Scribd Logo
Upload

Welcome to Scribd!

  • 42 views

    What Is A Small Business Enterprises?

    Uploaded by

    Rajasekaran Srinivasan
    This document discusses key aspects of small and medium enterprises (SMEs) including their financial management and strategies for success. It notes that SMEs are generally managed by a small team or owner and have greater variability in profits compared to large businesses. The document outlines three approaches an SME can take to increase profits, such as increasing sales or cutting costs. It emphasizes the importance of cost cutting and compound interest in business growth over time. Internal controls, risk management, and accessing public funding are also covered.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    What Is A Small Business Enterprises?

    Uploaded by

    Rajasekaran Srinivasan
    42 views5 pages
    This document discusses key aspects of small and medium enterprises (SMEs) including their financial management and strategies for success. It notes that SMEs are generally managed by a small team or owner and have greater variability in profits compared to large businesses. The document outlines three approaches an SME can take to increase profits, such as increasing sales or cutting costs. It emphasizes the importance of cost cutting and compound interest in business growth over time. Internal controls, risk management, and accessing public funding are also covered.

    Original Description:

    an article on sme

    Original Title

    Sme

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    This document discusses key aspects of small and medium enterprises (SMEs) including their financial management and strategies for success. It notes that SMEs are generally managed by a small team or owner and have greater variability in profits compared to large businesses. The document outlines three approaches an SME can take to increase profits, such as increasing sales or cutting costs. It emphasizes the importance of cost cutting and compound interest in business growth over time. Internal controls, risk management, and accessing public funding are also covered.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    42 views5 pages

    What Is A Small Business Enterprises?

    Uploaded by

    Rajasekaran Srinivasan
    This document discusses key aspects of small and medium enterprises (SMEs) including their financial management and strategies for success. It notes that SMEs are generally managed by a small team or owner and have greater variability in profits compared to large businesses. The document outlines three approaches an SME can take to increase profits, such as increasing sales or cutting costs. It emphasizes the importance of cost cutting and compound interest in business growth over time. Internal controls, risk management, and accessing public funding are also covered.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 5

    What is a small business enterprises?

    Many people think that it is a business which is not big but is not so. SME has got
    many individualities and qualities, in this one hour we shall discuss the conduct of
    SME with respect to financial angel. We are not going to discuss the ways and
    means to conduct the SME because it is an ocean and two full days of this seminar
    might not be enough to discuss it. Hence like a sculpture by removing the
    unwanted parts of the stone to produce a statue, we shall discuss the things of
    SME should avoid or should be careful, so that the other ways of functioning will
    be successful.

    What is an SME?
    Generally the business model is classified as under,
    Business with less than 20 employees is a small firm and from 20 to 199 is an
    medium firm and above 199 is an big firm.
    Generally the SMEs are managed by 1 person or a small team and it is closely
    controlled the final decision making rest with the owner or the managers.

    SME Vs Big business


    1. Variability in profitability is great for SME the inability to diversify across
    investment is also high for SME.
    2. SME has lower level of long term debt to total assets comparing to large
    business sources.
    3. Easy access to short term debt such as trade credit, Bank OD and bill
    trading is also high for SME.

    Cost cutting measures, for example if the sales of and SME is 1 lakh and the total
    expenditure is 80 thousand and the net profit is 20 thousand and the firm wants
    to increase the net profit by 10 thousand to make it as 30 thousand. There are
    three ways to do it.

    1. Increase the sale to 1.5 Lakh and the expenditure will be 1.2 lakhs and the
    net profit will be 30 thousand
    2. Because the increase of sales would be difficult the firm may choose to
    increase the sales to 1.20 lakhs and peg the expenses to 90 thousands and
    the net profit would be 30 thousand.
    3. Provide for higher expenditure like 2 lakhs, undertake regress brand
    building and increase the sales to 2.30 lakhs and achieve a net profit of 30
    thousands.

    Which of the above is good method, actually speaking all the 3 are correct
    methods, there is no good, bad or worst. There is no correct method, but you
    have to choose one method and make it correct.

    Wallmart Model
    This type is highly successful because of the following qualities
    1. Keep cost very low and discount the product price heavily.
    2. Ranked no.1 in the world in terms of expenses to sales ratio
    3. Share profit with your employees

    Adhering to the following operating principles


    A.
    B.
    C.
    D.
    E.
    F.

    Commit to your business


    Share profit to the associates
    Motivate your business partners
    Communicate everything
    Listen to everything
    Always exceed customer expectation

    By following all these above one can become a successful business man and a
    wealthy person

    According to stanely and danko, the common qualities of all wealthy people are
    A. They are simple and always like to live below there means
    B. They allocate there resources efficiently in ways conducive to make more
    money.
    C. They value the financial success more than showing there wealth
    D. They are all self made man.
    E. They always choose the right business that is suitable to them.

    Cutting Cost
    Cost cutting is one of the major tools for success. The power of compounding
    which we are going to discuss later plays a major role in this area. Suppose you
    cut your cost by 10 thousand per year and invest it in back in the business and the
    ROE is 15% and the end of 10th Year this 10 thousand per year could have given
    28 lakhs more to your company. Hence cost cutting is the most important thing in
    business but cost reduction should not be at the cost of quality, over jealous cost
    reducing can impact product quality, damaging the hard earned reputation.
    Similarly over jealous reduction in manpower may impact the company growth,
    reputation, brand and finally sales. Other areas where cost cutting should be
    carefully done is repairs and maintenance and research and development.

    Power of Compounding
    A business man should always keep in mind the power of compounding in simple
    way there is one formula which is called power of 72. Here it gives in how many
    years your money will get doubled, suppose interest rate is 10% per year,
    compounded annually our money will become double in 72/10= 7.2 years.
    Similarly if the rate of interest is 6, money will get doubled in 12 years, so we
    should keep in mind that if we borrow at 24% we have to pay double in just 3
    years, this should always be kept in mind by business man.

    Emergency Expenditures

    Here also the business man should take a clue from spirituality, where they say
    there are three things in the world known, unknown and unknowable. This can be
    explained with one example.
    If we have a apple in the hand, apple is a known thing but how many seeds are
    there inside is unknown which can become known at later stage also but if we ask
    how many apple trees will grow from those seeds is unknowable which cannot be
    known at any time. Like wise in business expenditure are known some are
    unknown, some other are unknowable we have to take care of all the three to be
    successful.

    Internal Control
    This is the most important thing for the success of the business. The following
    checklist for internal control will give a broad guide line.
    1. Always separate income and expenditure
    2. Separate authorization, custody and record keeping roles
    3. Have a system to always to get a copy of bank statement marked to
    managing authority.
    4. Don not delicate check signing powers to too many persons
    5. Always fix a maximum limit for the purchasing authority
    6. Require all payments should be supported by invoices
    7. Get quotes beyond a limit
    8. Inventory control understand inventory is your cash.
    9. Always keep insurance policies live
    10. Internet controls and technical controls are much more important
    11. Make it a practice to maintain a log for everything

    Mobilizing funds
    One of the best ways to mobilizing fund is going public, it is getting funds from
    the public by way of shares, debentures and NCDs. Some of the requirements to
    go public are
    1. Good track record of the company

    2.
    3.
    4.
    5.
    6.
    7.

    History of earnings
    Strong potential for future growth
    Good market share
    Strengthen governance and accounting
    Good management team
    Clearly define the growth path

    Advantages of going public

    Easy access to capital


    Higher valuation to the company
    Good market share
    Use funds for expansion
    Stock option is a very good incentive for employees

    Disadvantages of going public

    Books are opened to scrutiny


    Higher accounting cost
    Ownership valuation is subject to market fluctuation
    We will lose some flexibility in operations

    You might also like