Small business management: how it works and tips to do it right

A small business management has specific characteristics that all owners of this business format need to know very well. That's when doubts arise. How does small business management work? What mistakes should be avoided?

This article is intended to answer these and other questions so that, when reading it, you are prepared to make the management appropriate for a small business nowadays. Shall we go ahead?

What is small business management?

Small business management brings together several essential steps that are simplified through planning Sourcing done for each sector of the organization so that everyone is successful.

In addition to the concept, it is important to understand your concept and also your background. In the 90s, in Brazil, large companies began to have the need to outsource some activities, such as cleaning and security. 

In addition, many unemployed Brazilians saw entrepreneurship as a chance to return to the market as owners of their own businesses. Thus began the increase in the number of small businesses.

Nowadays, it is possible to find different types of small businesses ranging from offices with a small number of employees to an individual who works from home doing freelance services or products such as jewelry, accessories, snacks, among others.

In Brazilian law, there is a specific legislation that protects small and medium-sized companies, called General Law for Micro and Small Businesses. Its creation took place in 2006 with the purpose of regulating these types of business.

From there, there was also the institution of Simples Nacional, a specific tax regime for these companies. In addition to simplifying the processes, it also has a tax burden reduction to facilitate the management of small entrepreneurs.

What are the types of small businesses?

According to Complementary Law 123 / 2006, the classification of small companies is based on the annual billing. Therefore, even if a company outsources services and the profit is considerably lower, for the law, the invoiced amount will determine which of the types that we pointed out below it fits. 

Microenterprise

Although its definition may vary according to each country, micro-enterprises are understood to have a maximum of 10 employees, with the owner being one of the contributors to the firm's work.

Brazilian legislation indicates that micro-enterprises (ME) refer to limited-liability, simple, individual companies whose annual gross revenue is equal to or greater than R$ 360 thousand.

Small business

Small businesses (EPP) are those that have a turnover greater than that of a micro-enterprise – that is, above R$ 360.000 – up to an amount that is equal to or less than R$ 4.800.00 in each calendar year.

Like micro-enterprises, EPPs can opt for Simple national in which, from a single monthly payment, you can qualify for IRPJ, PIS/PASEB, Confins, IPI, CSLL, CSS, IOF, ICMS and ISS.

Another advantage of having and managing a small business involves bidding procedures, as they do not need to present a balance sheet for the last fiscal year, that is, for the period of time to make the company's accounting results.

MEI

The individual microentrepreneur (MEI) is the person who works on his own and legalizes his service by registering as a small business owner, also opting for Simples Nacional.

This type of small business was created in July 2008 with the intention of placing informal workers within the legal framework from a reduced tax burden from the article 966 of the Brazilian Civil Code.

To qualify as MEI, the entrepreneur must act individually (that is, without partners), perform any of the activities available in the Annex XIII of Simples Nacional and have an annual turnover of up to R$ 81.000.

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How does small business management work?

Now we present the essential points to run a small business.

Get to know the business landscape 

When developing the management of a small business, the first step is to know the scenario in which it is inserted. Even if the business is already in operation, it is essential to go through this step which includes:

• survey of direct competitors, that is, those competing in the same market;
• knowing the profile of customers, as well as their consumption habits;
• ter knowledge the capital needed to keep the company running monthly;
• list what are investments priorities within the company’s management.

This way, an action plan can be drawn up based on the objectives that the firm needs conquer in the medium and long term.

Make competent people management

Os employees are representatives of your brand, so you must choose them well so that the product or service offer is of Quality and give the customer a great experience.

Therefore, to select the suitable professionals to the business, make sure they are aligned with the organizational culture, that is, they have skills and habits that are consistent with those applied within the company.

In order for these values ​​to be constantly remembered, the periodic practice of corporate training is also recommended.

Choose the suitable suppliers

This is also an important step in business management, because even though the suppliers are not your employees, they represent your company when carrying out their activities. 

Shall we see an example? Suppose a customer buys the product from a store and the shipment is made by a third-party carrier. However, delivery takes time and there is not even the possibility of tracking the product to know if it is on its way.

No matter how careless the supplier is, the customer will attribute it to the store. After all, the purchase was made on her and the choice of the transport company was also made by her.

So, so that situations like this do not occur in your business, choose suppliers that have experience, quality, trust and respect for deadlines.

Financial management

The financial part of a company is one of its pillars of success once management is well done. All entries and exits need to be recorded so that there is control and certification that the business is in the blue.

Ideally, these insertions should be made in a program of gestão financeira. But if it is not possible, it may be an Excel spreadsheet at first. 

From this organization, you can know what the spending really needed, investment possibilities and which paths are most profitable.

Integrated management system

One of the most confusing aspects of managing a small business is using multiple programs that perform specific functions: one for finance, another for customer service, one for sales, and so on. Unifying them all in a single software makes work simpler and more effective, which makes it highly recommendable to acquire an ERP.

With this tool, all departments use the same software, which improves communication between them and makes work more efficient and faster.

As pointed out in this article that we produced, there are several ERPs on the market, including some with free plans to get you started.

💡 Tip! Do you want to optimize your company's management with a digital signature? Click here and create yours now!

How to manage a small business?

When we plan the financial management of the company, it is common for some mistakes to happen. Here we highlight the main ones so that you can avoid them as much as possible while managing your business.

1. Have a pro-labore

Pro-labore is the term given to the salary defined by the business owner for himself.

It is not uncommon to see companies whose owners appropriate the profit (or even worse: the invoiced amount) considering that the money belongs to them. This is wrong.

Every entry belongs to the company and is intended for payments and investments to make the business grow. Therefore, the owner must withdraw only the amount that corresponds to his salary.

2. Separate personal and business accounts

This is also a common mistake: using the personal account to manage company payments.

Even if you have a control over the values ​​belonging to the business, mixing them with the personal bank account gives rise to the first mistake: appropriating the company's money.

As much as the finance of small companies is managed by the owner, in medium and large corporations this work is done by the financial manager. So, if your idea is to scale the business, it is important to have this practice of separating the accounts from the beginning.

3. Comply with labor laws

Unlike large companies, small entrepreneurs are the ones who perform the HR functions, so they are the ones who do the interviews, hire and sign the work papers of their employees.

For this reason, it is important to be aware of all the rights and duties that exist between contractor and contractor within a company, such as:

• documentation required for contracting;
• recording of salary, bonus and benefit payments;
• working days and hours corresponding to the contracted functions.

It is essential to have the services of an accountant who can help with this part. If the contractual process involves someone who resides in another city or country, the contract admission form can be signed electronically.

4. Manage documents

Every company has documents signed with its employees, suppliers and customers that must be kept very carefully. However, this requires physical space, which can be a problem if the workplace (either an office or the microentrepreneur's own residence) is small.

Therefore, it is recommended that documents are digitized, because instead of separating space in cabinets and drawers, they can be stored in the a cloud.

By following the tips presented in this text, you will be able to manage small businesses efficiently.

Since we touched on electronic document management as the last topic, how about delving into the subject and seeing how it can work in your company? Check out the article we wrote about it here.!