How to Manage a Business Effectively (7 Key Elements)
Business in a lay man’s language is “an exchange of goods and services for money with the main aim to earn profits, which involves risk and investment of time, ideas and finances”.
“If you can run one business well, you can run any business well.”
– Richard Branson
Any business, be it small-scale, micro business, large-scale or an online business cannot be run without proper management of time, human resources, finance /money, updated technology, new and creative ideas, and co-operation among everything mentioned. Remember, “Customer is the King” for any business. An efficient businessman does not only lure new customers, but also maintains his/her old customers, so that he is able to make maximum profits, by providing the best of goods and services according to the current demands and needs of his customers. Losing a customer can be a setback, because one unhappy customer can turn down a lot more customers.
Thus, with this comes the risk of losing loyal customers, which leads to fewer profits, and ultimately lowering the market share and value. This does not stop here, especially if it’s unforeseen, because if the planning goes wrong it consequently leads to a greater loss than expected. This was the case of small/micro business until they come up with some great ideas to get back their customers and retain the market position. The large scale businesses have a lot many other things to take care of as well. With the ones discussed above, they need to take care about the human resources in their business, i.e., the people working inside the organisation. It’s not the people outside (customers), but also the ones inside (employees) that the business needs to keep happy, as they are the ones who can either prove to be an asset or a liability for the business.
The ideas, planning, directing, controlling, etc. might be perfect and give you a picture of achieving great results by optimum utilisation of resources involved, however, if the employees are unhappy and not satisfied inside the organisation, the implementation of those planned ideas can go in the opposite direction as well.
Therefore, business does not imply with producing goods and services, exchanging them for money and earning profits. It involves a great risk and a businessman needs to be dynamic and flexible to accept the changing needs and demand patterns according to the diversification experienced with each new day keeping in mind the most important fact which is “providing the customer with the best product or service and after-service at an economical cost which retains the customers as well as makes good profits, making it a win-win situation for the business”.
Griffin and Ebert (1996) says “Business is an organization that provides goods or services in order to earn profit”.
The business can be run effectively by proper planning and strategy, healthy relationship with the resources or the 4 Ms, viz., Men, Money, Materials and Machinery, and pre-defined short and long term objectives with a futuristic approach aimed towards the common goal of earning profits and retaining and making more customers, which further leads to increased market share and development of the economy.
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How to manage a business effectively?
Communication is the key to any business. Proper communication is necessary in order to deliver the best results, therefore, it should be made sure that the message conveyed to the last person is exactly the same as it was sent by the sender and has not been tampered. Direct communication is the most effective way, which does not only makes the message clear but also creates a sense of trust, responsibility and belonging in the employee, thus making him deliver better results.
Communication is a two way process. It’s important while discussion of the plan and delegating responsibilities that everybody is on the same page, which means everyone should have the exact same perception about the plan and its implementation and nothing is tampered with.
Brainstorming is an activity which involves getting ideas from all the employees in a business. In case of hierarchy, it’s done at different levels in form of mini teams and finally ideas are discussed with the top management. And in small businesses, the businessman can organise a meeting with all its employees and get ideas about a specific situation.
The best part about Brainstorming is that you have the freedom to speak out your mind without being judged or questioned, given that you have logic behind your idea of course. This leads to getting new innovative ideas by all the employees be it experienced employees or the fresh new talent, giving each of them a sense of confidence and belongingness, further doing their efforts towards the best of the company.
Any business that is static or closed to the changing environment of the world cannot expect to develop itself or retain the same market position as it had when it began, because adapting the latest trends keeps you going as you are able to cope up with the demands of your customers or the end-consumers.
“Change is the only Permanent Thing.”
Therefore, it is necessary for the business to adapt change be it in technology, product line, and demand patterns of the customers, or anything that might affect your business. Any business, large or small, should be flexible and dynamic, in order to be manage a business effectively. The human resources should be trained from time to time with the upcoming new trends or updated technology.
It’s not only with the demands or needs of the end-consumers but also the updated technology, a business needs to cope up with. We live in a tech-savvy world; therefore, keeping yourself updated and with the world is always the best way out.
Authority and Responsibility
Business can prove fruitful only when there is an appropriate delegation of authority and responsibility. There has to be an equilibrium or balance between “Authority” and “Responsibility” as they go hand in hand. In case the authorised person does not delegate the responsibilities constructively, it can create a loophole in the entire working system, because with authority comes great responsibility. The authorised person is also accountable and answerable for any obligation, trust, debt, or any kind of bridge gap between expected and delivered.
It’s very important to delegate some authority to the person you are delegating responsibility to, as it gives them the power to make necessary decisions rather than running here and there to take permission from the seniors. At the same time it also gives them the liberty and confidence to make decisions, hence developing them as better employees.
Planning is an art which is futuristic and goal oriented. It becomes very important for a businessman to have at least two to three best plans (Plan A/B/C), so that any plan proves to be incapable or a business man needs to change a course of action in between he has an alternative plan ready, producing optimum maximum results.
The best way to manage a business effectively is through an effective planning. You can easily do this by planning a defined strategy for business. You first need to etch out a great strategy that should focus on both the positive and negative outcomes of a potential business plan. The best way is to prepare for failure rather than success as most first ventures have limited chances of success.
Planning processes can lead to better productivity, higher accuracy, and faster turnaround for essential business tasks. The goal of planning as a process is to improve and streamline the business methods of a company. This would have results like:
- Lower costs, due to fewer staff needed to complete the same process.
- Increased efficiency, by eliminating problematic process steps like loops and bottlenecks.
- Higher accuracy, by including checkpoints and success measures to make sure process steps are completed accurately.
- Greater understanding by all staff of what they need to do to meet their department objectives.
Team is a group of people with different backgrounds, experience levels, knowledge status and thought-process. One and one is eleven, therefore, an efficient team can prove to be really fruitful and constructive. Effectiveness of a business is determined by the outcome from the action of employees and managers. If they demonstrate effectiveness in their workplace, it will definitely help in producing high quality outcomes. Customer Satisfaction and a company’s reputation are often dictated by the effectiveness of a team which include the way they put forward the company’s service or product.
It’s very likely that the team members work together towards the same goal and put forward their best foot. This can only be possible if there is co-operation, absolute understanding, thorough flow of communication and positive atmosphere among the team members. There might be a possibility that different ideas might create conflicts in a team, but a trait of strong and productive team is to develop coherence and come out as plausible and advantageous.
4 M’s of Business
The four M’s of business are: Men, Materials, Money and Machinery. These are the most important resources any organisation must not only possess, but also utilise in an optimum way. Men contribute the human resources both inside and outside the business which include employees-labourers, stakeholders, retailers-wholesalers, CUSTOMERS, and everyone involved directly or indirectly. It’s very essential to retain and take care of the needs and demands of each and every human resource that is a part of the business.
The next M is Materials. This includes raw materials, work-in-progress, finished products and services. Timely management of materials is pivotal as they are the initial products that will further decide on how the final products will be that need to delivered to our end-consumers.
The next and very crucial M is Money or the funds. A business starts with a correct usage and allocation of finances and cost management. Therefore, it is the most significant resource to run or upgrade any business. Hence, a business should have a trustworthy source of finance and should maintain healthy relations with all the financial sources like Banks, Financial Institutions, Stakeholders, etc.
In this concept, money does not only stand for the funds available but also the costs involved. Thus, wider concept of managing finances, it’s also important for a business to cut costs without compromising on the quality of product or service demanded by the customer.
The last M is the Machinery or the technology. For any business to survive in a long run, the essential factor is to be updated with the newest technology by training the employees and also being aware of the changing trends in the market. Thus, running ahead of time is of utmost importance, as it will help the business to be on the top of the market and create a benchmark for other organisations in the industry.
Learning to effectively manage a business is generally not a skill that happens overnight. Managing a business is a task that requires a person to not only have a great deal of knowledge about their specific industry but knowledge of general business practices and people skills as well. It is a learning process where the practices and approaches can change many times over the span of a career. The basic principles of business management that always remain the same, however, include the abilities to successfully motivate and lead employees, increase business growth, smoothly operate the business, and follow business laws.
“Time is the essence of Life”, rightly said. Time management is of key importance in running a business effectively as it plays a vital role in every business activity from planning to proper implementation of these plans, thus further producing effective results:
- Preparing the best plan which produces optimum results with minimum utilisation of resources.
- Arrangement of funds not only for the execution of the plan and day-to-day functioning of the business but any unforeseen and uncertain activity.
- Effective marketing strategy, involving market research, advertising, promotion, sales and after-sales service.
- Allocation of proper resources to various activities involved.
- Changing market scenarios and upgrading technologies
- Venturing into new business lines or investing into new strategies.
All these activities mentioned above require efficient time management, or else it might make your business a Dog rather than a Star as per the BCG Business Matrix.
“Entrepreneurs never have enough hours in the day, so it’s important to optimize your time to the fullest”. Thus, time management and the above mentioned points help a businessman manage their business in an excellently effective and efficient manner, thereby producing extraordinary results by making higher profits and customer base.
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