Intro to Business

1. Intro to Business Unit Four Business Operations Chapter 12 Small Business Management

2. 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.

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. Intro to Business Unit Four Business Operations Chapter 13 Managing Human Resources

12. 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.

13. 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

14. Human Resource Needs • Human Resource Management • Ensures that employees are available, that they are productive, paid, and satisfied with their work.

15. 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)

16. 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? Permanentor Temporary; Full or Part-Time? • Goal: Hire people who can meet those needs

17. 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

18. Human Resource Needs • Locating New Employees

19. Human Resource Needs • Hiring New Employees • Less formal than large company

20. Compensation & Benefits • Compensation • amount of money paid to employee for work performed. Consists of two parts: • Salary & Wages: direct payment to employee for work completed • Benefits: indirect forms of payment (i.e. insurance, vacation, paid parking)

21. 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.

22. 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.

23. 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.

24. Intro to Business Unit Four Business Operations Chapter 14 Maintaining Financial Information

25. GOALS • Identifycommon 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. • Explainthe financial statements used by a business.

26. Financial Planning • Business Budget • Anticipate sources and amounts of income • Predict the types and amounts of expenses for a specific business activities or entire business • Income (Revenue) – Money Received • Expenses – Cost of Operating

27. 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

28. 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/

29. 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

30. 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.

31. 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.

32. 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)

33. 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.

34. 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)