Business 101 The purpose of this activity is to introduce you to the basics of business and entrepreneurship.

Session 1: Business Basics

What is a business? A business is a person or group of people who create and sell products and/or services in order to make money. Can you give an example of a business? What things can be purchased from a business? What is the goal of a business? To make money

Profit Equation Worksheet Revenue - Expenses = Profit (or Loss) Money a company earns from selling a product or service is called revenue. An expense is a cost associated with operating a business. Some common expenses are: Salary: the money a person is paid for working Rent: money regularly paid to use or occupy a space Profit is the money made by a company, after expenses have been paid.

Profit Equation Worksheet Revenue - Expenses = Profit (or Loss) In order to make a profit, a business must sell a product or service for MORE than it costs to produce it. If it does NOT do this, the result can be a loss. A loss occurs when total expenses exceed total revenue.

Entrepreneurial Cycle An entrepreneur is a person who takes on the risk of beginning and operating a new business. Starting a business is risky because it takes a lot of time and money, and there is no guarantee the business will succeed. The first thing entrepreneurs do is think of an idea; then, they follow the four stages of the entrepreneurial cycle to run their business. The four stages of running a company are: Design (Draw it) Manufacturing (Make it) Marketing (Tell everyone about it) Sales (Sell it)

Entrepreneurial Cycle Finance, the management of money and other items of value (i.e. expenses, cash, revenue, supplies), is at the center of the cycle because financial decisions are a part of each stage. In each stage, companies must record their revenue and expenses to make sure they are on track to make a profit. Companies often move through this cycle many times as they continue to perfect and create new products.

Jobs in the Company Chief Executive Officer (CEO): Focused on leading the team and managing the smooth operation of the company and its employees. VP Design: Focused on leading the team in creating an attractive design and a quality product that will appeal to customers. VP Finance: Focused on leading the team in making sure all money is accounted for and the company is making a profit. VP Manufacturing: Focused on leading the team in making the product as easily and inexpensively as possible. VP Marketing: Focused on leading the team in promoting the company, product, or service. VP Sales: Focused on leading the team in providing excellent customer service and selling lots of products. ASK STUDENTS TO CONSIDER WHICH JOB THEY WOULD LIKE TO APPLY FOR. WHY DO THEY THINK IT WOULD BE A GOOD FIT? WHAT SKILLS ARE NECESSARY FOR THIS JOB? HAVE STUDENTS COMPLETE APPLICATIONS AND COLLECT.

Business Contract This specifies a code of conduct that is expected from each member of the team and recognizes the responsibilities of each employee. All members must read, sign and date the contract. The Company Packet is retained by the CEO of the company.

WHAT DO THESE NAMES MAKE YOU THINK OF?

Company Name Your company’s name should: Be memorable and/or unique Reflect your company values Reflect your product design You will also need: A logo A slogan for use in your marketing campaign Use the “What’s in a Name?” page from your company packet to create a name for your company. Be sure to answer ALL questions completely.

Financing Your Company Why is it important to keep track of your finances? To know how much you have left To make sure you earn a profit Capital is money and/or other resources used to make money A person who starts a business, a founder, usually contributes their own money to the business. A deposit is money put into an account A withdrawal is money taken out of an account You will be using the Company Ledger in your student packet to keep track of deposits and withdrawals

Financing Your Company What are some of the expenses you will have ????? Do you have enough money right now to pay for these expenses? Where can companies get money to pay for these costs? Bank Venture capitalist = a person who invests money in new and innovative businesses Do you think a venture capitalist will just give you money? No. Venture Capitalists give money in exchange for ownership of part of the company.

Stock and Incorporation In order to sell a part of your company, you need to have shares of stock. Stocks are pieces of ownership in a company. When someone buys stock, they own a “piece” of the company and “share” the profits the company makes. To incorporate means to form a company that is officially recognized by the state government as an independent organization. (Incorporation protects individuals who own businesses from losing personal assets in the event of corporate bankruptcy or financial trouble.) How much stock you are willing to sell (how many shares) depends on how much control you are willing to give up.

Why Invest in a New Company Investing in a new business is risky and people only want to do it if the company will be profitable. Investors should be thought of as a “partner in the business” because they are interested in the company’s success. How does a venture capitalist benefit from investing in companies? The company “goes public” meaning they start selling shares of the company on an open market. When more people want to purchase shares, the value of each share rises. The company is purchased by another company, in which case, investors are paid based upon their percentage of ownership in the company

What is a Pitch A pitch is a presentation made to convince someone to invest money in a company. Once you have designed your product, figured what supplies you will need and calculated how much money you will need for supplies, then you will make a pitch to Janet Keane, Mandel JDS’s CFO (Chief Financial Officer) to request a loan for the amount needed. The loan will be paid back out of revenues collected from sales of soap. The CEO and the VP of Finance will make the pitch to secure a loan.

Section 2: The Design Process

Things to Consider When designing a product for sale, answer the following questions: Who are our customers? What do they want? What is trendy right now? What will our product look like? What will make our product unique? How much will it cost to buy supplies? To pay for design expenses, our company will need funding. Funding is money that is available for use. To obtain funding, our company will need a business plan. A business plan is a written document describing a business and its goals.

Things to Consider Keeping our target market in mind: What do we want our soaps to look like? What colors do we want to use? Which scents do we want to use? What add-ins do we want to use? (glitter, oatmeal, pumice, soy, apricot) How do we want to package our soaps? How many soaps can we make? How much will it cost to buy supplies? Have students complete the business plan worksheet on page 10 of the student packet

Making a Prototype A prototype is a model of a new product or a new version of an existing product. The VP of Design will supervise the production of prototypes. Later, the VP of Manufacturing will be responsible for large scale production of the finished product. Be sure to keep track of what ingredients go into each prototype and in what amounts. Once prototypes are completed and packaged, test the products and decide which ones will be produced.

Preparing for Production Using the notes used during prototype production, calculate the amount of each ingredient needed to make 40 bars of soap. 10 lbs. of soap base will make 40 (4 oz) bars of soap. Determine how much it will cost to produce each bar of soap. Then determine what your profit will be for each bar of soap by subtracting your cost from the price you will charge for each bar of soap. Use this information along with your Business Plan Worksheet to complete your loan presentation.

Section 3: Manufacturing

Manufacturing Techniques There are several ways companies produce goods in large quantities. Two examples of manufacturing techniques are job shop and assembly line. Job shop is a process in which one individual produces a product from start to finish. What are some examples of this process What are some advantages and disadvantages of it Assembly line is a process in which a product is assembled in a step-by-step process by multiple individuals, each performing a specific task. Job shop = low production rate, increased cost, usually an increase in quality; assembly line = high production rate with decreased cost but usually a decrease in quality Discuss which process would work best for our company

Manufacturing: Important Information Since production space will be shared by all advisories, and the space is also used for meetings, it is important that each group leaves the room in good condition for the next group Return all shared supplies in their proper location in the cabinet Reusable items, such as spatulas, molds and measuring cups, must be thoroughly cleaned and dried before being put away All tables and surfaces must be cleaned The cost of any shared items (thermometers, molds, measuring cups, etc.) that need to be replaced will be shared by all advisories