© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 13 Preparing for the New Venture Launch: Early Management Decisions

© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Hiring Your Staff 1.Contact your friends and business associates, contact a personnel agency. 2.Collect resumes, establish an assessment procedure to determine candidates’ strengths. 3.Provide incentives to insure loyalty and commitment of employees. Job Opening 13-1

© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Accurate Record Keeping is Important Effective control and tax purposes. Knowledge about sales by customers both in terms of units and dollars. Maintaining a database about employees both for labor management and withholding taxes in order to make deposits on a quarterly basis. 13-2

© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Table 13-1 Accrual versus Cash Basis Accrual Method Cash Method Sales Ex- penses Accounted for Not counted until when sales are cash is received. made. Accounted for Not counted until when the ex- cash is actually pense is paid out. actually in- curred. 13-3

© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Inventory Control FIFO: Inventory costing method whereby first items into inventory are first items out. LIFO: Inventory costing method whereby last items into inventory are first items out. If you are running a convenience store, use which method? Why? Answer: FIFO so inventory does not become obsolete. 13-4

© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Ratios can be used to assess financial strengths and weaknesses. Liquidity ratios (the current ratio, the acid test ratio) are used to measure short term solvency. Activity ratios (average collection period, inventory turnover) measure efficiency of venture in managing and selling its inventory. 13-5

© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Leverage ratios analyze the firm’s capital structure. –Debt ratio assesses ability to meet obligations. –Debt to equity ratio assesses the firm’s capital. Profitability ratios indicate firms ability to translate sales into profits (Net profit margin) and ability to manage total investment in assets (R.O.I.). 13-6

© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin The early venture must have an effective marketing plan because marketing is “the engine that pulls the entire train.” 13-7

© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin To effectively promote the new venture: Develop awareness of the product or service offered through publicity and advertising. –Publicity is free advertising provided by a media outlet. Publicity introduces the company. Advertising focuses on specific customers. –Ad agencies provide promotional services. –Ad agencies can help launch the product. 13-8

© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Develop a website promoting your company. Indicate background of the company, its products, officers, address, , phone, and direct ordering information. Use YahooStore, Ebay, Lycos and/or Excite to promote and sell your product or service. 13-9

© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Avoid the “Field of Dreams.” õ “If we build it, they will come.” -Field of Dreams NEWS FLASH: If you don’t promote it, they aren’t coming! 13-10