ST PAULS UNIVERSITY

GROWTH AND PERFORMANCE OF A SMALL BUISNESS

(A CASE STUDY OF SHARPIS GIFT SHOP)

MILLICENT KAIA
BBAM/NKR/2018/15

This is a project report submitted to thedepartment of business administration in partial

fulfillment of the degree of businessadministration and management

APRIL 2015

CHAPTER ONE: INTRODUCTION

1.1 Back ground information.
A small business is a normal private owned co-operation, partnerships or sole
proprietorships. Small companies are common in many countries depending on the
economic system in co operation. Small companies are not to be discriminated,they
serve the requirements of larger businesses e.g. for photography services.
In the UK mostof the businesses are small. About Two thirds are owned and run by one
person. Nearly 90% employ less than 6 people. They are also an important source of
employment. Just over 2.5 million UK workers are self employed; one in eight of all
workers. It is from these small companies that tomorrow's big names will probably arise
(Goldman Sachs, 2010)
According to McClelland (1971), small business constitutes a major force in the U.S.
economy. There are more than 27 million small businesses in this country, and they
generate about 50 percent of the gross domestic product. The millions of individuals who
have started businesses in the United States have shaped the business world.
Workers first enter the business world working for small businesses they are either are
self-employed or work for businesses with fewer than five hundred employees. Small
firms hire more frequently and fire more frequently than do big companies. This is
because at any given point in time, lots of small companies are started and some expand.
These small companies need workers and so hiring takes place. But the survival and
expansion rates for small firms is poor, and so, again at any given point in time, many
small businesses close or contract and workers lose their jobs. Fortunately, over time
more jobs are added by small firms than are taken away.

The important role that these and other companies of similar size play in the Kenyan
economic growth has often gone unappreciated especially because little is said about the
number of direct and indirect jobs that they create. The small business can also help to
achieve the broad goals outlined in the Vision 2030 of making Kenya industrialized and
with a high quality of life for its citizens. The companies can also be showcased as
potential avenues for job creation, especially among the youthful population as they
dispel the myth that only employment can. This is significant in a country that
traditionally exports primary products. What these companies teach the others is that the
one way to create wealth is to add value to goods and services, whether these are for
export or local consumption.
Small business may not

generate as much money as large co-operation, they are a critical

component of and a major contributor to the local economy, they bring growth, innovation to
the community in which the business is established, the economy is also stimulated by jobs
being provided by small business.

1.1 Statement of the problem

Most of the small businesses within the world start out with high expectations and some
of these businesses dontlast more than 3 years within the industry.
Burlburg (2012, notes that, about 40% of businesses dont make it to their third or fifth
year. Lack of capital to spend on promotions is a cause to the downfall of a small
business.Most of the young business have failed

due to

lack of proper

funds and

having unrealistic expectations. The wrong location of a good business can lead to its
downfall. This is because location is part and parcel of any successful business. A good
location may facilitate a struggling business to ultimately thrive, thus a good company
situated at a wrong location is a disadvantage.
Overexpansion leads to bankruptcy though this can be avoided if more concentration is
focused on the company slow growth. Thus an expansion can take place if a solid base is
established and steady profitability seen .To overcome this problem, a well managed
small business can make it to their fifth year. The government has a role to play by
creating the right long term conditions to enable business organization to be a success to
the economic growth by providing quality information and support to enable employees
to recruit the right skill and resources ,department for business innovation and skills,
(2009). For a business to be successful and function properly, they should fully embrace
and the practice the motion of employee management (R.Robinson, 2012)

1.2 Purpose of the study

The purpose of this case study is to describe the growth and performance (sharpis gift
shop) of a small business that has been in existence for 3 years and is located in Nakuru
Central Business District.
1.4 Research questions
1. How does the management of a small business contribute to the growth and
performance of the business?
2. How do the challenges that the business faces enhance the growth and performance of
the business?
3. How did the initial preparation done before the business was started to the growth and
performance of the business?

4. How does the performance of the employees affect the growth and performance of the
business?

1.5 Assumption of the study.

The business owner will be able to understand and will give truthful and honest answers to
the questions and that she will not recommend me to another type of business.

1.6 Limitations of the study.

During the research, challenges came across that posed as the constraints. Time constraint,
was present in the interview since the business owner did not have time for a long interview.
Also another limit was the language barrier whereby it was difficult to communicate to the
respondent.

CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction
All entrepreneurial ventures are business ventures but not all business ventures are
entrepreneurial ventures. In this section, the startup process, the management and challenges
that face a business will be discussed in depth. Many people start up a business simply
because a gap or a niche has been found in the market which they want to fill. The lack of
preparation may explain the high mortality rate for many small businesses. Successful
entrepreneurs will first conceptualize their business. For any entrepreneur, starting up a
business is achievable though there are some factors that need to be considered in order for
the business to start and be able to be a success. Entrepreneurial venture start up is ideally
set of steps the venture goes through from the time its launched and starts opening. The
steps form the start up stage of the venture and thus forming the foundation of the business.

2.2 Key factors when starting up a business.

Choosing a business location is perhaps the most important decision a small business owner
will make, so it requires precise planning and research. This is because the location of
business is part and parcel of its success. Most businesses choose a location that provides
exposure to customers. When choosing a location

there some few factors that should be

considered such as brand image, competition local labour market safety, and the zoning
regulations. The location of the business should be friendly thus understanding laws and
regulations

imposed on businesses in a particular location are essential. As one looks to

grow the business, it can be beneficial to work with a small business specialist.

In the USA, programs and on line tools are offered to help small business owners start up
and succeed. Many states offer online tools to help small business owners start up and
succeed. Resources such as SBA Offices, Small Business Development Centers, Womens
Business Centers, and other government-funded programs specifically support small
businesses.
A business might also want to restructure or modernize its operations. It might do this by
shutting its less profitable operations due to bad location and open branches in locations that
offer more business potential.
A business will have to consider many factors when determining where to locate a new
branch or operation. Usually, it will have to balance several factors in making a decision such
as choosing a site though sometimes one factor may sway the decision.
It might choose a site that has easy access to raw materials. For example, many frozen food
factories are located near fishing ports to reduce transport time taken and to keep fish fresh.
The key factor could be the transport and service infrastructure. Many businesses require easy
access to good road and railway links and modern telecommunication services. These ensure
that they can meet service or delivery deadlines.

Another key factor to consider when starting up a business ,is that every entrepreneur runs
their business idea by their nearest information they find useful, in order to take any business
idea to the next stage it is essential to prove, using information that, can be reliable. In fact
the idea is wanted or needed by the target market. Despite this many entrepreneurs only
undertake this minimal amount of market research (E. Bundlerberg , 2013).
It is important to gain responses from an unbiased target market this is because they will be
honest views Market research is significant for every business, and should not be just a oneoff activity. Successful businesses conduct research on a continual basis to keep up with
market trends and to maintain a competitive edge. Regardless of whether one is starting or
expanding the business, market research is essential to understanding the target market.
Business owners conduct research for many reasons such as to set realistic targets such as
growth, sales and the introduction of new products or services and also to examine and solve
business problems with in the business. According to Henry Bwisa (2011) the benefits of
market research for entrepreneurs range from finding hidden niches and preserving capital to
building customer loyalty and identifying more business opportunities with existing
customers. While market research is crucial for business start up , its also essential for
established businesses. Its the accurate information about customers and competitors that
allows the development of a successful marketing plan.
Accurate and thorough information is the foundation of all successful businesses because it
provides a wealth of information about prospective and existing customers, the competition
and industry in general.

Capital is also another key factor to consider when starting up a business, chances are one
will need some form of capital, which simply refers to the money that finances the business.

Most small businesses fail because they

under capitalize their business. Therefore, it is

important to know how much of capital will be needed in order to start or and run a business
and know how much money will actually be needed to start and to run the business until
one can reach a break-even point. Capital can be gained

through equity investment,

whereby, with equity investment, an investor makes money available for use in exchange for
an ownership share in the business. If one uses equity investment, be sure to consider how
much ownership one is willing to give up, and at what price.
Equity investment includes any money from individuals. This money may be from personal
savings, inheritance, personal loans, friends or relatives, business partners, or stockholders.
These funds are not secured on any of the business assets.
One is more likely to get start-up funding from personal savings, inheritances, friends, or
family. 76% of small businesses in British Columbia financed their business with personal
savings , according to statistics Canadas survey of financing of small enterprise (2007).
Small business BC,(2010) states that throughout the course of the business, personal
investment should be kept at least 25% in the business to increase the equity position and
leverage. In order to get capital, one has to be qualified, whereby there has to be cash flow,
the ability to repay the cash you borrowed. This is measured using the cash flow forecast that
one creates in the business plan and also collateral which is the value of assets that one is
willing to pledge for assurance that will repay the loan.

When starting up a business, its proper and wise to check the competition, and take time to
visit any competitors, or similar styles of business. Another way to get to know how they do
their business and this gives one the opportunity to get to know how the business offering is
going to be different and ideally better than other competitors.
Its important to know and also understand the market; the business will be venturing in to.

The market includes customers, suppliers and competitors, though these factors contribute to
the success of the business.
Getting to know the taste and preference of the customers buying from the business owner is
significant to the business. Getting to know what they like, how much they will spend, what
they enjoy and what they need will give you a better understanding of what they will want
from you, enabling you to translate your product into something that will sell to your target
market

"We started by looking at the industry generally and found there was a gap in the market. We
spent a lot of time researching the market, to understand what others were doing and where
we could create value. "Luke and Sam , the founders of thousands yard films. This just
shows how important it is to evaluate other competitors .This will give you the insight needed
into how to make a product or service even better on price and quality.
Its essential for any entrepreneur to take their time at the start to properly research what
their customers wanted, what their competition is doing and where they can create a niche for
themselves , forcing change to create clear water between themselves and the rest of the pack.
(C. James , 2009)

When starting up a business its important to understand the law and regulations, whereby
some leading business representatives, debate business laws tend to be a heavy weight on the
small business specially when starting out. This is because many mangers struggle to keep
pace with the ever changing legislation.
But as well as giving business managers more work to do, the cost implications of complying
with business laws and regulation can be considerable, especially where significant legal

changes are introduced. Potentially, there are also fines for firms that fail to live by the letter
of the law.
While it seems much legislation has been created by those with no experience of running a
small business, there are many laws that protect owners interests.
Such legislation is designed to stop businesses from being harmed by the illegal acts by
competitors, customers, suppliers, employees and even government.
Complying with every rule and regulation might seem intimidating if one is about to start up
a new business. However, many people find it painless enough but much will depend on the
nature of the venture. .
For having an interest in starting a business , one should find more about licenses and
registrations one might need , laws covering how to protect the staff and customers; making
sure the business is insured and, of course, the health, safety and environmental regulatory
regime.

2.3How to manage a small Business.

Henry Bwisa (2011) defines management as a process whereby scarce resources are
combined to achieve organizational goals. Without management , people would pursue their
own objectives independently and this would lead to a waste and inefficiency.
Management of a business, especially the staff should be effective, because this is the
establishment and growth of the business. The key to a good business is to examine the
market and be able to get profit by creating jobs .Despite management being essential ,its an
area that has been mis-understood ,this is because people focus on the out of a business
rather than how to manage a business.

When hiring any staff member, it can be hard to find the right person with the right skills .Its
important to not underestimate the value of networking. When managing employees within a
business, its important to hang on good employees, retention of employees is as important
as the initial hire. An individuals suitability to particular job is the single most important
factor in job performance and retention .its proper to listen to the employees and continue
providing training and skills development.
Managers are required to motivate employees to do their best in any task assigned to lead to
the appropriate goal and also guiding the members of the organization to move towards the
set goals thus a better performance is due to ability and motivation.

Product management

is also a key factor that focuses on products and services being

produced. However, concern of production operation manager is the effective management.

This is because any successful business must have an effective

and efficient production

management.
A product is anything that can be offered in order to satisfy a want or a need. Planning is
required in order to cover production, planning, quality control, inventory control and raw
material handling. Production planning and control determines limits or levels of production
process in some future period of time. The aim is to ensure customer receive a product or
service according to the organizational schedule. To carry out proper production, planning
and control inputs are necessary .These include sales, order to reflect level of demand. When
quality control standards and number of inspection and storage packaging take place, this
will ensure a result of effective production ,planning and control .
2.4 Challenges Facing a Small Business.

According to Isaac Maragia (2008), many small businesses are faced with many challenges which
affect their operations. Small businesses owners must either be heavily capitalized or be able to
pick up extra income to shore up cash reserves when needed. This is why many small
businesses start out with the founders working a job and building a business simultaneously.
While this split focus can make it difficult to grow a business, running out of cash makes
growing a business impossible.
Money management becomes even more important when cash is flowing into the business and to
the owner. Although handling business accounting and taxes may be within the capabilities of
most business owners, professional help is usually a good idea. The complexity of a business'
books go up with each client and employee, so getting an assist on the book keeping can prevent
it from becoming a reason not to expand.
The biggest problem that a small business faces is , hiring employees that can truly ensure
business growing. It's difficult to compete with the larger businesses for the same talent when
there are limited funds. The solution is basically helping them to think as a partner would.
Another challenge is being able to able to secure the business. About 31 percent of small business
owners said they are concerned about having customer credit card information stolen through a
point-of-sale breach, according to a recent Manta survey(2012).Though small business
owners don't typically have the depth in security knowledge, time or resources to effectively
protect themselves against targeted attacks, it will be important for small business owners to
continuously educate themselves in order to protect both their business and their customers.

The biggest challenge for any business is adding value to the economy. A lousy economy poses
as a challenge whereby, it is difficult to get new customers and generate sales when people and

businesses are not spending. This is why it is so important to distinguish the business as being
different and better so people/businesses receive a strong benefit from doing business with, that
they do not receive anywhere else. Being average in the business realm is another factor that
leads to a failure.

Another challenge is that many larger businesses have professionals who manage the
administration, training, and management of employees. Small businesses, on the other hand,
most likely will not even have a human resources professional on staff. Theyre lucky to even
keep their HR files in order. Handling HR tasks can present a challenge for small business
owners.
Small business owners may have no training in these areas such as staffing, hiring and may
be especially vulnerable. Nevertheless, small business owners should try to keep up to date
with changes in payroll and employment laws, and look to a mentor when questions arise.
The field of human resources continues to evolve with new technology for recruitment and
employee screening, personality and skills testing, training and development, and payroll
functions. Technology is available for small businesses as well, allowing them to access vital
HR info on the fly. Small business owners should consider a human resources tool such as
online HR software designed for small business. Small business owners can keep track of
hiring information, emergency contacts, census data, and benefits packages. With these
advancements in technology, small business owners can successfully manage the human
resource tasks.

2.5 Employees Performance.

For employees performance to have a huge effect on the growth of the business, its proper
to establish an employee performance management. This is a process whereby a shared
work force understanding is employed. Its all about aligning organizational objectives
with employees, agreed measures, skills, competency requirements, development plans and
the delivery results.
The emphasis is on improvement, learning and development in order to create a high
performance.

When performance management is implemented ,organizational performance outcomes will

increase very quickly. The performance management drives organizational performance
outcomes. Employees that achieve the organizational goals can be rewarded with favorable
reviews and bonuses in line with their performance and contribution to the
organization.hieved when the employee and manager c
Communication improves, this can be achieved when the ng and manager communicate and
agree on changed objectives to suit continuing changes in conditions andpriorities.this is an
insluive nd collaborative process, which ensures that the employee has input and doesnt feel
they have wasted the year.