Businesses are started with great enthusiasm, sometimes accompanied by great fanfare too. The business idea is the brainchild, and the baby of the entrepreneur, and therefore he will obviously be very attached and caring towards it. However, many a time, things do take place the way they were planned and the person gets into problems. This is especially true for the first generation entrepreneurs who have started their small businesses.
Keeping these first-time entrepreneurs in mind, are there any pointers or red flags they need to be aware of beforehand? Let us ponder over a few such concerns.
Small Business Concerns
Management Of Funds
- Has the financial planning been done properly? Has the entrepreneur put in funds and built up an adequate equity base?
- Was the business started as per the time schedule, or there were delays due to obtaining finance, or because of some other reasons?
- Is the costing of the product proper? Is the review done on a regular basis?
- Are the credit sales being realised (sales proceeds) as per the credit period been given to the customers?
- Is the money received out of sales proceeds recycled in the business?
- For scaling up, whether additional capacity was built by raising funds which are to be repaid immediately?
- In an emergency, are funds raised at very high/exorbitant rates of interest?
- Is the business paying all the taxes and creditors in time?
- Has the business started without getting the necessary infrastructure in place? If no, then is it due to non-availability of adequate funds?
- After starting the business does the entrepreneur still reconsider whether the business site is appropriate for the activity?
- Is the firm/business carrying obsolete stocks?
- Are there any slow moving goods?
- Are there sufficient orders to keep the machines/ equipment/ employees working?
- Is appropriate technology being used and the laid down process being followed properly?
- Is the business stuck up with “goods returned?’’
- Are there orders, which the business is not able to complete in time? Alternatively, is the delivery schedule adhered to?
- Has the business laid down quality control norms? Are these norms being strictly observed/followed?
- Is the business getting the right quality material easily?
- Are there bottlenecks in transport?
- Are the employees adequately trained? Is training for skill improvement wherever necessary arranged?
- Are the employees meeting with the productivity norms set by the business?
- Does the business face employee turnover problem? Is attrition a major problem?
- Are there problems related to the availability of skilled labour?
Marketing & Sales
- Are the marketing efforts adequate? Is the business getting feedback from the customers or people who have shown interest in the product/service?
- Has the business adopted appropriate marketing tools? (i.e. suitable for the target group?)
- Whether a cost-benefit study has been done ( i.e the cost incurred on marketing and the benefits derived thereof)
- What is the mechanism to receive and handle customer complaints? Is it working?
- Are new competitors emerging? Has any strategy been decided to face the competition?
- Are there any substitutes on the way which could pose serious problems?
- Is there overdependence on a single customer?
- Are the sales/ revenue targets being achieved timely?
- Is the selling price properly decided in order to take care of profit and competition?
- Are there changes in the Government rules, and policies which are likely to affect the business?
- Do the entrepreneurs feel overall recession in the economy?
- Are there natural calamities which are likely to affect the business?
- Is there any dispute between the partners/directors?
- Are the business books of accounts up-to-date?
- Have all legal compliances been done timely?
Mr. Arun Vartak
Mr. Vartak has 34 years of experience as a banker specialised in handling credit processing cells. He has served in many banks including State Bank Of India, Janata Sahakari , Saraswat Bank and various other management institutes.