Chapter 12 Managing a Small Business EQ: 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