6.1 Bootstrapping it
Many small businesses start small, with no external help or funding. They do not usually start by hiring people to run the business, but instead try to turn their hand to everything which can mean long hours, learning new skills and relying on a lot of advice – that’s bootstrapping it. Don’t panic!
One of the dilemmas small businesses face is when they need to hire their first employees. Being a good employer means taking responsibility on a number of fronts. You will return to these later in the course when you consider on a personal level the implications for you and them. One useful piece of advice about taking on employees is to consider a term from economics – the ‘opportunity cost’. At some point, you should consider whether it is cheaper or more efficient for someone else to carry out the functions of the business – either running it, getting it or delivering the business. If you can make more profit from turning out something to sell per hour, than you can doing your book-keeping, then it makes more sense, economically speaking, for you to hire someone to do the books. This ‘make or buy’ decision can be applied to each aspect of your business. At this point, you should reflect back on the points made by Jyoti Banerjee about growing your business in Section 3.
Activity 3 Core functions of a business
Under each of these headings, make a list of tasks and roles that you would need to consider when running your business.
Finance
Discussion
Here are some you might have thought of:
Book-keeping; banking cash and cheques; payroll; invoicing; chasing unpaid invoices; making VAT returns (if applicable); budgeting; forecasting cash flow; settling invoices.
Administration and governance
Discussion
Here are some you might have thought of:
Making statutory returns (if applicable); keeping customer records; managing supplier contracts; managing employee contracts; managing pensions; complying with data protection and security; managing leases and hire contracts; keeping insurances up to date (e.g. property, life insurance, public liability); share agreements; partnership agreements; managing stock and supplies; securing premises; establishing policies, for example – refunds, payment terms, customer loyalty, employment terms and conditions.
Sales, marketing and customer service
Discussion
Here are some you might have thought of:
getting and converting leads; answering enquiries; following up leads; closing deals; responding to tenders; drafting proposals; solving customer queries (complaints, payment errors etc.); replacing and managing faulty goods; building loyalty; getting referrals; networking and the more formal part of setting up contracts with customers, distributors and clients.