Starting and developing a new venture
Management is a major concern in the development of a new venture. The management of a venture can play a major role in the success or failure of the business. There is no management structure which will guarantee success, but tested management techniques used by successful companies such as Six Sigma can be used to increase any ventures chances of being successful. There are also Six Sigma training courses available for assisting management skill development (The Six Sigma Group 2008). With the vast amount of information available in libraries and on the internet on the topic of business management there is no excuse for new ventures to fail because of poor management.
The role of small businesses in the economy
One way of starting a business is taking a fresh idea and turning it into business opportunities. One prediction is that if one in ten of the respondents realised their ambition, it could create 1.1 million extra jobs (SB 2009). Here the word ambition displays that respondents have ideas to turn into business opportunities, and that these opportunities can create jobs. The potential for small businesses to create over a million jobs shows small businesses play a significant role in the economy. Some small businesses have developed into the large corporations we know today. Kentucky Fried Chicken is one example. The company started from a single resturant which was put out of business by the construction of a new highway (Bell 2009). Today the company has franchises across the globe and supports many employees. The question which reamains is how can a business take an idea and turn it into opportunities
Small and Medium Enterprises, SMEs, account for a significant portion of the economy. In 2005 it was reported that there were over 4 million SMEs which accounted for the employment of over 24 million people (Small Business Service 2005). Even very small businesses, those with less than 5 employees, are making a large impact on the economy by employing over 1.7 million people.
The possibility of success of these SMEs can be increased with improved flexibility. Take the example of Harland Sanders, better known as Colonel Sanders. In the early 1950s a highway was built which would bypass the town which Harland Sanders had his resturant (Bell 2009). This nearly ended Harland Sanders business. Instead of giving up, he sought out investors to purchase his recipies and started the Kentucky Fried Chicken franchise. His flexibility and unwillingness to give up created large profits from his business. The market is a changing environment and being flexible enough to change is a key element for any business.
The problems small businesses face are not small
Small businesses face internal and external problems which threaten their survival on a regular basis. Finances and labor are key internal issues which constantly threaten a small businesses survival. A small business must find ways of cutting costs to compete which is often more difficult.
Small businesses often lack the resources to make purchases in larger quantities and may not have the ability to internally produce resources which can be handled internally by larger corporations. Some small businesses are able to adjust by specializing. If the company limits their product range they are often able to make larger purchases of specific items which can reduce their purchase costs.
Maintaining skilled labor is an internal issue which most small business must find a way to deal with. When starting a business it may be difficult to find skilled labor and some work may need to be outsourced to other companies until qualified labor can be found. Internal conflicts between employees can also cause a huge problem in small businesses as it may not be possible to separate employees with conflicts into separate departments. In family run businesses these conflicts can tear a family apart and lead to problems which last longer than the lifetime of the business. Another problem for small businesses is that with less employees if one or two employees require time off the business may be completly cripled as there may not be employees available to fill their roles. Some small businesses are able to protect themselves from this with the help of insurance policies and employment contracts. It is not unusual for employees of small businesses to be required to perform aspects of their job while they are out of the office. Insurance policies can also buffer the difficulties caused by the loss of critical employees.
The most difficult external problem a small business faces is competition. In many industries there are more companies providing a serice than there are customers requiring those services. This highly competative environment drives down prices which further increases the difficulty of maintaining a small business. Large corporations also have more financial resouces available for marketing and advertising which can make it much more difficult for a small business to be noticed. To make up for this many small businesses will utilize local advertising media which larger companies may not be aware of, such as posting advertisements at local government offices. While a large corporation may have an intimidating amount of resources, the small business is often more prepared to provide one-on-one customer service and be able to better match the needs of the customers. This is a key advantage which helps many small businesses survive the competative environment.
Converting an idea into a business opportunity
Turning ideas into business opportunities is the process of identifying potential sources of income from ideas and the realisation of their potential within the current and future business environments. The first step is often to identify the customer by asking the question who can benefit from this idea If potential customers are not readily available giving up on the idea immediatly could be a big mistake. The potential for home based business ideas and for network marketing on the Internet is huge (Plumb 2009). Any venture can turn to experts and anyone available for assistance. Trade secrets which are unique to the idea should still be protected. This can be done by asking general questions which need answers to identify who will benefit from the ideas. Once potential customers have been identified the next step is to determine who is willing to pay a new company for these benefits.
With ideas and potential customers identified the next thing to do is test the ideas. In order to test the ideas, a plan must be developed to implement the idea for the customers. Identify and prepare everything which will be needed to implement the idea and find customers to test the idea on. Remember that this is still part of the testing phase of the business idea. Normally only one customer is required to test new ideas. Once a customer is found, the next step is often completing the first sale. If the customer is satisified with the results of the sale than the ideas have successfully been turned into a business opportunity.
Building off of someone elses success
A unique idea is not required to start a business venture. There are many business opportunities available either publicly or privately through direct contact with businesses who have needs which can be provided by a new business. There are many companies with more work than they can handle or who are incapable of efficiently producing various products and services who adjust for this by resorting to outsourcing customer requirements to other companies. This is often done transparently to the customer where customers only see one business. They will not always know that another company is providing them the products and services they are requesting, and in many instances this fact would be irrelevant to customers.
A venture does not always need its own resources to produce products and services which the business will provide. The chart below, titled IT Leading as Most Active Area of Outsourcing, shows there are wide ranges of services that can be provided with the assistance of outsourcing. Outsourcing companies work for other businesses often transparently to the customer. Using outsourcing small businesses can produce wider ranges of products and services to appear larger than they are.
An ideal situation for small businesses is to attach to larger businesses with a contract which guarantees work for the smaller business. This relationship benefits businesses greatly by providing reliable income streams and service providers. This relationship strengthens the new business based on the success of the parent company. It is possible, though rarely advised, that small businesses can rely entirely on income from a single company.
The small business enironment
Small businesses can range from one person home based operations to companies with over 50 employees. These businesses face a highly competative environment from other small businesses and from large corporations. In many industries, such as marketing research, there are more businesses competing for work than there is work available. This can create a great deal of down time for employees when there is no work available. Unlike large businesses, a small business normally will not have enough equity and available credit to maintain these employees while there is no work available. This downtime can also be a large financial blow to a small business as some expenses, such as rental agreements and license fees, are still presant even when the business is not active.
Small businesses also face an intimidating amount of competition from larger corporations. Larger corporations often are able to use their vast resources to decrease their operating expenses below what a small business is capable of. This makes it even more difficult for the new business to attain a share of the market since they are unable to provide services at a lower price than the larger corporations. Larger corporations can often afford more advanced technologies such as automation technologies which can be too expensive for the small business to attain. In some cases, such as Walmart, the larger company is able to provide products at or below cost by increasing the cost of other products. Large corporations are also often capable of establishing labor centers in coutries with cheaper labor which further increases their competative advantage over small businesses. These practices ultimatly can put small business out of business.
They key element of business creation is flexibility
Possibility of success can be increased with improved flexibility. Take the example of Harland Sanders, better known as Colonel Sanders. In the early 1950s a highway was built which would bypass the town which Harland Sanders had his resturant (Bell 2009). This nearly ended Harland Sanders business. Instead of giving up, he sought out investors to purchase his recipies and started the Kentucky Fried Chicken franchise. His flexibility and unwillingness to give up created large profits from his business. The market is a changing environment and being flexible enough to change is a key element for any business.
Every business faces needs for flexibility as the environment of any business will change. Prices will change, suppliers go out of business and new suppliers will become available who can produce higher quality products or similar products with lower prices. Technologies are often developed which offer a business using them a competitive advantage in the marketplace. Companies utilizing technologies which decrease their expenses have an increased chance of survival during the times when the economy is weak. These innovative companies have higher potential for profits when the economy is strong. Leaving room for flexibility in the development of ventures ultimately increases the chances of success and provides room for growth.
The marketplace is filled with individuals with unique needs. Being flexible is practically a requirement for creating new businesses because every business must be designed to serve the needs of customers which rarely match the original plan. Harland Sanders did not originally intend building a chain of resturants he wanted a resturant to sell his recipies for fried chicken. He had to be flexible with his plan and was forced to change them when the environment caused his business problems. Ventures are best implemented by open-minded people who are ready to make changes. When potential customers are found with needs which do not exactly match the original idea, the new company may fill those needs if they are willing to be flexible. Ultimately, the new venture is developed to serve customers. It helps if the people managing companies remember that they are in business for the customers.
The business development process
Business development is a process and not a one-time event. The world changes and companies must adjust to survive. The managers of some companies may not be capable of producing enough ideas for the company, and can adjust by hiring employees to specifically analyse the business environment and use this information for improving and growing the business. Other companies have more ideas than they are capable of implementing, and keep lists of all ideas for future implementation. From that list, management can select ideas which are likely to create the most benefit for the business.
Business development can be broken down into key parts. First is the introduction of new ideas or opportunities. Once a new opportunity is accepted, the next step is planning. Without a plan to establish the idea within the business, it is likely the idea or its benefits to the company will be lost. Once the plan is established, the next step is testing the plan. After the testing phase is complete, the next step is deciding if the new idea is beneficial or detrimental to the business. If the new idea is benefiting the company, then the completing step is the full implementaiton of the plan into the business. This is not the end of the process but instead, the point at which the idea is cycled indefinately through the business development process. The idea may outlive its usefullness, and the same process is used to remove the use of the idea from the business or new ideas may be born as a result of these new ideas which require the process to be repeated. The business development process will be used for the lifetime of the company and over time the development process which is used by the business will also be improved in an effort to keep the business alive in its changing environment.
Partnerships and business agreements
There is a saying that no man is an island (John Donne, as cited in The Phrase Finder c. 2008). How this applies to a small business is that the business is not alone in the market. Partnerships and agreements are an important part of any business. Seeking out partnerships with success-minded people and businesses can greatly increase the success of any company. In the computer programming of artificial intelligence, there is a method of creating systems which is referred to as hive intelligence (Team 006 from Albq. Academy 1998) Hive intelligence is a system-based on the individual parts of a system understanding how to perform their specific tasks even though they do not have full access to the entire system they are working in. Adding partnerships and agreements with other companies can increase the capabilities and success of a business the same way since the company will be able to share in the success of a larger part of the market.
The market has existed for a long time and any business wishing to enter the market will need to form partnerships and agreements with companies which are already part of that market. These connections with other businesses will strengthen the business which is being created. Having more connections is preferable since businesses close and new businesses are opening all of the time. A business relying solely on a parent company is likely to collapse completely if the parent company fails. When creating a company, it is often preferable to plan for multiple partnerships, plan for the creation of new partnerships, and even plan for the dissolving of partnerships.
Management concerns for a new venture
A new business venture often creates a small business where there is little or no separation between the owners and management (Beaver Jennings 2005). What is seen is that, as a business grows, the business will reach a point where the owners are no longer able to manage the company without the assistance of a dedicated management staff. A new venture should include plans for the current and future management of the business so that when the time comes for dedicated management, then there are established policies and procedures for the new managers to utilize to take over management of various operations within the company. These policies and procedures should be written out clearly and maintained as the policies and procedures change. Having these procedures in writing helps as a reference when customer issues arise. Many customers will appreciate having policies quoted to them as that establishes to them that the company is treating them as fairly as possible. Making policies and procedures public which directly affect customers and do not reveal any trade secrets is one way a new venture can begin building trust with their customers. This can also help reduce customer complaints. The customers can easily review the policies which are establishing their relationship with the new business venture before a complaint is filed or after the complaint is filed to quickly resolve the issue.
Management of the new ventures relationship with its vendors is also very important for many businesses. Keeping consistent open communication with vendors is part of this and is a good way to maintain a view of the current business envoronment. Many vendors provide newsletters which they utilize to release important news about changes in their services and pricing. Newsletters are only a one-way communication so when possible, it is good for a company to regularly communicate news about the business with the vendors. A vendor of one service can often become a customer of another service which creates the possibility for a barter agreement which in some cases are tax-free.
As you can see there is a wide range of opportunities available for starting and growing a business. The creation of ideas and turning them into opportunities is one method of starting and developing a business. There are also many other ideas available which have already been developed into opportunities by other companies and it is possible to maintain a business using these opportunites. Small start-up businesses are creating many jobs and therefore, have a significant impact on the economy. Ultimately, these jobs are providing money to consumers which further helps drive the entire economy. Some of these small businesses also develop into large international companies which create significant impacts on both local and global economies. As long as a business is developed to be flexible enough to respond to changes and challenges in the business envoronment, it is likely that there will always be opportunities available for an entrepreneur to utilize to maintain the success of the business even if they are not utilizing their own ideas which need to be turned into opportunities
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