Do you know what 'E-Myth' is? It refers to an assumption that if certain person is expert in certain technical field, he can to run the business smoothly. It ignores the fact that although technical knowledge is very much required for survival of any business, business management skills are also equally important to run the enterprise efficiently. In the parlance of small business, it is known as Entrepreneurial Myth and it is one of the main reasons why in spite of having everything else, small business often fails to make any mark.
It is a fact that 80% of all non-franchised businesses fail because of such myths. The would-be entrepreneur fails to realize the hard fact that running a business is totally different from performing services under one. You may be expert in your own field, but that does not mean you will know how to set up a company, manage finances, prepare reports, market your business, handle disgruntled customers etc. These aspects are as important as being technically sound in the area of business.
Let us first clarify that there is no fixed definition of small business. Indeed, it can include anything from hairdressing salons, restaurants and convenience stores to manufacturing units employing less than 500 people. However, in general the term refers to:
* privately owned corporations, partnerships and sole proprietorships, * business operated, with a small number of employees * business having relatively low volume of sales
People generally set up small businesses because they want to work independently; free from all constraints. Freedom to make decisions and to act accordingly is vital for many, but the fact is: one is never totally free. Indeed, even when you are the owner of the business, the market condition as well as the market demand is the actual boss. You have to work through several restraints; you cannot simply ignore them.
Therefore, if you want to set up your business, just wait and watch. Small business houses need different types of managerial handling than big and established houses do. You cannot employ too many people because of your financial restraint and so you have to work in many capacities. This in turn can be quite taxing for you. Moreover, as we have already discussed, it is not necessary that you should be capable of handling every facet of the business. Therefore, before you open your own business, give a good thought to this aspect.
Apart from that, undercapitalization is very big problem for small entrepreneurs. In fact, of all the small business houses, which open up in any given year, a large percentage of them close down because of that. An undercapitalized business is one that does not have enough funds to meet its current operational expenses and so it is soon forced to close its door. Such a situation arises mostly due to lack of financial planning and can be rectified through proper financial management.
Experts today suggest that small business houses should always establish a line of credit and borrow against it even if such loan is not needed. Of course, you should always pay it back in time. By doing this repeatedly you can easily expand your capital and when you need to increase your credit or take out a larger loan, you will not have to face any major problem. However, the least expensive way to raise capital is to finance from cash flow.
Keeping your accounts up to date is essential if you indeed want to improve your cash flow. Regular invoicing will allow you not only to collect your dues on time, but will also allow you to stretch the payables without incurring interest or penalties. Renegotiating loans for lower interest rates and exploiting trade discounts are some other methods you can employ in order to improve your cash flow and avoid undercapitalization and consequent bankruptcy.
The third important factor is marketing. Finding customers is a big challenge for the small business houses. Unless you have a comprehensive marketing plan, all your effort may go in vein. Taking out eye-catching advertisements in newspapers and TVs may not be feasible for you; but you can follow the other ways. The most common marketing source for the small business is the words of mouth. Having satisfied customer is the best thing that can happen to you. You can also use customer referrals, yellow pages directories, radio and internet advertisements, roadside billboards etc. In short, there is no shortcut to a comprehensive business plan; if you indeed want to succeed.
It is a fact that 80% of all non-franchised businesses fail because of such myths. The would-be entrepreneur fails to realize the hard fact that running a business is totally different from performing services under one. You may be expert in your own field, but that does not mean you will know how to set up a company, manage finances, prepare reports, market your business, handle disgruntled customers etc. These aspects are as important as being technically sound in the area of business.
Let us first clarify that there is no fixed definition of small business. Indeed, it can include anything from hairdressing salons, restaurants and convenience stores to manufacturing units employing less than 500 people. However, in general the term refers to:
* privately owned corporations, partnerships and sole proprietorships, * business operated, with a small number of employees * business having relatively low volume of sales
People generally set up small businesses because they want to work independently; free from all constraints. Freedom to make decisions and to act accordingly is vital for many, but the fact is: one is never totally free. Indeed, even when you are the owner of the business, the market condition as well as the market demand is the actual boss. You have to work through several restraints; you cannot simply ignore them.
Therefore, if you want to set up your business, just wait and watch. Small business houses need different types of managerial handling than big and established houses do. You cannot employ too many people because of your financial restraint and so you have to work in many capacities. This in turn can be quite taxing for you. Moreover, as we have already discussed, it is not necessary that you should be capable of handling every facet of the business. Therefore, before you open your own business, give a good thought to this aspect.
Apart from that, undercapitalization is very big problem for small entrepreneurs. In fact, of all the small business houses, which open up in any given year, a large percentage of them close down because of that. An undercapitalized business is one that does not have enough funds to meet its current operational expenses and so it is soon forced to close its door. Such a situation arises mostly due to lack of financial planning and can be rectified through proper financial management.
Experts today suggest that small business houses should always establish a line of credit and borrow against it even if such loan is not needed. Of course, you should always pay it back in time. By doing this repeatedly you can easily expand your capital and when you need to increase your credit or take out a larger loan, you will not have to face any major problem. However, the least expensive way to raise capital is to finance from cash flow.
Keeping your accounts up to date is essential if you indeed want to improve your cash flow. Regular invoicing will allow you not only to collect your dues on time, but will also allow you to stretch the payables without incurring interest or penalties. Renegotiating loans for lower interest rates and exploiting trade discounts are some other methods you can employ in order to improve your cash flow and avoid undercapitalization and consequent bankruptcy.
The third important factor is marketing. Finding customers is a big challenge for the small business houses. Unless you have a comprehensive marketing plan, all your effort may go in vein. Taking out eye-catching advertisements in newspapers and TVs may not be feasible for you; but you can follow the other ways. The most common marketing source for the small business is the words of mouth. Having satisfied customer is the best thing that can happen to you. You can also use customer referrals, yellow pages directories, radio and internet advertisements, roadside billboards etc. In short, there is no shortcut to a comprehensive business plan; if you indeed want to succeed.
About the Author:
Article by Cliff Schubert of QuantumMarketer, who is a specialist in online marketing. For more information on small business marketing ideas and search engine optimization consulting, visit his site today.
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