Report on how small and medium businesses operate.

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Abstract 2

Introduction. 2

Methodology. 2

Small businesses. 2

The beginning. 3

Networking. 4

Finance. 5

Marketing. 5

Innovation. 6

Conclusion. 6

References. 6

 

Abstract

This paper will deal with the report on how small and medium businesses operate. Herd Hire is the organisation which is discussed in the paper. Information has been collected from Herd Hire with the help of primary data collection and different factors such as networking, marketing, finance and innovation are evaluated based on the information collected from Nigel, Managing Director of Herd Hire.

Introduction

This paper will focus on the providing a report of how a small and medium enterprise operates in comparison to the large organisations. The report is based on Herd, hire a van service which is managed by Nigel Schroder who is the Managing Director of Herd Hire. Nigel is the majority shareholder in the organisation and manages the finance function of the organisation. There are about 15 employees and a total of 6 branches and 544 vans. The firm is based out of Epsom and South West London from where customers can hire vans for personal or business purpose (Herd Hire, 2016). The firm is focused on providing high level of customer service and the objective of the organisation is to provide best local prices, clean and tidy vans, best customer service and no hidden extras. The firm also provides flexibility to its customers so that they are able to accommodate last minute customer request such as scale up or scale down at short notice, inclusion of service, maintenance and repair, choice of vehicles, signwriting and availability of wraps and any number of vehicles on a given plan. It has been highlighted on Herd Hire (2016) that “Herd Business van hire is a low cost, flexible and scalable alternative to long term hire and leasing. It enables businesses of all sizes to release cash and increase or decrease their fleet size at will.” This would suggest that the organisation is customer centric and focuses on delivering a solution to the customer. The firm is also flexible in terms of changing its terms based on the needs of the customer. This would help to ensure that the customers are happy with the service and return back to the organisation for doing business in the future. The key benefits of using this service are reduction in fuel and emission costs, zero maintenance costs, minimizing the downtime for vehicle and driver, claim back VAT, no depreciation and disposal risks and more profit for the customers. In addition to Nigel, the other people in the organisation are Carol Baldwin leading our franchise team, Michelle Green running Herd HQ in Epsom and Rebecca McBride, Herd Business National Sales Director (My Herd, 2016).

Methodology

The research used primary data collection process in order to gather information from the organisation. The data collection process was based on semi structured interviews and Nigel participated and provided his inputs for the different questions. The questionnaire was based on the key areas that the organisation focuses on and its operation in the market.

Small businesses

According to El-Gohary (2010) and Mulhern (1995) it has been pointed out that Small business enterprise play an important and major role in the world economy. These organisations are considered to be the main contributors to economic development and growth of the country. According to Gov (2016) it has been pointed out that small businesses accounted for 99.3% of all private sector businesses at the start of 2015 and 99.9% were small or medium-sized (SMEs). The small and medium enterprise also creates an employment of 15.6 million which is 60% of the overall private sector in the UK. In terms of the overall contribution to the economy it has been pointed out by Gov (2016) that the annual turnover of the SMEs was around 1.8 trillion pounds which is 47% of the overall sector. The graph below shows the contribution of the different businesses towards employment, turnover and businesses. It can be seen from the graph that the small and medium enterprises contribute to the maximum to all these sections. There has also been a significant increase in the number of businesses in the UK over the past few years. According to Gov (2016) the number of SMEs has increased by 1.9 million (56%) since 2000 and the increase in the number of employees is around 18%.

784451_Graph

It has been pointed out in a report published by Young (2015) that this is the golden age for the development of the small businesses as there has been a record number of firms which have started operation since 2000, in addition to this there is a record number of people employed in this sector (48% of the overall private sector), the market environment for the small enterprise is very supportive now with employment allowances available to them, subsidy on business rates, apprenticeship grants and tax benefits and more important the barrier to starting a new business is diminishing. Technology has helped in reducing the barriers to entry and with the help of internet there are a large number of businesses which have started their operations. It has been pointed out by Young (2015) that the internet represents about £19 billion business opportunity. In addition to this there are a number of support processes which have been developed by the government which can ensure that the small firms are able to access finance for their growth.

The beginning

It was identified that there was a need for customized solution for van hirers in the UK. Most of the large rental houses had fixed plans which could not be changed as there was no flexibility. There were a lot of hidden charges and customers were not given good vehicles. This resulted in an increase in the overall cost of operation. In order to answer to the needs of the customer in a very effective manner Herd Hire was established. The firm developed a solution for the customer, which helped customer to focus on their business and the team at Herd hire would manage the fleet. The key differentiation of the firm from other larger firms is that the firm has brand new vans in the fleet which helps to reduce the running cost and maintenance, there is no contract or commitment hence the level of risk involved is very low and the payment terms are very simple. This helps to ensure that the needs of the customers are meet and they return back to do business. Flexibility is also an added advantage for the firms operation such as scaling up or down the fleet size, choice of van sizes and long term or short term period. The other companies such as Hertz and Northgate van hire do not provide these services. In order for any organisation to be success in today’s operating environment they need to be customer centric. Develop solutions based on the needs of the customer and only then you will be able to generate profits and retain customers. In today’s operating environment customers have access to information and options. They would only do business with firm where they feel they are getting the value for money.

Networking

According to Shaw and Conway (1999) and Haong and Antoncic (2003) it has been pointed out that networking is important for development of relationships in the field of commerce. This activity of bringing together individuals and organisations together in formal business networks has been funded by the UK government in a number of areas. Networking is the process by which the entrepreneur of the organisation develops contacts for trading and business development. This would mean that networking would enable the owner to meet new people and share experiences. This activity would give them a platform to learn from each other and improve their business presence.

Nigel explained that networking for him was a medium through which he could meet new people and discuss with the about the opportunities in the market and the experiences they had in their businesses. It helped in the sharing of best practices and challenges which were faced in other organisations. Networking helped Nigel to recruit a number of people in the organisation who were referred by other people. Nigel explained “I do networking on a regular basis with customers, clients and other business owners. Networking with customers helps to understand their needs from our organisation and also helps me to develop solutions with the team that can help to resolve customer problems. Spending time with the clients helps to ensure that the operations in the organisation are strong and there are no loop holes in the service delivery. Meeting other business owners helps to gain a different perspective towards doing business, we share best practices, discuss about new technology and the ways in which it can impact the different businesses and also talk about challenges in the market and how to overcome them. In addition to this, another important initiative which is run by the UK government is very helps which is known as business link. It has helped me to connect with key people who have helped me in improving the overall business operation. With the help of networking I have been able to gain and increase my customer base. I am able to meet new customers and offer them the solution we have in the networking events and this has helped to improve our business performance and market share.” Thus it is evident that networking has had positive business impact on the organisation and has also improved the performance of the organisation. It has also helped the firm to increase its customer base. Nigel pointed out “Through networking I have been able to get in touch with most of my key customers such as Yodel, Amazon, Alliance, Whistl, Flowrite and Knowhow. I was able to get contact for a few of these businesses while networking with customer at one of the events. The follow-up to that lead helped in getting the business from these customers. Face to face networking has really helped our business. We have also started social networking however the one which actually helps us to create leads and opportunities is the face to face networking functions and events.”

Finance

It has been pointed out by Bygrave (2004) that entrepreneurs help in driving the small business however the finance will enable the firm to propel. There has been an increase in the availability of funding from external sources by the implementation of the different initiatives such as grants, tax reforms and small business loan schemes. However the preference of the small business owners is still focused on development of internal source of funding for the organisation. This is mainly to ensure that the control of the firm is with them. It is evident from the discussion that Nigel owns the majority shares for the firm and therefore has the control of the organisation. It has been pointed out by Burns (2007) that in the initial stage of the start up the firm focuses on avoiding using all the money which is available to them and focus on using people resources and borrowing of funds. The money for the organisation is mainly aggregated from founder, family or friends. Nigel pointed out “The initial investment for setting up the organisation and also developing the operation was from my own earning and from my family and other partners in the organisation. We initially considered applying for loans however then we dropped the plan and worked with our own investment. This helped to ensure that we kept a watch on our spend and focused on reducing them.” It has been pointed out by Majluf and Myers (1984) that firms will try to secure funds from places where there is least amount of resistance as it is readily available. This supports Nigel’s strategy of using funds from self and friends. However over the years the firm has been able to generate substantial profits which have ensured that it has been able to perform well. The firm now has a health financial pool which is used for the day to day operation and other activities which the firm would want to implement. Nigel takes care of the financial planning of the organisation and helps to identify and develop the cash flow for operations.

Marketing

According to Stokes (2000) it has been pointed out that marketing focuses on the way in which customer is at the centre of the organisation and is guided by the segmentation, targeting and positioning of the product or service which is promoted with the help of a clear marketing mix strategy (this focuses on the 4Ps strategy where the P are Product, price, promotion and place). It has also been pointed out by Chartered Institute of Marketing that marketing deals with the identification, anticipation and satisfaction of the customers with a positive impact on profitability. Nigel pointed “We do a number of marketing activities in order to improve our brand awareness and positioning. Initially, when we started the firm we were focused on reaching out to specific customer segment who are looking for renting. We wanted to create a niche segment for our offering however after the initial phase we started to focus our attention on focusing our budget on brand awareness and demand generation. We spend around 60% of our marketing budget on brand awareness and 40% on demand generation. The process helped us to focus on creating initiatives which helped to improve voice of customers and then demand generation helped in creating leads which could be followed up by the sales team. Due to the limitation of the budget that we had for marketing our main focus was on word of mouth marketing, we also worked with different partners on co-opt basis in order to share the overall cost of marketing. All these activities helped in ensuring that we were able to generate priority leads for the sales team. In addition to this we also started online promotion to ensure that we are able to use the power of internet and social media to improve our business. The online medium helped us to optimize out cost of marketing and also ensured that we were getting a good return on investment.”

Innovation

The focus of innovation is to help the organisation to develop options which can help it to meet customer needs and also improve the overall performance of the business. Innovation is extremely important for an organisation as it would help to ensure that the firm is adapting to the changing needs of the customers and is also able to meet them. Herd Hire mainly focuses on offering solutions there innovation for them would be different ways in which the solution can be packaged to ensure better customer service. The firm developed different types of offerings and flexibility for the customers which have helped to improve its reach and customer satisfaction levels. The organisation is also able to effectively use technology in order to provide customers with information regarding their fleet, branches and other information. The booking of the vans can also be done online at the touch of a button. All these factors will help to improve the overall experience of the customer with the brand.

Conclusion

Therefore from the discussion it is evident that the small firms focus on a number of factors in order to ensure that they are able to meet the customer needs and also deliver better customer service. The focus of these businesses is to be flexible and accommodate the customer request in order to improve their business. Herd hire also focuses on delivering customized solutions to the customer in order to ensure that they can deliver better customer experience and also improve retention of these customers. The discussion highlighted the different factors such as networking, finance, marketing and innovation which have helped the business to perform better.


 

References

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Bygrave, W. (2004). Founders, Family, Friends and Fools, www.businessweek.com (Accessed 24/04/2016).

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Herd Hire (2016). About us. www.herdhire.co.uk (Accessed 24/04/2016).

Hoang, H. & Antoncic, B. (2003). ‘Network-based research in entrepreneurship: a critical review’. Journal of Business Venturing, 18: 165-187

Majluf, N. and Myers, S. (1984). Corporate financing and investment decisions when firms have information that investors do not have, Journal of finacial economics, 13 (1984), 187-221

MULHERN, A. (1995), The SME sector in Europe: A broad perspective. Journal of Small Business Management, 33, 83 -87.

My Herd (2016). My Herd. www.herd.co.uk (Accessed 24/04/2016).

Shaw, E. & Conway, C. (1999). ‘Networking and the small firm’, in S. Carter and D. Jones-Evans (Eds.), Enterprise and Small Business: Principles, practice and policy, pp.367-383. London: Addison Wesley Longman.

Stokes, D (2000). Putting enterpreneurship into marketing, Journal of research in Marketing & Entrepreneurship, 1(2), 1-16

Young (2015). THE REPORT ON SMALL FIRMS 2010-2015. www.gov.uk (Accessed 24/04/2016).