Starting our own business can be a rewarding and exciting venture. However, we must be prepared and we must understand the basics of operating our own business. Planning is one of the most important aspects of starting a business. Proper planning is needed for success in business and, for that matter, anything we do in life. There are a wide variety of ways to put together the operations of our business so that it functions effectively and efficiently. The model that works best for us will be related to our objectives, our product or service, and our personal operational style. However, there are a number of functions that every business needs to address simply as part of doing business. Let us describe some areas with respect to starting a dairy business that we need to know about to keep our business running with minimal effort.
i.Financial Resource Management
Financial Management is the process of managing the:
a. Financial resources – It includes accounting and financial reporting,
b. Budgeting – Dividing costs under various heads and planning for the year
c. Accounts Payables and Receivables
d. Working Capital Management
e. Insurance for a business.
Financial Resource Management - The financial management system for a small business includes both how we are financing it as well as how we manage the money in the business. All businesses require some form of financing. We need to learn and be very thorough about raising capital, borrowing money and managing the financial operations of our business.
The bookkeeping and accounting systems, recordkeeping, taxes, collecting money,insurance, budgeting, and managing risk are all part of keeping our business financially solvent. While most of us consider this the most painful part of running a business, it needs to be handled well if we plan to stay in business. Financing our business is often the critical component to success. There are a wide variety of ways this can be accomplished, depending upon the credit history of our business and how established it is in the market.
In setting up a financial management system our first decision is whether we will manage our financial records ourselves or whether we will have someone else do it for us. Bookkeeping refers to the daily operation of an accounting system and recording routine transactions within the appropriate accounts. An accounting system defines the process of identifying, measuring, recording and communicating financial information about the business.
Budgeting – Budgeting is a very important exercise to keep watch and control over our actual versus planned performance. We must be ready with the next 3 month’s plan in advance to avoid any surprises. Mid course corrections, re-working of forecast numbers is a must to achieve uniformity in the cash flows.
Accounts Receivables and Payables (AR and AP) - Setting up an accounting system, collecting bills, paying employees, suppliers, and taxes correctly and on time are all part of running a small business. And, unless accounting is our business, it is often the bane of the small business owner. Setting up a system that does what we need with the minimum of maintenance can make running a dairy plant not only more pleasant, but it can save us from problems down the road.
Regular updation and follow-up are the only ways to manage AR and AP. One must try to stretch payables as long as possible without affecting one’s credibility in the market and on the other hand must be alert enough to get its receivables in time as promised by the customer. A good AR and AP management system would ensure reduced working capital in the business and also reduced interest costs on working capital loans/limits taken from the financial institutions.Working Capital Management - Although finding financing for our business is just one aspect of the overall financial management of our business, it is a critical factor for the success of many small businesses. The hardest question to answer is what kind of capital should we seek? Often we are not aware of options available to us or don’t have the time to explore what is possible. Using personal or family funds to finance a business is called Boot Strapping the business. Boot strapping can involve personal investment by the founders, their family and friends and/or the owners foregoing salary.
For those of us who are looking for external financing, there are various levels available depending upon the stage of development our business is in. External funds can be raised through grants, loans, investors, mergers, going public, and selling all or part of the business.
Insurance for Business - Another area that our financial management system needs to address is risk. Any good system should minimize the risks in our business. Certainly, insurance needs to be considered not only for our property,office, equipment, and employees, but also for loss of critical employees. Clearly,financial management encompasses a number of crucial areas of our business.
Take time to set them up right. It will make a significant difference in our stress levels and in the bottom line for our business.Government Support and Financial Schemes There are many schemes run by government of India to promote small scale enterprise. There is a separate ministry of Agriculture to look after interests of farmers. In addition, there is a ministry of Agro and Rural Industry under which Prime Minister’s Rozgar Yojana (PMRY) is run for providing financial aid as well as consultancy to set-up a small enterprise. The details of the scheme can be taken from http://ari.gov.in/pmrymain.htm or see Appendix 1 . Also, there is a Ministry for Food Processing Industries which provides financial assistance at very low interest rates and with huge subsidy component. To get more details please visit http://mofpi.nic.in or see Appendix 2.
List of ministries which offer various schemes, consultancy, and financial assistance to set-up a new venture is as given below:
Ministry of Agriculture
Ministry of Agro and Rural Industry
Ministry of Rural Development
Ministry of Food Processing Industries
Ministry of Small Scale Industries
Note: List of all other ministries of government of India can be taken from http://goidirectory.nic.in/exe.htm
ii. Human Resource Management
Human Resource refers to the labor, physical and mental abilities that the people in our organization contribute to producing the goods and services of our business.
The employees of a business are its most important asset. We need to learn how to find and manage our employees successfully. Many small businesses operate with no employees. One person handles the whole business with perhaps Making the leap to hiring someone to help is a big one because all of a sudden we need to worry about payroll, benefits, employee insurance, and what seems like a myriad of other details. And, this does not even take into consideration the host of problems that can arise from personality conflicts and loss-of-control of all the processes in running our business.
In case of a dairy business manpower at senior level is not much needed. One can have a procurement officer, quality control officer, and a production officer to begin with. Administration etc. should be managed by self. Rest of the people would be mainly workers who one should always try to outsource. It means one should not have them on one’s roles because it leads to many legal complications
over a period of time due to very stringent labor laws of our country. Workers must be taken on contract through a labor contractor.
The administration of human resources involves:
Staffing involves developing personnel sources, recruiting potential employees,equal employment opportunity, hiring issues, the selection process, new employee orientation, and termination. Even in a very small set-up like milk and milk products testing lab, staffing is a critical decision. A loyal, trained, sincere person with high integrity is needed to make your business a success. loyal and expert quality control person is an asset for a dairy plant.
Training and Development
Initial training of new workers is must. It helps them do their work faster than the normal e.g. they must know the right procedure for lifting milk can and tipping it over for fast weighment of incoming milk.
Policies and Procedures
Policies and procedures deal with instituting health and safety standards, handling of employee grievances, setting employee work hours, and worker relations.Good processes are the cornerstone of any successful business. Initially you may think that too much focus on processes delay decision making but gradually, when the business grows, one realizes the need for good systems and processes for better control and operational efficiencies. Good processes pay in the long run.
Recordkeeping
Recordkeeping involves making certain records as per labor laws governing employers, maintaining individual employee files and records of all functions, and preparing daily reports for better control over the business. Recordkeeping is a must from legal point of view. Running a business means complying with many statutory government regulations. Laws of the land must be followed sincerely and strictly.
Wage and Salary Administration
Wage and salary administration includes job analysis, preparation of job descriptions,pay surveys, compensation, employment taxes, and fringe benefits. As explained in the earlier unit Entrepreneurship and Delegation, wage and salary are very sensitive issues and need your personal attention and decision making.
iii. Logistics and Supply Chain
Any business which involves a physical product requires logistics of one sort or another to carry out its operations. Whether it’s operating a small warehouse or stockroom to store, pick and pack your customer orders or arranging delivery of your products to customers, even the smallest businesses require logistics. Logistics includes all the processes required which goes from procurement of raw materials to end customer delivery of finished goods, including purchasing, inventory management, warehousing, shipping and even customer returns.
Unlike large organizations, small businesses don’t have huge budgets for logistics and many people available to carry out these tasks. We need to learn about logistics to be able to do it ourselves, or hire staff that can do it for us. The size and amount of logistics activity we have will determine what type of third party arrangement we require. If we have got less than 500 cartons to ship each
month, we’re probably looking at packing them ourselves, or with appropriate assistance, and then shipping them direct by courier or through a local courier center. This of course assumes we have the space to carry out the packing operation and stage the cartons for shipping. If we don’t, many courier centers have appropriate facilities, equipment and packing materials to assist. But in case of dairy business we need to rely on our own resources or outsource the work to a reliable contractor for carrying milk from milk procurement centers or village level societies. As we know milk is a perishable commodity. Inefficient transport service would result in heavy losses in dairy business. Playing to win requires an agile, responsive, demand-driven supply chain that can embrace complexity and variability without compromising performance. We need to manage supply chain to synchronize cycles of demand, supply, and product -so that our supply chain can rapidly get product to customers wherever they are,and/or find new manufacturers or suppliers with the available capacity to handle pent-up demand. Whether our direction is upstream or downstream, the result is an adaptive supply chain that helps you win customers and market share while improving revenue and profitability.
iv. Marketing
Marketing is all about satisfying customer needs. We need to learn how to better understand customer needs and ways to satisfy those needs. Marketing consists of advertising and promoting our product or service in order to sell it. Our business produces goods and services. Marketing is what lets potential customers know that they are available for sale. Sales, advertising, and public relations are each essential components of marketing and each require specialized skills and expertise. While a small business may have only one person performing all these functions under the marketing umbrella, knowledge of each area is important to develop a focused effort.
A focus on what the customer wants and needs is essential to successful marketing efforts. This customer-orientation should go hand-in-hand with your objective of maintaining a profitable volume of sales. Marketing is a creative process combining all of the activities needed to accomplish both of these objectives.
Product Identification
The process of marketing begins with discovering what product customers want to buy. Providing the features and quality customers want is a critical first step in marketing. We will be facing an uphill battle if we provide something we want to produce and then try to convince someone to buy it. Though, milk is a high consumption food item and necessary part of our daily life still it is not necessary that whatever you produce would be bought by the market. It is highly possible that the market, for which you are planning to introduce liquid milk, is already saturated due to high competition. So, you need to think of a value added product like flavored milk or perhaps ice-cream for these markets.
P’s of Marketing
Once we have a product, we need to determine a price for the product, let potential customers know about our product, and make it available to them. The product, price, promotion, and place are often called the four ‘Ps’ of marketing.If we cover the four P’s well, we should have no trouble achieving a fifth P,profits.
Marketing activities are numerous and varied because they basically include everything needed to get a product off the drawing board and into the hands of the customer. Marketing of any product encompasses gamut of activities like including activities such as designing the product so it will be desirable to customers by using tools such as market research and pricing; promoting the product so people will know about it by using tools such as public relations, advertising,marketing communications; and exchanging it with the customer through sales and distribution.
Usually, successful marketing of a product or service relies upon the coordination of several business areas. Therefore, marketing requires coordinating with everyone who plays a part in the common goal of pleasing the customer. For a small business owner who has no or few employees, this means looking at problems through a variety of lenses so that all the bases of marketing, production, financial management, and human resources are covered.
i.Financial Resource Management
Financial Management is the process of managing the:
a. Financial resources – It includes accounting and financial reporting,
b. Budgeting – Dividing costs under various heads and planning for the year
c. Accounts Payables and Receivables
d. Working Capital Management
e. Insurance for a business.
Financial Resource Management - The financial management system for a small business includes both how we are financing it as well as how we manage the money in the business. All businesses require some form of financing. We need to learn and be very thorough about raising capital, borrowing money and managing the financial operations of our business.
The bookkeeping and accounting systems, recordkeeping, taxes, collecting money,insurance, budgeting, and managing risk are all part of keeping our business financially solvent. While most of us consider this the most painful part of running a business, it needs to be handled well if we plan to stay in business. Financing our business is often the critical component to success. There are a wide variety of ways this can be accomplished, depending upon the credit history of our business and how established it is in the market.
In setting up a financial management system our first decision is whether we will manage our financial records ourselves or whether we will have someone else do it for us. Bookkeeping refers to the daily operation of an accounting system and recording routine transactions within the appropriate accounts. An accounting system defines the process of identifying, measuring, recording and communicating financial information about the business.
Budgeting – Budgeting is a very important exercise to keep watch and control over our actual versus planned performance. We must be ready with the next 3 month’s plan in advance to avoid any surprises. Mid course corrections, re-working of forecast numbers is a must to achieve uniformity in the cash flows.
Accounts Receivables and Payables (AR and AP) - Setting up an accounting system, collecting bills, paying employees, suppliers, and taxes correctly and on time are all part of running a small business. And, unless accounting is our business, it is often the bane of the small business owner. Setting up a system that does what we need with the minimum of maintenance can make running a dairy plant not only more pleasant, but it can save us from problems down the road.
Regular updation and follow-up are the only ways to manage AR and AP. One must try to stretch payables as long as possible without affecting one’s credibility in the market and on the other hand must be alert enough to get its receivables in time as promised by the customer. A good AR and AP management system would ensure reduced working capital in the business and also reduced interest costs on working capital loans/limits taken from the financial institutions.Working Capital Management - Although finding financing for our business is just one aspect of the overall financial management of our business, it is a critical factor for the success of many small businesses. The hardest question to answer is what kind of capital should we seek? Often we are not aware of options available to us or don’t have the time to explore what is possible. Using personal or family funds to finance a business is called Boot Strapping the business. Boot strapping can involve personal investment by the founders, their family and friends and/or the owners foregoing salary.
For those of us who are looking for external financing, there are various levels available depending upon the stage of development our business is in. External funds can be raised through grants, loans, investors, mergers, going public, and selling all or part of the business.
Insurance for Business - Another area that our financial management system needs to address is risk. Any good system should minimize the risks in our business. Certainly, insurance needs to be considered not only for our property,office, equipment, and employees, but also for loss of critical employees. Clearly,financial management encompasses a number of crucial areas of our business.
Take time to set them up right. It will make a significant difference in our stress levels and in the bottom line for our business.Government Support and Financial Schemes There are many schemes run by government of India to promote small scale enterprise. There is a separate ministry of Agriculture to look after interests of farmers. In addition, there is a ministry of Agro and Rural Industry under which Prime Minister’s Rozgar Yojana (PMRY) is run for providing financial aid as well as consultancy to set-up a small enterprise. The details of the scheme can be taken from http://ari.gov.in/pmrymain.htm or see Appendix 1 . Also, there is a Ministry for Food Processing Industries which provides financial assistance at very low interest rates and with huge subsidy component. To get more details please visit http://mofpi.nic.in or see Appendix 2.
List of ministries which offer various schemes, consultancy, and financial assistance to set-up a new venture is as given below:
Ministry of Agriculture
Ministry of Agro and Rural Industry
Ministry of Rural Development
Ministry of Food Processing Industries
Ministry of Small Scale Industries
Note: List of all other ministries of government of India can be taken from http://goidirectory.nic.in/exe.htm
ii. Human Resource Management
Human Resource refers to the labor, physical and mental abilities that the people in our organization contribute to producing the goods and services of our business.
The employees of a business are its most important asset. We need to learn how to find and manage our employees successfully. Many small businesses operate with no employees. One person handles the whole business with perhaps Making the leap to hiring someone to help is a big one because all of a sudden we need to worry about payroll, benefits, employee insurance, and what seems like a myriad of other details. And, this does not even take into consideration the host of problems that can arise from personality conflicts and loss-of-control of all the processes in running our business.
In case of a dairy business manpower at senior level is not much needed. One can have a procurement officer, quality control officer, and a production officer to begin with. Administration etc. should be managed by self. Rest of the people would be mainly workers who one should always try to outsource. It means one should not have them on one’s roles because it leads to many legal complications
over a period of time due to very stringent labor laws of our country. Workers must be taken on contract through a labor contractor.
The administration of human resources involves:
Staffing involves developing personnel sources, recruiting potential employees,equal employment opportunity, hiring issues, the selection process, new employee orientation, and termination. Even in a very small set-up like milk and milk products testing lab, staffing is a critical decision. A loyal, trained, sincere person with high integrity is needed to make your business a success. loyal and expert quality control person is an asset for a dairy plant.
Training and Development
Initial training of new workers is must. It helps them do their work faster than the normal e.g. they must know the right procedure for lifting milk can and tipping it over for fast weighment of incoming milk.
Policies and Procedures
Policies and procedures deal with instituting health and safety standards, handling of employee grievances, setting employee work hours, and worker relations.Good processes are the cornerstone of any successful business. Initially you may think that too much focus on processes delay decision making but gradually, when the business grows, one realizes the need for good systems and processes for better control and operational efficiencies. Good processes pay in the long run.
Recordkeeping
Recordkeeping involves making certain records as per labor laws governing employers, maintaining individual employee files and records of all functions, and preparing daily reports for better control over the business. Recordkeeping is a must from legal point of view. Running a business means complying with many statutory government regulations. Laws of the land must be followed sincerely and strictly.
Wage and Salary Administration
Wage and salary administration includes job analysis, preparation of job descriptions,pay surveys, compensation, employment taxes, and fringe benefits. As explained in the earlier unit Entrepreneurship and Delegation, wage and salary are very sensitive issues and need your personal attention and decision making.
iii. Logistics and Supply Chain
Any business which involves a physical product requires logistics of one sort or another to carry out its operations. Whether it’s operating a small warehouse or stockroom to store, pick and pack your customer orders or arranging delivery of your products to customers, even the smallest businesses require logistics. Logistics includes all the processes required which goes from procurement of raw materials to end customer delivery of finished goods, including purchasing, inventory management, warehousing, shipping and even customer returns.
Unlike large organizations, small businesses don’t have huge budgets for logistics and many people available to carry out these tasks. We need to learn about logistics to be able to do it ourselves, or hire staff that can do it for us. The size and amount of logistics activity we have will determine what type of third party arrangement we require. If we have got less than 500 cartons to ship each
month, we’re probably looking at packing them ourselves, or with appropriate assistance, and then shipping them direct by courier or through a local courier center. This of course assumes we have the space to carry out the packing operation and stage the cartons for shipping. If we don’t, many courier centers have appropriate facilities, equipment and packing materials to assist. But in case of dairy business we need to rely on our own resources or outsource the work to a reliable contractor for carrying milk from milk procurement centers or village level societies. As we know milk is a perishable commodity. Inefficient transport service would result in heavy losses in dairy business. Playing to win requires an agile, responsive, demand-driven supply chain that can embrace complexity and variability without compromising performance. We need to manage supply chain to synchronize cycles of demand, supply, and product -so that our supply chain can rapidly get product to customers wherever they are,and/or find new manufacturers or suppliers with the available capacity to handle pent-up demand. Whether our direction is upstream or downstream, the result is an adaptive supply chain that helps you win customers and market share while improving revenue and profitability.
iv. Marketing
Marketing is all about satisfying customer needs. We need to learn how to better understand customer needs and ways to satisfy those needs. Marketing consists of advertising and promoting our product or service in order to sell it. Our business produces goods and services. Marketing is what lets potential customers know that they are available for sale. Sales, advertising, and public relations are each essential components of marketing and each require specialized skills and expertise. While a small business may have only one person performing all these functions under the marketing umbrella, knowledge of each area is important to develop a focused effort.
A focus on what the customer wants and needs is essential to successful marketing efforts. This customer-orientation should go hand-in-hand with your objective of maintaining a profitable volume of sales. Marketing is a creative process combining all of the activities needed to accomplish both of these objectives.
Product Identification
The process of marketing begins with discovering what product customers want to buy. Providing the features and quality customers want is a critical first step in marketing. We will be facing an uphill battle if we provide something we want to produce and then try to convince someone to buy it. Though, milk is a high consumption food item and necessary part of our daily life still it is not necessary that whatever you produce would be bought by the market. It is highly possible that the market, for which you are planning to introduce liquid milk, is already saturated due to high competition. So, you need to think of a value added product like flavored milk or perhaps ice-cream for these markets.
P’s of Marketing
Once we have a product, we need to determine a price for the product, let potential customers know about our product, and make it available to them. The product, price, promotion, and place are often called the four ‘Ps’ of marketing.If we cover the four P’s well, we should have no trouble achieving a fifth P,profits.
Marketing activities are numerous and varied because they basically include everything needed to get a product off the drawing board and into the hands of the customer. Marketing of any product encompasses gamut of activities like including activities such as designing the product so it will be desirable to customers by using tools such as market research and pricing; promoting the product so people will know about it by using tools such as public relations, advertising,marketing communications; and exchanging it with the customer through sales and distribution.
Usually, successful marketing of a product or service relies upon the coordination of several business areas. Therefore, marketing requires coordinating with everyone who plays a part in the common goal of pleasing the customer. For a small business owner who has no or few employees, this means looking at problems through a variety of lenses so that all the bases of marketing, production, financial management, and human resources are covered.
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