Page 3: Challenges of a small business
Small businesses do have some disadvantages. Running an enterprise on your own involves hard work and making most decisions on your own. Initially there is little time for holidays and considerable risks involved. Also, as the business is small, it is harder to find the economies of scale from which big firms are able to benefit. For example, because small businesses tend to buy relatively small quantities of raw materials and other supplies, they receive lower discounts than larger firms. The small firm cannot afford to employ a range of specialists and also find it more costly to raise finance.
Setting up and running a business is something to be tackled by people who are energetic and enthusiastic. These people like hard work, enjoy challenges, are adaptable and are not put off by failure. Perhaps you are like that! Starting up on your own is a big step. It is vital to carry out careful research and think things through thoroughly, rather than rushing into it.
Planning is one of the most important steps at the start. Not only is the plan useful to the person setting up the business; it is also very important to anyone wanting to invest in it, or lend the business money. It needs to be based on detailed research e.g. market research. Market research is the process of systematically gathering and recording information about the market for a product or service. This can be carried out by using questionnaires, or bringing together people in small groups to discuss their views on the goods or services being offered. Alternatively, market research can draw on information already published e.g. surveys. One purpose of market research is to identify and provide evidence of market opportunities and challenges. It helps someone starting a new business to get to know the environment they will be trading and competing in.
Other key ingredients of the business plan include:
- details of the business idea
- where the business will be run from the expected sales
- costs of running the business.