How to Manage a Business: A Helpful Guide
Running a successful business is the goal of all entrepreneurs. For this you need to have a grasp of the key elements of business management, including employing staff, attracting customers, planning marketing strategies, making a profit, and every other element an entrepreneur must tackle for business success.
When you are running your own business you have to be prepared for a challenge, but having the determination to overcome the odds will prove to be the difference between business survival and failure in the long run. We prepared a helpful guide to run you through the key elements you need to focus on in order to be able to manage a successful business.
The 4 M’s of business management
The 4 M’s represent the most important resources in any business, which should be not only present but also managed in an optimum way to guarantee the business runs smoothly.
Manpower. The human resources both inside and outside the business, which include employees, partners, retailers, wholesalers, and customers. Within reason, it is fundamental to manage and take care of the needs and demands of every single human resource that is a part of the business.
Materials. This comprises raw materials, work-in-progress, finished products and services. Managing materials successfully is essential as they are the basis of all final products that are going to be delivered to the end-consumers.
Money. A business begins with the right usage and allocation of funds and cost management. Consequently, money is the most critical element to manage in any business. A business should have a secure source of finance and keep healthy relations with all financial sources, including banks and stakeholders.
Machinery. For any business to succeed in the long run, a fundamental factor is to have its machinery regularly updated, or rather keep on top of the latest technology. It is essential to be constantly ahead of the innovation curve when compared to the competition. In order to do that, you should keep optimizing work methods and processes, while training and developing your employees accordingly.
The fundamentals of business management
According to the Indiana Small Business Development Center, 46% of businesses fail due to incompetence, 30% due to lack of management experience, and 11% due to lack of experience in the market.
You can’t run a business effectively if you haven’t established short-, medium- or long-term goals. You have to have a vision and mission for your business so you can keep track of its progress – besides having a daily reminder of why you decided to start your own business in the first place. It is essential to establish goals, not only in terms of profit or sales, but also in terms of growth, product or service development, innovation, expansion etc.
Short-term milestones. Ideally you will have established a few milestones (skills, experiences, accomplishments) to aim for in the first 2 years after setting up your business. Accomplishing these should lead you successfully to your objectives.
Medium-term objectives. These objectives should spread throughout 3-5 years and work as goals to support the ultimate vision you have for your business.
Long-term vision. This is the exact state you want your business to be in in the future, and you will know you can take your business there by successfully overcoming all the goals you established since its setup.
Business planning plays a big role in sustaining a business. Once you have found the mission of your business and established all the goals you will have to achieve in order to succeed in that mission, the planning begins. Your original plan and strategies will most certainly change throughout the years, as challenges come up, priorities arise and unpredicted changes occur. But, even so, it is essential to start off on the right foot with a detail strategic plan, so you not only know where you want your business to go, but also how to get it to that destination.
Making a profit
Often entrepreneurs start their business ventures and forget how to make a profit, even though one of the keys for a successful business is profit. Therefore, to run a business it is essential that you understand money, sales, cash flow and, ultimately, how to make your business profitable in order to sustain it. The golden rule is simple: more money should come in than the money that goes out.
Profit is essential to keep your business up and running, as you need to have enough money to keep reinvesting in the business growth and development. You need to be able to manage costs effectively in order to minimize waste, while maximizing productivity and profitability. It is also important to have your business accounting books in order and keep on top of financial reports – especially if your business funding comes from investors who will be expecting a gradual growth in profits, year after year.
Keeping customers happy
It is fundamental to focus on your customer base as one of the core pillars of any successful business. Keeping your customers happy can sound like a hard task, but if you understand your customers, keep improving their experience with your business, and developing the products or services you offer in order to meet their needs, you will surely be able to maintain a loyal customer base, plus attract new customers.
Customer service. Keep on top of your customer service system in order to guarantee it consistently provides valuable help to all customers in a timely manner.
Feedback. Consider customer suggestions and reviews of your products or services in order to take action and keep improving their quality.
Shopping experience. Develop a satisfying shopping journey for your customers, that is easy and quick to navigate through, and offers valuable features such as different payment options and payment security.
Communication. Make your business approachable and, ultimately, accessible to customers. Keep communication going via email, telephone, webchat, and social media platforms.
Rewards. If you aim for a high customer retention rate and expect a strong and loyal customer base to support your business, remember you need to incentivize customers to return and develop a relationship with your business. To do so, use rewards such as exclusive access to sales or new products or services, plus discount codes.
Don’t let a few years of stable performance drag your business to the comfort zone. Everyday should be an opportunity for the innovation, improvement and development of your business – so it can constantly perform better than it performed the day before. One of the crucial rules to successfully manage a business is to never let it stagnate or become redundant. Make creativity an obligatory skill within your business and promote the free flow of ideas and brainstorming.
Strive to greatness by constantly reviewing your business performance, productivity, processes, and systems in order to always be on top of opportunities for development, innovation and overall growth. Encourage your staff to give feedback on internal processes and to suggest different approaches that might improve quality, reduce costs and be more time-efficient. And encourage your customers to review your products or services, so you can keep innovating what you offer. Remember to also keep on top of the latest technology relevant to your business type, so you can keep your business modern and competitive.
Quality control is an important part of business management, throughout the whole lifetime of any business. Especially in the first years after setting up, it might be easy to take the focus away from the original quality standards from when you first introduced your products or services to the market.
But, remember that it was not only how you presented yourself to your customers, but mainly what you offered that led your business to where it is now, so it is crucial to manage quality to high standards and keep on top of internal systems, product or service development, and manufacturing to ensure what you offer is not only good, but consistent.
Communication is the key to any business. Proper communication is necessary in order to deliver the best results. Direct communication is the most effective way, which does not only make the message clear but also creates a sense of trust, responsibility and belonging. Remember communication is a two way process. It is important that while discussing a plan and delegating responsibilities, your employees understand the process and purpose of their task, which means they should all have the same perception of the plan and its implementation.
But, it is also important that your customers understand what you are offering and why they should buy it, so communicating with them in a clear manner will not only increase engagement, but also help build a relationship between you and your audience.
Managing risk is essential to a business’s success. Since not even the largest businesses can control the economic and competitive environment around them, you need to be prepared to manage unforeseen changes, events and situations – sometimes within, other times out of your control. Planning the management of possible risks encourages the development of “what-if” scenarios, where you can attempt to envision possible risk factors and develop contingency plans to deal with them. Markets change constantly, and businesses need to be able to quickly adjust their strategies to these changes.
According to a study conducted by the Stanford University, “feeling like you’re part of a team of people working on a task makes people more motivated as they take on challenges”.
Think about your staff as the core of your business – they handle the products or services you offer from start to finish, so the production quality and quantity depends solely on their performance. That is why it is important to promote team building and a spirit of cooperation within the business. If your employees can see how their work contributes to the success of the business as a whole, they can take pride in their contributions and feel as part of a community where everyone is working towards the same goal. Plus, encouraging teamwork amongst all employees, from different departments and experience levels, can reduce potential internal conflict.
If you are looking to attract new customers and, possibly, penetrate new markets, networking is an essential part of business management. It is important to build an approachable business identity while connecting with other business owners and attending local business events, in order to share valuable strategies and experiences, and find potential opportunities for growth or even partnerships. By participating in different local events in your city and state, you will also be raising business awareness, connecting with potential investors, and promoting the products or services you offer.
According to the Pew Research Center, 68% of adults use Facebook in the U.S. and social selling expert Dan Swift says “social media is more effective than email and cold calling as a means to nurture potential buyers”.
Your product or service can be the best in the market, but if you don’t promote it, you won’t sell it. First, you need to understand your target audience and market in order to create a successful advertising plan that engages customers, builds brand awareness, and ultimately converts into sales. Although physical advertising such as billboards and fliers is still used for promotion, digital advertising is the modern route to successfully engage potential customers and generate a profit. Email, content and video marketing are strategies you can invest in, but the ultimate advertising strategy is definitely social media. It has consistently proven to be the fastest and cheapest way to promote products and services, and to efficiently connect with a target audience.
Learning how to effectively manage a business is not something that happens overnight. Running your own business is a task that requires knowledge, confidence and determination, but it is also a learning process where methods and approaches can often change.
By understanding the key elements of business management you are already on the right track to run a successful business, all the way to achieving the long-term vision you have for it.