Entrepreneurship: Starting and Operating A Small Business

ENTREPRENEURSHIP: Starting & Operating A Small Business, Global Edition
Half Title Page
Title Page
Copyright
Dedication
Brief Contents
Contents
Preface
Chapter Learning System
End-of-Chapter Learning Portfolio
Additional Resources
About the Authors
Acknowledgments
UNIT 1: ENTREPRENEURIAL PATHWAYS
	CHAPTER 1: Entrepreneurs Recognize Opportunities
		Entrepreneurship
			What Is an Entrepreneur?
			The Free-Enterprise System
			Voluntary Exchange
			Benefits and Challenges of Free Enterprise
			What Is a Small Business?
			Definitions of Success—Monetary and Other
			Taking the Long View
		Benefits and Costs of Becoming an Entrepreneur
			Potential Benefits of Entrepreneurship
			Potential Costs of Entrepreneurship
			Cost/Benefit Analysis
			Opportunity Cost
			Seeking Advice and Information to Succeed
		Entrepreneurial Options
		How Do Entrepreneurs Find Opportunities to Start New Businesses?
			Entrepreneurs Creatively Exploit Changes in Our World
			Where Others See Problems, Entrepreneurs Recognize Opportunities
			Train Your Mind to Recognize Business Opportunities
			Entrepreneurs Use Their Imaginations
		An Idea Is Not Necessarily an Opportunity
			Opportunity Is Situational
			The Five Roots of Opportunity in the Marketplace
			Integrating Internal and External Opportunities
			Establishing Strategies
		Paths to Small Business Ownership
			Securing Franchise Rights
			Buying an Existing Business
			Licensing Technology
			The Many Faces of Entrepreneurship
		Making the Business Work Personally and Professionally
			A Business Must Make a Profit to Stay in Business
			Profit Is the Sign That the Entrepreneur Is Adding Value
			Profit Results from the Entrepreneur’s Choices
			Seven Rules for Building a Successful Business
			The Team Approach
		Chapter Summary
		Key Terms
	CHAPTER 2: The Business Plan: Road Map to Success
		Feasibility Analysis: Does My Idea Work?
			Analyzing Product and/or Service Feasibility
			Analyzing Market and Industry Feasibility
			Analyzing Financial Feasibility
		Creating a Business Model Canvas
		What Is a Business Plan?
		Why Do You Need a Business Plan?
			Writing a Business Plan Early Will Save You Time and Money
			Your Business Plan Is the Key to Raising Capital
			The Business Plan Is an Operations Guide
		Business Plan Components
			Cover Page and Table of Contents
			Executive Summary: A Snapshot of Your Business
			Mission and Culture: Your Dreams for the Organization
			Company Description—Background and Track Record
			Opportunity Analysis and Research—Testing Ideas
			Marketing Strategy and Plan: Reaching Customers
			Management and Operations: Making the Plan Happen
			Financial Analysis and Projections: Translating Action into Money
			Funding Request and Exit Strategy: The Ask and the Return
			Appendices: Making the Case in Greater Detail
		Business Plan Suggestions
		Presenting Your Business Plan
		Business Plan and Venture Competitions
		Chapter Summary
		Key Terms
		Honest Tea Business Plan
			Table of Contents
			Mission Statement
			Executive Summary
			Company Story
			The Product
				Low in calories
				Health benefits of brewed tea
				Cultural experience of tea
				Flagship line of flavors
			Production and Manufacturing
			Market Opportunity
				Beyond Snapple–The Emerging Market for Quality Bottled Tea
				Profile of Target Customer
				Market Research
				Market Response
			Marketing & Distribution
				National natural/specialty foods channels
				Higher end food service
				Promotion
				Packaging and Pricing
				International Markets
				Product Development and Future Products
			Management
				President & TeaEO
				Chairman of the Board
				Brewmaster
				Consultants and Advisors
			Statement and Aspirations for Social Responsibility
			Financial Statements–Year-to-Date and Projections
			The Investment Opportunity
				The Offering
				Financing History
				Exit Strategies
				Investment Risks
				Competitive Advantage
				A Parting Thought
	CHAPTER 3: Creating Business from Opportunity
		Apple and the Personal Computer
		Business Definition
		What Sort of Organization Do You Want?
			Your Company’s Core Values
			Your Company’s Mission Is to Satisfy Customers
			Your Company’s Vision Is the Broader Perspective
			Your Company’s Culture Defines the Work Environment
			The Decision Process
		Your Competitive Advantage
			Find Your Competitive Advantage by Determining What Consumers Need and Want
			You Have Unique Knowledge of Your Market
			The Six Factors of Competitive Advantage
			Is Your Competitive Advantage Strong Enough?
			Checking Out the Competition
		The Most Chocolate Cake Company
			Competitive Strategy: Business Definition and Competitive Advantage
		Feasibility Revisited: The Economics of One Unit as a Litmus Test
			Defining the Unit of Sale
			Cost of Goods Sold and Gross Profit
			Your Business and the Economics of One Unit
			The Cost of Direct Labor in the EOU—An Example
			Hiring Others to Make the Unit of Sale
			Going for Volume
		Determining the Value of a Business
			Asset Valuation Method
			Earnings Valuation Method
			Cash Flow Valuation Method
		Chapter Summary
		Key Terms
	Unit 1: Entrepreneurial Pathways: SPANX—Idea to Entrepreneurial Opportunity
UNIT 2: INTEGRATED MARKETING
	CHAPTER 4: Exploring Your Market
		Markets and Marketing Defined
			A Business That Markets versus a Market-Driven Business
		Research Prepares You for Success
			Research Your Market
			You Open Your Business
			Types and Methods of Research
			Getting Information Directly from the Source: Primary Research
			Getting Information Indirectly: Secondary Research
		Research Helps You Know Your Customer
			Customer Research
			Industry Research: The 50,000-Foot Perspective
			Make Research an Integral Part of Your Business
		How Customers Decide to Buy
			Owning a Perception in the Customer’s Mind
			Features Create Benefits
			Home Depot: Teaching Customers So They Will Return
		Which Segment of the Market Will You Target?
			Successful Segmenting: The Body Shop
			Applying Market Segmentation Methods
			The Product Life Cycle
			Is Your Market Saturated?
		Market Positioning: Drive Home Your Competitive Advantage
		Developing a Marketing Plan
		Chapter Summary
			Key Terms
	CHAPTER 5: Developing the Right Marketing Mix and Plan
		The Four Marketing Factors
		Product: What Are You Selling?
			Create Your Total Product or Service Concept
			Focus Your Brand
			Ford’s Costly Failure: The Edsel
			Ford’s Focus on Success: The Mustang
			How to Build Your Brand
		Price: What It Says about Your Product
			Strategies and Tactics for Effective Pricing
		Place: Location, Location, Location!
			Key Factors in Deciding on a Location
		Promotion: Advertising
		Publicity
		Use Integrated Marketing Communications for Success
			Reinforce the Company’s Unique Selling Proposition
		Promotional Planning
			Determine a Promotional Budget
		The Advertising Advantage
			Types of Advertising
			Media Planning and Buying: Focus on Your Customer
			Marketing Materials Should Reinforce Your Competitive Advantage
		Sales-Promotion Solutions
			When to Use Promotional Tools
			Advertising Specialties
			Trade Show Exhibits
			Mall Carts or Kiosks
		Alternative Marketing
			Other Media Venues
		E-Active Marketing
		Publicity Potential
			Generating Publicity
			Telling the Story
			Sample Press Release
			Follow Up a Press Release
			Public Relations
		The Fifth P: Philanthropy
			Cause-Related Marketing
			Gaining Goodwill
			Not-for-Profit Organizations
			What Entrepreneurs Have Built
			You Have Something to Contribute
		Developing a Marketing Plan
			Marketing Analysis
		Marketing as a Fixed Cost
			Calculate Your Breakeven Point
		Chapter Summary
			Key Terms
	CHAPTER 6: Smart Selling and Effective Customer Service
		Selling Skills Are Essential to Business Success
			Selling Is a Great Source of Market Research
			The Essence of Selling Is Teaching
			The Principles of Selling
		The Sales Call
			Electronic Mail, Blogs, and Social Networks
			Prequalify Your Sales Calls
			Focus on the Customer
			The Eight-Step Sales Call
			Three Call Behaviors of Successful Salespeople
			Analyze Your Sales Calls to Become a Star Salesperson
			Turning Objections into Advantages
			Use Technology to Sell
		Successful Businesses Need Customers Who Return
			Customer Service Is Keeping Customers Happy
			The Costs of Losing a Customer
			Customer Complaints Are Valuable
		Customer Relationship Management Systems
			Why Does CRM Matter?
			Components of CRM for the Small Business
			How Technology Supports CRM
		Chapter Summary
			Key Terms
	Unit 2: Integrated Marketing: Kitchen Arts & Letters, Inc.—An Independent Bookstore Defies Industry Odds
UNIT 3: SHOW ME THE MONEY: FINDING, SECURING, AND MANAGING IT
	CHAPTER 7: Understanding and Managing Start-Up, Fixed, and Variable Costs
		What Does It Cost to Operate a Business?
		Start-Up Investment
			Brainstorm to Avoid Start-Up Surprises
			Keep a Reserve Equal to One-Half the Start-Up Investment
			Predict the Payback Period
			Estimate Value
		Fixed and Variable Costs: Essential Building Blocks
		Calculating Critical Costs
			Calculating Total Gross Profit (Contribution Margin)
			Calculating EOU When You Sell Multiple Products
			Fixed Operating Costs
			Fixed Operating Costs Do Change Over Time
			Allocate Fixed Operating Costs Where Possible
			The Dangers of Fixed Costs
			Using Accounting Records to Track Fixed and Variable Costs
			Three Reasons to Keep Good Records Every Day
			Cash versus Accrual Accounting Methods
			Recognizing Categories of Costs
		Chapter Summary
			Key Terms
	CHAPTER 8: Using Financial Statements to Guide a Business
		Scorecards for the Entrepreneur: What Do Financial Statements Show?
		Income Statements: Showing Profit and Loss Over Time
			Parts of an Income Statement
			A Basic Income Statement
			The Double Bottom Line
			An Income Statement for a More Complex Business
		The Balance Sheet: A Snapshot of Assets, Liabilities, and Equity at a Point in Time
			Short-and Long-Term Assets
			Current and Long-Term Liabilities
			The Balance Sheet Equation
			The Balance Sheet Shows Assets and Liabilities Obtained through Financing
			The Balance Sheet Shows How a Business Is Financed
			Analyzing a Balance Sheet
			Depreciation
		Financial Ratio Analysis: What Is It and What Does It Mean to You?
			Income Statement Ratios
			Balance-Sheet Analysis
		Chapter Summary
			Key Terms
	CHAPTER 9: Cash Flow and Taxes
		Cash Flow: The Lifeblood of a Business
			The Income Statement Does Not Show Available Cash
			Rules to Keep Cash Flowing
			Noncash Expenses Can Distort the Financial Picture
		The Working Capital Cycle
			The Cyclical and Seasonal Nature of Cash Flow
			Reading a Cash Flow Statement
			The Cash Flow Equation
			Forecasting Cash Flow: The Cash Budget
			Creating a Healthy Cash Flow
			Managing Inventory to Manage Cash
		Managing Receivables to Manage Cash
			The Cash Effects of Accounts Receivable
			The Life Cycle of Accounts Receivable
			The Financing of Accounts Receivable
		Managing Accounts Payable to Manage Cash
			Negotiating Payment
			Timing Payables
		Capital Budgeting and Cash Flow
			The Burn Rate
		The Value of Money Changes Over Time
			The Future Value of Money
			The Present Value of Money
		Taxes
			Cash Flow and Taxes
			Filing Tax Returns
			Collecting Sales Tax
			Tax Issues for Different Legal Structures
			Make Tax Time Easier by Keeping Good Records
		Chapter Summary
			Key Terms
	CHAPTER 10: Financing Strategy & Tactics
		Going It Alone Versus Securing Financing
			How Often Do Small Businesses Really Fail?
		What Is the Best Type of Financing for You and Your Business?
		Gifts and Grants
		Debt Financing
			Debt Financing: Pros and Cons
		Equity Financing
			Equity Financing: Pros and Cons
		Where and How to Find Capital That Works for You
			Having an Excellent Business Plan Goes a Long Way
			How Capital Sources Read Your Business Plan
			Family and Friends
			Financial Institutions and Dimensions of Credit
			Community Development Financial Institutions (CDFIs)
			Venture Capitalists
			Angels
			Insurance Companies
			Vendor Financing
			Federally Supported Investment Companies
			Financing for Rural/Agricultural Businesses
			Self-Funding: Bootstrap Financing
		Accessing Sources Through Online Networking
		Investors Want Their Money to Grow: Can You Make It Happen?
			How Stocks Work
			How Bonds Work
		Chapter Summary
			Key Terms
	Unit 3: Show Me the Money: Finding, Securing, and Managing It, Lee’s Ice Cream
UNIT 4: OPERATING A SMALL BUSINESS EFFECTIVELY
	CHAPTER 11: Addressing Legal Issues and Managing Risk
		Business Legal Structures
			Sole Proprietorship
			Partnership
			Corporation
			Tips for Entrepreneurs Who Want to Start a Nonprofit Organization
		Contracts: The Building Blocks of Business
			Working with an Attorney
			Drafting a Contract
			Letter of Agreement
			Breach of Contract
			Small Claims Court
			Arbitration
			A Contract Is No Substitute for Trust
		The Uniform Commercial Code (UCC)
		The Law of Agency
		Bankruptcy
		Protecting Intangible Assets: Intellectual Property
			Trademarks and Service Marks
			Copyright
			Electronic Rights
			Patents
		Protecting Tangible Assets: Risk Management
			Insurance Protects Your Business from Disaster
			Basic Coverage for Small Business
			How Insurance Companies Make Money
			Protect Your Computer and Data
			Disaster Recovery Plans
		Licenses, Permits, and Certificates
		Chapter Summary
			Key Terms
	CHAPTER 12: Operating for Success
		Operations Permit Businesses to Deliver on Their Promises
		The Production-Distribution Chain
		Supply Chain Management
			Finding Suppliers
			Managing Inventory
		Facilities, Location and Design
		Key Factors in Deciding on a Location
			Facilities Design and Layout
			Special Considerations for Home-Based Businesses
			Special Considerations for Web-Based Businesses
		Defining Quality: it is a Matter of Market Positioning
			Profits Follow Quality
		Organization-Wide Quality Initiatives
			Benchmarking
			ISO 9000
			Six Sigma
			Total Quality Management
			Malcolm Baldrige Award
		Using Technology to Your Advantage
			Computer Access Is Essential
			Capture the Potential of the Telephone
			Identify Market-Specific Software and Technology
			Electronic Storefront (Web Site)
		Chapter Summary
			Key Terms
	CHAPTER 13: Management, Leadership, & Ethical Practices
		The Entrepreneur as Leader
			Leadership Styles That Work
			How Entrepreneurs Pay Themselves
			Manage Your Time Wisely
		Business Management: Building a Team
			What Do Managers Do?
		Adding Employees to Your Business
			Growing Your Team
			Creating and Managing Organizational Culture
			Determining Organizational Structure
			Getting the Best Out of Your Employees
		Human Resources Fundamentals
			Performance Management
			Firing and Laying Off Employees
		Ethical Leadership and Ethical Organizations
			An Ethical Perspective
			Establishing Ethical Standards
			Corporate Ethical Scandals
			Doing the Right Thing in Addition to Doing Things Right
			Balancing the Needs of Owners, Customers, and Employees
		Social Responsibility and Ethics
			Leading with Integrity and Examples
			Encourage Your Employees to Be Socially Responsible
		Chapter Summary
			Key Terms
	Unit 4: Operating a Small Business Effectively: ONLC Training Centers— Virtual IT Training in a Classroom
UNIT 5: CASHING IN THE BRAND
	CHAPTER 14: Franchising, Licensing, and Harvesting: Cashing in Your Brand
		What Do You Want from Your Business?
			Continuing the Business for the Family
			Growth through Diversification
		Growth through Licensing and Franchising
			Focus Your Brand
			When Licensing Can Be Effective
			Franchising Revisited from the Franchisor Perspective
			How a McDonald’s Franchise Works
			Do Your Research before You Franchise
		Harvesting and Exiting Options
			When to Harvest Your Business
			How to Value a Business
			The Science of Valuation
		Creating Wealth by Selling a Profitable Business
			Harvesting Options
		Exit Strategy Options
			Investors Will Care about Your Exit Strategy
		Chapter Summary
		Key Terms
	Unit 5: Cashing in the Brand: Honest Tea—From Start-Up to Harvest
Appendix 1: Sample Student Business Plan
Appendix 2: BizBuilder Business Plan
Appendix 3: Resources for Entrepreneurs
Appendix 4: Useful Formulas and Equations
Glossary
Index