Report: Analysis of Managing and Running a Small Business (Ensoft)

This report delves into the intricacies of managing and running a small business, using Ensoft, a UK-based software company, as a case study. It explores key considerations for planning and allocating resources, emphasizing the importance of entrepreneurial skills and strategic decision-making. The report evaluates various customer relationship management (CRM) processes, highlighting their role in enhancing customer satisfaction and business productivity. It also examines how a small business can develop transnationally, weighing the benefits and drawbacks of such expansion. Furthermore, the report includes a detailed cash flow forecast, illustrating financial planning and resource allocation. Break-even analysis is explained as a tool for evaluating financial performance, and key financial statements are interpreted to assess their contribution to successful management. Finally, the report discusses relevant legislation and regulations impacting small businesses.

MANAGING AND
RUNNING A SMALL
BUSINESS

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1Discuss the main considerations a small business or social enterprise needs to address when
planning and allocating resources to achieve business objectives.........................................1
TASK 2............................................................................................................................................2
P2 Explain and evaluate different processes of customer relationship management for a small
business or social enterprise...................................................................................................2
P3 Explain how a small business can develop transnationally and determine the benefits and
drawbacks...............................................................................................................................3
TASK 3............................................................................................................................................4
P4 Produce an annual itemised monthly cash flow forecast showing fixed and variable costs
set against income for a specific organisation........................................................................4
P5 Explain how break- even analysis could be applied to an organisational situation..........7
P6 Interpret key financial statements for an organisation in relation to how they contribute to
the successful management of the organisation.....................................................................8
TASK 4............................................................................................................................................9
P7 Discuss key legislation and regulations that have implications on small businesses or social
enterprises...............................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Being an owner of small business, a person has to face many challenges depends on size
and type of business deals in. Problems regarding selling, delivering, managing, financing and
growing with few resources including low capital and manpower. Apart from this the most
important task for small businesses is to retain interest of customers, vendors and associated
persons including all stakeholders (Polonsky and Waller, 2014). Therefore, for managing all
functions of company in an appropriate manner, owners need to develop entrepreneurial skills.
For discussing the plans of business owners for achieving success and objectives, a small
company named by Ensoft is taken. It is a software organisation of UK which is incorporated in
1997. This assignment is evaluate different processes of customer relationship management of
this company.
TASK 1
P1Discuss the main considerations a small business or social enterprise needs to address when
planning and allocating resources to achieve business objectives
For managing resources in a small organisation, entrepreneurs must have skills to plan
and develop the business accordingly. They should have abilities to manage interpersonal
relationship which enables them to build strategies, make decisions and implement the same
accordingly. Like in Ensoft Company, it has 70 engineers in firm who have possessed special
knowledge and skills to develop all aspects of required networking software. This would help in
accomplishing the tasks in order to achieve company's mission and objectives with full
efficiencies.
The main goal of Ensoft company is to develop high complex software for next
generation which runs communication devices of world in a better way. In order to achieve this
complexity, management needs innovation, creativity and expert engineers. This firm has
achieved its success in approximately all areas of networking like Routing and switching (all the
IPs and BGP), Carrier Ethernet (E-OAM, IEEE technologies), Embedded services and more.
Process by which human resources, technologies and other resources are combined is
management which helps in making and developing business policies and establishing required
organisational structures by distributing responsibilities of each person. For initiating changes,
managers set priorities by reviewing and revising objectives (Ratten, 2014). They maintain
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effective communication with all staff persons and stakeholders to retain them in business as
well as provide training and appraisals. When planning and allocating resources they consider
the following points:-
Drafting a usable businesses plan: For opening a small business, it is important for
owners to put ideas into writing. It would help them in making plans as well as in determining
whether it is effective or not. This process assist businessmen to find potential investors and how
much capital they required to launch their companies.
Identifying customer's need: In order to set business goals and make plans accordingly,
small firms' owners need to determine demands and desires of customers. They should identify
how much money people can spend for purchasing such services and products which would help
in determining all aspects of business operations (Roomi, 2013).
Outline the finance required: For carrying out all business plans and operations in small
companies, owners should consider that how much money they need in manufacturing the
product or services. After delivering goods, how much they will get in return of investment. So
they need expert financial managers who can help in raising funds and utilizing the available
resources in a desired way so that company gains profitability.
TASK 2
P2 Explain and evaluate different processes of customer relationship management for a small
business or social enterprise
Today, every business organisation wants high customer satisfaction for their retention.
They always focus on how to make people happy with products or services. Managing and
maintaining good relationship with consumers helps in getting loyalty of them. Therefore,
customer relationship management plays an important role in small business for running and
carrying out operations smoothly (Schaupp and Bélanger, 2013). For small enterprises, investing
in CRM will help in increasing productivity as it would decrease operational costs as well as
increase revenue in a systematic manner. For this process of investment, business owners makes
decisions by discussing with top management, sales and marketing departments.
For software company like Ensoft, CRM marketing software helps in identifying and
analysing needs of every individual customers. It access the ongoing process of organisations by
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monitoring performance of each departments and track locations and plans accordingly for sales
team members. In order to implement such process successfully, five step process for CRM are-
(Source: Customer Relationship Management, 2018)
Customer portfolio analysis: It is a first step of evaluation which helps in analysing
what type of customers are the most profitable persons for a company. In short, it defines an
organisation its customer base.
Customer intimacy: This step aid a company to get familiar with customers on
individual basis. Interaction with people like suppliers, investors and customers gives an
opportunity to firms to improve customer intimacy.
Network development: In order to provide effective services to customers, Ensoft
requires to develop strong networking system which helps in developing strong relationship with
them.
Value proposition development: It build on data and information gathered by a firm
while working on how to involve customers with products or services. Therefore, for creating
value of people, company should pay an attention on value proposition that how it will reflect on
own business organisation.
Customer life cycle management: This step helps in determining how an organisation
itself manage customer relationship (Schleifer, Sullivan and Murdough, 2014). For managing
this cycle, Ensoft Company requires restructure the CRM process which aid in approaching
customer acquisition and retention as well as measure performance of strategies used by it.
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Illustration 1: Customer Relationship Management

P3 Explain how a small business can develop transnationally and determine the benefits and
drawbacks
Today in competitive world, small enterprises are increasing at rapid rate as they have an
ease communication skills with customers, vendors and stakeholders through internet. In order to
develop transnational business, these companies create effective strategies which allows them to
conduct operations in various countries at international level. For driving sales, increasing
market share and growth in business, a transnational strategy combines coordination and unique
advantages of local marketplace in a proper manner.
Transnational sales gives opportunity to small organisations to expand businesses and
increase profitability worldwide. It helps in how to quickly sell products or services in a fruitful
way. Further more, such process assist companies to participate in global marketplace and
initiates value-added competencies taking similarities and differences as benefits of a country.
For Ensoft, transnational business helps in increasing growth of business and acquire
international clients as well (Wellin, 2016). But as every factor has its advantages and
disadvantages both, likewise this sales procedure has following benefits and drawbacks:-
Benefits:
Cost in production: When small business sales its products at international marketplace
then it will reduce its cost in marketing the products (Zafar, Butt and Afzal, 2014). When sales is
increasing at rapid rate then its production will also enhance and company may not require to
advertise the products or services.
Time in marketing: Since transnational sales assist companies to sell its products at
international market then it will reduce time on advertising and retaining customers.
Drawbacks:
Reduce Profit Margin: When firms will totally concern on any how maximising sales
then they will sell products on heavy discounts for availing minds of customers. This would may
reduce their profit margin as it will lead to decrease revenue and return on investment.
Affect Reputation: Transnational sales provide number of national and international
clients to small companies (Njenga and Jordaan, 2016). Therefore, in order to complete their
demands on time company will not concern on quality of products. This would lead to reduce
brand image at marketplace and great impacts on reputation of a company negatively.
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TASK 3
P4 Produce an annual itemised monthly cash flow forecast showing fixed and variable costs set
against income for a specific organisation
A cash flow forecast helps companies what actually finance it needs to carry out
operations in a desired way. It shows all information regarding cash budget like where to allocate
cash in all resources so that a firm can get its achievement successfully. For company Ensoft, a
general cash flow forecast is given below:-
Balance Sheet
Year 2017 (value in £) 2018 (value in £)
Fixed assets 250 300
Stock on hand 45 50
Accounts Receivable 75 85
Bank 30 25
Total 400 460
Accounts Payable 250 300
Bank Overdraft 150 160
Total 400 460
Profit and Loss Account
2017 2018
Sales 25 30
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Cost of sales 20 20
Gross profit 45 50
Overheads 5 5
Net. profit 40 45
Cash flow Statement
Cash budget for the year
Basis Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year
Beginning
cash balance
30000 32000 28250 20250 110500
Budgeted cash
receipts
15000 10500 1000 1000 27500
Total cash
available
45000 42500 29250 21250 138000
Cash
distributed
Direct
material
2500 1550 1350 1500 6900
Direct labour 2250 650 700 600 4200
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Overhead 1250 1200 450 800 3700
Selling and
distribution
950 850 800 700 3300
Total cost use 7250 4250 3300 3600 18400
Cash surplus/
deficit
37750 38250 25950 17650 119600
P5 Explain how break- even analysis could be applied to an organisational situation.
Break-even analysis is like a business tool which is widely used in all companies in order
to evaluate its financial performance and to track all records. It helps an organisation what it
need to sell on monthly or annual basis in order cover up investment (Njenga and Jordaan,
2016). Therefore, it is also helpful in business plan. This analysis calculates a break-even point
on the basis of fixed and variable costs and revenues as per unit of sales. For Ensoft Company
this process helps in following way:-
 This process helps a firm in analysing what type of mistake it had done in carrying out
operational activities which increases time in recovering the investment.
 It totally depends on fixed costs including payroll and normal expenses as if a company
breaks out its financial operations then such costs would run continue. Therefore, it is
also called 'burn rate' process also.
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(Source: Break-even Analysis, 2018)
Break-even analysis can be calculated as average of per unit variable cost to per unit
revenue over whole businesses. With this assistance, firm needs to measure unit contribution
margin which is the amount of additional revenues and calculated as:-
Unit Contribution Margin = Sales Price-Variable Costs
Calculation of break-even points in units-
Break-even units= Fixed Cost/Contribution margin per unit
In terms of sales value-
Contribution margin= (Sales Price- Variable Cost)/ Sales Price per unit
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Illustration 2: Break-even Analysis

P6 Interpret key financial statements for an organisation in relation to how they contribute to the
successful management of the organisation
Tracking financial data is the most difficult part of management especially for running
operations on daily basis. But it is important when companies seek funds from investors that
helps in expanding business and taking to next level. This process also helps in making price
strategies as well as in determination of cash flow (Kumar, Petersen and Leone, 2013). Through
which enterprises can file their returns and taxes easily. The basic financial statements for small
businesses like Ensoft are:-
Balance Sheet: It provides all financial report of small business. It displays total assets of
company as well as how these are financed i.e. by debt or equity. Assets are summing up of
liabilities and equity. The main purpose of making such statement is to disclose financial
position of Ensoft Company on month-end or year-end. As per mentioned balance sheet of this
company, it has interpreted that in 2018, value of fixed assets has raised as compared to last year
i.e. from 250k Pounds to 300k Pounds. In terms of, total value of assets, in 2017 it was 400
which has raised to 460 in current year.
Profit and Loss Statement: It summarises revenues, costs and expenses during a certain
period of time. It is also known as income statement which shows changes in accounts by
comparing cash flow statements with incomes ones. According to present P&L A/c. Of Ensoft
Ltd, it has analysed that in current year, sales performance of business has increased from 25k to
30k with same rate of price. Therefore, it has generated profitability in business as well i.e. net
profit and gross profit both are enhanced to 5k Pound in current year. So, it reflects that now this
company is growing its business in much economic manner.
Cash-Flow Statement: This financial statement shows how changes in balance sheet
affects cash. It identifying the needs of break-even analysis into operational and financial
activities. It includes accounting personnel and potential investors. Intention behind making cash
flow statement is to indicate amount, timing and profitability of future cash flows. From cash
flow statement of Ensoft Ltd., it has interpreted that in beginning, only £30000 cash was
available in business. But till end of 4th Quarter in same year, it has increased to £119600.
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TASK 4
P7 Discuss key legislation and regulations that have implications on small businesses or social
enterprises
For improving conditions of workers in an organisation, Government of UK has
established several amendable laws. In order to run business legal and in smooth manner,
companies must consider these laws depend upon type of operations they car carrying out.
Likewise for small companies such as Ensoft some basic laws they need to focus on are-
Employment Law: According to this law, company should compliance its workforce
with employment legislation which includes minimum wage, break from work, insurance,
pension plan, redundancy and termination etc. Likewise in Ensoft Company, its management
should give salaries to employees accordingly to their part of role in a task. Since this company
has operate its business in developing software so, its workers might get much stressed and feel
tired while working on technologies. Therefore, organisation must provide flexible working
hours for them.
Consumer rights: In selling products or services to people, organisations need to comply
with consumer laws also. It includes Sales of Goods Act- according to which company must
offer the best quality of products or services to customers and fit for purpose accordingly. If they
fails to meet such criteria then consumers can demand for refund also (Herbane, B., 2013). If
company retail its business through online process then seller must provide people necessary
information about brand and quality of products so that they can place their orders in an
appropriate manner. Information to be given to them include a description of goods or services,
value and prices, when to deliver, cancellation rights and all terms or conditions of business.
Competition Laws: This law has mandatory for all firms that prevent them from wrong
business practices. According to which, a company can't reduce or increase its prices unfairly
just to retain customers with products or services in order to get competitive advantages.
Therefore, regulatory bodies has established two main legislations under it that are Anti-
Competitive Agreements and Abuse of Dominant Market Position (Hove and Tarisai, 2013). If
many firms are offerings their products at same marketplace then differences of their prices may
not get higher. Similarly, if two companies agree to work on a single product then it will
considered as anti-competitive agreement.
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CONCLUSION
From this assignment, it has concluded that for opening a small organisation at
marketplace, owners must have a unique and innovative ideas for planning the business plan.
They should develop entrepreneurial skills for general employment such as interpersonal and
transferable abilities, capabilities to work within group with effective leadership and
communication skills. Service providers needs to address what type of resources they need when
planning business in order to achieve business success. This report also highlights customer
relationship management for such businesses as well as why they need to develop transnational
sales. For further expansion and growth of business, enterprises needs to forecast cash flow
which shows fixed and variable costs against income for a specific organisation.
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REFERENCES
Books and Journals
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4(1). pp.57-67.
Kumar, V., Petersen, J. A. and Leone, R. P., 2013. Defining, measuring, and managing business
reference value. Journal of Marketing. 77(1). pp.68-86.
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Njenga, K. and Jordaan, P., 2016. We want to do it our way: The neutralisation approach to
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Entrepreneurship and Small Business. 22(2). pp.266-274.
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growth of women-owned enterprises in Pakistan. International Small Business Journal.
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Schaupp, L. C. and Bélanger, F., 2013. The value of social media for small businesses. Journal
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Schleifer, T. C., Sullivan, K. T. and Murdough, J. M., 2014. Managing the profitable
construction business: the contractor's guide to success and survival strategies. John
Wiley & Sons.
Wellin, M., 2016. Managing the psychological contract: Using the personal deal to increase
business performance. CRC Press.
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Zafar, F., Butt, A. and Afzal, B., 2014. Strategic Management: Managing Change by Employee
Involvement. International Journal of Sciences: Basic and Applied Research. 13(1).
pp.205-217.
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