1. 4th “Live” Seminar AB209, Small Business Management

2. Unit 7 Seminar Game Plan Course Check-In Course Website Check-In Course Activities & Assignments Check- In Review Unit 5 & 6 Content Content Review Assignment Review Unit 7 Check-In Look Ahead to the Unit 9 Seminar

3. Course Check-In

4. Assignments Review Discussion Boards: We have graded DBs in Units 1 through 9 (40 points each) Reviews: We have graded Review exercises in Units 1, 2, 5, 7, & 9 (50 points each) Case Studies: We have graded Case Studies in Units 3, 4, 6, & 8 (50 points each) Activity: Unit 5 Financial Planning (60 points) Final Project - Business Plan: Our graded final project (Business Plan) is due in Unit 9 (140 points); please note that in Units 2, 4, 5, 6, & 8 you are encouraged to work on specific sections of this plan Writing Assignment: Written reflection paper due in Unit 10 (40 points)

5. Final Project Our graded Final Project (Business Plan) is due no later than the end of Unit 9 To complete our Final Project, please refer to Final Project Template in Doc Sharing: In Units 2, 4, 5, 6, & 8, students are encouraged to work on specific elements of the Final Project Completed Business Plans should be submitted via the DropBox (name file: Final Project Your Name) The Final Project is worth 180 points

6. AB209 Final Project Mini-Business Plan Outline for the AB209 Final Project: Executive Summary Management Team & Advisors Definition of the Market & Products/Services Marketing & Sales Strategy Financial Information And, be sure to add a cover page and references page

7. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 6–7 Exhibit 6.3Abbreviated Business Plan Outline Section Heading Cover Page Table of Contents Executive Summary Industry, Target Customer, and Competitor Analysis Company Description Product/Service Plan Marketing Plan Operations and Development Plan Management Team Critical Risks Offering Financial Plan Appendix of Supporting Documents

8. Introduction to Small Business Our exploration of Small Business Management will focus on the five (5) parts: o Entrepreneurship: A World of Opportunity o Unit 1 (Chapters 1 & 2) o Starting From Scratch or Joining an Existing Business o Unit 2 (Chapters 3, 4, & 5) o Developing the New Venture Business Plan o Unit 3 (Chapters 6 & 7) o Unit 4 (Chapters 8 & 9) o Unit 5 (Chapters 10, 11, & 12) o Focusing on the Customer: Marketing Growth Strategies o Unit 6 (Chapters 14 & 15) o Unit 7 (Chapters 16, 17, & 18) o Managing Growth in the Small Business o Unit 8 (Chapters 19 & 20) o Unit 9 (Chapters 21, 22, & 23)

9. Unit 5 Review

10. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 10–17 Understanding Financial Statements Financial Statements (Accounting Statements) Reports of a firm’s financial performance and resources Helps determine a startup’s financial requirements Assesses the financial implications of a business plan Basic Financial Statements Income statement Balance sheet Cash flow statement

11. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 10–18 Understanding the Income Statement Income Statement A report showing the profit or loss from a firm’s operations over a given period of time. “How profitable is the business?” Sales (revenue) – Expenses = Profits (income) Revenue from product or service sales Costs of producing product/service (cost of goods sold) Operating expenses (marketing, selling, general and administrative expenses, and depreciation) Financing costs (interest paid) Tax payments

12. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 10–19 The Income Statement (cont’d) Cost of Goods Sold The cost of producing or acquiring goods or services to be sold by a firm Gross Profit Sales less the cost of goods sold Operating Expenses Costs related to marketing and selling a firm’s product or service, general and administrative expenses, and depreciation Operating Income Earnings before interest and taxes are paid

13. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 10–20 The Income Statement (cont’d) Financing Costs The amount of interest owed to lenders on borrowed money Net Income Available To Owners (Net Income) Income that may be distributed to the owners or reinvested in the company Depreciation Expense Costs related to a fixed asset, such as a building or equipment, distributed over its useful life

14. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 10–21 The Balance Sheet Balance Sheet A report showing a firm’s assets, liabilities, and owners’ equity at a specific point in time Total Assets = Debt + Owner’s equity

15. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 10–22 Exhibit 10.3 The Balance Sheet: An Overview

16. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 10–23 Exhibit 10.5 The Fit of the Income Statement and Balance Sheet

17. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 10–24 The Cash Flow Statement Cash Flow Statement A financial report showing a firm’s income (cash) when it is received and expenses when they are paid. Cash flows from normal operations (operating activities) Cash flows related to the investment in or sale of assets (investment activities) Cash flows related to financing the firm (financing activities)

18. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 11–25 The Purpose and Need for Financial Forecasting Pro Forma Financial Statements Project a firm’s financial performance and condition Purposes of pro forma statements: How profitable can the firm be expected to be, given the projected sales levels and the expected sales–expense relationships? How much and what type of financing (debt or equity) will be needed to finance the firm’s assets? Will the firm have adequate cash flows? If so, how will they be used; if not, where will the additional cash come from?

19. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 11–26 Forecasting Asset and Financing Requirements Working Capital Current assets, accounts receivable, and inventory required in day-to-day operations Net Working Capital Current assets less current liabilities Bootstrapping Minimizing a firm’s investments

20. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 12–31 Exhibit 12.4 Startup Financing for Inc. 500 Companies in 2003 Source: Mike Hofman, “The Big Picture,” Inc. Magazine, Vol. 25, No. 12 (October 2003), p. 87. Copyright 2003 by Mansueto Ventures LLC. Reproduced with permission of Mansueto Ventures LLC in the format Textbook via Copyright Clearance Center.

21. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 12–33 Understanding a Banker’s Perspective Bankers’ Concerns How much the bank will earn on the loan? What is the likelihood that the lender will be able to repay the loan? The Five C’s of Credit Character of the borrower Capacity of the borrower to repay the loan Capital invested in the venture by the borrower Conditions of the industry and economy Collateral available to secure the loan

22. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 12–34 Questions Lenders Ask Lender’s Questions:  Do the purpose and amount of the loan make sense, both for the bank and for the borrower?  Does the borrower have strong character and reasonable ability?  Does the loan have a certain primary source of repayment?  Does the loan have a certain secondary source of repayment?  Can the loan be priced profitably to the customer and to the bank, and are this loan and the relationship good for both the customer and the bank?  Can the loan be properly structured and documented?

23. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 12–35 Financial Information Required for a Bank Loan Three years of the firm’s historical statements Balance sheets, income statements, and statements of cash flow The firm’s pro forma financial statements The timing and amounts of the debt repayment included as part of the forecasts Personal financial statements The borrower’s personal net worth (assets – debts) and estimated annual income

24. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 12–36 Business Suppliers and Asset-Based Lenders Accounts Payable (Trade Credit) Supplier-provided financing of inventory to a company, which sets up an account payable for the amount. Short-duration financing (30 days) Amount of credit available depends on type of firm and supplier’s willingness to extend credit

25. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 12–37 Business Suppliers and Asset-Based Lenders (cont’d) Equipment Loan and Leases Installment loan (mortgage on equipment) from the seller of machinery purchased by a business. Equipment leased from a supplier: Frees up cash for other purposes Leaves lines of credit open Provides a hedge against obsolescence

26. Unit 5 DB: BuiltNY On page 286 of our textbook, read the “in the spotlight” mini-case study on BuiltNY, and feel free to visit their website for more information on the company: www.builtny.com Then, answer the following questions: www.builtny.com What is the difference between cash flow and profitability? How can rapid growth lead to cash flow problems? What did BuiltNY do to plan for growth and attract bank financing?

27. Unit 5 Activity In preparation for your financial summary plan which you will prepare in Unit 9, you will start your planning for financing your business now. In order to get you started, answer the following questions: What will the ownership equity* be? How much will you as an owner invest of your own money in the business to show commitment to it? $____________ Is your business growing fast? If so you should plan for additional financing. Will you have additional needs that need financing? Where will this come from? Is it better to source relatives and friends or apply for a bank loan (what type)? $___________________ http://www.firstresearch.com/search.aspx?kw=Industry%20asset%20to%20sales% 20ratios http://www.firstresearch.com/search.aspx?kw=Industry%20asset%20to%20sales% 20ratios Look on the site above and research what your industry’s typical asset to sales ratio should be (called percentage of sales technique). This will help you forecast what you will need in terms of financing. Then read over p. 294 and determine what this (asset to sales ratio) would be for your business. Divide your assets by your sales: __________________________________ Is this in line with your industry standard? If not figure out what you need to do to make it so. Where will you get the additional money you need from friends, relatives, investors, or the bank? How much will you ask for? Submit your responses to this activity in a Word document to the Dropbox before the end of this unit.

28. Unit 6 Review

29. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 14–45 What is Customer Relationship Management? Customer Relationship Management (CRM) A company-wide business strategy designed to optimize profitability and customer satisfaction by focusing on highly defined and precise customer groups. Focus of CRM: Customers rather than products Changes in processes, systems, and culture All channels and media involved in the marketing effort, from the Internet to field sales.

30. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 14–46 Exhibit 14.1Sources of the Next Sale

31. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 14–47 Importance of CRM to the Small Firm Economic benefits of maintaining relationships with current customers:  Acquisition costs for new customers are high.  Long-time customers spend more money than new ones.  Happy customers refer their friends and colleagues.  Order-processing costs are lower for established customers.  Current customers are willing to pay more for products.

32. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 14–48 Components of Customer Satisfaction Key Elements of Customer Satisfaction: Providing the most basic benefits of the product or service. Offering general support services, such as customer assistance. Setting up a system to counteract customers’ bad experiences. Delivering extraordinary services that excel in meeting customers’ preferences and make the product and/or service seem customized.

33. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 14–49 Extraordinary Service Do Business on First-name Basis Address Problems Promptly Keep in Touch Ways to Provide Extraordinary Service Find Ways to Help Provide Custom Service

34. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 14–50 Managing Customer Satisfaction Customer Experience Management (CEM) An approach that recognizes that with every interaction, customers learn something about a firm that will affect their desire to do business there in the future. Having a positive experience with a business becomes part of the firm’s value equation.

35. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 14–51 Evaluating a Firm’s Customer Service Health Customer Service Strategies Provide an exceptional experience throughout every transaction Provide sales materials that are clear and easy to understand Respond promptly to customers’ requests and concerns Listen to customers and respond accordingly Stand behind products/services Treat customers as family members and best friends Stay in the hearts and minds of customers

36. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 15–52 To Grow or Not to Grow Growth sufficient to maintain the status quo is a goal of some entrepreneurs. Growing a business too quickly can be stressful for the small firm. A “growth trap” may occur when a firm’s growth soaks up cash faster than it can be generated. Growth also puts pressure on a small firm’s personnel.

37. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 15–53 Innovation: A Path to Growth Competitive Advantage and Innovation Innovation and entrepreneurship often go hand-in- hand. Coming up with and perfecting new products or services is often not easy. The risk of failure increases when innovation is the goal. Innovation is a means by which a firm can sustain its competitive advantage.

38. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 15–56 Exhibit 15.1The Competitive Advantage Life Cycle

39. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 15–57 Exhibit 15.2Sustaining Competitive Advantages

40. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 15–60 Supply Chain Management Integrates and coordinates the means by which a firm creates or develops a product or service and delivers it to customers. Distribution Physically moving products and establishing intermediary relationships to support such movement.

41. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 15–61 Supply Chain Management (cont’d) Physical Distribution (Logistics) The activities of distribution involved in the physical relocation of products. Channel of Distribution The system of relationships established to guide the movement of a product.

42. © 2010 South-Western, Cengage Learning, Inc. All rights reserved. 15–62 Exhibit 15.8Alternative Channels of Distribution

43. Unit 6 DB: Horse On page 389 of our textbook, read the “in the spotlight” mini-case study on Horse, and feel free to visit their website for more information on the company: www.horse.com Then, answer the following questions: www.horse.com When owner Scott Mooney realized he needed more exposure for his products, what strategy did he employ? How did this strategy impact his product and supply chain management strategy?

44. Case Study #3: eHarmony Please answer the following questions in your case study analysis: Describe eHarmony in terms of its bundle of satisfaction. How does eHarmony define its market segment? What strategy or strategies does eHarmony use to target one particular segment?

45. Look Ahead to 5th & Final “Live” Seminar

46. Unit 7 Information Theme: Pricing & Credit Decisions, Promotional Planning, & Global Marketing Readings: Longenecker – Chapters 16, 17, & 18 (pages 418 to 492) Discussion Board: Foley’s NY Pub & Restaurant (page 440) (40 points) Review: Chapters 14 through 18 (Part 4 of textbook) (40 points) Seminar: Conducted on Scheduled Day/Time

47. Unit 8 Information Theme: Professional Management & Managing Human Resources Readings: Longenecker – Chapters 19 & 20 (pages 493 to 546) Discussion Board: Too Many Bad Questions (page 521) (40 points) Final Project Activity: Financial Management (ungraded) Seminar: No Seminar in Unit 8

48. Unit 9 Information Theme: Managing Operations, Assets, & Risks Readings: Longenecker – Chapters 21, 22, & 23 (pages 547 to 622) Discussion Board: Modern Postcard (page 547) (40 points) Review: Chapters 19 through 23 (Part 5 of textbook) (40 points) Final Project: Business Plan (200 points) Seminar: Conducted on Scheduled Day/Time Please note that the Unit 9 Final Project (Business Plan & MS PowerPoint Presentation) must be submitted no later than the end of Unit 9. No late submissions of this important assignment will be accepted to allow time for grading and submission of final grades for the term.

49. 4th “Live” Seminar Wrap-Up If you need assistance: o Contact instructor at their KU email address o Post message to “Instructor’s Office” o Meet with instructor during Virtual Office Hours o KU Tech Support: 1-866-522-7747 o Academic Advisor: If you have any challenges that prevent you from succeeding this term or at KU in general o Other KU Resources: Writing Center, etc. Our next “live” seminar: Unit 9 Questions? o Course Website or Content? o Assignments? o Other issues?