chapter 12 managing a small business eq: what are the key steps to follow in order to start your own...

Chapter 12Managing a Small BusinessEQ: What are the key steps to follow in order to start your own business?

Identifying the Small Business Owner

Advantages:

independence, control, decision making, setting own schedule

Disadvantages:

long hours, customer complaints, meeting payroll, taking responsibility for all problems.

Small business ownership is risky!!!

Identifying the Small Business Owner

Fewer than half (less than 50%) of all new businesses will survive for 5 years.

Operating a business requires skill in management, finance, marketing, and other business activities.

Who Owns Small Businesses

Years ago—a majority of small business owners were middle-aged males with less than a college degree.

Today, small-business owners are more educated, younger, and more likely to be female or minority

New business owners that are women are increasing at a rate 3 times that of men. (30% of all small business owners are female)

Who Owns Small Businesses People of non-white ethnic and racial

heritage are also a fast growing segment of small business owners.

Minority ownership has doubled since the ’80s

These groups lack financing, limited management experience, prejudicial treatment by financial institutions, vendors, and other business.

Starting a Small Business

An Idea + Experience

Right Place, Right Time

Team Approach

Preparation and Research

Idea + Experience

Ideas come from many sources such as hobbies, interests, and business experiences

Books and magazines also suggest ideas.

Experience is a key—having the know how to be successful in business.

Right Place and Time

Retail and restaurant places require good customer traffic Think Whataburger

If business is hard to find or not easily accessible, then customers will find alternatives.

Starting a business when customer demand is high is also important factor.

Team Approach

Even small businesses need full and part time employees.

Finding the right people is key.

Trust

Reliability

Assistance will also be required from bankers, lawyers, accountants, etc.

Preparation and Research

Includes having adequate information to make good decisions.

Gathering and studying information before starting business will save time and avoid problems.

Information needed about customers, competitors, operations, activities, gov’t regulations.

What is a Business Plan?

A written description of the business idea and how it will be executed, including all major business activities.

Used to persuade lenders and investors to finance the venture.

Business Plan Elements

Description of the Business

Competition

Customer Analysis

Operations Plan

Marketing Plan

Financial Plan

Description of the Business

Business Idea

Major Products and Services

Ownership Structure

Strengths

Weaknesses

Long and Short Term Goals

Competition

Characteristics of Industry

Condition of the Economy

Strengths of Competitors

Weaknesses of Competitors

Customer Analysis

Description of Customers

Location of Customers

Number of Customers

Resources (Income) of Customers

Sales Forecasts

Operations Plan

Organization of the Company

Chart

Description of Major Operations

Analysis of Resources Needed

Human Resource Plans

Marketing Plan

Description of Major Marketing Activities

Description of Resources Needed

Schedule of Marketing Activities

Promotions

Sales

Financial Plans

Start Up Costs

Short and Long Term Financial Needs

Sources of Financing

Budgets and Financial Statements

Types of Financing

Start-Up Financing

Short-Term Financing

Long-Term Financing

Start Up Financing

The amount of money needed to open the business.

Includes the buildings, equipment, inventory, supplies, licenses, etc.

Short Term Financing

The money needed to pay for the current operating activities of a business.

Obtained for a period of less than a year and often for only one or two months.

Long Term Financing

Money needed for the important resources of a business

Examples: land, buildings, and equipment.

Usually require large amounts of money and will be paid over a number of years.

Chapter 12 Assignment

Review Your Reading (1-7) Page 166

Develop Your Business Language (13-16) Page 167