Intro to Business Unit Four Business Operations Chapter 12 Small Business Management
Feb 25, 2016
Intro to Business
Unit Four Business Operations
Chapter 12Small Business Management
GOALS Describe the characteristics of small
business owners.
Identify key steps small business owners follow to start their business.
Explain the importance of a written business plan.
Detail various types of financing for a new
business.
Characteristics of Small Business Owners Advantages:
Independence Control Set your own schedule Make your own decisions
Disadvantages: Long hours Customer complaints Making payroll Taking responsibility
for everything
Characteristics of Small Business Owners Small Business Ownership is risky Fewer than ½ of all new businesses survive 5 yrs
Personality–Based: Self-motivation Risk-taking Persistence
Business-Related: Knowledge & Skills
Management, finance, marketing, business operations
Most importantly – EFFORT
Key Steps in Starting a Business An Idea Plus Experience
Begins with an idea Hobbies, interests, and business experiences Training and experience from previous jobs Various aspects of business operations
Right Place and Time Location – customer traffic Location – manufacturers, wholesalers,
transportation, supplies accessible Timing – customer demand is high
Key Steps in Starting a Business Team Approach
Even the most independent people need help Team = employees with right abilities
Preparation and Research Preparation is most important step
Having adequate information to make good decisions Time spent gathering and studying information Info about: customers, competitors, operations and
activities, government regulations, etc. Sources: Libraries, Internet, Business Assistance Centers
Importance of Business Plan (Pg164) Business Plan: a written description of the
business idea and how it will be carried out, including all major business activities.
Key Features: General Description of Company Qualifications of the owner(s) Description of Products & Services Analysis of Market (demand, customers, competition) Financial Plan
Forces owner to consider activities, time & cost
Importance of Business Plan (Pg164) Why write a Business Plan?
Persuade lenders/investors top help finance venture
Developed plan to follow through with: Layout the idea Analyze the concept Make decisions about business activities
(production, marketing, staffing, financing, etc.)
Provides Owner with: Game Plan Timeline Goals
Financing Options Start-Up Financing
Amount of money needed to start the business
Short-Term Financing Money needed to pay for current operating activities of a
business; Usually LESS THAN 1 year
Long-Term Financing Money needed for the important resources of a business
(such as land, buildings, equipment) that will last for many years
Financing Options Sources of Financing
Owner’s funds Sole-Proprietorship = Personal savings Partnership = contributions from both parties
Borrowed funds Loans from banks Loans from other financial institutions Financing from private investors Financing from other companies
Intro to Business
Unit Four Business Operations
Chapter 13Managing Human Resources
GOALS Explain why human resources are
important to the success of small business.
Identify factors to be considered by a small business owner when assessing human resource needs.
Outline types of compensation and typical benefits for employees.
Importance of Human Resource Human Resources
The people who work for a business
Small business may have few employees Impact of one person can be very noticeable Responsible for a number of activities May make key decisions & solve problems
Human Resource Needs Human Resource Management
Ensures that employees are available, that they are productive, paid, and satisfied with their work.
Human Resource Needs Categorizing Human Resources
Staffing is vital Once hired, employee is paid (profitable or not) Contribute to company’s profitability
Permanent: long term commitment Temporary: specific time frame or assignment
(seasonal) (Full/Part)
Full-Time: regular schedule, 30+ hours per week Part-Time: fewer hours, fewer days (afterschool)
Human Resource Needs Determining Employee Qualifications
What work needs to be completed? (current or new activities)
What skills are needed to do the work?
What type of employee? Permanent or Temporary; Full or Part-Time?
Goal: Hire people who can meet those needs
Human Resource Needs Locating New Employees
Young & Older Employees looking for part-time. Provides convenient location more flexible schedules pleasant work environment.
Skilled Workers Want more decision-making responsibility Greater variety of workload Prefer smaller organizations
Human Resource Needs Locating New Employees
Human Resource Needs Hiring New Employees
Less formal than large company
Compensation & Benefits Compensation
amount of money paid to employee for work performed. Consists of two parts:
1. Salary & Wages: direct payment to employee for work completed
2. Benefits: indirect forms of payment (i.e. insurance, vacation, paid parking)
Compensation & Benefits Time Wage
Pays employee a specific amount of money for each hour worked.
Straight Salary
Pays a specific amount per week or month worked.
Neither based on amount or quality of work.
Compensation & Benefits Financial Incentives
Commission: performance reward (% of sales they were responsible for making)
Piece Rate: performance reward(amount per unit of work produced)
Base Plus Incentive: wage or salary in addition to (PLUS) performance reward
i.e. Profit Sharing: receive regular pay plus a share of the profits earned by the company
Encourages commitment to company, teamwork, effective customer service, etc. to ensure higher profits.
Compensation & Benefits Fringe Benefits
Businesses offer and pay costs of benefits: Compensation (including overtime pay) Social Security Medicare Unemployment Workers Compensation (injury) Insurance plans (Health, life, dental, disability)
Vacation Benefits Paid for time they aren’t working, but makes happier,
more productive employees in the long run.
Intro to Business
Unit Four Business Operations
Chapter 14Maintaining Financial Information
GOALS Identify common sources of financial
information for small businesses.
Describe the 3 types of business budgets.
Outline the primary financial records needed to manage a small business.
Explain the financial statements used by a
business.
Financial Planning Business Budget
1.Anticipate sources and amounts of income2.Predict the types and amounts of expenses for
a specific business activities or entire business
Income (Revenue) – Money Received Expenses – Cost of Operating
Financial Planning Sources of Information
Small Business Administration Planning tools for small businesses (develop budget)
Private Businesses (Collect & Publish Info) Dun & Bradstreet Value Line Standard and Poor
Financial Planning Sources of Information
Business Magazines Fortune http://money.cnn.com/magazines/fortune/ Forbes http://www.forbes.com/ Entrepreneur http://www.entrepreneur.com/ Black Enterprise http://www.blackenterprise.com/ The Wall Street Journal http://online.wsj.com
Professional Associations National Federation of Independent Business
http://www.nfib.com/ National Retail Merchants Associations
http://www.retailmerchants.com/
Budget Prep – Budget #1 Start-Up Budget
Plans income and expenses from beginning of the business until it becomes profitable
Needed before business can begin selling:Buildings, equipment, inventory, supplies, materials, employees, utilities, licenses, advertising, transportation
Investments and loans help get them started
Budget Prep – Budget #2 Operating Budget
Financial plan for day-to-day operations of the business
Six months to a year
All revenue and expenses are listed and the planned net income (loss) for the period of time is shown.
Budget Prep – Budget #3 Cash Budget
An estimate of the actual money received and paid out for a specific time period
Anticipates that cash will come into a business and that cash will be paid out during each week or month of operation.
Financial Records Used to record and analyze the financial
performance of a business.
Cash Records: list all cash receipts and disbursements
Records of Accounts: Accounts Payable: identifies companies from which
credit purchase were made (we owe them)
Accounts Receivable: identifies companies that have made credit purchases (they owe us)
Financial Records Inventory Records
Identify the type and quantity of products available for sale. (needed for control & security)
Payroll Records Contain info on all employees and their earnings
Asset Records Identify buildings and equipment owned by business,
their original and current value, & the amount owned if money was borrowed to purchase assets.
Financial Statements Reports that summarize the
financial performance of the business.
Balance Sheet Lists assets, liabilities, and owner’s equity (capital) Prepared every six months or every year
Income Statement Reports revenue, expenses, and net income (or loss)
from the business for a specific time period. Prepared every month (new) or 6 months (established)