Key Factors in Managing a Business

Management is commonly considered to be the central operations of the business- Financial, Legal, Human Resources, Office Space, Equipment, and Organization,Marketing, and Production. However, mostly management is described as a combination of five processes -

1. Planning

2. Organizing

3. Staffing

4. Directing

5. Controlling

Let us see what these areas cover in the business model.

1. Planning and Organizing: It involves determining the appropriate objectives for the business and how those objectives would be accomplished. This is one of the most commonly skipped steps in running a small business, yet it is also the one thing that can keep us on track. Organizing structures the resources and activities of the business so that the objectives are accomplished.

2. Staffing involves hiring the right people to do the activities of the business, training them to do the job, and rewarding them appropriately. Even if we are the only employee of the business, there may be issues like health insurance that may be of interest to us. Remember we are part of the human resources of our firm and our needs need to be met also.

3. Directing is really leadership - motivating the employees to achieve the business objectives. Leadership is often considered an art, but there are a lot of tools that can help us to be better at it. You must try to be impartial and even if busisness is there in your decisions but you must appear to be unbiased to keep all employees motivated and enthusiastic. Channelizing your employee’s energy in a positive direction for the fulfillment of your business objective is a great challenge. You as a leader only could see the bigger picture. You need to create it in front of your employees and make them not only appreciate it but also work towards making it a reality.

4. Controlling is the process of evaluation and correction that is needed to make certain that the business stays on track towards its goals. Controlling does not mean gate-keeping. The controls should be such that they prevent your employees from moving in the wrong direction which may be harmful for your business.Controls should be such that they facilitate business, impart efficiency and keep your employees alert and conscious of their duties. Too much control and monitoring is not good for the business. You must give sufficient space to your employees so that they use their own intelligence and knowledge for the betterment of your business.

i.Managing Government Bodies

To many entrepreneurs, the proper role of government is to just stay out of theway. However, government policies help create entrepreneurial boom by increasing access to capital, developing new technologies and opening new markets. We often look to the government to break up or regulate companies that appeared to be developing so much power that they could defy market forces. We also rely on the government to address matters the private economy overlooks, from education to protecting the environment. And despite our advocacy of market principles, we have used the government at times to nurture new industries, and at times even to protect Indian companies from competition.

For setting up a small dairy plant there are many local municipal and state government agencies involved for giving various sanctions and clearances. For example, pollution control board gives pollution clearance certificate without which your plant would be illegal and liable to penalties or may be closed down by authorities anytime. Take another example, equipment installed in your plant needs to strictly comply with BIS standards for proper hygiene and sanitation.

Indian Boiler Act - 1923: For installing a boiler you need to comply with the Indian Boiler Act (IBR) as prescribed by the state government. All boilers which produce steam at pressure above 3Kg/sq. cm fall under IBR act. You need to get sanction from the state industries department for installing any boiler. A boiler inspector visits dairy premises at regular intervals to check worthiness of boiler and steam pipelines. See Appendix 3 Factory Act - 1881: The objectives of this act are to ensure adequate safety measures and to promote the health and welfare of the workers employed in factories. To ensure that there is no random growth of factories without adequate provision of health and safety or workforce and prior approval of plans for setting-up of a factory. It regulates working conditions in factories across the country. It forces the entrepreneur to adhere to and provide basic minimum standards for safe and healthy work environment in the factory.

At local level you need to coordinate with local police person, electricity personnel who would come for periodic checks to verify whether you are drawing load within the prescribed and allotted limits or not and many more agencies like factory inspector, labor commissioner office etc.

Another important government agency with which you need to coordinate is the Income Tax Department. It also operates through its subordinate departments,which help it to perform its responsibility on time in a better manner. We need to understand the tax policies that govern our business. We need to state our income earned as a profit or gain in our business or profession so that our income tax assessment can be done conveniently.

ii. Managing Legal Aspects

Understanding the legal issues involving tax requirements is a necessary aspect of all businesses. We need to learn about payroll taxes, employee identification numbers, income taxes, and other required taxes like central excise, service tax etc. Following the conceptual stage of starting a business, a prospective owner will move towards the actual legal formation of the business. There is much that needs to be known about forms of ownership, required licenses and business law.

We don’t need to have a lawyer in house, but we definitely need to make certain that all the operations of our business are legal. Some of the issues to consider are business licenses, determining the correct legal form of our business, pollution clearance, alliance agreements, copyrights, trademarks, patents, contracts with suppliers, and employment law.

There are a wide variety of legal issues that we can face in starting our business.During various stages of business there are different issues that come up. For example, at the time of starting the issues faced by you would be different from the issues that would come up while business is a few years old. Some of the critical stages are:

a. Starting a business – Land acquisition issues, pollution clearance issues, getting various numbers from government agencies like service tax number, PAN number etc.

b. After starting the business i.e. doing a business – Regular filing of tax returns,coordination with labor office, filing of various government taxes etc.

c. Getting out of business – informing company affairs office, closing firm’s bank accounts, filing of final tax returns etc.

It is useful to have some expert who you can consult at regular intervals about issues that come up. Therefore, selecting a lawyer or a chartered accountant we can call when we need to is always advisable.

iii. Managing Partnership

Every business is conducted either single handedly or in association with other persons. The benefits of managing business in group and associations are numerous and hence it is a common and most desirable form of doing business. If the group has acquired a status of company, whether public or private, then it has certain privileges and advantages, which are not available to partnership firms and other associations. On incorporation, the company acquires a separate legal entity distinct from and independent of its members. Unlike a partnership firm, which has no separate legal entity, a company has a separate corporate existence.

Partnership does not necessarily mean incorporation of financial investor in company or having your friend as a stakeholder who started with you as a business partner.That is too narrow a definition of partnership in today’s business environment.Partnerships are internal as well as external.

Internal partnership can be defined as relationship with your partner who legally owns a part of the business. For example, Ramesh and Ravi get into a partnership and start a firm. Ramesh owns 60% of the firm and Ravi owns remaining 40%.This is an internal partnership which is legally tenable since a formal agreement is signed and registered in the court of law.

External relationship can be defined as relationship with your vendors, suppliers and distributors who sell your product in the market. They can be termed as external stakeholders of the firm. They do not have legal ownership in the firm but they are stakeholder through a legal contract which regulates financial transactions between them and the firm. This contract only gives them right to sell your products but they do not own the firm.

Managing relationship with both external as well internal stakeholders is a tough 60task. All partnerships are based on the fundamentals of mutual trust and confidence in each others capabilities.

Every business starts with good intentions and on mutual trust and confidence.Usually a partnership firm is established by two or three or sometimes four old friends or classmates with very optimism. But managing a friendship is entirely different from managing partnership. As friends you do not have conflicting interests,neither you have any selfish motive nor you see shortcoming of your friend critically.

Once you get into a partnership the whole story changes. There are conflicts due to many reasons like working style, dealing with clients, overlapping authorities,ego clash etc. Financial reasons become the biggest stumbling block for any partnership to survive long term.

Entering into a partnership is very easy but getting out of it is a very cumbersome and a painful process. The separation must be handled in a very objective manner.

Financial matters must not spoil your relationship built over many decades. But usually partnerships end on acrimonious note when two old time friends not only stop talking to each other but initiate legal proceedings against each other.

To manage a partnership successfully, you must:

•  Define each partner’s role very clearly
•  Define each partner’s share equally, in legal terms
• Not encroach each others work area unless asked for by other partner
•  Respect each other with respect to capability, decision making, and working style
•  Keep full faith in each others capabilities, integrity and loyalty towards business