Small business decision-making, planning and evaluation AREA OF STUDY 2 UNIT 1 SMALL BUSINESS MANAGEMENT SUMMARY

Learning Intention Learning Intention: Explain how small businesses make decisions. Plan & Evaluate. Success Criteria. I will be able to: Apply decision making and planning skills to operate and run a small business and evaluate it.

Overview

Decisions All small business operators need to become effective decision makers. Decisions and self analysis must be made prior to the commencement of a small business.

Decision1 – Suited to operate a small business? Am I suited to run a small business? What are my motivations for commencing in business? What are my personal goals and will the business help in achieving these? Decision 1: Suited to operate a small business?

Decision1 – Suited to operate a small business? A self-appraisal of: personal skills, including communication skills, technical skills, planning and organisational skills, accounting and financial skills, marketing and promotional skills, administrative skills, computer skills, negotiation skills, leadership skills

Decision1 – Suited to operate a small business? A self-appraisal of: personal skills, including communication skills, technical skills, planning and organisational skills, accounting and financial skills, marketing and promotional skills, administrative skills, computer skills, negotiation skills, leadership skills. personal qualities, including risk taking, ability to recognise opportunities, ability to work independently, ability to set and achieve goals, decision making.

Decision 2 – Type of business? Type of business An entrepreneur sees opportunities that others do not. Possible sources of ideas are family and friends, personal inspiration, research, looking overseas, innovation. Innovation and entrepreneurship are important. Innovation must be protected by intellectual property.

Decision 3: Developing a business concept Develop a concept Initial market research, including a feasibility study conducted to ascertain if the business can be financially viable.

Decision 4: A new business from scratch or an existing business? Establish a new business: Advantages: owner is autonomous and has control over the business and its development; owner avoids buying into the mistakes of others. Disadvantages: greater uncertainty and risk; more work building business up from scratch; longer to become profitable; greater scope for error.

Decision 4: A new business from scratch or an existing business? Purchase an existing business Advantages: simpler process, access to financial records; established clients, suppliers, staff, and so on; cash flow commences sooner. Disadvantages: pay extra for goodwill; may be buying the mistakes of previous operator.

Decision 4: A new business from scratch or an existing business? Buy a franchise Advantages: less risk, greater recognition and assistance Disadvantages: less autonomy, cost of fees associated with franchising.

Decision 5: Form of ownership structure? Ownership structure Sole trader Partnership Company – private or public Each has its own advantages and disadvantages.

Decision 6: Location? Location – different businesses have different location requirements depending on available funds, visibility requirements, need for space, and access to suppliers.

Decision 7: Layout of premises? Layout of the business – need to consider: desired environment, maximising traffic flows and avoiding bottlenecks, location of stock in optimal positions.