Chapter 12 Managing a Small Business

Chapter 12
Managing a Small
EQ: What are the key steps to follow in order to start your
own business?
Identifying the Small Business
 Advantages:
independence, control, decision making, setting own
 Disadvantages:
long hours, customer complaints, meeting payroll,
taking responsibility for all problems.
 Small business ownership is risky!!!
Identifying the Small Business
 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
 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
 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
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
 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
 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
Page 167