In the formation of a business, an ideal entrepreneur always has to be a future oriented business person. He should project of how his small business unit will evolve and grow to become a big corporation. With time and strategic planning, he should replace himself as the sole manager and install a board of directors to take up his functions.
The commonest way to increase the size of a firm is by increasing its capital base. Some methods to achieve this could be, plough back profits, taking loans or engaging in financial partnership. More capital means more funds will be available to increase factors of production like labor and hence increase scale of operation. A firm with a strong financial base will also enjoy certain advantages, for example, they can obtain loans at low interest rates and their assets can act as collateral.
Availability of funds will enable a business to employ qualified staff. This will lead to division of labor and specialization hence increase output. Qualified staffs are able to make viable decisions that can go a long way to necessitate a company’s growth. It will also enable the business put in place better organizational structures which will allow departmentalization and subsequently division of labor.
As the scale of operation increase, the company is able to buy and sell goods in large quantities. Such a company is likely to get trade discounts. It is also likely to incur less cost per unit in transport, advertisement and distribution.
With effective planning, coordination and directing initiatives by the management of a company, economies of scale will increase. Once a firm turns large-scale, it will further be able to enjoy such benefits as research in new production techniques, new market and new products are being introduced.
Belsheba is a business management expert. She researches and studies on big and small business strategies. Website: Business Management Solutions for efficient business operation.