In order to manage a business correctly, it is necessary to understand how a business operates. That is to say, there are activities that the entire business must perform, with the objective of reaching its goal, being in the majority of cases making money.
Within the theory of business administration, there are many ways to categorize and analyze both processes and business activities.
The most common problem is that it does not apply to a small company, such as a microenterprise, composed of less than five people in its workforce, or a small company, with less than 20 people working in the organization.
How a business operates
A simpler concept to be able to manage a successful business is to build in the Administration cycle.
Every business operates in the form of a cycle or a circle, where products are bought, sold, and money is made. Buying, selling and making money is repeated constantly, and the company begins to grow around this cycle, becoming a profitable business.
Obviously there is more complexity in reality, it is not as simple as buying and selling, as the entrepreneur would think. A series of activities that complement these basic functions are involved.
A more complex cycle that we call the administration cycle. Two actors participate in this cycle, being in the first place the administrator, who makes the most important decisions to give a direction to the business. On the other hand, support the organization, conformed for all the people that offer a task within the company, from the products to the people of production.
In this diagram, you can see more clearly how this administration cycle occurs.
Everything starting from the organization. There must be a planning of a place where you want to go and how to reach the proposed goals, which represents the whole aspect of the plans and decision making. Likewise, we see that it requires having a staff hired and trained for the development of daily tasks.
This is linked to the control aspect. If we simplify the task of running a business, just say that it is to control the operations. Therefore, before starting to sell, buy, serve customers, etc., there must be the necessary control mechanisms to take care of each operation.
Having control systems, whether you install software to control operations, develop plans such as budgets, programs, policies, etc., or create formats for daily control; You can go to the shopping aspect. / Recommended article: Guide for small businesses /
Purchases represent the activity where the goods, raw materials, or complementary products are purchased, necessary to offer the product or service to the seller. They involve tasks such as quotation, negotiation, search of suppliers, estimation of costs, etc. After the purchase, some companies go through the production process.
Within production, the administrator must control that the raw material is received, processed and packaged as a finished product. Also, an important aspect is the quality control to obtain a product ready for sale.
When the product is finished, it becomes part of the Inventory. This is the merchandise ready for sale. An inventory entry, storage and exit of inventory for sale is given.
At this stage, you can leave for distribution to other points of sale, or direct for sale, in a physical or virtual store.
In the Sales stage, the Administrator must control not only the daily operations, but all the activities “behind the counter”.
Among the most important, the management of problems, control and motivation, control of problems such as returns, guarantees, thefts, etc., accounting management, among others. / Read how to increase sales /
Another aspect linked to Sales is Customer Service. It is more economical to maintain a client, than to look for new prospects to make sales.
Within the administration of clients, aspects such as sales policies, lists and control of customers, attention to problems, reorder of goods, etc.
Finally, the entry of money will be given. It is important that money be considered as a process in itself, it is interrelated with all other activities, but in the end, there must be an inflow of money, the exit of money for the payment of the operation, and the remaining amount in the remaining utilities).
This is the priority of the good administrator, to define if the company is profitable or not, and