A Model of Small Business Growth

Transcription

1 A odel of Small Busness Growth artn achek, Ondrej achek Abstract Small and medum enterprses (SEs) play an mportant role n the world economy and ts development. In partcular, small and medum enterprses generate new jobs, support nnovaton and stmulaton of prvate ownershp and entrepreneural sklls. At the same tme, the growth s an mportant and desrable stage for all for-proft organzatons. However, current models of small busness growth are rather theoretcal and most of them are not sutable for a practcal everyday use. In ths paper, we present a model of small enterprse sales growth, whch s based on two axes: the average bll and the frequency of vsts. Consequently, we derve partal factors whch affect ths growth and propose tools to manage growth the proftablty matrx and segmentaton matrx. The use of the model s demonstrated on the example of hardressng salons, representng busnesses provdng servces. The model may be used n managng small busnesses as well as n the educaton of small busness owners. eywords Small and medum enterprses; Growth; odel; Educaton S I. INTRODUCTION mall and medum enterprses (SEs) have become a subject of nterest of academcs, researchers, and practtoners. The vast majorty of busnesses around the world are small and medum-szed enterprses, and these enterprses play a vtal and mportant role n the world economy and ts development. The mportance of small and medum enterprses les n job creaton, nnovaton and stmulaton of prvate ownershp and entrepreneural sklls. oreover, small busnesses are flexble and able to adapt quckly to a changng envronment, whch s becomng mportant n tmes of economc crses. Small and medum enterprses generally employ the majorty of the actve workng populaton and sometmes, they are consdered to be more mportant than large frms and corporatons [20]. The defnton of small busness s not standardzed and vares n dfferent countres, as well as n ndvdual sectors. In European countres, a small busness s usually defned as a company that has less than ffty employees, whle medum- The authors would lke to express ther grattude for the fnancal support of the Unversty of Economcs, Prague - the paper s one of the outcomes of the research project No. F/3/202 Busness Strategy on Globalzed arkets.. achek s wth the Department of arketng, Faculty of Busness Admnstraton, Unversty of Economcs, Prague, Wnston Churchll Sq. 4, Prague 3, Czech Republc (e-mal: [email protected]). O. achek s wth the Department of Busness Economcs, Faculty of Busness Admnstraton, Unversty of Economcs, Prague, Wnston Churchll Sq. 4, Prague 3, Czech Republc (e-mal: [email protected]). szed enterprses are defned as companes wth less than 250 employees. In the Unted States, a small enterprse s defned as an enterprse havng less than 250 employees, whle a medum-szed enterprse s defned as an enterprse wth less than fve hundred employees. However, small busnesses are often characterzed, nter ala, by a chaotc and smple management and the omnpresence of the owner n all busness processes, ncludng HR management, marketng, fnancal management etc. For ths reason, the educaton of small busness owners sgnfcantly mpacts ther growth and compettveness. At the same tme, n a rapdly changng and challengng socety, the need for entrepreneurshp educaton and tranng has permanently ncreased [7]. However, the exstng models of busness growth are rather theoretcal, and most of them are not sutable for a practcal everyday use. In ths artcle, we present a model of sales growth, whch can be used n managng a small busness whch sell products, goods or servces, as well as n the educaton of owners of small busnesses. In the frst part of the artcle, we deal wth the exstng models of busness growth and ts measurement. In the second part of the paper, we formally derve our model and present ts two axes the average bll and the frequency of vsts. Even f the model s mathematcally founded, the knowledge of mathematcs s not necessary for ts use n practce, whch can be seen as one of ts advantages. Subsequently, we propose two matrces: the proftablty matrx whch can be used n defnng the most proftable products and servces, and the segmentaton matrx whch can be used n lne wth the abovementoned two axes of our model. In the thrd part of the artcle, we llustrate the use of the model on a practcal example: the case of small hardressng salon management. II. BUSINESS GROWTH AND ITS EASUREENT Some theorsts attempted to model the evoluton of busnesses usng corporate lfe cycles. The stage model or corporate lfe cycle theory orgnated from economc lterature ([9] or [22]). Ths model descrbes the progresson of a frm through multple growth phases over tme. For nstance, ller and Fresen [6] descrbed fve common stages of frm development: brth, growth, maturty, revval, and declne. However, the number of stages n corporate lfe cycle models s not standardzed [2]; some theorst consders more or less than fve stages of busness lfe cycle. The mportant thng to pont out s that from the perspectve Issue 3, Volume,

2 of corporate lfe cycle theores, the growth represents only one of the stages n the busness lfe. uch attenton has been devoted to ths stage snce a permanent growth s desrable and mportant for all for-proft organzatons. At ths pont, we can menton the wdely-cted conceptual artcle of Grener [8] who presumed that busness growth conssts of fve phases: growth through creatvty, growth through drecton, growth through delegaton, growth through coordnaton, and growth through collaboraton. Sometmes, economc theorsts dstngush two knds of busness growth: organc growth and growth through mergers and acqustons (norganc growth). However, n the case of small and medum enterprses, almost all growth s supposed to be of organc nature [4]; n ths artcle, we wll deal wth the organc growth only. In ths paper, we wll concentrate on the growth stage of the corporate lfe cycle. Growth s a process functon whch happens over multple tme perods. A small frm growth can be represented by the change of some amount over tme. The most frequently used measures of growth are probably proft, physcal output n natural unts, sales n monetary unts and market share (see e.g. [5] or [26]). It s presumable that these measures are mutually nterrelated. However, the nterdependence between these varables s not clear and the emprcal results on ths topc are nconsstent and mxed. For example, evolutonary models suppose that proftablty s the man factor of frm growth (see for example [] or [7]). Other authors found that the proftablty had a postve mpact on the growth rate, but growth rates had a negatve mpact on the current year's proftablty [24]. Sometmes, proftablty s even consdered to be n a drect trade-off relatonshp wth frm growth because proftablty s concentrated on short-term results and postpones nvestments whch are sources of growth, but ther mpact s not mmedate [5]. We may also menton the term sustanable growth rate whch s defned as the maxmum yearly ncrease n sales whch s consstent wth the gven condtons and lmtaton of the fnancal polcy of the frm. Hggns [9] defnes the optmal (sustanable) frm growth rate as g = P R A T () where P denotes the return on sales (proft margn) usually defnes as the rato of earnngs over sales, R denotes the plowback rato ( dvdend / earnngs per share), A denotes the asset turnover (sales / assets), and T denotes the equty multpler (assets / equty). However, the applcaton of ths model s lmted when the above-mentoned parameters are not stable (constant). We wll further consder that the sales growth of a frm s a suffcent measure of ts growth, because sales growth can be consdered to be a normal aspect of the phenomenal growth of small enterprses [6]. A. Factors of Busness Growth Emprcal evdence shows that most small frms do not manage to grow; nstead, they start and go out of the market small. Ths s perhaps due to the fact that these companes serve only local markets and therefore have no sgnfcant growth potental (see e.g. [2] or [23]). The growth may be nfluenced by external and nternal factors whch may or may not be affected by the frm tself. External factors of small frms growth often consdered n the lterature are dynamsm, hostlty and heterogenety [6]. For example, frms operatng n dynamc regons or ndustres are more lkely to be growng (see e.g. []), but the growth s negatvely affected by envronmental hostlty and the overall rsk of the envronment [26]. Internal factors are often controllable by managers. Among such factors, we can cte the frm sze, ownershp structure, locaton, management competences, human resource management, and so on. Sometmes, human captal, whch s consdered to be one of the most mportant nternal factors nfluencng busness growth, s emphaszed [4]. We can also classfy the factors nfluencng growth n small frms followng [25] as factors related to the entrepreneur, factors related to the frm and factors related to the strategy. These factors are summarzed n Table I. Table I. Factors nfluencng growth n small frms Entrepreneur Frm Strategy otvaton Age Workforce tranng Unemployment Sector anagement tranng Educaton egal form External equty anagement experence ocaton Technologcal sophstcaton Number of founders Sze arket postonng Pror selfemployment Ownershp arket adjustments Famly hstory Plannng Socal margnalty New products Functonal sklls anagement recrutment Tranng State support Age Customer concentraton Pror busness falure Competton Pror sector experence Pror frm sze experence Gender Source: [25] Informaton and advce Exportng Issue 3, Volume,

3 The effects of the factors descrbed n the table may be unclear; for nstance, the effect of sze on the performance and growth of companes s not clear [8], whle concernng ownershp, t s consdered that famly-owned and famlymanaged busnesses perform better than non-famly busnesses, but grow less [3]. However, only an approprate combnaton of the abovementoned factors can produce a rapd frm growth. Unfortunately, tradtonal models are too general and many of the above-mentoned factors may not be nfluenced by the frm tself. The mpact of growth factors wll vary across ndustres and sectors. oreover, the usablty of such theoretcal models n practce by ordnary small busness owners s debatable. A more specfc and precse model s needed n order to be used n the everyday management of small frms. III. A ODE OF A SA FIR SAES GROWTH et us defne a company as an agent transformng a set of nput factors nto three classes of outputs: products, goods and servces. In the followng text, three scalar values and sx vectors are used (followng the usual mathematcal notaton, bold letters represents vectors,.e. ordered lsts of elements): denotes the number of products offered; denotes the number of goods offered; denotes the number of servces offered; k = (k, k 2,, k ) denotes the quanttes of products offered; l = (l, l 2,, l ) denotes the quanttes of goods offered; m = (m, m 2,, m ) denotes the quanttes of servces offered; p = (p, p 2,, p ) denotes the prces of products offered; q = (q, q 2,, q ) denotes the prces of goods offered; r = (r, r 2,, r ) denotes the prces of servces offered. Then, the total sales S n perod t can be specfed as S t = = kp + lq + mr = k p + l q + m r (2) = As we already notes, growth happens over multple perods. The growth rate g of the company can be represented by the change n sales volume S, where represents the tme nterval. g = ds dt S = = k p + lq + mr = = (3) = C denote the number of customers. Then the sales growth can be specfed as g = = = k p + k p + = = l q + l q + = = mr = mr = B f We wll call the frst term average bll (B) and the second term frequency of vsts (f). The average bll can be rewrtten as k p lq mr = = = B = + + (5) The number of vstng customers C can be represented by the sum of exstng customers E and new customers N. So the frequency of vsts can be further rewrtten as ( E + N ) E N f = = = + (6) And fnally, the whole sales growth g can be specfed as k p lq mr = = = E N (7) g = We have shown that sales growth can be represented by a product of two terms: the average bll and the frequency of customer vsts. Snce we seek to maxmze growth, we may do so by ncreasng the average bll or frequency of customer vsts. These two components and ther propertes vary by ndustry. Some goods are characterzed by a low frequency of vsts, but a hgh average bll (e.g. typcally more expensve goods, such as car dealershp or real estates), whle other sectors are characterzed by a hgh frequency of vsts and a low average bll (typcally more affordable goods, such as statonery or food stores). The ways of ncreasng sales are graphcally llustrated n Fg.. In the followng text, we wll dscuss the possbltes of ncreasng the average bll and the frequency of vsts. (4) The equaton can be further decomposed nto two terms. et Issue 3, Volume, 203 9

4 Hgher average bll Sales growth Hgher frequency of vsts of demand s not constant, but t vares across dfferent ntervals of prce changes. The prce elastcty of demand also depends on brand loyalty; loyal customers are supposed to be less senstve to prce changes []. The second way of ncreasng the average bll s to offer and sell more products, goods or servces per one customer. Ths may be acheved by sellng more exstng types of products, goods and servces, or by offerng and sellng new types of products, goods and servces. In addton, t s necessary to take nto account the fact that small busnesses typcally have a lmted tme capacty (we wll deal more wth ths ssue n secton C of ths chapter). Tme capacty T of a small busness can be defned as Hgher prce Hgher quantty New products / goods / servces Fg. : Ways of ncreasng sales growth A. Increasng the Average Bll New clents Exstng clents The average bll,.e. the amount of sales over the number of customers, can be ncreased by ncreasng unt prces of products, goods or servces (components of p, q or r); ncreasng quanttes of exstng products, goods or servces (components of k, l or m); sellng new products, goods or servces (ncreasng, or ). The frst way of ncreasng the average bll s to ncrease unt prces of products, goods or servces. The possblty of ncreasng the unt prces depends on the postonng of products, goods and servces. These possbltes are lmted wth regard to demand curves and ther elastctes. Products, goods and servces wth premum postonng (e.g. luxury goods such as sport or recreaton) wll have hgher prce levels and margns, but these wll be offset by a lower number of unts sold. In contrast, more affordable products, goods and servces wll have lower proft margns, but wll be bought by a consderably hgher number of consumers. The economc theory suggests that the quantty demanded,.e. the volume of products, goods or servces sold, s a functon of the prce. Ths fact has to be taken nto account when adjustng prces. The prce elastcty of demand determnes the effect of prce changes on the total revenue. If the demand s nelastc and the prce s ncreased, the total sales are growng (t s a case of necessary goods such as food or accommodaton). If the demand s elastc and the prce s ncreased, the total revenue declnes (e.g., the aforementoned luxury goods). It s also necessary to take nto account the fact that the prce elastcty T = N h (8) P where N denotes the number of workers, h s the number of workng hours per worker and P denotes the average labor productvty n the company, whch can be calculated as a percentage of useful workng tme (not all workers work a full day, for example, due to ther educaton, pauses, etc.) Ths capacty should be utlzed the most effectvely possble. The decson-makng on the selecton of products, goods or servces, to whch the company wll concentrate, should be based on manageral decson-makng tools such as costbeneft analyss. For busnesses that are focused on servce provson but are not able to offer more servces, a good way of ncreasng the average bll s the sale of goods or products. In partcular, ths s advantageous because the sale of a product or good takes only a short tme, but the provson of a servce usually takes longer. Smlarly, small manufacturng busnesses or commercal enterprses that are not able to ncrease ther sale of products or goods may ncrease the average bll by offerng addtonal servces, such as transport of goods, etc. B. Increasng the Frequency of Vsts The second term n the equaton 6, the frequency of vsts f, ncreases when: exstng customers buy more frequently; new customers are acqured. akng the exstng customers buy more frequently s assocated wth offerng a larger number of products, goods or servces or ntroducng new products, goods, or servces dscussed n the prevous secton. Ths can be supported by ncreasng the customer loyalty, whch s assocated wth the soundness of the product n all ts concepts, not just the core product, but related servces lke warranty etc. The frequency of vsts may be also supported by tools of sales promoton and loyalty programs. oyalty programs drectly motvate the customer to vst the company more frequently. Among other tools whch postvely affect the Issue 3, Volume,

5 frequency of vsts, we can cte the customer databases, CR systems and other IT tools. Acqurng new customers s lnked to the marketng strategy of the company. Small busnesses often focus on fragmented markets and have very lmted budgets. For ths reason, the marketng possbltes are lmted both n terms of extent and actvty. As we already mentoned, small busnesses are characterzed by the omnpresence of the owner n all processes, ncludng the marketng actvtes. The marketng of small busness s often smple, chaotc, and very dependent on the actons of compettors [3]. The marketng concept s manly focused on the producton and prce. Cross-marketng actvtes, such as cooperaton wth other busnesses n the ndustry whch are focused on smlar segments of clents, or partcpaton on events targeted on them may also create addtonal demand for products and servces. Another possblty s to traler random passers-by the outer premses of the company, such as wndows, as well as by performng marketng actvtes n other places: nearby stores, shoppng malls, etc. C. Achevng Growth through Increasng Proftablty: The Proftablty atrx The second category of marketng tools deals wth the second axs of ncreasng proftablty. From the marketng and busness pont of vew, t s mportant to understand whch products or servces are the most proftable for the company and therefore should be promoted va targeted campagns. Among others, the followng mportant notons must be taken nto consderaton n terms of proftablty - operatng margn from each product or servce, the percentage on total turnover of the salon and tme requrements for the product or servce. On Fg. 2, we propose a proftablty matrx whch s a sutable analytcal tool to analyze these dmensons. (hgh, low), when each quadrant s defned by average values for both crtera. Ths matrx s based on the logc that wth lmted tme capactes, companes should focus ther energy on servces that generate a hgh proft operatng margn and do not requre a hgh amount of tme capacty, n order to cover hgh fxed costs. For example, a research of Oréal shows that only the average labor costs for hardressng salons n Europe represent 45% of ther total turnover. Fxed costs must be amortzed and dstrbuted across products/servces as fxed costs cannot be drectly assocated to a partcular product/servce. It s also mportant to understand that not every product or servce has to be proftable. Certan servces can be used as a tool to buld consumer loyalty or to attract new clents. Others can represent a pont of dfference and specalty of a gven company. In those cases, proftablty s not the key. However, t s essental to clearly dentfy purpose of each servce. The mportance of proftablty analyss rses when the strategy of the company s based on low average prces, because when prces are low, the key objectve s to generate hgh volume of servces sold n order to be proftable. In such scenaro, even a mnor loss on one servce multpled by the number of vsts and ts repetton can generate a sgnfcant decrease of overall profts. D. Two Axes of Clent Segmentaton: The Segmentaton atrx In lne wth the two above-mentoned axes of our model the average bll and the frequency of vsts we propose a useful tool for customer segmentaton. An effectve segmentaton based on purchase behavor of consumers can help to effectvely manage marketng and sales efforts and focus them on key ssues of the company growth. The segmentaton matrx we propose for such purposes s llustrated n Fg. 3. Fg. 2: Proftablty matrx The sze of each bubble represents the percentage of each product/servce on the total turnover and the poston n the matrx quadrant classfes each product/servce from the pont of vew of tme requrement (hgh, low) and operatng margn Fg. 3: Segmentaton accordng to B and f In order to manage our growth model, we wll dvde consumers nto nne dfferent categores based on ther average bll (low, medum, hgh) and ther frequency of vsts (low, medum, hgh). The ntervals of each category wll depend on Issue 3, Volume,

6 every specfc case (based on the sze of the frm, the ndustry t s operatng n, the type of clentele, etc.). Afterwards, we calculate the percentage of total clents that belong to each category and the percentage of total turnover generated by the company. Ths type of segmentaton wll allow us to dentfy key ssues of the company should t focus on ncreasng the average bll or does the low frequency of vsts represent a more serous ssue? Both axes requre dfferent marketng and sales tools and ther management could be very costly. A more effectve way s to clearly understand n whch segment the clents belong and address them n order to ncrease the proftablty of the company. Obvously, the most proftable group of customers s located n the bottom-left corner of the matrx. IV. THE USE OF THE ODE EXAPES The model we descrbed n the prevous sectons can be used n managng sales growth of small busnesses. In ths secton, we llustrate the use of our model by the case of hardressng salon management. A. Specfes of Hardressng Salon anagement ost hardressng salons belong to the small companes. The hardressng ndustry s drven by the lfestyle, fashon trends and new technologes. A hardressng salon s an ntegral part of a specfc dstrbuton channel, the ntermedary between professonal products manufacturers (e.g. Oréal, Schwarzkopf, or Procter&Gamble) and customers. Professonal products manufacturers sell ther products to the salons for a tarff prce. The products are subsequently sold to the customers for a suggested retal prce, whch s equal to the tarff prce ncreased by a margn. The amount of margn vares across brands and ther prce postonng, but generally, the followng rule apples: the hgher the fnal prce, the hgher the hardresser s margn on one product. Hardressng salons offer servces (harcuts, colorng, stylng, etc.) whch are very specfc and each servce conssts of the professonal product and the knowledge and sklls of the hardresser. However, salons also offer goods professonal products for home use. In comparson wth goods offered n retal stores, the prces n hardressng salons are hgher, whch s justfed by a hgher technologcal level of the products and addtonal servces, n partcular consultng and care of the hardresser. In lne wth the proposed model, we wll now analyze the possbltes of ncreasng sales growth of a luxurous hardressng salon. The llustraton s based on ntervews wth hardressng salons owners and tranng of hardressers carred out n the Czech Republc and Slovaka between B. Increasng the Average Bll When adjustng prces, t s necessary to take nto account the luxurous nature of hardressng servces whch results n a low prce elastcty of demand. However, we can assume that another feature of ths ndustry s a hgh ncome elastcty of demand [0], whch means that when the ncome of households ncreases, the demand for hardressng servces ncreases more quckly than the demand for necessary goods. Another mportant aspect s the fact that customers are characterzed by loyalty to a partcular brand, whch means they are less senstve to prce changes. The customers wll apprecate a stable level of prces, so the possbltes of ncreasng prces are very lmted. However, we can propose several ways of offerng new servces, n partcular when the salon s focused on premum brands of professonal har care. One of them s to make use of educatonal programs for hardressers and to offer new fashonable servces such as fashonable colorng or harcut. Then, a salon may clearly communcate to ts clents that the best level of servces s guaranteed due to ongong educaton of ts hardressers and buld ts mage on ths fact. Further, the average bll may be ncreased by ncorporatng more har care products (shampoos and condtoners) nto classcal servces. Another sutable way of ncreasng the average bll s to sell more goods (har care products for home use). The margns of such sells are hgh and the tme requrements are generally low. There are four key requrements that ncrease the probablty of successful sales. The frst one s vsblty of the offer n the salon, because clents wll not buy what they cannot see. The second s the clarty of the offer, whch helps hardressers to communcate t to clents and clents wll easly understand. The thrd s the tme pressure; when an offer s only vald for certan amount of tme, t ncreases the probablty that clents wll buy the offered products or servces. The fourth key requrement s the motvaton of hardressers and engagement from the part of manager, whch s often the crucal part as hardressers consder themselves to be artsts rather than sellers. They can be motvated by offerng a share on profts on goods sold, or by varous types of contests. C. Increasng the Frequency of Vsts A hgher frequency of vsts can be acheved by offerng more servces. Further, t s possble to offer more addtonal servces, such as lght brghtenng, gloss ncreasng, etc. Other servces, such as har blowng, are very proftable and can be performed repeatedly, even on a weekly bass. In our research among hardressng salon owners, we have analyzed opnons on dverse marketng tools and ther effectveness n hardressng ndustry wth regard to the nature of busness and very lmted marketng budgets. Based on our ntervews, we have dvded marketng tools used by successful salons nto two major categores as they wll vary sgnfcantly n dfferent stuatons. Followng the logc of our model, the frst category has the objectve to target new consumers and attract them to try out salon servces, thus ncreasng the frequency of vsts n salon by acqurng new consumers. The most powerful, yet least expensve tool for ths purpose s unquestonably the word-of-mouth, snce t s the most relable source of potental clents. Word-of-mouth can be spread also va emal campagns or Facebook actvtes, when Issue 3, Volume,

7 salons motvate ther clents to resend offers to ther frends. Recommendaton may be ncreased also by specalzed offers for ths purpose, such as "Come wth your frend and you wll both have 50% dscount", etc. On the other hand, t s also mportant to consder that the word-of-mouth spreads very fast among consumers and too many unsatsfed consumers can have devastatng effects on salon busness. To attract completely new consumers, salons must be vsble n the places of nterest of the target group, for example n nearby ftness centers, watng rooms, etc. wth propostons that create ncentve to come and try out salon s servces. That requres a clear value proposton and an attractve try-out offer. For example beauty days, ncludng celebrtes or free servce try-out, proposed to possble target group have based on the opnon of salon owners a good effect as they encourage potental clents to come. A better vsblty can be also acheved va targeted PR actvtes, such as beauty transformatons n specalzed fashon magaznes, when hardressers demonstrate ther sklls on selected readers of those magaznes. Such transformatons are very popular among consumers and cost practcally no money as t s n the nterest of fashon magaznes to meet the needs of ther readers. Another possblty s to traler random passers-by the outer premses of salons. The proxmty of the workplace or lvng place s one of the key crtera nvolved n a woman s choce of a salon. Accordng to a Oréal research, a pedestran stays 2 to 7 seconds on average n front of a shop wndow. A salon wndow has therefore to be vsble both from dstance and from close range, durng the day and at nght, and clearly express the type of servces sold. Also, the wndow has to be easy and quck to read for the random passers-by. Further, the wndow should have one sngle message/theme n one perod, whch should be easy to understand, thus havng the potental to call to acton. Snce the fashon ndustry s lnked to seasons such as Valentne s day, summer, fall collectons etc., salon wndows must be up-to-date and regularly changed every month or 6 weeks. Also, the wndow should clearly ndcate the prces of servces provded by the salon, the openng hours, the contact phone number, the name of the salon, etc. It has to be nnovatng, aesthetcal and eye-catchng. ast but not least, t has to be respectful of the envronment. Our research ndcates that classcal advertsement s too expensve for hardressng salons and has lttle or no return on nvestment. Advertsement n specalzed press and publc appearances can have a certan effect, but due to lmted resources of salons, t must be as much targeted as possble and a set of evaluatng crtera should be put n place to measure the return on nvestment. Salons may also use recommendatons through sales support. Another way of promotng the salon s the use of wndows and exteror of the salon. It s mportant to pay attenton to the frst mpresson upon enterng the salon, whch rases the need for educaton and development of communcaton and busness sklls of hardressers and receptonsts. As we already mentoned, hardressng salons may also nteract wth nearby stores, such as fashon stores. In ths case we are talkng about cross-marketng, whch can be mplemented by varous methods, such as gft certfcates, coupons, etc. Another opton s to promote the salon n commercal and admnstratve centers n the vcnty of the salon. Some possble ways of ncreasng the frequency of vsts can be graphcally llustrated on Fg. 4. Fg. 4: Increasng the frequency of vsts D. Usng the Proftablty atrx We may also llustrate the use of the proftablty matrx we proposed on Fg. 2. As we already noted, a second category of marketng tools deals wth ncreasng proftablty. The matrx takes nto account two dmensons: tme capacty and operatng margn. Hardressng servces wth hgh margns and low tme requrements could be represented by har cuttng - ths knd of servce requres, n general, relatvely low drect costs and can be done wthn one hour. In the Czech Republc, a typcal example of servces whch have low tme requrements and low operatng margn s the blow-dryng. Certan servces, such as hghlghts or har extensons, are by nature hghly tme consumng. Ths type of analyss could however serve as a startng pont for the analyss of prcng strategy for those servces. If the operatng margn of those servces s below the average and ther proporton on total turnover s sgnfcant, then ther prces should be rased.. V. CONCUSION In ths paper, we suggested a model of sales growth whch Issue 3, Volume,

8 can be used n the management of small busnesses. Even f the model s mathematcally founded, the knowledge of mathematcs s not necessary for ts use n practce, whch can be seen as one of ts advantages. The frst part of the artcle was dedcated to the busness growth and ts measurement, and we also dscussed the factors nfluencng growth n small frms. In the second part, we formalzed our model n several equatons, whch resulted n the proposton that the sales growth of a small company can be decomposed nto two terms: the average bll and the frequency of vsts. The average bll,.e. the amount of money per customer, can be rased by ncreasng unt prces of products, goods or servces, by ncreasng quanttes of exstng products, goods or servces, and by sellng new products, goods or servces. On the other hand, the frequency of vsts can be ncreased by makng the exstng customers buy more frequently and by acqurng new customers. We also propose two matrces: the proftablty matrx whch can be used n defnng the most proftable products and servces, and the segmentaton matrx whch can be used, nter ala, n defnng the most proftable group of customers. In the fnal part, we demonstrated the use of our model n the case of hardressng ndustry. The proposed methods are the result of ntervews and round tables whch have been carred out wth hardressng salon owners from Czech Republc and Slovaka between REFERENCES [] A. A. Alchan, Uncertanty, Evoluton and Economc Theory, Journal of Poltcal Economy, vol. 58, pp , 950. [2] G. R. Carroll,. T. Hannan, The Demography of Corporatons and Industres. New Jersey: Prnceton Unversty Press, [3] D. Carson, S. Crome, arketng Plannng n Small Enterprses: A odel and Some Emprcal Evdence, Journal of arketng anagement, vol. 5, no., pp , 989. [4] P. Davdsson, F. 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