations £3,500
From Investment £2,400
FIANAL BALANCE £3,500
According to above pictures, it is identified that cash inflow and out flow is not balance.
Cash inflow is £2500, while outflow is £5900. so there is major difference in cash flow and out
flow in negative manner. This affects financial position of Unicorn Grocery and investor may be
dissatisfied.
TASK 4
P7 Legislation and regulations that have implications on small businesses
Every organization has to adhere by certain rules and regulations laid down by
government at local, state and national levels. These legislations are formulated in order to
protect the rights of customers as well as employees and to safeguard them from getting
exploited or discriminated in any aspect by an organization. The firm needs to be abide by these
legal formalities while formulating various policies, procedures and strategies related to its

business operations. Some of the major laws that a company needs to follow are mentioned
below:-
Health and safety act 1974: This act make it mandatory for an organization to provide
healthy and safe working environment as per the set standards laid by government. It include
providing safe drinking water, proper ventilation, facilities, fire extinguishers etc. Ignorance in
practise of this particular act may lead company in defaulter stage (Bridge and O'Neill, 2012).
The National Minimum Wage Act 1998: According to this act an employee is entitles to
get minimum amount as per the wage rate fixed by UK government. It is calculated on the basis
of service provided by a worker per hour i.e. the wage rate or amount that is fixed for one hour
of service. HR of Unicorn Grocery ensures that its workers are getting their minimum wage as
per act.
Equity Act 2010: This act safeguard or protect an employee from getting discriminated
on the basis of caste, gender, nationality or any other ground. An employer is abstained to make
discrimination in the process of recruiting, selecting or promoting any employee on the basis of
any discriminatory factor. The employer should treat all its employees equal in organization and
should evaluate his performance on basis of his work performance. In case company proves to be
defaulter, it is subject to several penalty by the law and government.
Equal Pay Act – It is an act which avoids discrimination between the wages of men and
women who performs the same job with similar skills and efforts. In 1963, this act became
revision to the fair Labour standards act. Unicorn grocery must use this law so that they can
make equal payment to the labour, both men and women with similar skills and work.
Sex Discrimination Act – It is an act of parliament of the United kingdom which removes
the discrimination of men and women on the basis of sex or marital status. Unicorn grocery must
apply this act so that males and females working in it, must receive equal amount if doing the
same job.
Race Relations Act – This act was the first legislation in united kingdom to prohibit racial
discrimination on the basis of race, colour, national origins etc. Unicorn grocery must use this act
so that they can protect vulnerable people and focus on their requirements.
Sale & Supply of Goods Act – This act was replaced by the consumer rights act, 2015.
The act provides consumers a numerous new rights and remedies. Unicorn grocery must use this
act to make goods of satisfactory quality.

Trades Descriptions Act – This is an act of parliament of united kingdom which helps to
prevent misleading of customers from the retailers, manufacturers or service providers on what
the users are paying money for. Unicorn grocery must use this act so that they can protect their
customers from misleading in terms of products or service offered by the service providers.
Consumer Credit Act – This act help the customers in relation to credit, debt and the
lending industry. Unicorn grocery uses this act because it enables the consumer to know the
information about credit agreement before entering into it.
Auto-Enrolment Pensions legislation – This act states that every employer of the age of
22 and above must be enrolled automatically for the pension scheme. Unicorn must apply this act
to provide the benefits of pension to their workers.
CONCLUSION
The assignment undertaken concludes that managing operations of a small business
requires a lot of efforts and managerial efficiency by a firm. A firm to gain competitive edge
over customers and to increase it market share need to maintain and enhance its customer
relationship by adopting various CRM tool sand techniques for providing consumer satisfaction
Moreover, with immense increase in globalization trends even small scale business deal in
transnational trade by carefully gathering knowledge about the probable barriers and forming
counter strategies to overcome them. This report also give a brief synopsis about how a company
can allocate its resources tactfully to get maximum returns. In addition to an analysis about cash
flow, budget, break even analysis and key financial statements is also discussed.