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9. OPERATING A BUSINESS –
WHAT YOU NEED TO KNOW
Cash Flow Is The Lifeblood Of A Small Business
Cash flow is the lifeblood of a small business. Cash comes
from sales, collection of accounts receivables, and the sale
of assets. On the other hand, cash flows out to meet all expenses
and debt obligation of the business. Good cash flow management
forms an integral component of sound financial management,
which can be achieved by implementing and maintaining a financial
management system, whether manual or computerized
The goal of good cash flow management is to have enough cash
on hand when it is needed. This is a simple concept, yet in
practice, it eludes even the biggest operations.
Have A Management Plan
Too often, the owner/manager is the jack-of-all-trades, being
the production manager, the accountant, the bookkeeper, the
salesman, the marketing director, the custom broker, the truck
driver and the list can go on. Naturally, taking on all of
these responsibilities is too much for any one individual
and of course, some tasks are left undone.
The solution is to develop a management plan, which identifies
the various skills required and makes provision for the recruitment
of suitable staff to ensure the company’s viability
and sustainability. Proper human resource management is key
to the success of a company. Employees are the most important
asset any company can possess.
Products must Meet International Standards
The world is fast becoming a global village, so business competitors
may not necessarily be down the road or in the next village
or town, but as far away as Japan or Malaysia. Today’s
consumer may choose to purchase products locally or order
directly from overseas suppliers via the Internet, mail order
or by traveling to other countries. Products must therefore
meet international standards and be competitively priced.
Marketing- an important lifeline
Too often business owners fail to recognize that it is their
responsibility to ensure that the consumer is made aware of
their products or services, and operate under the mistaken
concept that the business will promote itself. It has also
been the argument of some that advertising and promotions
are unnecessary expenses to their business. As mentioned above,
today’s consumer has choices. In addition, with the
markets opening up (the advent of the Caricom Single Market
& Economy – CSME and the Free Trade Area of the
Americas – FTAA), the competition is becoming more aggressive.
It is therefore imperative that enterprises have a marketing
budget. Business owners need to be pro-active in ensuring
that their products and services are familiar to potential
consumers. Advertising and promotions are the lifeline of
a business and should be treated as such.
A Business Plan Is The Company’s Road Map
Many small business owners and managers very often place business
planning or strategic planning on the back burner, but planning
is critical to the company’s long-term viability.
The business plan is the road map, which directs the business
owner as to where to go, provides the tools that are needed
and the strategies that one must implement. The business plan
should contain four distinct sections; the description of
the business, the marketing plan, the financial plan and the
management plan. Ask the following questions in developing
the plan.
• What product am I going to produce or what service
am I going to provide?
• Can I raise adequate capital to sustain the business
over the long term?
• Is the product or service going to benefit the consumer?
• Which products or services are in demand; is there
a steady flow of cash?
• Is the product or service unique? Is my product or
service different from other products and services being offered?
• Can I find a suitable location and building for my
business?
Entrepreneurship has a number of benefits. These include:
the chance and the ability to make more money than one can
make working for someone else; being one’s own boss
and not having to answer to any one else; and the idea that
as the business owner, no one can terminate your services.
As an employee of a company one may be comforted by the fact
that at the end of the month there is a paycheck available
to meet financial commitments; but this is certainly not the
case for a small business entrepreneur. Before entering into
the world of entrepreneurship, one must give due consideration
to the following:
• A large financial risk is being taken on;
• There will be long hours and fewer opportunities to
take vacation;
• A lot of time will be spent attending to the details
of running a business and less time enjoying other things
of life;
• New disciplines like filing, bookkeeping, inventory
control, production planning and all the functions of management
will have to be learned.
Spending time addressing these issues and questions will go
a long way in making the small business profitable and sustainable.
Technical Assistance Is Available for Small and Medium
Size Enterprises
Technical Assistance is now available to small and medium
size enterprises throughout the OECS under a USAID funded
Small and Medium Size Enterprise Development Programme, (SMEDP),
being implemented by the Export Development Unit (EDU) of
the Organization of Eastern Caribbean States (OECS).
Designed to offer a range of services to improve competitiveness,
expand market access and increase exports of OECS enterprises,
the programme focuses on the delivery of technical assistance
to SME’s in upgrading enterprise capability, computerization,
the development and implementation of productivity tools,
business procedures, market information/market research, financing
and Training. It involves the implementation of a Technology
and Innovation Program (TIP), with special focus on quick
responsiveness to identified needs. While the Programme offers
a short-term financing facility, the main focus is the delivery
of technical assistance by in-country Business Advisors and
roving consultants, offered to SMEDP client firms free of
charge.
Companies involved in Agribusiness, Agro Processing, Arts
& Crafts, Food & Beverages, Furniture, Wood &
Forestry Products, Garments & Textiles, Information Technology,
Metal Fabrication, Glass Works & Ceramics, Renewable &
Bio Energy Technologies and Tourism & other Exportable
Services can qualify for recruitment into the Programme. To
be eligible, the enterprises should:
• Have underutilized production capacity (i.e. in plant,
or in field),
• Have an operational track record of at least two years,
• Already be exporting or be export ready (local tourist
market, regional or extra regional) and
• Have less than seventy-five employees.
Following the identification of a potential client company,
an in-house diagnostic assessment is undertaken in consultation
with the management of the enterprise. Upon recruitment into
the programme, a technical assistance plan is developed for
the delivery of the required technical assistance.
(Submitted by Anthony C John, Business
Advisor OECS-EDU SMED Programme, as part of the Eastern Caribbean
Currency Union’s Financial Literacy Month Programme
Oct. 2003 - “Building Strong Economies Depends on You
and Me”)
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Operating
a Business-What you need to know