AB209 Small Business Management Unit 7 – Managing and Organizing the Business

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Managing and Organizing the Business The competencies of a new business exist only in the individual competencies of the founders, key managers, advisors, mentors, or professionals enlisted in the start-up process. It is therefore important to carefully consider the match of available skills against those needed to successfully launch and grow the new business. The way in which a business is organized is also important to how it is managed, operated, and ultimately how it provides value for its customers. Both the human resources needs and the organizational structure of the new business are outlined in the Management and Organization section of the Business Plan.

Unit 7 Outcomes Describe the characteristics of a strong management team. Explain the common legal forms of organization used by small business. Describe the unique features and restrictions of the five specialized organizational forms. Explain the distinctive features of small business management and the managerial role of entrepreneurs. Discuss the steps in recruiting, hiring, training, compensating, and developing employees in a small business.

Unit 7 To Do List Start the Unit: Review the key terms Study: Read Chapter 8, Chapter 19, and Chapter 20 in your text Prepare: Carefully review the previously completed sections of your descriptive business plan in your AB209 Project Template. Graded Assignments: Respond to the Unit 7 Discussion Board Complete the Unit 7 Assignment Complete the Unit 7 Review Quiz Attend the Unit 7 Class Seminar or complete the Alternative Assignment

Unit 7 Class Discussion Unit 7 Discussion: After reading the Diamond Wipes International, Inc., case in your text (Case 19), please respond to the following questions: 1. Based on what you’ve read, how would you rate the leadership skills of Eve Yen? In what way does she fit the profile of the typical business founder? In what ways is she different? How would you describe her leadership style? 2. Do you think Yen has the capacity to make the transition from founder to general manager of a now-sizable company? 3. How would you rate Yen’s delegation skills? Was her timing appropriate for a handoff of responsibilities to a general manager? Was she too quick to take back delegated responsibilities? Is she too quick to terminate employees? 4. What outside sources of management assistance might help Diamond Wipes International reach its full potential?

Unit 7 Assignment Using the AB209 Project Template and AB209 Project Instructions, complete the Management and Organization section in the Descriptive Business Plan. This should include the following elements: 1. Who will manage the business on a day-to-day basis. 2. The experience and special competences that these individuals bring to the business. 3. Any outside professional advisors such as boards of directors, advisory boards, attorneys, accountants, insurance agents, bankers, consultants, mentors, or other advisors.

The Management Team! ). One of the most important considerations for a new business is assembling the key management team! Note that this team includes both those internal as well as those external to the new business who will provide start-up expertise as well as on-going management once the venture is launched.

Supplying the Essential Skills! ). Since the small business founder is initially the only source of managerial skills that are essential for the survival of the venture, he or she must endeavor to acquire these necessary skills either internally in the assembled management team or externally through the use of others outside the business, or in some combination of both!

). Building a Management Team Management Team Managers and other key persons who give a company its general direction Characteristics of a Strong Management Team Capable of securing the resources needed to make business a success Reassures investors about the their investment and the continuity of business Diversity of talent makes the team stronger than an individual entrepreneur © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

). Building a Management Team (Continued) Team Building and Structure The required combination of education and experience depends on the type of business and the nature of its operations The key: achieving a balance of skills and competencies in functional areas Designing an internal management structure that defines relationships and responsibilities Outside professional support can supplement the skills of a management team An active board of directors can provide counsel and guidance. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

). Outside Resources Advisory Boards, Boards of Directors Mentors, Experienced Business Friends Professional Attorneys, Bankers, Insurance Brokers Venture Capitalists University Business Incubators Small Business Administration SCORE Volunteers Consultants, etc.  Question: Can you list other external resources available to the entrepreneur? © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

General Organization Forms for Business: ). 1.Sole Proprietorship 2. Partnerships 3.Corporations

The Sole Proprietorship Option: ). Sole Proprietorship A business owned by one person, who bears unlimited liability for the enterprise. Advantages Receives all of the firm’s profits. Holds title to all of the firm’s assets. Can easily sell or transfer ownership of the company name and assets. Requires no registration or filing fee. Has absolute freedom from interference by other stakeholders.  Question: Can you think of some disadvantages of the sole proprietorship? © 2010 South- Western, Cengage Learning, Inc. All rights reserved.

The Partnership Option: ). © 2010 South- Western, Cengage Learning, Inc. All rights reserved. A partnership is simply an agreement among two or more individuals agreeing to own and operate a business together. These vary depending on the content of the legal agreement.  Question: Why would you want to be careful in choosing a partner?

Exhibit 8.3The Advantages and Disadvantages of Partnerships © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

The C Corporation Option: ). © 2010 South- Western, Cengage Learning, Inc. All rights reserved. C Corporation: A business organization that exists as a legal entity and provides limited liability for its owners. Legal Entity A business organization recognized by the law as having a separate legal existence (“artificial being”); can be sued, hold property, and incur debt. The C Corporation An ordinary, or regular, corporation chartered by the state and taxed by the federal government as a separate legal entity.

The S Corporation Option: ). © 2010 South- Western, Cengage Learning, Inc. All rights reserved. S Corporation: A simplified form of the corporate business organization that exists as a legal entity and provides limited liability for its owners but is limited in its options and is taxed as personal income on the owner’s personal income tax. Requires less tax reporting than the C Corporation.  Question: What are some advantages of a corporation?

The Not-For-Profit Corporation Option: ). © 2010 South- Western, Cengage Learning, Inc. All rights reserved. A Special Classification Granted By the IRS: Nonprofit Corporation: A form of corporation for enterprises established to serve civic, educational, charitable, or religious purposes but not for generation of profits. Organizational Test: Verification of whether a nonprofit organization is staying true to its stated purpose.

Question About Organizational Forms?

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