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Operating a small business.

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Introduction

Operating A Small Business: Executive Summary: Peter Torque, formerly employed by One. Tel as a sales person, has considered the possibility of entering the mobile phone business for himself. His friend, Simon, wishes to sell his mobile phone business, however, recently, it has been experiencing difficulties. Peter has also developed his own cash flow budget, in case he decides to start his own mobile phone business. The purpose of this report is to: *Analyse the difficulties faced by Simon's business with regard to its business life cycle, explaining the possible implications of these difficulties and providing strategies to rectify each situation. *Discuss the ways external advisors could aid Peter in managing Simon's business. *Identify and explain two other key considerations Peter would need to examine before purchasing Simon's business. *Evaluate the cash flow budget Peter prepared in case he decides to start his own mobile phone business. *Make recommendations as to the course of action most appropriate to Peter's situation. The Difficulties Faced by Simon's Business: Simon's business is currently in the decline stage of Post-Maturity. This is evidenced in the difficulties faced by the business: *Decline in sales- the most literal characteristic of a business in Post-Maturity and decline. This universal difficulty can be attributed to other difficulties faced by the business, including: *Outdated product line- a difficulty such as this often begins in the Maturity stage, with regard to the sense of complacency that often envelops organizations. In this instance, the management has become complacent in its research into the newest products and models available. This would have resulted in a levelling off, or plateauing, of sales. It is then the astuteness of the manager that determines what phase a business next enters. If business remains stagnant, then eventually sales will begin to decline noticeably, rather than simply plateau. This has occurred within Simon's business. He has become complacent in his research into the latest developments in the mobile phone industry and, as such, is faced with the difficulty of selling outdated stock. ...read more.

Middle

Utilizing an external, professional accountant would free time for Peter to apply himself to the areas he excels in. Equally, the strategies proposed and work completed by a professional accountant would create a more efficient and profitable business. An accountant can provide Peter with an understanding of his business' financial capacity, thus helping him create goals and objectives that most effectively balance challenge with realism. *Staffing advisors- many staff have left Simon's business, while the ones that are employed are likely to be new and inexperienced. As such, when Peter assumes managerial responsibility, he will be employing a workforce that may not be complete and one not working at its full capacity. Therefore, he will have to make some wise employment decisions. The use of an external staffing advisor can assist Peter in doing this. They specialise in locating the employee most suitable for a position. In locating quality employees, an external staffing advisor will also indirectly assist Peter in his endeavour to motivate the employees he begins with. The introduction of motivated, enthusiastic employees will positively affect others who may have developed poor work habits whilst Simon was managing. An external staffing advisor will also be of assistance to Peter once he has been managing for some time. One, at some stage, must always replace certain employees. External, professional advisors will be able to locate and present a pool of appropriate candidates, saving Peter much time. Other Key Considerations: Two other key considerations Peter needs to examine before purchasing Simon's business include: Supply and Distribution Networks- supply networks are more important to this business, as their distribution is very simple. It is done within the store, by handing product to customer. There are three major areas that Peter will need to examine with regard to supply networks: 1. Reliability- if a supplier is not reliable and punctual in their deliveries, a business wastes time and money. ...read more.

Conclusion

One might initially suggest that the large start up costs associated with establishing a new business would render purchasing Simon's more cost effective. Simon's business has also been established for ten years, which is an advantage. However, the cost to purchase another business is also high, and becomes greater still when one considers the difficulties currently faced by Simon's business. Peter and his partner would have to: *Invest in an extensive marketing campaign to promote a new, fresh image for the business. *Contend with low profits while customer resistance to this new image is still strong. *Possibly contend with staff still unenthusiastic after Simon's management, some of whom might have to be dismissed. To create an efficient workforce might take considerable time and finance. *Devise strategies to minimise the inevitable loss that will be made on Simon's outdated stock. *Purchase an entirely updated product range. *Contend with the normal difficulties suffered within the business environment and complete the routine activities of management. As such, the total cost of Simon's business would be not deviate immensely to the cost of establishing a business. Peter would have a far greater personal connection and motivational drive if he were to establish his own business. Additionally, it would be simpler to cope with difficulties as they arose, rather than starting with many problems. This is not to suggest that establishing a new business will be easy. Both Peter and his partner would have to work extremely hard. If however, they develop a comprehensive business plan, there is a high chance they will be able to cope with difficulties that arise. Therefore, the probability of Peter's success would be greater if he were to establish his own mobile phone business with a partner who has had managerial experience. Particularly, greater personal motivation is derived from establishing one's own business - providing the energy and enthusiasm essential to succeeding in the business environment. Equally significant is the fact that it is far easier and effective to plan for difficulties. If Peter purchased Simon's business, he and his partner would be burdened and overwhelmed by problems immediatedly. By Ben Cotton. ...read more.

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