Small business growth and plans Summary

Small business growth and plans

Introduction

Business growth is a natural process of development and adaptation that is only achieved under favorable circumstances (Stokes & Wilson, 2010, p. 229). This paper presents an analysis of Kelly’s Sandwich Stop, a small scale enterprise that has been in existence for the last five years. After operating the business successfully as a sole proprietor Kelly has considered expanding the business. This paper provides a critical evaluation of Kelly’s options for growth strategy, business form, financial assistance, Organizational Structure, and staffing needs, customers and promotion strategies and ethical issues and social responsibilities that may arise.

Growth Strategy

Business growth generally involves an increase in the scale of operations or size of an enterprise (Longenecker et al. 2011, p. 46). There are two forms of growth that Kelly can adopt in expanding her business, namely, inorganic growth and organic growth. Organic growth refers to internal growth accompanied by an increase in resources and size of a firm. Organic growth can be achieved through intensification, diversification or modernization. On the other hand, inorganic growth (also termed as external growth) involves the merger of two or more firms. Kelly intends to adopt an organic growth strategy and has already leased space to expand her restaurant. She will need to gather market information in order to select the best type of organic growth strategy. In case there is an opportunity for increasing market share in the region and eventually expand her sales revenue and profits, intensive growth strategy will be the most appropriate (Longenecker et al. 2011, p. 48). If the market is saturated and the possibility of gaining market share is low, she can consider diversification through developing new products. Another option is modernization, which involves improvement in technology in order to improve the quality of products and to reduce the cost of production and wastes.

Business Form

Currently, Kelly operates as a sole proprietorship. This form of business is operated and managed by one person or a married couple. Given her expansion plans, the structure of the business will need to change. She will need to change the business into a limited liability company or any other appropriate form such as a general partnership. This is due to the fact that the business will require more people to manage the increased resources (Fontana, 2010, p. 196).

Financial Assistance

Kelly may not have enough financial resources to support her short term plan. There are numerous options for small business financing available for Kelly. They include; bank loans, loans from credit unions, grants, equity financing, and credit cards. Equity financing is the most appropriate option for Kelly. She needs funding to expand her business resources and her business is likely to attract venture capitalists and angel investors. The expansion may lead to lower cash flow and thus, debt financing using loans may not be an appropriate option (Longenecker et al. 2011, p. 63).

Organizational Structure and Staffing Needs

Kelly will have to hire additional staff for her business. The business will require a general manager, chefs, cooks, food suppliers, and clean-up crew. In a fast food restaurant, there is a likelihood of a high turnover rate, especially among the frontline staff. To have all employees dedicated to one job in each section is the best approach (Enz, 2009, p. 306). Thus, the best management structure is a vertical hierarchy.

Customers and Promotion

Kelly will have to explain to the existing customers through the word of mouth and other channels such as FaceBook regarding her plans to shift to a new location. If she will continue to supply to them, she needs to highlight that taste, prices and relationship will not be affected. In order to attract new customers and to maintain the old ones, she will need to use promotion strategies that highlight creativity, affordability, and taste of the foods produced in the new restaurant. Discounts and posts of special foods can help to promote the business (Enz, 2009, p. 311).

Ethical Issues and Social Responsibility

Kelly will have to deal with issues related to corporate social responsibility after the expansion of her business. She will have to cultivate good relations with and between the old and new employees, customers and surrounding community members. Social responsibility implies that she will need to adhere to the principals of economic, environmental and social sustainability (Fontana, 2010, p. 67).

Summary/Conclusion

In summary, Kelly has considered expanding her business after operating successfully over the last five years. She has adopted an organic form of growth but she needs to carry out additional market research in order to determine the best among three types of organic growth strategies to adopt. She will need to change the form of business from sole proprietorship to more appropriate form such as Limited Liability Company. Equity financing will be the best option for Kelly. She will have to hire additional staff and develop a vertical hierarchy management structure. Further, she will need to inform the old customers about the change through word of mouth and other appropriate channels and adapt promotional strategies that highlight creativity, taste, and affordability. Lastly, Kelly will need to develop and maintain good relations with old and new stakeholders. She also needs to adhere to principles of social, economic and environmental responsibility.

References

Enz, C. A. (2009). Hospitality Strategic Management: Concepts and Cases. London: John Wiley

and Sons

Fontana, P. K. (2010). Choosing the Right Legal Form of Business: The Complete Guide to

Becoming a Sole Proprietor, Partnership, LLC, Or Corporation. Ocala: Atlantic Publishing Company

Longenecker, J., Petty, J., Palich, L. & Hoy, F. (2011). Small Business Management: Launching

and Growing Entrepreneurial Ventures. New York (NY): Cengage Learning

Stokes, D. & Wilson, N. (2010). Small Business Management and Entrepreneurship. New York

(NY): Cengage Learning

 


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