Introduction
Starting a small business is a challenging endeavor, requiring preparation and planning. Most commonly, successful businesses have a business plan in place to help entrepreneurs be ready for the future, have a path for development, and estimating costs. This paper will examine the various key components to a business plan and small business sustainability.
Forecasting
Both short- and long-term forecasting have key roles in the development of business plans. Short-term forecasting is important in annual budget planning to ensure business daily operations function smoothly and there are appropriate supplies. In turn, these daily operations allow for the business to potentially achieve some of the long-term goals. Long-term forecasts aim for projects in the next three-to-five years and seek to ensure that the business goals match its vision and mission, outlining the general direction the business is headed. While long-term forecasting is not as crucial as the short-term, it does contribute to keeping the business grounded and guiding potential strategic decision-making as the entrepreneurs encounters either opportunities or challenges. Long-term forecasting can also be used in testing out various scenarios to determine the optimal one in terms of staffing, marking, pricing, and other components of operations (Lohrey, 1). The short-term forecast stems from the long-term projections, and using a combination of these, the business can effectively manage its budgeting activities.
Networks
Networking has many potential benefits for an entrepreneur and their business, particularly as a small business where any opportunities can significantly impact expansion or profitability. Small business owners can use networking to form relationships in similar or associated industries to find either new partners, new customers, or seek out opportunities for growth. Networking can help find business leads, this may range from more efficient supply chains and logistics to marketing to partnerships that direct consumers to each other’s businesses. The leads can be numerous, but even a few can open doors for changes. Networking can help to learn from others and sharing of information to identify best practices and latest business trends in the specific area or industry (Anwar, 2). Business and commercialization are always evolving, so finding out the latest best practices through networking is critical, either informal as business owners chatting with each other or formal such as various business associations.
Finally, networking brings the possibility of connections and increasing one’s business profile in the industry or community. It can offer a lot of benefits, for example, a restaurant is remodeling its kitchen, a business connection with an interior design agency can be beneficial, reducing some costs. In turn, if that agency decides to host a Christmas party, they can place a catering order from the restaurant. While mostly informal, good relationships between businesses in a community can benefit everyone on a tit-for-tat basis due to cooperation.
Knowledge Management
In the digital age and rise of Internet of Things, businesses utilize a range of devices and technological solutions to run an effective and sustainable business at a relatively low cost. In the digital age, knowledge management is vital as big data systems can drive new business opportunities, costs savings, and strategy. All data is now quickly analyzed and stored on cloud services, being available to the owner of the business at any time, including from mobile devices. This allows the business to quickly adapt, make necessary changes in its practices or models, and capitalize on key performance indicators (Stevens-Hall, 3).
One competitive pressure for a small business is the potential for small entrants. That is common, as small businesses rarely have enough financial power or social influence to drive out competitors completely. However, that can be mitigated by building and well-recognized brand in the community which exceeds expectations of consumers and maintains a positive reputation. The business can invest further into expansion of either locations or available offerings, making the consumer experience more pleasurable through various means (dependent on the industry). Another competitive pressure are supplier pressures, as costs, consistency, quality are all factors that impact the supplier, with many having significant bargaining power over small businesses. This risk can be mitigated by building close relationships with suppliers, developing long-term business partnerships, and selecting a supplier that is the best fit for one’s business in the long-term rather than necessarily pursuing the best financial alternative.
Challenging Components and Technology
The first component of the business plan I may struggle with is market analysis. It is complex and requires a deep understanding of the industry and specific market where the business plans to function. Technology can aid in this process by collecting data and breaking down industry trends and organizing this by themes in a presentable manner. It can also study and analyze data on local populations and businesses to identify particular preferences, frequencies, and general impacts.
The second component that I would undoubtedly struggle with are financial projections. Financial goals, expectations and budgeting must be determined with near perfect precision. Without proper financing, most small businesses close shortly after opening. It requires a careful understanding of costs, the industry as described above, and competent risk analysis. Technology can be helpful as finances have been strongly integrated into it. There are whole programs aimed at helping to calculate and program financial projections based on available data, type of business, and estimated costs of operations based on previous collected data from thousands of SMEs.
Sources
Jackie Lohrey. N.d. How to Do a Business Forecast. Web.
Muhammad Anwar. 2018. Networking and New Venture’s Performance: Mediating Role of Competitive Advantage. Web.
Jon Stevens-Hall. 2016. The Importance of Knowledge Management in the Digital Enterprise. Web.