Small business planning

Small business includes small scale enterprises, tiny business, cottage industries, trading concerns whose annual turnover is less than a million dollars.

The list of small business includes:

1. Hotels

2. Home delivery foods, snacks and beverages

3. Catering services

4. Grocery shops

5. Vegetables shop

6. Handicrafts

7. Small trading establishments

8. Transportation business operating a few buses or trucks

9. Stationery shops

10. Toys

11. Car rental service

12. Courier service

13. Events management

14. Manufacture of soaps, cleaning liquids at home

15. Printing business

16. Engineering services or repair work services like carpentry, plumbing masonry etc

The above list of small businesses is only illustrative and not exhaustive.

What are the typical characteristics of small business

The owner is usually a sole proprietor who starts this business with small amount of capital. He is the owner and also the main employee. If the business grows and manual labor is required he employees a few persons. But Cash dealing and accounting is retained by the owner only. That is ownership and management of the business is done by one person who is the owner. The volume of business, the volume of transaction and the volume of inventory handled and rotated at any given point of time is not huge and is limited to the investment made by him. Usually he takes a small loan from his neighborhood banker or money lender against hypothecation of his inventory or personal property. The risk appetite of this owner is limited and he is usually risk averse.

The process of starting a small business and subsequent small business planning is explained and enumerated in the following steps:

1. How to get started

2. Preparation of business plan

3. Identifying loan requirements

1. How to get started

Typing a person who is not interested to go for employment and who feels he has the right talent, attitude, temperament and skills to be an entrepreneur decides to start business. Once a person decides to commence a business the question is how to get it started. What are all the steps involved, what is the procedure, what are all the legal formalities to be completed, what are the approvals and license that is to be obtained from local authorities

These questions come in the mind. The answers to the questions have to be found out. For example in case of hotels business, a certificate from health Inspector is a

Pre-requisite. In case the business is planning to employ few persons then the local labor laws is to be strictly followed regarding hours of work, overtime pay, weekly holiday, holiday wages and other employee benefits and facilities as per local law in force. Some states and some type of business have been banned to employ children below the age of 15 years. All these aspects have to be taken care of. It is difficult for a new entrepreneur to be possessing knowledge of the above legal requirements. Hence it is advisable to obtain expert opinion from an advocate or labor law fractioned. Because obtaining all required approvals from respective authorities is a pre-requisite for obtaining loans from banks. But nowadays banks have established a separate division which exclusively deals with small and medium enterprises known as SME Segment. This division gives expert guidance to new entrepreneurs for starting their business. They give guidance on obtaining licenses and approvals, drawing a business plan. The bank themselves vet the business plan and proposal and are usually ready to extend loan assistance.

2. Preparation of Business Plan:

It is advisable to entrust this important task to a Business Consultant. Any how the process involves the following:

Type of business to be selected is the first step. This depends on the age, educational qualification, background and future plan of the individual. Place of business is generally selected in the place where the owner normally resides.

Apart from the above preparation of business plan involves:

1. In case of manufacturing source of raw material, long term tie-up for raw material purchase from a dependable source

2. In case of trading also the above point holds good

3. The amount and value and quantity of materials purchased should always be commensurate with the level of sales anticipated. Non-moving inventory in the case of small business will eat the profits because of interest rates.

4. Taking an office building or space on rent. The estimation of space required should be estimated conservatively in the initial stages.

5. Employment of labor or staff should be strictly done based on need and requirement.

6. Arrangement of working capital requirements based on inventory holding, anticipated sales and profits.

7. Arrangement of purchases on credit terms so that it will ease the burden of interest payments on working capital borrowing

8. Tie up for customers, identifying customers, market, terms of sales etc

Most small business fails to get started because of the following reasons:

1. Lack of a business plan

2. Faulty business plan

3. Owner reluctant invest his own money

4. Banks not ready to fund new ventures which are risk per se like dotcom business

5. Not identifying a secured and dependable raw material source

6. Not targeting a secured and dependable customer base and market

7. Lack of vision among the owner

8. Integrity, qualification and background of the person also plays a vital part in this process. An electrical engineer who was working as a service engineer in a Refrigerator repair and servicing Company in California was dismissed from service for fraud. This engineer planned to start the same line of repair service business. His business plan was not approved by the local bank.

Most small business after getting started fail because of the following reasons:

1. Too much inventory stocking than actually required

2. Employment of persons more than required

3. Marketing efforts did not pay off

4. Working capital requirement

5. Unmindful expansion of business beyond the means and resources of the owner which invites attention of persons who start a rival competing business in the same line.

Government of India through its planning commission has devised a number of loan assistance plans and programmes for unemployed youth who possess a basic minimum prescribed educational qualification or any technical diploma. State Governments and Banks extending any financial assistance to this youth under this scheme are given reimbursement of these loans. Also grants are directly disbursed to these eligible persons. There is a separate division for development of small scale industries known as Small Scale Industries department under MINISTRY OF COMMERCE AND INDUSTRY. Small Industries Service Institute and NATIONAL SMALL INDUSTRIES CORPORATION are doing pioneering work in development of small scale business in India particularly in the area of handlooms, textiles, handicrafts, small engineering works like machining, drilling, lathe etc. Also nationalized banks have done a laudable work in this area by assisting timely loans to these businesses. The scheme of Cash credit account and over draft accounts is an encouraging factor in working capital requirements.

The challenges of the above authorities to further develop this small scale business are:

1. Encouraging technically qualified persons to take up self employment business

2. Liberal loan assistance with minimum formalities

3. Granting all approvals under single window to be operated by local authority

4. Offering professional guidance and expertise by a single designated agency in the areas of preparation of business plan, obtaining statutory approvals, obtaining working capital loans

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Corporations life is not dependent upon its members.
personally liable for the debts and liability of the corporation.