Managing and Running a Small Business: Report for Rowlinson Knitwear

This report analyzes the management of a small business, using Rowlinson Knitwear as a case study. It begins with an overview of resource planning and allocation, considering factors such as staff skills, strategic objectives, and financial resources. The report then explores customer relationship ...Read More

Managing and Running
A Small Business

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Overview of the company...........................................................................................................1
P1 Main considerations that a small business needs to addressed while planning and allocating
resources......................................................................................................................................1
M1 Tools and techniques that are used to plan and allocate resources.......................................2
M2 Importance of planning and allocating resources.................................................................2
D1 Analysis of application of appropriate resources..................................................................3
TASK 2............................................................................................................................................3
P2 Different processes of customer relationship management for a small business...................3
P3 The way in which small business can develop transnationally..............................................4
M3 Elements of customer relationship management process.....................................................5
M4 Benefits and challenges of Stage model of internationalisation...........................................5
D2 Critical evaluation of customer relationship management process.......................................6
TASK 3............................................................................................................................................6
P4 Cash flow forecast that shows fixed and variable costs.........................................................6
P5 Application of Break even analysis.......................................................................................7
P6 Interpretation of key financial statements and its contribution in successful management of
business.......................................................................................................................................8
M5 Application of quantitative and analytical techniques........................................................10
D3 Evaluation of financial statements......................................................................................10
TASK 4..........................................................................................................................................11
P7 Key legislations and regulations that impact activities of small business organisation......11
M6 Implication of key legislations...........................................................................................11
D4 Critical evaluation of key legislations and regulations that affect small business firms.....11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Small business enterprises are the firms which are running their business with less funds
and work force. It is very important for the managers and directors of such firms to manage all
the activities of the organisation appropriately. For those organisations it is very important to
follow all accounting principles, rules and regulations so that their financial statements can be
formulated accurately (Johnson and Schaltegger, 2016). While running a small business a
businessman is required to form appropriate strategies for the purpose of attaining higher profits
and increasing sales. Main aim of this report is to analyse importance of managing a small
business. The organisation which is chosen for this report is Rowlinson Knitwear which is a
small manufacturing company of formal and school wear. Various topics are discussed under this
report that are the way in which small business plans and allocation of resources in order to
attain objectives and evaluation of small customer relationship management of small firm are
included. Analysis of cash flow forecast, budget, breakeven point, interpretation of financial
statements, implications of regulations and legations on a small business are also covered in this
assignment.
TASK 1
Overview of the company
Rowlinson Knitwear is a manufacturing company of clothes which is based in UK and
operating its business successfully. The organisation is currently dealing in school and corporate
wear. The company was established in year 1935 by Mr. Wilfred Rowlinson. Currently the
business is executed successfully by the directors, managers and employees.
P1 Main considerations that a small business needs to addressed while planning and allocating
resources
Resource allocation and its planning is a very complicated process and managers have to
pay high attention to allot appropriate resources to various divisions of company. In Rowlinson
Knitwear management and other executives have to consider various factors that are required to
be plan and mobilise resources within the organisation (O’Connor and Kelly, 2017). All the
factors are discussed below:
Staff members and skills: Employee are concerned with operational and business
execution activities hence they are considered as an important asset of the company. Skills of
1

workers help an organisation to attain all the objectives that are required be competitive in the
market. The managers of Rowlinson Knitwear needs to consider the employee and their skills
while planning and allocating resources and responsibilities in order to develop the organisation.
Vision, mission and strategic objective: For all the companies and their owners it is
very important to communicate with their employees and other staff members regarding
organisation's vision, mission and objectives. It will help to gain their trust and result in
increased engagement of them in their job responsibilities. Managers of Rowlinson Knitwear are
required to consider these elements while allocating resources as it can help to motivate
employees to work more productively. When worker perform their jobs with higher involvement
than it can help to increase their work quality and result in attainment of organisational goals
(Spence, 2016).
 Vision: Rowlinson Knitwear's vision is to be on the top of the clothing industry in
upcoming period.
 Mission: Organisation's mission is to capture large market share by attracting large
number of customers.
 Strategic objective: Rowlinson Knitwear' objective is to increase its profits by 20% in
next two years so that it business can be expanded appropriately.
Monetary resources: Finance is the main resource which is required to execute business
activities. If an organisation is not having sufficient funds than it is not possible to perform
operational activities appropriately. While planning and allocating funds the management of
Rowlinson Knitwear required to analyse that firm is having adequate monetary resources. For
this purpose, managers may evaluate final accounts like income statement, balance sheet and
cash flow statement. Enough funds may help to execute business in appropriate manner and
achieve organisational goals. There are various types of monetary resources that can be used by
the organisation in order to acquire funds for business operations. These are bank loans, venture
capital, personal funds, selling old business assets. All of them can help to arrange funds for
business and it executional activities.
M1 Tools and techniques that are used to plan and allocate resources
Management of Rowlinson Knitwear can use following tools to plan and allocate
resources to the functional departments of the company:
2

Critical path analysis: It is a planning technique which is used to find various
alternatives that can be used while allotment of funds. It is very beneficial for the company as it
helps to find appropriate path in which a project can be accomplished in a specific period of
time.
Gantt chart: It is a horizontal bar chart which is prepared by various organisations to
schedule all the operational activities with the time in which they are going to be completed. This
technique can be used by managers of Rowlinson Knitwear while they allot resources to different
divisions of the company as it helps to formulate impressive business cognition. An example of
gantt chart is as follows:
3

4

The above gantt chart reflects that a project of the company is going to be completed in 6
to 7 years. There are various types of activities that are going to be completed in a specific time
period.
M2 Importance of planning and allocating resources
For all the businesses it is very important to plan while planning to allot funds to different
departments of the company as it can help them to perform all operational activities
appropriately. In Rowlinson Knitwear proper allotment of funds results in enhanced skills of
employees, increased profitability and productivity. It is essential to allot resources appropriately
so that all the departments can perform tasks successfully and contribute in the development of
the company.
D1 Analysis of application of appropriate resources
Appropriate allotment of resources helps to achieve organisational objectives because it
is very important for all the divisions of a company to have sufficient resources so that they can
operate business appropriately. If the operational activities executed properly than it may help to
achieve organisations objectives that are mainly related to profit and sales maximisation.
TASK 2
P2 Different processes of customer relationship management for a small business
Customer relationship management: It can be defined as the procedure which is used
by the organisations in order to retain their customers. For all the business entities it is very
important to maintain good relations with customers as it is required to increase profitability. In
Rowlinson Knitwear appropriate processes are used by the managers in order to manage
5

relations with customers (Customers relationship management processes, 2010). All the
processes are as follows:
Analytical process: In this process customer data is analysed for various purposes that
includes their taste, preferences, demands and needs. It is mainly used to set appropriate format
for marketing campaign so that large number of customers get aware of the products that are sold
by Rowlinson Knitwear. Decisions related to pricing of the products, their development and
target market are related to this process.
Operational process: It is a process that help an organisation to take care of all its
customers. Various organisational processes like sales, marketing etc. are supported by this
process. It guides the managers of Rowlinson Knitwear to improve the customer facing business
procedure so that they attract large number of customers. Main purpose of this process is to
generate leads form open market and convert them in to business contacts for the purpose of
capturing large market share (Skolud and et. al., 2016).
Collaborative process: It can be defined as the communication process in which direct
interaction with customers is conducted that includes collecting their feedbacks, reporting their
issues and queries. For the purpose of iteration emails, websites and voice mails can be used. It is
mainly used to improve the delivering process of products.
All the above described processes are followed by Rowlinson Knitwear's managers to
manage customer relationship because it can help to retain existing and attract prospect
customers.
P3 The way in which small business can develop transnationally
Transnational development of business refers to the process of operatingbusiness beyond
the boundaries. It is mainly concerned with the international trade in which businesses supply
products all around the world to enhance profitability. While expanding business in different
countries it is very important to the organisation to analyse the market conditions and other
factors of the nations as it is required to formulate business expansion strategies. Rowlinson
Knitwear can develop its business transnationally by offering its products to different countries
(Ramadani, Hisrich and Gërguri-Rashiti, 2015). This will result in increased profits and sales of
the company as people get attracted towards the organisation due to its quality of clothes. While
launching business transnationally managers of Rowlinson Knitwear have to put extra efforts as
6

it may help to grab development opportunities. There are various benefits and drawbacks of
introducing business transnationally. All of them are described below:
Benefits:
 Foreign trade: When an organisation launch it self transnationally than it will increase
foreign trade for that company. This will result in increased profitability and funds for
operational activities. If Rowlinson Knitwear supply its products nationwide than it will
also increase liquidity that can be used to execute business more effectively.
 Independence: Owner and other concerned persons of a business have right to make all
the decisions regarding the expansion of business and its development. In Rowlinson
Knitwear the managers are free to formulate decisions like expanding business
transnationally that may result in enhanced profits (Burns, 2016).
Drawbacks:
 Risk in terms of finance: The major risk that can be faced by Rowlinson Knitwear in
future while introducing products transnationally is financial risk because small business
does not have sufficient funds to operate business. Small organisations like Rowlinson
Knitwear is not able to spend higher amount in promotional activities to aware customers
the products that are offered by the organisation.
 Long time period: It takes a long time to establish a business in different countries.
Rowlinson Knitwear also have to wait for a long period to expand its business in
transnationally (Olson and Wu, 2017).
Ways of becoming international for an organisation:
 Organisation can start a campaign to grow internationally and expand business in
different countries.
 Companies may conduct foreign market research and identify the nest market for
business expansion.
M3 Elements of customer relationship management process
There are various elements that plays important role in customer relationship
management process as they help to achieve goals of Rowlinson Knitwear. All the elements are
described below:
7

 Understanding market and customers: If a company is willing to attain objectives of a
company than it is very important to understand the market and needs of customers so
that appropriate products that they are willing to buy can be offered.
 Gain trust of customers: Rowlinson Knitwear have to gain trust of its customers by
offering good quality clothes to them. This will help to achieve of customer satisfaction.
 Retaining customers: Rowlinson Knitwear use specific strategies to retain its
customers. That includes providing them discounts and other offers on sales.
M4 Benefits and challenges of Stage model of internationalisation
Stage model: It is also known as process theory of internationalisation that includes
integration, acquisition and use of skills and knowledge to launch business in foreign market.
This model can be used by Rowlinson Knitwear while introducing itself in international market.
It will help to increase profits and liquidity of the company. Following are the benefits and
challenges of this model:
Benefits:
 This will help to introduce organisation's product in international market.
 It can help to increase profits and sales of the company.
Challenges:
 Managers require higher amount to invest in marketing and advertising activities in those
countries where products are going to be introduces and it is not possible for small
organisation like Rowlinson Knitwear to bear high cost.
 Expansion in different countries require high time.
D2 Critical evaluation of customer relationship management process
For all the business entities it is very important to manage customer’s relationship
appropriately at all stages. Effective customer relationship will result in higher retention rate of
consumers and higher sales. When an organisation is launching its business transnationally than
various challenges can be faced by the company. These challenges are lack of financial resources
and long time period.
Recommendation: To overcome the challenges the organisation is recommended to
formulate budgets so that sufficient funds can be acquired to operate business in different
countries. it is also necessary to have adequate resources so that all the activities can be carry out
in proper way.
8

TASK 3
P4 Cash flow forecast that shows fixed and variable costs
Cash flow statement: It can be defined as a statement in which information regarding
cash inflows and outflows are mentioned. It is mainly made for a specific time period. It helps
stakeholders to analyse that organisation is financially strong or not. While Rowlinson Knitwear
is willing to expand its business in different countries than it is very important for the managers
to forecast possible future expenses that may take place in future (Nowotarski and Paslawski,
2015). A forecasted cash flow for Rowlinson Knitwear is as follows:
Forecasted Cash flow Statement
Cash
distributed Jan Feb
Mar
ch
Apri
l May June July
Aug
ust
Sept
emb
er Oct. Nov. Dec
Tota
l
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
labour 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
9

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
From the above forecasted cash flow it has been analysed that organisation may receive a
surplus of 6392 in upcoming period, total variable expenses are 63753 and total fixed cost is
24000. Total estimated revenues of the company are 94145.
P5 Application of Break even analysis
Break Even analysis: It can be defined as the point where the organisation is not in
profits and loss. At this stage all the expenses of the company get recovered with the sales of the
products. Formula for calculation break even point is as follows:
BEP = Fixed cost/ selling price per unit – variable cost per unit
Calculation of BEP=
Fixed cost= 12000
Selling price per unit= 10
Variable cost per unit= 4
BEP= 12000/10-4
BEP= 12000/6
= 3000.
The organisation needs to sell 3000 units to recover all its expenses.
As Rowlinson Knitwear is currently operating business in UK successfully. The
organisation is a small business firm hence it is very important for the company to analyse the
point where it can recover all its expenses with the help of sales. With the help of BEP analysis
company can easily recover its total expenses that are incurred during the production process as
it can guide to manufacture appropriate units (Chauma, 2017).
Application of BEP:
 It is used to determine the actual point where the company can achieve higher profits.
 BEP analysis guide the managers to set appropriate prices for the products that are
manufactured by the company.
10

 Managers may get the idea of such units that needs to be manufactured to recover all the
costs that are related to production process.
Illustration 1: Break even point
From the above image it can be analysed that when revenues and total costs meet than it
results in break even point. Fixed costs always remain same for the production and variable costs
always fluctuate according to production units (Falkner and Hiebl, 2015).
P6 Interpretation of key financial statements and its contribution in successful management of
business
Financial statements: These are the statements that are formulated by the accountants
and managers of a company and analysed by internal and external stakeholders in order to
determine that organisation is attaining profits or facing losses. Main purpose behind formulation
of financial statement is to analyse actual performance of company. Following statements are
formulated by the accountants of Rowlinson Knitwear:
 Income statement: It is mainly formulated to record all the income and expenses of an
organisation so that actual profitability can be analysed. In Rowlinson Knitwear income
statements is formulated to determine t all the incomes and expenses of the company that
have taken place in a specific time period (MacDonald and Coffield, 2015).
 Balance sheet: It is formulated to analyse over all performance of the company. It
depicts liquidity, assets, liabilities, equities and other elements that are required by
stakeholders to make strategic decision. It helps the external stakeholders like investors to
determine that organisation is able to provide them good returns on their amount invested
or not.
11

 Cash flow statement: All type of cash related transactions that are related to cash
inflows and outflows are recorded in cash flow statement. It helps determine the actual
liquidity of the company for a specific period of time. Following are the
financialstatements of the company:
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
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
12

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
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
From the above statements it ash been analysed that Gross profits of Rowlinson Knitwear
are 3500, total sales is 15000 and cost of sales is 11500. net profits of the company according to
the income statements are 1240 which means the organisation is earning profits continuously.
From the balance sheet of the organisation it has been analysed that organisation is having 3500
cash and total assets of the company are 19400. Organisation is having internal liabilities that
include equities are 9240 and total liabilities of the company are 10160. From the cash flow of
the company it has been observed that total cash that organisation is having is 3500. According
13

to above analysis it has been identified that organisation is in good situation because it is
generating profits continuously (Javaid and Iqbal, 2017).
Ratio analysis: Following ratios are calculated for the company:
Name of ratio Formula Calculation
Liquidity ratio
Current ratio Current assets/current
liabilities
8600/1660=5.18
Quick ratio Quick assets/current
liabilities
7100/1660=4.27
Profitability ratio
Net profit ratio Net profit/sales*100 1240/15000*100=8.27%
Gross profit ratio Gross profit/sales*100 3500/15000*100=23.33%
From the above calculation it has been analysed that Rowlinson Knitwear is having good
profitability and liquidity because the above mentioned ratios shows a good performance and
position of the company.
M5 Application of quantitative and analytical techniques
Analytical and quantitative techniques play vital role in the evaluation of cash flow and
break even analysis. All such type of techniques are mainly used to improve organisational
performance. It also helps the stakeholders to determine actual status of the company in the
market. Cash flow provides information of cash inflows and outflows and break even analysis
help to analyse actual units that can be manufactured by the organisation to recover expenses.
D3 Evaluation of financial statements
Financial statements like income statement, cash flow and balance sheet are formulated
to analyse overall performance of Rowlinson Knitwear. It guides the stakeholders to make
strategic decisions about making investment of providing credits to the organisation. Managers
also evaluate financial statements to form strategies that can be implemented in order to enhance
performance of the company. Financial statements results in successful business management as
it guides managers to properly formulate their strategies.
14

TASK 4
P7 Key legislations and regulations that impact activities of small business organisation
For all the business entities it is very important to follow key legislations and regulations
that are imposed by the government of the country. All the legislations that should be followed
by Rowlinson Knitwear are as follows:
Health and safety act, 1974: According to this act organisations needs to look out that
their manufacturing activities do not harmits employees. Rowlinson Knitwear is also required to
follow this act because it is very important to follow it to operate business successfully
(Hammer, 2015).
Data protection act, 1984: This act guides organisations to protect their confidential
information so that it cannot be misused by others. Rowlinson Knitwear's executives are required
to keep their data safe so that employees who may leave organisation in future.
Record keeping act, 1967: In this act companies are directed to keep proper record of
organisation's activities so that it can be presented to the legal authorities to assure that
organisation is not part of any illegal activity. Rowlinson Knitwear requires to follow this act so
that its stakeholders may get exact information of the company.
All the above described acts are required to be followed by Rowlinson Knitwear as it
may help to execute business smoothly with less interference of legal authorities (Goss, 2015).
M6 Implication of key legislations
There are various legislations that are imposed by legal authorities of the countries where
different type of companies operate business. All the small and large organisations including
Rowlinson Knitwear should follow all the rules to execute operational activities successfully.
Main impact of these legislations is that it helps to keep the data safe and have detailed report of
all the activities.
D4 Critical evaluation of key legislations and regulations that affect small business firms
Key regulations including data protections, record keeping, health and safety act affect
small business entities such as Rowlinson Knitwear positively as well as negatively. Positive
impact of the legislation is that it helps to keep detailed information and records and negative
impact of them is that for all the small entities it is not possible to follow the rules as they operate
business on a small scale.
15

CONCLUSION
From the above project report it has been concluded that for all small businesses it is very
important to manage operational and execution activities appropriately so that business can
achieve success. If the managers are not able to manage the business than it may result in
decreased profitability and liquidity. For small business it is very important to manage customer
relations so that predetermined goals of the organisations can be achieved. While launching a
business in a new location it is very important for the business entity to forecast future expenses
and make a budget.
16