SimVenture's Survival in the Market - Essay Example

SimVenture Introduction Many business ventures fail to catch up and grow majorly because of internal problems that call for restructuring and reengineering. Survival in the market is a challenging task that calls for careful analysis and cautious decision making procedures. For the business entity to be sustained and efficiently run, the proprietor ought to be up to date with best ideas and information before the competitors can and also incorporates forming loyal relationships with various stakeholders (Abbott, ix) Business growth By the period of 8 months, the business has stabilized and established a considerable amount of loyal customers. The challenge lies in maintaining the customer base before the competitors get away with them. They are good opportunities to entrepreneurial excellence as well as a share of challenging moments. These moments call for prudent decisions to be chosen or there lies the risk of business in operation. (Little, 2) notes that in the US, out of 22 million small businesses in operation, 17 percent do not have employees. They have an auditor or accountant for reasons of taxation. This means for the growth of a business, it is not entirely on the employee number. Various mechanisms can be put into practice so as to reduce costs and heighten the productivity. Business ventures have wasteful areas that do not aim at conservation of cash within the business enterprise. One such way is through the unnecessary advertisements. I will redefine my advertisement strategy and omit unnecessary methods of advertisement so as to conserve cash for working capital. I will ensure the methods of advertisement meet the relevant potential customers at the lowest cost possible. I will embrace the most cost-effective advertisement such as use of the World Wide Web. The advertisements I will engage in should reflect the quality of goods and services I offer. They ought to be ethical and conform to the moral standards (Trehan and Trehan, 44) I will also cater for unproductive business operations. The redundant costly operations are wasteful in terms of money, time, operating manpower required. Such unproductive activities include, delays in handling of materials, using obsolete technology, such as use of typewriters, inefficient service delivery and redundant tasks that lead to loss of business’ valuable time (Parnaby et al, 2003) The actual operations of a business could be costly. The processing could involves, a large pool of resources, lines in business that are not beneficial, too many processing steps which are rigid. This eats into the profitability targets. With efficient cost cutting programs the set annual profit targets of $1000 are attainable (Hiam, 240) The business could also be wasting money inform of ineffective choice of debtors and the credit policy. Much cash is tied up in debtors, of which is needed to run the day to day operations of the business. As (Dunn, 163) illustrates that it important that each and every business should know its customers. Knowledge of the type of customers will help me formulate a sound credit policy. This will be beneficial to the business as well as protecting the existing and potential customers. Improper management of debtors will result in higher values of bad debts and will consequently affect the profitability of the business entity. Administration of credit sales will be cautious and only credit worthy customers will be advanced with credit sales. Interactive feedback from customers and a suitable debt collection policy that incorporates reminder of debtors when their payment time is due, will be applied. Less costly, debt collection approaches will result in saving of cash for other needs of working capital. Dunn, 277 illustrates different factors that determine the credit score as shown below; Retrieved from: Dunn, Michelle. Ultimate Credit and Collection Handbook. Irvine: Entrepreneur Press, 2006. Reduction of operating cost is essential to the success of any business venture. (Bragg, 1) argues that when the business reduces its operating costs, there is a positive impact on the profitability. This should be however, go hand in hand with the customer loyalty. The underlying objective is to do away with the unnecessary costs but maintain a vigorously performing business entity. To enable this there need to be a Cost Reduction Analysis. This seeks to evaluate parts of the business entity that are regarded as wasteful and make recommendations to efficiently run these sections effectively. To enable success in this business, I will engage my focus on different areas in my business. One way to reduce costs is through lease contracts. These are contracts that will allow to my business to acquire assets on a lease basis from the lessor who get rental income. My business will be required to pay the principal amount and interest payments within the lease period. This is a strategy to save more cash to indulge it for other working capital requirements. This, according to, (Hogan and Hogan Jnr, 176), is one of the swiftest growing methods adopted by businesses to raise capital equipment. This is a suitable method for acquiring the assets without making their full payment. The lease agreement could also make a provision to purchase the asset at the end of the lease period. Another strategy that will be used to conserve cash will be a delay to pay creditors. This will be in the reasonable time possible which would not compromise the relationship with them. It is noted that creditors are delayed they institute a legal action to have their payments made. It is therefore very prudent to exercise caution so as to avoid a strain on the creditor relationships that are key to the existence of the business. Extending the period of payment to creditors will temporarily avail cash to be mobilized in different needs and it considered an appropriate method of increasing working capital base (Patel and Tarquin, 92). My business will also aim to reduce the period by which accounts receivables are realized. Under this method, the debtors’ collection period will be shrunk and debtors will be expected to make their payments earlier than they usually do. For instance, I will reduce the debtors’ collection period from 60 days to 45 days. Customers will also be offered with incentive programs for instance use of discounts such as a 2% discount for payments made within 10 days. This will go a long way in helping to ease the liquidity squeeze. This type of decisions have would setbacks but it ideal to provide capital to running of the business. This payment acceleration scheme ought not to be overburdening. A strain on customers makes them nervous if these terms are so stringent to their disadvantage. The method seeks to avail cash that is tied up among debtors so that it can be utilized for instance in production (Tracy and Tracy,25) (Hiam, 240) outlines variety of ways to change the process so as to increase profitability. I will ensure I adopt less expensive processing alternatives such as more use of computers to enhance efficiency and reduction in the paperwork. The processes will be restricted to be flexible to changes in the environment so as avoid rigidity. Resources that I do not use frequently will be done away with. All this processes need adequate planning so as to achieve a cost effective strategy. (Kaarboe et al, 156) argues that an effective planner should fully understand the competitive dynamics of the environment in which the business entity operates. One of the major setbacks that result in declining profits is the loss of focus on sales targets. The business aim should be to set sales targets and find means towards their achievements. These scoreboards are vital tools in realizing of the goals of my business venture. Loss of focus on sales targets represents laxity to the business goals. Focusing on sales targets will ensure customers orders are processed quickly, their grievances addressed, supplier needs fulfilled, debtors followed up and any deliveries made on time. With the $8500 as the bank balance I will opt to purchase sales forecasting software. This will ensure increase in sales revenue (Wallace and Stahl, 1) Cash management systems may be the reason for retardation in profitability. Cash maintains a constant value and can be converted into other assets. Its therefore be prudent to manage cash effectively since it is very key resource within the organization. Transactions that involve cash will be noted with caution and bank transactions recorded precisely. Cheques to be presented should be done so. Proper financial books should be maintained and any cash inflow and outflow passed in relevant journals. A sound cash management system will ensure that all transactions are noted and disparities can be discovered and investigated (Tennent, 1) Conclusion To ensure the survival of a business entity, there is need for effective decision making. These decisions have implications on the survival of the business. The bold steps need to install positive changes in manpower, management of finance and reduction of costs. Agility and flexibility, information availability and new opportunities call for reexamination of organizational operating system. This collective effort by the entrepreneurs is key in survival of any business venture. These decisions to continually put the business venture ahead of its competitors are the needed guidelines that support the existence and growth of the business in the ever changing business society (Rud, xvii) References Abbott, Tom. The SOHO Solution: 21 Selling Strategies For Growing Your Small Business. Singapore: Soho Sales Coaching, 2011. Bragg, Steven M. Cost Reduction Analysis: Tools and Strategies. Hoboken: John Wiley & Sons, 2010. Daniel R. Hogan, Ph D Daniel R Hogan Jr. The Entrepreneurs Guide to Start, Grow, and Manage a Profitable Business. Bloomington: Author House, 2011. Dunn, Michelle. Ultimate Credit and Collection Handbook. Irvine: Entrepreneur Press, 2006. Hiam, Alexander. Business Innovation For Dummies. Hobokens: John Wiley & Sons, 2010. John A. Tracy, Tage Tracy. Cash Flow For Dummies. Hoboken: John Wiley & Sons, 2011. John Parnaby, Stephen Wearne, Ashok K. Kochhar. Managing by Projects for Business Success. Hoboken: John Wiley & Sons, 2003. Katarina Kaarbøe, Paul N. Gooderham, Hanne Nørreklit. Managing in Dynamic Business Environments: Between Control and Autonomy. Cheltenham: Edward Elgar Publishing, 2013. Little, Steven S. The 7 Irrefutable Rules of Small Business Growth. Hoboken: John Wiley & Sons, 2005. Mukesh Trehan, Ranju Trehan. Advertising and Sales Management (for BBA - 1). New Delhi: FK Publications, 2011. Rud, Olivia Parr. Business Intelligence Success Factors: Tools for Aligning Your Business in the Global Economy. Hoboken: John Wiley & Sons, 2009. Tennent, John. Guide to Cash Management: How to Avoid a Business Credit Crunch. Hoboken: John Wiley & Sons, 2012. Thomas F. Wallace, Robert A. Stahl. Sales Forecasting: A New Approach : why and how to Emphasize Teamwork, Not Formulas, Forecast Less, Not More, Focus on Process Improvement, Not Forecast Accuracy. Windridge: T. F. Wallace & CO, 2002. V. G. Patel, Anthony J. Tarquin. When The Going Gets Tough: Strategic Response To Business Crises. Gautam Budh Nagar Noida: Tata McGraw-Hill Education, 2007. Read More