1. Management of Operations

2. Gordon Crane
Grad. U. Rhode Island, used $2,000 of savings to start small natural foods distributing
Law School, used $3,000 to start Apple & Eve as means of funding law school
Grad. Law School, Apple & Eve sales reach $1 million
packaged apple juice in “brik-pak” juice boxes
employees with sales over $36 million

3. Gordon Crane Heavy competitors Constant Innovation
Motts
Seneca
Lincoln
Ocean Spray
Snapple
Constant Innovation
Management of early operations

4. Managing Early Operations
Financial Management
Venture Management
Risk Management

5. Start Up Costs Start-up Expenses Legal $50,000 Stationary $2,000
Legal
$50,000
Stationary
$2,000
Brochures
$1,000
Consultants
$3,000
Insurance
$4,000
Rent
$8,000
R&D
$6,000
Equipment
$24,000
Custom Software
Logo Design
Management Salaries
$40,000
Raw Material Inventory
Packaging Supplies
Other
$15,000
Total Start Up
$174,000

6. Financial Control Accrual vs Cash Accounting
Accrual Method Cash Method
Sales Accounted when sales Counted when
are made cash is received
Expenses Accounted when expense Counted when
is actually incurred cash is paid out

7. Example August cash sales = $ 6,000 chg. sales = 4,000
Expenses = 8,000 on 30 /credit
Receives July sales = 2,000
Pays out July Exp = 10,000

8. Example (cont.) August Income Stmt. Basis Accrual Cash
Revenue $ 8, $10,000
Expenses 10, ,000
Net Income ($2,000) $ 2,000

9. Managing Cash Flow

10. Managing Cash Flow
Concerns
Low Sales
High COGS
High Selling Exp.

11. Managing Assets

12. Managing Assets Concerns Accounts Receivables Inventory
credit cards (3-4%)
bad depts
Inventory

13. Inventory Control LIFO (Last in - First out)
FIFO (First in - First out)
Inventory Units Sold FIFO LIFO
$ $ 800
500 @
, ,035

14. Conversion to LIFO Beneficial if
Rising labor, materials, & other production costs are anticipated
Business & inventory are growing
Business has computer-assisted inventory control method capability
Business is profitable (higher inventory costs lower taxes)

15. Managing Costs/Profits

16. Managing Costs/Profits
Concerns
Compare Actual % to budgeted or standard %
Compare 3rd yr to 1st & 2nd to pick up trends
Selling Expenses = $11,700, break that out to individual expenses for each product
Also evaluate exp. by region, customer, distribution channel, department, . . .
Taxes
FICA/SSN withheld from wages but paid to IRS on quarterly basis
Don’t spend

17. Marketing & Sales Control
Control focus on key variables
Market Share (% of total industry sales)
Sales
Avg sales calls/wk
Avg $ sales/salesperson
Avg. cost/sale
# new accounts/lost accounts
Distribution
Out of stock conditions
Promotion
Important to know why a customer buys
Customer Satisfaction

18. Rapid Growth & Control Problems during rapid growth
Can cover up weak management, poor planning
Dilutes effective leadership
Causes venture to stray from goals & objectives
Leads to communication barriers between depts.
Training & employee development given little attention
Can lead to stress and burnout
Can create bottlenecks in mgmt. decision making
Quality control is not maintained

19. Promoting New Venture News Release Advertising Agency location
organizational structure
public relations services
research department
creativity of agency staff
professional qualifications
interest shown towards new product
recommendations by other clients
experience & success of new products