Chapter 12

Managing a Small Business

Identifying the Small-Business Owner

•

Independence

;

control

; the chance to set your own

schedule

and make your own

decisions

are some of the positives to owning your own business.

• • However,

long hours

;

customer complaints

;

meeting a payroll

; and taking

responsibility

for every problem are some of the drawbacks of being a small-business owner.

What it Takes

– Fewer than

half

years.

of all new businesses will survive for

five

Characteristics of a small business owner: –

Self motivation

-internal vs. external motivation (intrinsic vs.extrinsic) –

Risk taking

Identifying the Small-Business Owner

• • Characteristics of a small business owner: –

Persistence

”Persistence pays off” – –

Knowledge Skills

• Management • Finance • Marketing • Human Relations

Who Owns Small Business

– Years ago, the majority of small-business owners were

middle aged (white) males

with less than a college education.

– Today, small business-owners are more

educated, younger,

and are more likely to be

female

or

minorities.

– Women now make up over

30

business owners.

– percent of all small-

Minority

1980’s.

business ownership has nearly

doubled

since the early

• • • •

Starting the Small Business

An Idea plus Experience

– Business ideas come from

hobbies, interests

, and

experience

.

business

– Several years of training in various aspects of business operations will prepare you for the role of owner. (Rick Stone Premier Sound and Design)

Right Place and Time

– Good

customer traffic

–

Timing

is essential to small business success.

is another important factor in starting a business.

Team Approach

–

Employees

must be selected carefully for their ability to work as a team.

– Small-business owners will require assistance from

bankers

,

lawyers

,

accountants

and other people with specialized business knowledge.

Preparation and Research-(the most important step in starting a business)

•

Starting the Small Business

– –

Preparation and Research-(the most important step in starting a business)

Information (knowledge)

is power!

Knowing about

customers

,

competitors

,

operations

, and

activities

,

government

regulations are key research in starting a small business.

• –

Developing a Business Plan

Owners of successful businesses develop and follow a business plan.

– A business plan is: a written description of the business idea and how it will be carried out, including all major business activities.

– Key features: 1.

2.

3.

4.

5.

General description of the company Qualifications of owner Description of the product or service Analysis of the market (demand, customers, competition) Financial plan

•

Steps in Developing the Small Business

The most popular use of business plans is to persuade

lenders

and

investors

to finance the venture.

• 1.

2.

3.

4.

Business Plan Steps:

• Gather and review information Review other business plans and study information on the activities and financial performance of similar businesses, competitors.

• Develop a “game plan” Alternatives for production, marketing, staffing and financing Write out the plan Have other business professionals review plan for strengths and weaknesses. (SBA)

–

Financing the Small Business

Types of Financing

1.

Start-up Financing-

amount of money needed to open business (includes cost of buildings (rent or own) equipment, inventory, supplies, licenses)

2.

3.

Short-term financing

-money to pay current operating obtained for period less than a year,one or 2 months.

•

Long term financing

-money borrowed for such things as land , buildings, equipment.

Paid off over many years.

• • •

Sources of Financing

Money to start a new business usually come from a combination of

owner-supplied

money and

borrowed

funds.

Borrowed funds are obtained through loans from

banks

and other

financial

institutions, or through financing provided by other

companies

. (

venture capitalists

)