The Importance Of Small Business Management

The Importance Of Small Business Management

In the United States, 99.9 percent of the millions of companies are small businesses. In addition, a substantial majority of American workers rely on small businesses for their livelihood. As a result, it’s difficult to overemphasize the importance of small business management.

Owning A Small Business

Owning a small business is not easy, nor is managing one. Like its larger cousins, you still need to manage a small business efficiently and effectively in order to survive over the long term. This can be extremely difficult for some. Many small business owners start their businesses because they’re experts in their trades, not because they’re experts at managing a business.

Despite the challenges, being a small business owner does come with many invaluable benefits and rewards.

Barriers To Entry

The barriers to entry can be relatively low with a small business. For example, you can start a small business in your garage.

Many household brands that we know today started in a garage somewhere. Think of Disney, Hewlett-Packard, Apple, Microsoft, and Dell. Of course, this doesn’t mean that your next venture will make you a billionaire tech mogul.

However, starting a small business doesn’t require the expense of office space or large amounts of furniture and fixtures. This frees up valuable capital that you’ll need to get your business off the ground.

Passion, Hobbies, and Experiences

Passion can also inspire you to transform a hobby into a thriving business venture. A woman indulged her passion for hand-making designer leather handbags. She joined with a cousin and as a result, they now own a company that has a contract with a world-famous ladies handbag supplier. You’ll likely see them on TV.


A Latino-American who is also advertising on TV in a growing industry started producing wine at home and selling it door to door. He sold his home and started a wine business.

Lastly, three war veterans in an interview by Fox News revealed that they capitalized on their war experiences to start a small business venture. One of them earned an MBA and says that education had strongly pushed his business forward. You may have heard of Black Rifle Coffee Company.

Entrepreneurship and Freelancers

More and more people are going into self-employment as starting point for establishing a small business venture. Often, this begins with someone doing work as a freelancer, which naturally grows into a larger business over time.

Entrepreneurial Benefits

This doesn’t suggest that starting or operating a small business is easy. However, it does indicate that owning a small business has some desirable benefits, such as:

  1. It gives you some sense of success or gratification by successfully starting a small but income-producing business, while also providing encouragement.
  2. Being able to do business where larger companies don’t can allow you to carve out a nice niche without the concern of having to compete directly with a large competitor.
  3. Small business owners are often active in their local communities in a way that larger businesses can not be. This can also improve your reputation and community standing.
  4. Having command over your time is a huge benefit for business owners. While you still have to make sure processes are in place to run the business, you don’t have to get approval to take time off and can work where and when you choose.
  5. Being your own boss is invaluable. You can easily do what larger companies find difficult; move your business, add a new product line, or start an entirely new project.
  6. Being free to hire who you want on your own terms can be a huge benefit as well. Being able to fire an underperforming employee without jumping through corporate hoops is also huge.
  7. Due to the small cash requirements of a small business enterprise, you can quickly borrow cash when you need emergency purchases. Large companies go through circuitous procedures to borrow money from lenders.
  8. Operational expenses can be minimal in small business enterprises, unlike in larger companies where much more infrastructure is required.

Read also: 21 Ways To Finance A Small Business

Best Advice to Small Business Owners

The Importance Of Small Business Management

Small businesses can derive benefits from the application of sound management practices. Like any organization, refining and managing the business operations starts with some fundamental principles. For example, in a typical 1-year Business Management course, the list of core subjects include:

  1. Communication Skills– Fundamentals of oral and verbal communication competencies as applied in business operations.
  2. Organizational Behavior– Fundamentals of employer-employee relations and basic psychology as applied in business.
  3. Finance Management– Fundamentals of money, banking, cash handling, and Monetary policies.
  4. Economics– Fundamentals of resource mobilization, allocation, and utilization.
  5. HR Management– Basic recruitment, training, and movement of personnel in a business organization
  6. Business Communication– Principles and practices of letter writing, documentation and procedures.
  7. Computer Application– Literacy in Basic business computer languages and protocols.
  8. Basics of IT– Introduction to software, hardware handling, and Elementary programming.
  9. Marketing Management- Basic studies in Standardization, grading, warehousing, and distribution of goods.
  10. Business Law and Ethics– Study of Obligations, Contracts and pertinent forms and commercial laws.
  11. Taxation– Study of Income and tax determination, tax schedules and guidelines.
  12. Specialization Subject– You can specialize in any of the above core subjects.

You can quickly tell from the core subjects that the knowledge required for effective small business management shouldn’t be taken for granted. While there’s certainly value in advanced degrees like a Masters in Business Administration (MBA), it’s important not to get too hung up on a pedigree.

The reality is, a large percentage of small business owners (and managers) learned from experience and self-education. College is not a requirement to pursue your passion.

Education is the key. How you acquire it is not.

Types of Business Structures

While the principles are generally the same, effective small business management techniques differ from larger businesses depending on the environment in which they are applied. To demonstrate, let’s take a quick look at the different types of legal structures for small businesses:

  1. Sole Proprietorship – It’s the most basic type of business entity. A single individual owns the business. Usually, the owner also runs the business.
  2. Partnership – It’s similar to a sole proprietorship. However, in a partnership, two or more individuals own the business. The owners may perform responsibilities in running the business.
  3. Limited Liability Company – The business is similar to a corporation. But the business isn’t as structured as a full corporation. The owners of the company are called members. They may or may not work in the corporation.
  4. Corporation – It’s a business entity that has a separate personality from its creators. The owners or creators of a corporation are called incorporators. They may or may not work in the corporation.

In a larger business that’s organized as a corporation, there may be more procedural hurdles to overcome in order to implement changes. This can be challenging, even for the owner, if you need to refine your processes to improve performance.

Generally speaking, in a smaller business these hurdles are less challenging. As a result, a small business owner can more easily make the changes necessary to address an operational concern.

Read also: Which Legal Structure Should You Choose for Your Small Business?

Characteristics of Small Business Management

In attempting to expand and define traditional management functions, Luther Gullick coined the keyword ’POSDCORB’:

  1. P for Planning
  2. O for Organizing
  3. S for Staffing
  4. D for Directing,
  5. Co for Co-ordination
  6. R for reporting
  7. B for Budgeting.

However, the most widely accepted management functions are those advocated by KOONTZ and O’DONNELL. These include:

  1. Planning– It’s deciding what to do, when to do it, and how to do a particular activity. It connects the vacuum between the point where you are and where you want to be at a definite future time.
  2. Organizing– According to Henry Fayol, ‘you organize a business by putting together all the factors that enable it to perform its functions; raw materials, tools, capital, and personnel’.
  3. Staffing– Providing and maintaining personnel for the organization. In fact, it’s a part of the organizing function but Human Resources Management (Personnel Management) has become a specialized field in Business Administration. As a result, it’s now considered a distinct management function.
  4. Directing– It deals with mobilizing, influencing, guiding, supervising and motivating team members for the achievement of tasks and organizational goals.
  5. Controlling– Theo Haimann says, ‘Controlling is checking what progress is being made towards the objectives and appropriately acting to correct deviation’. Koontz & O’Donnell agree with Haiman by stating that “Controlling is measuring and correcting the activities of subordinates to make sure that the desired objectives are being accomplished”.

What Are The Benefits Of Small Business Management?

By employing a set of sound management principles and entrepreneurial skills in small business operations, the small business owner can make it possible to:

  1. Successfully achieve without delay his/her business objectives, even with limited resources.
  2. Systematically organize all facets of his/her small business enterprise to ensure that the right things will be put in the right places and all the required work will be done on time.
  3. Create working groups and responsibilities that will be evenly distributed from person to person. The right people will be assigned the right functions. The right skills will be applied to the right jobs.
  4. Improve employees’ lives as a result of increasing productivity, income and creating a friendly and comfortable work environment for all.
  5. Reduce employee turnover, tardiness, and absenteeism, while improving work continuity and flows.
  6. Produce the highest possible output with the resources of the small business. Giving appropriate training and incentives to less productive employees will also contribute to an increase in output.
  7. Greatly reduce operating costs by eliminating unnecessary expenditures and hidden costs.
  8. Introduce a proactive and flexible training program that will help build new skills and procedures in order to adapt to a changing business climate.
  9. Implement flexible strategies and plans based on the organization’s current levels of strength, weaknesses, opportunities, and threats. This will help lead to the smooth and steady operations of all phases of the business. It will also assist in the development of contingency plans for imminent or possible future risks.
  10. Provide motivation for the company owners and the workforce to work as a team, thus helping to achieve steady growth in income.

End Results

In short, the application of sound practices in small business management guarantees:

  1. The alignment and coordination of the series of activities of the organization; and
  2. Encourages small business owners to mix education, knowledge, and expertise to operate their businesses.
Small Business Management Principles

Sound Management Principles Can Help

Understanding and implementing sound management principles can help small business owners learn to:

  1. Implement a unified vision.
  2. Identify and attain the goals and objectives of the small business.
  3. Gain opportunities to test useful knowledge and skills in management like marketing, banking and finance, auditing and monitoring, and other critical management subjects.
  4. Implement a pro-active, flexible, efficient and effective decision-making process that takes all important factors into consideration.
  5. Design a flexible work schedule that also takes into consideration the time constraints of the workforce.

Important Traits For Effective Small Business Management

Even the most knowledgable and experienced people need to have certain traits in order to succeed in business. These traits are the bridge that allows small business owners to apply their knowledge and experience. These include:

  1. Vision– They clearly visualize and explain where they are, and what and where they would like to be in terms of mission, goals, objectives, strategies, and tactics.
  2. Passion– They love their businesses because these fit into their individual personalities and circumstances. They enjoy finding ways to promote and improve the appearance and content of their businesses.
  3. Hardworking– They are naturally inclined to put extra effort to gain more and move forward.
  4. Decisive– They don’t procrastinate and let opportunities pass by. They make decisions and move forward with them with a minimum of wasted time.
  5. Adventurous– They’re willing to take risks.

“The biggest risk is not taking any risk… In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.”

Mark Zuckerberg

In Conclusion

Effective small business management can make the difference between success and failure. Like any machine, a business has to be maintained in order to operate reliably. However, this requires knowledge and experience on the part of the owner.

Fortunately, this is not an insurmountable task and it doesn’t require an expensive degree. It simply requires effort. Educate yourself and solicit the help of experts where you need them. Apply what you learn from both your successes and failures. Yes, it takes time but with perseverance, you’ll get there.

Kevin A. Nye

I am a dynamic and seasoned operations executive with over 20 years of rich experience in leading diverse teams and driving organizational growth across multiple sectors. Possessing a strong track record in strategic planning and execution, I excel in transforming challenges into opportunities. Having served in roles in Supply Chain, Operations, and Regional management, I was previously the Chief Operating Officer of a regional steel company, Director of Operations for a third-generation family-owned citrus packing company, and served on the Boards of Directors of Sunkist Growers and Fruit Growers Supply.

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