Project Report: Identifying and Analyzing Small Business Risks

This project analyzes the risks associated with starting a small business, focusing on financial, competitive, and operational challenges. The introduction outlines the research background, rationale, problem statement, aims, and objectives, which include evaluating internal and external factors, analyzing risk factors, and investigating ways to overcome them. The literature review explores the impact of internal and external factors, such as organizational structure and political factors, and examines financial and competitive risks. It also suggests strategies to mitigate these risks, including low-interest loans, skilled employees, and effective marketing. The marketing strategy section covers competitive advantage, market segmentation, and market existence. The impact analysis focuses on societal factors, and the conclusion summarizes the findings. The project uses a Gantt chart for time management and provides references to support its analysis. The case study of Sparky Dishes, a UK street food company, is used to illustrate the practical implications of the research.

Project

Table of Contents
INTRODUCTION...........................................................................................................................3
Background of the study..............................................................................................................3
Rationale of research...................................................................................................................3
Problem statement.......................................................................................................................3
Research aims and objectives......................................................................................................3
How the objectives will be achieved...........................................................................................3
TIMESCALE...................................................................................................................................4
LITERATURE REVIEW................................................................................................................4
To evaluate the impact of both internal and external factors over the start of a small business. 4
To analyse the risk factors which are concerned with the start of a small business....................4
To investigate the ways to overcome from the risk factors which are related with the start of a
small business..............................................................................................................................4
MARKETING STRATEGY...........................................................................................................4
IMPACT ANALYSIS.....................................................................................................................4
CONSTRAINTS..............................................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Background of the study
Research is the study on a specific topic. In other words it means to search something new or to
modify the existing knowledge. Small businesses are those businesses which has small amount
of refunds and small amount of workforce and which is not too famous among their customers
(Caseiro, N. and Coelho, A., 2019). Risk is associated with business, whether it is risk related to
finance or related to competition but for all time risk is associated with business. The only
difference is that some businesses are having low risk and others are having high risk. Sparky
Dishes are a small company of UK dealing in street foods. They are having 3 stores in London
with approx 35 employees. This business is also associated with many risk factors like lack of
fund, insufficient workforce (cooks) and many others. The first thing to overcome the problems
and risks are to analyse them. To find what are the actual business risks is the first stem, second
step is to find out how these risks impacted upon business and finally to make strategies which
help to overcome these risks.
Rationale of research
The following study is selected because in today’s scenario when a small business plan to
grow then many other factors impacted negative upon business and sometimes due to lack of
funds small business are ineligible to tackle the issues and at the end business owners have to
shut down their small business. Hence, this study will help the small business owners to identify
all related business risks at the business start-ups, how these risks impacted upon business and
what measures can be taken to overcome with business related risks.
Problem statement
While conducting this research, researcher has to face many issues like incomplete data is
received, deciding objective is complex, hard to found respondents, availability of less resources
to gather necessary data and less coordinative behaviour of respondents. All this issues is
occurring while conducting the following research.
Research aims and objectives
Research aims

The main aim of this research is “to identify the risk factors which are associated with the
start of a small business”.
Research objectives
 To evaluate the impact of both internal and external factors over the start of a small
business (Pan, X. and et. al., 2018).
 To analyse the risk factors which are concerned with the start of a small business
 To investigate the ways to overcome from the risk factors which are related with the start
of a small business
How the objectives will be achieved
To achieve business objectives, researcher have to formulate some research questions and need
to find the answers of these research questions because these questions are the further
explanation of research aim. A review of literature is also done to achieve the objectives.
Research questions
 What is the impact of both internal and external factors over the start of a small business?
 Discuss the risk factors which are concerned with the start of a small business?
 Explain suitable ways to overcome from the risk factors which are related with the start
of a small business?
TIMESCALE
Gantt chart: Gantt chart is used to measure how much work is done in a planned time and then
they are compared with the planned activities to identify that right task is done or not and how
much time is covered to complete the task (Graafland, J., 2018).

LITERATURE REVIEW
To evaluate the impact of both internal and external factors over the start of a small business
According to viewpoint of Dewi Hanggraeni and Beata Slusarczyk, (2019)
Whenever small business start-ups takes place then various types of internal and external factors
impacted upon business activities. Internal factors are those factors which occur inside a
company like organisational structure, relationship of management team and employees. SWOT
analysis, STP analysis, VRIO analysis and many others are best tools to identify internal factors
of business. Whereas external factors are those factors which occur outside the business and
which is also uncontrollable like political factors, government laws and many others. To identify
the impact of external factors most of the companies uses PESTEL analysis. It is one of the best
ways to analyse political, economical, social, technological, environmental and legal factors of a

business. The impact of internal and external factors increases when the business is in small size
(Cortés and et. al., 2020). In context of Sparky Dishes, there main issue is that they don’t have
appropriate team to analyse their internal and external factors. Another issue is they don’t have a
popular brand image because they are serving to small targeted customers. The very first thing
they must adopt is that they should assign a team for business analyses who aware them about all
internal and external factors. Secondly for internal factors, the best way to identify the value of
resources is to have VRIO analysis and compare it to other company’s VRIO analysis. The
comparison must be considered with above and popular company to verify how they handle their
resources and then learn the ways. For external risk factors Sparky Dishes must follow all legal
and political laws which are compulsory to follow. It is essential to change strategies according
to situation to compete and to attract customers.
To analyse the risk factors which are concerned with the start of a small business
As per the perspective of Anthony Miles, (2018)
Whenever small business plans to start their business, it is recommended that they first analyse
all their risk factors and then pursue to start the business after making plans to tackle all risks
(Tertilt and Scholz, 2018). Some major risk factors of small businesses are explained below-
 Financial Risks- The first thing is the requirement and arrangement of finance to start
business. Small business owners did not have that much of equity amount that they can
start their own start up with whole proportion of equity shares (whole shares owned by
owner). On the other hand if they raise their shares then the less people will trust them as
they are new in the market. Others have the fear to loss their shares in case company shut
down quickly. In case of raising funds for business through bank loans then they ask a
business plan first. Hence, a proper and effective business plan can help the business to
take bank loans to start their setups.
 Competition Risk- Other biggest risk for small business is to compete with other well
established companies dealing in the same industry (Hashim, Raza and Minai, 2018). Big
and tough competition always impacted negative upon small businesses and force them to
leave the market by their powerful strategies. Large companies have good amount of
funds, customers, brand image, effective labours and many others which impacts small
business as they are unable to adopt high tech machines and skilled labours which is
considered costly for them.

To investigate the ways to overcome from the risk factors which are related with the start of a
small business
According to the perspective of Roy Thurik and Niels Bosma, (2017)
There are many ways by which small business can overcome their risk factors and these ways are
explained below-
 In context of UK, their interest rate is too low which is 0.1 %. Hence, it is helpful for
small business to take loans on very low interest rates to start their own business. The
only thing which is required is a good business plan. Therefore, there are some famous
and experienced business advisors which work for some fees (Huang, 2018). Hence,
taking their advice and ask them to make a proper and effective business plan will help
small business to represent good idea in front of banks. Hence, by this financial risk can
be mitigated.
 For the risk of competitive factors, small businesses like Sparky Dishes are suggested to
focus on their staff and hire talented and skilled employees because their performance
help the company to compete well in market and grow internationally. Assigning people
for marketing department is also very essential because they are the one who analyse
company’s biggest competitors and provide efficient ideas to make business strategies to
compete well. For Sparky Dishes, it is suggested that they must use product line in their
food dishes and also required to offer both vegetarians as well as non vegetarians.
 To create brand image and gain customers trust toward small and newly established
business is also biggest issue. For this small companies are required to focus on
promotions of business first to aware customers and at the starting good offers must be
provided to customers on discounts because the main aim of business at their initial days
is to attract more and more customers. Hence, providing good offers to attract customers
is a good strategy for business to overcome these risks (Čepel and et. al., 2018).
MARKETING STRATEGY

 Competitive advantage: It is the factors which allow a company to offer better goods and
services then their competitors. These factors are cost structure, branding, quality of
offered merchandise, distribution network, suppliers and many others. It is compulsory to
offer qualitative products to customers at lower prices to win the competition advantage
(Mittal and et. al., 2018). In context of small company start-ups, to take competitive
advantage they must focus on their production and services. In context of Sparky Dishes,
they must focus on their easy availability of shops like deciding which location they can
pursue their business and they selected crowded area of middle class families who like to
have street foods. They provide it in low cost with good quantity because their foods are
prepared with full hygiene.
 Market segmentation: It is another marketing strategy which is essential to identify
targeted customers. Market segmentation is basically dividing whole market into groups
of customers and each group have different characteristics but customers falling in same
group have same characteristics (Macdonald and et. al., 2018). This is done to analyse
which selected group will provide maximum profit if they offer their product to them. In
context of Sparky Dishes, they have segmented their market into vegetarian and non
vegetarians because they have different sections for both and they also segmented their
market for adults and for children. For adults they have spicy foods and for children they
have sweet and light foods. Hence, this market segmentation helps them to offer those
foods to customers which are liked by them mostly.
 Market existence: This means where the company will exist, what is the industry of
company and what is the form of company like oligopoly, monopoly, competitive and
many others (Yun, Won and Park, 2018). In context of Sparky Dishes, they are dealing
under food and drinks industry which is having tough competition in UK. It is
compulsory to identify the existence of market and all details about it to save them self
from external issues like competition.
IMPACT ANALYSIS
Small business start-ups have many factors which impacted upon them and one of the
factors is societal factor. This factor includes the thinking and attitude of society for new start-
ups. It’s not related to UK only but it’s related to all country that they believe more to their
regular stores more than the new start-ups. They have the mindset that the company by which

they are purchasing products from many years are providing good qualitative goods to them why
they need to try new one. In case of raising shares for new start ups, people are less interested to
purchase those shares. Today society believe brand name more than the hard work. It’s very
tough to gain the trust of society (Mansoori and Lackeus, 2019). Beside all this, the success of
small start ups is only depending upon their societal purchasing belief with them. When society
show little interest to purchase products from these new start ups then they have the hope to gain
more customers from mouth to mouth wording of one customer to another. Hence, a society with
good purchasing power and interested in trying new things will always helpful for new start-ups
whether it is large sized business or small sized business.
One the other hand from business point of view, they help their society to grow and to
develop by providing employment to them and providing qualitative products to increase their
standard of living in reasonable prices. In context of Sparky Dishes, they give employment to
more than 30 employees at their initial stage of business. They also fulfil the need and wants of
their society who love to have street foods more. It is important for the company to fulfil all
needs and wants of their customers to make them satisfied for what they have paid. Satisfying
the societal need can make big profit for company (Guiso, Sapienza and Zingales, 2018).
Providing good services like asking the customer if they want anything else with polite tone and
helping the customer to understand menu and many other services will also a good factor to gain
the trust and loyalty of society.
CONSTRAINTS
 Arranging of finance: Arranging finance is one of the most important factor of start-ups
of a business especially small business. Finance is compulsory for operating activities,
purchasing raw materials, for promotional tools and many others. There are many ways
by which a small business can arrange finance like using equity funds which means using
owners own money. Another arrangement is to allot shares to public but less people are
interested to purchase newly start-ups business shares. Another idea is to have loans from
banks which are best idea for small business. Sparky Dishes arranges their finance from
banks at low interest rates.

 Finding a location: Location of business is also a big factor which must be set according
to targeted audience. It is compulsory to open stores in those areas where more number of
targeted audience live (Dutra, Tumasjan and Welpe, 2018). In context of Sparky Dishes,
they have chosen the location for their stores near the area or middle class families who is
more interested to have street foods at dinner. Location is also depend on demand, where
the demand of business is more, company will establish their store their only. On the
other hand selecting crowded and highly populated area is also a good idea to earn more
profit.
 Government approval: Another important factor is government approval which is very
compulsory for business start-ups. Whether the business is done on large scale or small
scale it required a government approval. Government approvals are in the form of some
legal documents where companies have to register their companies name and objectives.
In case government did not agree with business idea they didn’t approve and business are
not supposed to move forward. Hence, it is compulsory to have government approval and
government approval is only gain when companies makes sure that they will not engage
them self in any unlawful business activity.
 Resistance from local business: local business is that business which has already
working for many years in a particular country and has a strong power attracting
customers (Oh and Patton, 2018). They are popular among their targeted customers.
Hence, start up of small business in such a industry where local business influence a lot
on their customers is very harmful for business. The only way to overcome this problem
is that offering good quantity of products at low prices to have customer’s attention. In
context of Sparky Dishes, they make their food products with full hygiene by wearing
gloves and mask and also make foods with fresh vegetables and the prices of their dishes
are low as compared to other street food provider.
 Resistance from local people: Local people have the mind set of purchasing from those
stores only where they are purchasing from last few years. Very few customers’ tries to
purchase products and services from newly settled company especially which small sized
and which is unpopular. Hence, to overcome with this issue, Sparky Dishes focuses on
the promotional factors like advertisement through newspapers and on pamphlets. At the

initial stage they offer discounts on their products so that customers even try their product
and get to know about Sparky taste.
CONCLUSION
From the above information it is concluded that internal and external factors impacted
upon small start ups. There are many other risk factors which impacted upon business which is
going to start especially which is small in size. These risk factors are finding financial
arrangements, lack of skilled employees, gaining customer trust and many others. All these risk
factors can be overcome only by proper management and by proper planning and adoption of
successful strategies which help the business to grow faster. First thing is to identify business
environment that what all factors are impacting upon start up of a business whether it is internal
or external. Another step is to record how much damage they are giving to business start up and
then consult with business experts who advice suitable ideas to overcome the issues. At the end
take corrective measures. Some strong marketing strategies can be made like market
segmentation, taking competitive advantage by lowering the prices and many others are some
powerful strategies for marketing. A business start ups need to find the financial arrangements,
need to find proper location, need government approval and many others.