Managing and Running a Small Business: Comprehensive Report Analysis

This report provides a comprehensive analysis of managing and running a small business, using Oak Cash & Carry as a case study. It covers critical aspects such as the main considerations for achieving business objectives, including vision, mission, skills of employees, and financial and physical resources. The report details the process of customer relationship management, emphasizing setting targets, prioritizing customers, and continuous improvement. It also explores the benefits and drawbacks of developing a transnational business, examining strategies like mergers and strategic alliances. Furthermore, the report includes a cash flow statement analysis for forecasting fixed and variable costs, application of break-even analysis, and the contribution of financial statements to successful business management. Finally, it discusses the implications of key legislation and regulations on small business enterprises.

Managing and
Running a Small
Business

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Main consideration for small business enterprise for achieving business objectives ..........1
TASK 2............................................................................................................................................2
P2. Process of customer relationship management for small business enterprises.....................2
P3. Benefits and drawback of developing transnational business...............................................3
TASK 3 ...........................................................................................................................................4
P4. Cash flow statement for forecasting fixed and variable cost................................................4
P5. Application of Break-even analysis......................................................................................7
P6. Contribution of financial statements in managing business successfully.............................8
TASK 4............................................................................................................................................9
P7. Implication of key legislation and regulations on small business enterprises ....................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Small business organisations are the one that play a big role in economic growth of a
nation. These are the one that manufacture featured goods for people living in society and
provide employment to various individuals (Schaper and et. al., 2014). Government also promote
development of small businesses as these are the one who contribute a lot in economic growth of
nation and at the same time play crucial role in difficult situation such as economic recession.
OAK Cash & Carry, a firm which deals in grocery items is consider in this report for study.
Various considerations that require to be consider by a small enterprise during allocation of
resources is all given in this report. Further, process that can be utilise by enterprise to create and
maintain good relations with customers is also given in this. In addition to this, different
financial statements and its contribution in success of company all detailed in this.
TASK 1
P1. Main consideration for small business enterprise for achieving business objectives
Small business enterprises refers to a business which employs not more than 50 workers
and their volume of sale are also very low. These enterprises are privately owned and operated
by single individual or in partnership. These businesses generally have low budget, therefore it is
very essential for them to consider all the essential factors before operating its business operation
or allocation of resources (Crane and Matten, 2016). Following are the major consideration that
Oak Cash & Carry must undertake while planning and allocating resources to achieve
organisational objective:
 Vision and Mission:-
Mission:- It refers to a statement of a company which state the goals or purpose of an
enterprise. Mission of Oak Cash & Carry Ltd is “to be a leader in merchandising and
distribution of grocery item.”
Vision:- This statement describes what a company want to achieve or accomplish in long
term future. Vision of Oak Cash & Carry Ltd is to maintain a broadest network of
distribution throughout UK.
These two statements are very essential for a company, as they are consider as a
roadmaps which further describe the actions to be performed. So, vision and mission statement
are the essential factors that must be consider while allocating resources.
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 Skills and ability of workers:- Before allocating resources it is very essential for a
company to determine the strength of its employees. So that task and resources can be
allocated according to the skills and capability of a worker (Burns, 2016). This help in
eliminating the wastage of resources and contribute toward bringing effectiveness in
business operation. It also assist in achieving competitive edge over competitors so that
they can achieve their organisational goal much effectively and efficiently.
 Financial resources:- It refers to the fund of an organisation which is required for
perform its activities and operations. Before performing its business operations it is very
essential for Oak Cash & Carry Ltd to arrange and secure sufficient fund for operating its
business efficiently. Company must analyse all the financial statement and prepare
budget accordingly. This will help in identifying the fund available to company and what
amount of capital required for performing a particular activity. Using budget statement
enterprise can minimize its expenses and achieve its objective at minimum cost.
 Physical resources:- It refers to the tangible resources which are necessary and available
for a business to function. Physical resources includes manufacturing equipments and
tools, inventories, assembly, storage, information system, production etc. Before planning
for operation, it is very essential for a manager of Oak Cash & Carry Ltd to evaluate the
availability of physical resources which are requires for performing a task effectively and
efficiently.
TASK 2
P2. Process of customer relationship management for small business enterprises
Customer relationship management refers to the tools and methodologies used by an
organisation for interacting with current and potential clients for improving the customer
relationship with business. Main aim of CRM is to collect relevant information of customers and
then use it to satisfy customers in order to develop their positive interaction with company.
Following points describe about step by step execution of CRM process for small business
enterprise:
 Set a target:- First and foremost step in CRM process is to identify the goals to be
achieve, after deciding goals next step is to formulate plan for reaching up objectives.
This plan list out various activities or task to performed in order to achieve set goals or
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objectives. The main target of Oak Cash & Carry is to achieve higher market share and
to maintain broadest network of distribution all over UK.
 Prioritize customers:- Next step is to prioritize customer based upon how profitable they
are for company. For instance, returning customers are more valuable asset for company.
Therefore, according to their traits customers are being segmented so that CRM efforts
can be put to establish long term relationship.
 Communicate with employees:- After prioritizing the customers, next step is to
formulate strategies for course of action to be taken for improving customer relationship.
For efficiently operating these activities, Oak cash & carry must involve its employees in
CRM process by conducting meetings to formulate strategies regarding relationship
management. This will assists in providing the directions which provide better results. As
employees can integrate policies and technologies much better which is beneficial for
company as well as customers.
 Track customers :- After deciding all the actions and technologies to be use for building
up customer relationship, next step is to track targeted customers. Company must try to
collect information related to targeted customers through social media platform for
identifying their views regarding its product or services(Legg and et. al., 2015). This
information will help in determining the demand of customer and their expectation
toward company's product.
 Assess the information collected:- Information collected from customers must be
analysis in order to identify the changes to be made in current process for improving the
relationship. Company uses customer rating system for evaluating the information
through social media platform. By assessing the information, Oak Cash & Carry Ltd can
formulate strategies and modify required changes to fulfil demand of target market.
Higher customer satisfaction will help in building up long term relationship.
 Continual improvement in relationship:- An enterprise must continuously ask about
feedback and suggestion for improvement from their current clients. This will help Oak
Cash & Carry Ltd in identifying the progress of their CRM program. It also suggest
various area of improvement to be consider for improving future customer-company
relationship.
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Above explained customer relationship management process must be followed by Oak
Cash & Carry Ltd. In order to build up long term relationship with their customer. This further
support in growth of company and in achieving competitive edge.
P3. Benefits and drawback of developing transnational business
Transnational strategy is used when an organisation decided to operate its business
activities across international boundaries. These organisation tend to have their headquarters in
parent country and their subsidiaries in another countries. Small business enterprises can set up
their subsidiaries in different nation by assessing the market potentiality and opportunities
present in that area (Steingold, 2017). These transnational activities help small businesses in
growth, as serving to new customer assists company in generating higher revenue.
Oak Cash & Carry Ltd, can develop its transnational business by adopting following
actions:
 Merger:- It refers to an agreement that combines two separate businesses which work at
same level into a single entity. Oak Cash & Carry Ltd can opt for this option by signing
an agreement with a grocery retailer to merge their business. This provide them an
opportunity to get established in another country at lower cost. Further synergy of skills
and other resources will help in achieving competitive advantage in market place.
 Strategic alliance:- It refers to a formal agreement done among to businesses for the
accomplishment of particular objective. Apart from merger another option that can be
used by Oak Cash & Carry Ltd is strategic alliance. It can signing an agreement with a
company present in another nation to get financial and other support till they become
eligible to establish their practices in market.
Company can establish their subsidiaries in different countries to offer its products that
can response to nation's need, different laws, culture and business environment.
Benefits:-
 Brand recognition:- By performing operations transnationally, Oak Cash & Carry Ltd
can achieve higher brand recognition (Epstein, 2018). This help company in generating
maximum revenue and also support in increasing growth prospectives in new market
place.
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 Broader market base:- By establishing its subsidiaries in different countries, Oak Cash
& Carry Ltd can get an opportunity to serve customers at global scale. Access to large
customer base will help company in generating maximum revenue. Tax benefit:- Companies which operates transnationally will get benefited with lower
tax in other countries for its import-export transactions. As government in different
countries give tax rebate for attracting more international investors to perform their
business operations in their country.
Drawbacks:-
 Expensive:- One of the biggest disadvantage of transnational business for small scale
enterprise is that it is difficult and expensive to set-up. It includes number of cost such as
acquiring facilities, obtaining permit etc., are beyond the reach of small business
enterprises.
 Risk of failure:- Political and legal requirement are varied across region that if not meet
properly may lead to failure in business operations (Spence, 2016). Apart from this each
country have different cultural norms that must be consider by company as failure of
which may cause heavy loss to company by reducing the demand for product or services.
TASK 3
P4. Cash flow statement for forecasting fixed and variable cost
Financial resources refers to the fund available to the company for financing its business
operations in the form of capital, liquid security and credit lines. Adequate amount of fund help
company in performing its operations effectively and also help in developing competitive
advantage. Major sources of fund that can be use by Oak Cash & Carry Limited for generating
cash are as follows:- Bank loan: This is a major source of generating firm for various organisation for
financing their business operations (R. Anderson and Ullah, 2014). Bank loan refers to
the amount taken on credit from bank which is repayable after fixed period of time over
an interest rate fixed by bank.
 Hire purchase and lease: This is an another important source of finance for company in
which they can give their property on lease to another party for fixed time period. Under
this enterprise get fund in the form of rent.
Cash flow statement, P&L and balance sheet of Hawthorn international is given as follows:
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Year 2016 (value in £00) 2017 (value in £00)
Fixed assets 130 140
Stock 20 40
Debtors 70 70
Bank 20 30
Total 240 330
Creditors 40 40
Bank overdraft 20 30
Total 210 300
Working capital 30 80
Profit and Loss Account at the year ended
Year 2016(value in £00) 2017(value in £00)
Sales 200 250
Cost of sales 160 200
Gross profit 40 50
Overheads 15 25
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Net. profit 25 25
Cash flow Statement
From the above explained cash statement it can be stated that, Oak Cash & Carry Ltd
begin with the cash balance of 8333.33£ in January, total cash used is 1383.34£ and profit is
11083.32£. at the end of year this profit is equal to 9166.67£.
P5. Application of Break-even analysis
Break even analysis is considered as a calculation and examination of the margin of
safety for an organisation based on the revenues gathered and associated costs (Gandy, 2015).
Analysing various price levels relating to the different levels of demand a firm used break even
analysis to evaluate which level of sales are required to cover total fixed costs.
Break even point is the point that show the benefit in which an organisation bear no loss
and no benefit. This situation arises when all the profit generated by company is equal to the cost
of operation. At the point when administrator find out break even point then it help in recognize
the aggregate number of units sold by the firm. This is analysed by the administrator since this
give direction in take different decisions in respect to developing the financial performance of an
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organisation (Villamizar, M., and et. al., 2016). Sales has a direct influence on the business
activities of the firm as high sales represents the profitability situation of an organisation and on
the contrary low sales shows the loss situation of an organisation. The major focused area of an
organisation is to attain high growth and success within the market place through developing the
operations in effective manner.
Oak Cash & Carry Ltd is a retail organisation which is widely concern on enhancing their
sales and revenue through producing more effective and appropriate products and services as to
satisfying the needs and wants of people at market place. Distinctive attempts are done by firm to
maximise the sales of firm, so organization can produce more benefits and can maintain sustain a
higher position within the market area. In an organisation the major obligation of a Manager is
to gather and analyse finance related data gathered through sources keeping in mind the end goal
to forecast the demand of products and services. This provide help to supervisor at the time of
creating budget (Trevino and Nelson, 2016). Company made various efforts to cross break even
point for generating maximum profit and to assure its long time survival within the market place.
Break even analysis also helps managers of Oak Cash & Carry Ltd in minimizing the wastage
and extra expenses, this create value in implementing efficiency in the commercial activities of
the firm. Break even analysis can be calculated using following formula.
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Above given graphs shows the BEP condition where all the cost incurred by company is
covered and firm attains the situation of no profit no loss. This is a point where all the cost
incurred by company is equal to revenue earned by the firm.
For example: If fixed cost which was incurred by Oak Cash & Carry is 20000 in
production process of particular product whereas, variable cost 10 rupees per unit and 15 is the
selling price then in this situation BEP will be calculated by apply the following formula:
BEP: Fixed cost/construction margin per unit or product= 20000/(15-10)= 4000.
This will shows that it is important for an organisation sell minimum 4000 units of that
product to attain the situation of no profit and loss.
P6. Contribution of financial statements in managing business successfully
Financial statement refers to a written record which shows the financial condition of a
business enterprise that can be further used to formulate strategies for future course of action.
These reports are used to identify the financial strength, performance and liquidity of a company.
There are mainly four types of financial statements which are as follows:-
 Balance sheet:- This statement help in determining the financial position of a business
by depicting the assets, liabilities and owner's equity over a specific point of time.
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Balance sheet help in tracking the spending and earning incurred by a company
throughout its financial year (Kitching, Hart and Wilson, 2015). It is very crucial
document as it help in keeping business owner informed about the company's financial
position. Balance sheet is also assists current and potential investors in understanding that
whether they should invest and what return they can expect for future. Oak Cash & Carry
can identify their financial position with the help of preparing Balance sheet and also
attract investors to invest in.
 Income statement:- It refers to a financial statement which provides shows the
company's financial performance over a specific accounting period. Financial
performance is evaluated by providing a summary of revenue and expenses that are
incurred through operating and non-operating activities. Income statement help in
determining the net profit or loss generated over a specific accounting period. Analysis of
financial statement help Oak Cash & Carry Ltd in decision making process. By assessing
the income statement, company can determine the value of assets that they currently have
and decide if they can afford to purchase more. This will also help in taking decision
regarding investment which provide future benefit and higher return.
 Cash flow statements:- It is an financial statement which shows aggregate information
regarding cash inflows that a company receive through its investment and business
operations. It also show cash outflows which are paid by company while performing its
business operations within a given period (Moir, 2014). Preparation of this statement will
help Oak Cask & Carry Ltd in identifying the whether the company is able to cover its
expenses or not.
Financial statement of the organisation helps the organisation in order to take the
decisions in an effective manner. there are so many ratios which ultimately assist the
management to take the decisions in an effective manner. By using ratios, interpretation of
financial statement can be done. Hereunder, various ratios are mentioned hereunder:
Liquidity Ratio: This reflects the cash availability of the organisation and its ability to
meet its short term dues.
Quick Ratio: This represents whether the liquid assets are enough to pay their current
assets. This is calculated by dividing current liabilities to the liquid assets. Here, current
liabilities of the organisation 5000+2000= 7000 and 4000+2000=6000=7000/6000=1.167 in
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