Managerial Functions of Sole Proprietorships

The sole proprietorship is the most common business model, probably because it is the easiest form of business to start and operate. Sole proprietors are individually responsible for the performance of the business and can be held individually liable for the business's debts. To ensure a successful enterprise, sole proprietors must effectively perform a number of managerial functions.

Many sole proprietorships are one-person operations with no employees, but not all of them. Those who use employees on a full-time, part-time, seasonal or contract basis must perform the functions of hiring, firing, disciplining and compensating. As such, they must be familiar with employee laws pertaining to areas such as discrimination and unfair hiring practices and be capable of performing payroll functions. They must also become adept at recruiting and interviewing job candidates.

The sole proprietor bears the responsibility of planning the business's activities and charting its future. The owner sets the goals the business should achieve, which are often in line with the owner's personal goals. For example, the owner may establish a goal of the business earning a specific amount of profit per year for the next 20 years so he can retire. The owner also creates the plan necessary to reach these goals.

At first glance, it might appear that organization for a sole proprietor with no employees is a simple task. However, a sole proprietor often must wear many hats, requiring her to become proficient at multitasking and time management. She also must be a self-starter, as tasks won't be accomplished unless she performs them herself. If she has a staff of employees, she must organize and direct their activities.

Because he is ultimately responsible for the performance of the business, the sole proprietor typically controls all aspects of the organization. He must monitor progress and take corrective action as necessary. For example, if a marketing strategy is not generating the desired increase in revenues or an expanded customer base, he must decide whether to tweak the strategy or abandon it altogether. He also must monitor spending and expenses and make changes to activities that are limiting profitability.