A small business may be defined as a business with a small number of employees. The legal definition of “small” often varies by country and industry, but is generally under 100 employees. The common characteristic that sets them apart from large enterprises is that they posses less tangible properties.
Small business management pertains to the independent ownership, supervision and control of assets, resources, products, services, workforce and profits of an enterprise which is not prevalent in its area of operation.
In an economic atmosphere that breeds and sustains entrepreneurship, a lot of individuals are attracted to the prospect of possessing and directing his own business. They choose having a small enterprise to be close to costumers–enabling fast, flexible, and personalized service, to innovate less expensively, and to manage solely.
Managing both small and large businesses involves the five major functions of management–planning, organizing, directing, controlling, and coordinating.
The mistake that most small business owner-managers commit is giving less attention to planning and controlling functions. These two, when fulfilled effectively would result to excellent goal setting. And the success of every business relies heavily on its long-range goals.
The most popular approach applied to most small businesses is management by objectives or MBO. The reason for this is that it is result-oriented and jobs are perceived in terms of achievements rather than simply functions.
The first step in developing an effective MBO program is to define your business. A transparent and attainable vision of the business is critical for planning, marketing, product development, building and equipment, and financial and staff needs.
The next step is to set both short- and long-range business goals. Long-range goals would serve as the mold from which your company’s MBO program would take form. These goals would triumphantly be attained through management and employee communication. The staff should also take part in the formulation of goals, to increase their sense of commitment in fulfilling them.
The third step in developing the MBO is devising a work plan. The work plan should address the following areas: (1) goal–should be specific and concise; (2) measurement–benchmarks to be used; major problems to be anticipated; (3) work steps–most essential steps to be completed at a fixed time; and (4) supervisor’s goals–employees should identify which of their manager’s goals relate to their own.
The fourth step would be to report progress. An MBO program must include a provision for regular progress reports. Goals and objectives can only be attained through conducting regular record and review of progress. Progress which is below expectation can enable problem identification.
The fifth and final step would be to evaluate performance. This is done by compiling and reviewing the past results of the steps done in the development of the MBO. Measure every element and know if each coordinated and supported each other.
Small businesses face an array of problems most commonly, bankruptcy and under- capitalization This is often a result of poor planning rather than economic conditions – it is a common rule of thumb that the entrepreneur should have access to a sum of money at least equal to the projected revenue for the first year of business in addition to his anticipated expenses.
Getting into small businesses is not as easy as it seems. To avoid the problems stated above, the owner-manager should first ensure that he has or would be able to raise enough funds. And no matter how small his enterprise is, he should not fail to apply the major functions of management.