Intro to Business Unit Four Business Operations Chapter 12 Small Business Management
Jan 16, 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
Characteristics of Entrepreneurs
ENTREPRENEURS HAVE ENTREPRENEURS ARE
Problem-solving skills Persistent
Tolerance for ambiguity Inquisitive
Strong integrity Energetic
Personal initiative Goal-oriented
Ability to secure resources Independent
Capability to learn from failure Creative
Willingness to work hard Reliable
Self-confidence Competitive
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
Elements of a Business Plan
Description of Business • The business idea Major products & services• Ownership structure Strengths and weaknesses• Long-term and short-term goals
Customer Analysis• Description of customers• Location, number, and resources of customers• Sales forecast
Operations Plan• Organization of the company 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
Financial Plans• Start-Up costs Short-term and long-term financial needs• Sources of financing Budgets and financial statements
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
COMMON REASONS FOR SMALL BUSINESS FAILURE Not keeping adequate records Not having enough start-up money Lack of management experience Lack of experience with the type of business Not controlling operating expenses Poor location for the business Failure to manage credit offered to customers
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)
Employee Category Supporting Reason Opposing Reason
Permanent Will know the business Employees will have a greater loyalty to it
Payroll expenses will continue no matter what the condition of the business (slow)
Temporary Can fill when business increases and be eliminated when business decreases
Difficult to find people who are qualified and want to work a short period
Full-Time Can be counted on to work regularlyComplete the important work of the business
Costs are usually higher because full-time must be paid some fringe benefits
Part-Time Can work during days and times when extra help is required
Will likely leave if a permanent job opportunity is offered by another business
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
High School Teachers & College Professors
High School or College Placement Offices
Recommendations of Current Employees
Classified Ads in Local Newspaper
Clubs and Social Organizations
Customers of the Small Business
Human Resource Needs Hiring New Employees
Less formal than large companyChoosing the Right People
Applicant Qualifications Information Sources
Business and Technical Knowledge & Skills Transcripts / Grade ReportsTeacher ReferencesEmployer ReferencesWork Samples
Communication & Interpersonal Skills Personal ReferencesInterviewsRole playingEmployer References
Attitude Towards Work and Customers Interview Employer ReferencesAttendance RecordsWork History from Resume
Work Experience ResumeEmployer References
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. (40 Hour Week)
Straight Salary
Pays a specific amount per week or month worked. (may have worked 35 hours or 45 hours)
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.
Fringe BenefitsFringe Benefit Value to Employee
Vacation Time Much needed breaksOpportunity to relax / de-stressEnjoy leisure time
Health Insurance Reduces financial burden suffered by individuals because of injury or illness
Life Insurance Provides financial security for family members (If family provider dies)
Uniforms/Clothing Allowance Shows employees commitment Reduces initial costs of dressing for work
Flextime (Flexible Start/End Time)
Allows employees control of work hours
Fringe BenefitsFringe Benefit Value to Employee
Employee cafeteriaLow-cost menus
Helps employees save moneyProvide course of nutrition at work
Daycare for employee children Reduces anxiety about child careKeeps children close to parents
Recreation facility (Gym) Provides convenient way for employees to stay fit and healthy
Retirement Income Provides financial security during old age.
Employee Discounts Offer good value for purchases of company products
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.
Basic Financial Equation Revenue – Expenses = Profit or Loss
Profit Revenue is greater than expenses Revenue > Expenses = Profit
Loss Revenue is less than expenses Revenue < Expenses = Loss
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)
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 Records - Payroll Payroll Records
Contain info on all employees and their earnings
What is the purpose of the payroll system? The purpose of the payroll system is to:
maintain information on each employee to be able to calculate the company’s payroll and make the necessary payments to each employee
taking the proper legal state and federal deductions from each paycheck.
SAMPLE EARNINGS REPORT & DIRECT DEPOSIT RECEIPT
Financial Statements
Reports that summarize the financial performance of the business.
Balance Sheet
Income Statement
(next 2 Slides)
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)