The Number Of Business Have Actually A Business Intelligence Service 80-90 – Categorizing small business problems and growth patterns in a systematic way useful to entrepreneurs may at first seem like a hopeless task. Small businesses vary in size and potential for growth. They are characterized by operational autonomy, different organizational structures, and different management styles.
However, a closer look reveals that they face common problems at similar stages of development. These parallels can be organized into a framework that increases our understanding of the nature, characteristics, and problems of businesses ranging from a corner dry cleaner with two or three minimum wage employees to a $20 million-a-year computer software company. 40% annual growth company.
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For small business owners and managers, such an understanding will help to assess the current challenges; for example, the need to upgrade existing computer systems or hire and train second-level managers to maintain planned growth.
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It can help anticipate key requirements at various points, such as when the company grows and becomes more complex, whether the owner will spend too much time, the need for representation, or changes in management roles.
This framework provides a basis for assessing the business impact of current and proposed government regulations and policies. An example of this is the elimination of double taxation on dividends, which would be of great help to a profitable, mature and stable business like a funeral home, but completely unhelpful to a new, fast-growing, high-tech enterprise.
Finally, the framework helps accountants and consultants diagnose problems and find solutions that work for small businesses. A 6-month-old, 20-person business problem can rarely be solved with advice based on a 30-year-old, 100-person factory. For the former, cash flow planning is paramount; For the latter, strategic planning and budgeting to establish coordination and operational control are most important.
Over the years, various researchers have developed business audit models (see Exhibit 1). Each uses business size as one metric and company maturity or growth stage as a second metric. Although useful in many ways, these systems are unsuitable for small businesses in at least three ways.
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First, they believe that a company must grow and pass all stages of development or die trying. Second, the models fail to capture the critical early stages of a company’s origin and growth. Third, these systems determine company size primarily by annual sales (although some mention the number of employees) and ignore other factors such as value added, number of locations, complexity of product lines, and rate of change in product or production technology.
We used a combination of experience, literature search, and empirical research to develop a framework relevant to small and growing businesses. The framework that emerged from this effort identified the five stages of development shown in Exhibit 2.
Each stage is characterized by an index of size, diversity, and complexity, and is determined by five management factors: management style, organizational structure, extent of formal systems, strategic goals, and owner involvement in the business. We describe each stage in Exhibit 3 and describe them in detail in this article.
At this stage, the main business concerns are acquiring customers and delivering the contracted products and services. Key questions include:
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An organization is a simple organization where the owner does everything and directly supervises subordinates who must have at least average ability. Systems and formal planning are minimal or non-existent. The company’s strategy is simply to survive. Owner
The business performs all important tasks and is the main provider of energy, direction, capital with relatives and friends.
Companies in the infancy stage range from newly opened restaurants and retail stores to high-tech manufacturers that have yet to stabilize production and product quality. Many such companies never gain enough consumer acceptance to make their products viable. In these cases, the owners close the business when the start-up capital runs out, and if they’re lucky, they sell the capital at cost. (See Endpoint 1 in Exhibit 4). In some cases, owners cannot accept the time, financial and energy demands of their business and quit. Companies that continue to do business will be Tier II enterprises.
By reaching this stage, the business has demonstrated that it is a viable enterprise. It has enough customers and satisfied enough with its products and services to keep them. Thus, the main problem shifts from mere existence to the relationship between income and expenditure. The main issues are as follows.
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The arrangement remains simple. A company may have a small number of employees supervised by a sales manager or general foreman. None of them make major decisions on their own, but rather carry out orders that are pretty well defined by the owner.
System development is minimal. Formal planning is, at best, a cash forecast. The main goal is still survival and the owner is still synonymous with the business.
During the survival stage, the enterprise can grow in size and profitability and move to stage III. Or, as many companies do, it may stay in the survival phase for a while, earning a marginal return on the time and capital invested (Endpoint 2 in Exhibit 4) and eventually going out of business when the owner gives up or retires. Mom and pop shops fall into this category, as do manufacturing businesses that cannot sell their products or processes as planned. Some of these marginal businesses have generated economic benefits that are often sold at a small loss. Or they may fail completely and fall out of sight.
At this stage, the decisions faced by the owners are whether to use the company’s achievements, expand the company, keep it stable and profitable, and form the basis for another owner’s operation. So will the company be used as a growth platform – Sub-tier III-G or as a vehicle to support the owners who are fully or partially divested from the company – Sub-tier III-D? company. (See Exhibit 3.) The separation may be motivated by a desire to start a new enterprise, run for political office, or simply pursue a hobby or other outside interest while keeping the business more or less at its current status.
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In the Success-Cut-out substage, the company achieves true economic health, achieves sufficient volume and product market penetration to ensure economic success, and earns average or above-average profits. A company can remain in this phase indefinitely unless environmental changes destroy its market position or inefficient management reduces its competitiveness.
As an organization, the company gets large enough that, in many cases, functional managers are required to perform certain roles performed by the owner. Managers must be competent, but not necessarily top-notch, because their growth potential is limited by the company’s goals. Cash is plentiful, and the main concern is to avoid cash outflows during times of prosperity, which can harm a company’s ability to weather the inevitable tough times.
In addition, the first professional staff comes on board, usually a supervisor in the office and perhaps a production scheduler in the factory. A basic financial, marketing, and production system is in place. Planning in the form of an operating budget supports functional allocation. Owners and, to a lesser extent, company managers must oversee strategies that primarily maintain the status quo.
As the business grows, he and the owner become increasingly separated, partly because the owner is elsewhere, partly because of other managers. Many companies have been operating in the Success-Cut sub-stage for a long time. Some people’s product markets do not allow for growth; This is the case with many small, medium, and slow-growing public service businesses and franchisees with limited territories.
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Other owners actually choose this route; If a company can adapt to environmental changes, it can survive and be sold or turn a profit, or it can then spur growth (Exhibit 4, end 3). For franchise owners, this last option will require the purchase of other franchises.
If a company fails to adapt to changing conditions, as many auto dealers did in the late 1970s and early 1980s, it will either revert to a marginal company or return to the rest (endpoint of Exhibit 4).
In the Success-Growth substage, the owner integrates the company and prioritizes growth resources. Owners take on cash and the company’s established credit strength to finance growth.
One of the important tasks is to develop managers to keep the core business profitable and to meet the needs of the growing business. This second job requires hiring managers who look to the future rather than the current state of the company.
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The system should be installed keeping in mind the upcoming needs. Operational planning is in the form of a budget, as in Subphase III-D, but strategic planning is broader in scope.
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