Welcome to Unit 8 Small Business Management Your Instructor: Jason J. Abate next to Diane Sawyer, Chris Cuomo Please call me Prof J Slide 1 Bella & Tinker Bell My Favorite Robin Roberts

Slide 73 Welcome to the Unit 8 Seminar Building a Powerful Marketing Plan Slide 2

Slide 73 But first …Let’s do a Quick review of the Unit 7 Seminar Managing Cash Flows Slide 3

Unit 7 Highlights Balance Sheet –Assets –Liabilities –Owners Equity Income Statement –Revenue –COGS –Expenses –Income Statement of Cash Flows Slide 4

Unit 7 Highlights Continued Pro forma Financials Why is Break-Even Analysis important? Slide 5

Unit 7 Discussion Question 1 What do you know about Balance Sheets? Slide 6

What is a balance sheet? In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a “snapshot of a company’s financial condition.” Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time. A company balance sheet has three parts: assets, liabilities and ownership equity. Slide 7

What does a Balance Sheet do? It tells someone that if the company SOLD off all of its assets and paid all of its bills, how much would be left over for the owners? A Balance Sheet provides a snapshot of what the company has (assets), what the company owes (liabilities), and the difference between the two (equity). Slide 8

Slide 9 The Accounting Equation is: Assets = Liabilities Owners’ Equity + The easiest way to understand Owner’s Equity is to think of it as, if we sold every asset of the company today and used the money to pay off everything that the company owed, whatever is left over afterwards goes to the owners. That is the stockholders (the owners’) equity in the firm. --- Owner’s Equity: What is left for the owners after all the liabilities are paid Liabilities are any claims against an asset. For example, a debt owed by the firm is a liability. It could be a loan from a bank or a line of credit from a supplier. It will include salaries and wages yet to be paid to employees, accounts payable to vendors, and interest payable on borrowed money.--- Liabilities: Money OWED by the company to other parties Assets are properties or items owned by a business that will provide future benefits. Examples would be cash on hand, supplies, equipment, buildings, land, marketable securities, products or inventory of merchandise available for sale, and accounts receivable from customers. --- Assets: the value everything that the company owns and that can be sold, if the company goes out of business

Balance sheet Start ASSETS Cash $ Accounts Receivable0 Raw Materials not used yet0 Office Equipment0 Total Assets$ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Accounts Payable Dad’s loan $ 3.00 Subtotal$ 3.00 OWNERS' EQUITY Common Stock$ Retained Earnings0 Total Liabilities and Owners' Equity $ What are the elements of the Balance Sheet ? Cash is the funds on hand Accounts Receivable is money OWED to the company Raw Materials not used yet in this case are the things needed to make the lemonade that has not yet been sold (in inventory) Office Equipment, in this case are things “owned” by the company that are not made into the lemonade sale Accounts Payable are moneys that the company owes (Loan from Dad) Common Stock in this case is the money that the sisters put into the company Retained Earnings is money kept in the company for future growth Slide 10

Any questions ? Slide 11

Unit 7 Discussion Question 2 What is the Income Statement? Slide 12

What is an income statement Income statement, also referred as profit and loss statement (P&L), earnings statement, operating statement or statement of operations,[1] is a company's financial statement that indicates how the revenue (money received from the sale of products and services before expenses are taken out, also known as the “top line” is transformed into the net income (the result after all revenues and expenses have been accounted for also known as the bottom line. It displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues, including write-offs. The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported. Slide 13

Income Statement - End of First Day REVENUE Gross Revenue Sales of Lemonade $ 7.50 Cost of Goods Sold: Water$.30 Lemons 1.50 Ice.60 Sugar.30 Cups.30 Total Cost of Goods Sold 3.00 Net Revenue $ 4.50 EXPENSES Supplies, Rent, Salaries, Utilities, etc. Total Expenses Income Before Tax $ 4.50 An Income Statement measures how successful is our operations. It shows how much Revenue we took in (Sales) From this amount it subtracts what it cost us in raw materials to make those sales – Cost of Goods Sold It also subtracts any other expenses (marketing, administration, rent, etc,) The result is a Net Income Before Taxes and Interest An Income Statement DOES illustrate the company’s net income or net loss by subtracting expenses from revenues. Slide 14

Any questions ? Slide 15

Unit 7 Discussion Question 3 How might you analyze and validate the information in your pro forma Income Statement that you include in your business plan in a way that makes investors trust the data is accurate? Slide 16

The Pro Forma Income Statement Financial forecasts must be based in reality; otherwise the resulting financial plan is nothing more than a hopeless dream. When creating the a projected income statement, an entrepreneur has two options: 1.To develop a sales forecast and work down 2.or set a profit target and work up Slide 17

The Pro Forma Income Statement Financial forecasts must be based in reality; otherwise the resulting financial plan is nothing more than a hopeless dream. When creating the a projected income statement, an entrepreneur has two options: 1.To develop a sales forecast and work down Talk to existing business owners in the industry (outside of the local trading area of course) can provide sales insights Purchase published financial information from sources such as RMA and Dun & Bradstreet. Web searches and trips to the local library Interviews with potential customers Test Marketing an actual product or service can also reveal the number of customers a company can expect to attract. Slide 18

Multiplying the number of of customers by projected prices yields a revenue estimate. One method for checking the accuracy of a sales revenue estimate is to calculate the revenue other companies in the same industry generate per employee and compare it to your own projected revenue per employee. The Pro Forma Income Statement 1.To develop a sales forecast and work down Slide 19

The Pro Forma Income Statement Financial forecasts must be based in reality; otherwise the resulting financial plan is nothing more than a hopeless dream. When creating the a projected income statement, an entrepreneur has two options: 2. or set a profit target and work up Or entrepreneurs can create a projected income statement targeting a profit figure and then “working up” to determine the sales level they must achieve to reach it. The next step is to estimate the expenses that the business will incur in securing those sales. Slide 20

Any questions ? Slide 21

Discussion Question 4 What are Fixed Assets and why is this important in your business plan? Slide 22

What are fixed assets? Assets acquired for long-term use in a business. Moreover, a fixed/non-current asset can also be defined as an asset not directly sold to a firm's consumers/end-users. As an example, a baking firm's current assets would be its inventory (in this case, flour, yeast, etc.), the value of sales owed to the firm via credit (,i.e. debtors or accounts receivable), cash held in the bank, etc. Its non-current assets would be the oven used to bake bread, motor vehicles used to transport deliveries, cash registers used to handle cash payments, etc. Each aforementioned non- current asset is not sold directly to consumers. These are items of value which the organization has bought and will use for an extended period of time; fixed assets normally include items such as land and buildings, motor vehicles, furniture, office equipment, computers, fixtures and fittings, and plant and machinery. These often receive favorable tax treatment (depreciation allowance) over short-term assets. According to International Accounting Standard (IAS) 16, Fixed Assets are assets whose future economic benefit is probable to flow into the entity, whose cost can be measured reliably. landbuildingsmotor vehiclesfurnitureoffice equipmentcomputersmachinerydepreciation allowanceInternational Accounting Standard Slide 23

What are fixed assets (cont) ? These are items of value which the organization has bought and will use for an extended period of time; fixed assets normally include items such as land and buildings, motor vehicles, furniture, office equipment, computers, fixtures and fittings, and plant and machinery. These often receive favorable tax treatment (depreciation allowance) over short-term assets. According to International Accounting Standard (IAS) 16, Fixed Assets are assets whose future economic benefit is probable to flow into the entity, whose cost can be measured reliably. landbuildingsmotor vehiclesfurnitureoffice equipmentcomputersmachinerydepreciation allowanceInternational Accounting Standard Slide 24

Any questions ? Slide 25

Unit 7 -Discussion Question 5 What are Current Liabilities and why are these important in your business plan? Slide 26

Discussion Question 5 What are Current Liabilities and why are these important in your business plan? Current liabilities are considered liabilities of the business that are to be settled in cash within the fiscal year or the operating cycle, whichever period is longer.For example, accounts payable for goods, services or supplies that were purchased for use in the operation of the business and payable within a normal period of time would be current liabilities.Current liabilities are considered liabilities of the business that are to be settled in cash within the fiscal year or the operating cycle, whichever period is longer.For example, accounts payable for goods, services or supplies that were purchased for use in the operation of the business and payable within a normal period of time would be current liabilities. Bonds, mortgages and loans that are payable over a term exceeding one year would be fixed liabilities or long- term liabilities. However, the payments due on the long-term loans in the current fiscal year could be considered current liabilities if the amounts were material.The proper classification of liabilities is essential when considering a true picture of an organization's fiscal health.Bonds, mortgages and loans that are payable over a term exceeding one year would be fixed liabilities or long- term liabilities. However, the payments due on the long-term loans in the current fiscal year could be considered current liabilities if the amounts were material.The proper classification of liabilities is essential when considering a true picture of an organization's fiscal health. Slide 27

Any questions ? Slide 28

Discussion Question 6 How do your find the Cost-of-Goods Sold? Service industry companies have no COGS (no inventory) Slide 29

How do your find the Cost-of- Goods Sold? Manufacturers, wholesalers, and retailers calculate costs of good sold by adding purchases to beginning inventory and subtracting ending inventory. The reason why service providing companies typically have no cost of goods sold is because they do not carry inventory. Slide 30

Any questions ? Slide 31

Slide 73 Now - Welcome to the Unit 8 Seminar Building a Powerful Marketing Plan Slide 32

Unit 8 Highlights Build a marketing plan –Who is target market? –What does target want / need? Research! Go get them (marketing tactics) Now keep them Slide 33

Unit 8 - Discussion Question 1 How does focus on the customer impact a marketing plan? What draws customers? Who are your customers? What will help you gain repeat / loyal customers? Slide 34

Slide 33 The Marketing Concept Slide 35

The Marketing Concept Slide 36

Segmenting the Market targeting marketing efforts at a subset, of the entire population, that has similar, if not identical, characteristics and needs relative to the product/service in question. Slide 37

Segmenting the Market targeting marketing efforts at a subset, of the entire population, that has similar, if not identical, characteristics and needs relative to the product/service in question. Geographic – Gender - Ethnic – Generational - Targeting specific areas of the country – snow blowers in the north during winter, bathing suits in the south coast. Slide 38

Segmenting the Market targeting marketing efforts at a subset, of the entire population, that has similar, if not identical, characteristics and needs relative to the product/service in question. Geographic – Gender - Ethnic – Generational - Targeting specific products to men vs. women – different Gillette shavers for men and for women Targeting specific areas of the country – snow blowers in the north during winter, bathing suits in the south coast. Slide 39

Segmenting the Market targeting marketing efforts at a subset, of the entire population, that has similar, if not identical, characteristics and needs relative to the product/service in question. Geographic – Gender - Ethnic – Generational - Targeting specific products to men vs. women – different Gillette shavers for men and for women Targeting specific areas of the country – snow blowers in the north during winter, bathing suits in the south coast. Slide 40

Segmenting the Market targeting marketing efforts at a subset, of the entire population, that has similar, if not identical, characteristics and needs relative to the product/service in question. Geographic – Gender - Ethnic – Generational - Targeting specific ethnicities – Spanish language packaging or Kosher foods Targeting specific products to men vs. women – different Gillette shavers for men and for women Targeting specific areas of the country – snow blowers in the north during winter, bathing suits in the south coast. Slide 41

Segmenting the Market targeting marketing efforts at a subset, of the entire population, that has similar, if not identical, characteristics and needs relative to the product/service in question. Geographic – Gender - Ethnic – Generational - Targeting specific ethnicities – Spanish language packaging or Kosher foods Targeting specific products to men vs. women – different Gillette shavers for men and for women Targeting specific areas of the country – snow blowers in the north during winter, bathing suits in the south coast. Targeting specific age groups – different products for the aging baby boomers vs. Gen X’ers. Slide 42

Marketing Environment Factors not controllable by the firm Competitive forces Economic forces Political, legal, and regulatory forces Other firms selling the same, or similar, items may lower prices to match, or under cut your prices. The amount of disposable income the consumer has left after taxes and necessities plus their faith in the future determines much of their willingness to buy. Restrictions created by the government, such as FDA setting labeling requirements and the FTC setting fair trade practices Technological forces New technologies lead to new products and new ways of doing business – failing to adapt spells financial doom Slide 43

The factors that the organization CONTROLS and includes: –PRODUCT –PRICING – DISTRIBUTION –PROMOTION Marketing MIX Designing and making the items, or providing the services, that meet the customers’ needs. Setting the price such that it reflects the consumer’ perceived value of the product, while returning enough revenue to the firm to justify investing in producing the item/service.. Physically getting the product to the consumer – How the consumer will buy the product/service. (stores, directly, internet, etc) Communications that builds a favorable relationship by informing and persuading a group of consumers that the product/service best meets their needs. Slide 44

Focusing on the Customer “If you’re not taking care of your customer and nurturing that relationship, you can bet there’s someone else out there who will.” –pg. 286 Poor customer relations examples and consequences: o Sixty-seven % of customers who stop patronizing a particular store do so because an individual employee treated them badly. o Ninety-six percent of dissatisfied customers never complain about rude or discourteous service BUT.. o One hundred percent of those unhappy customers will tell their “horror stories” to at least 9 other people. o Thirteen percent of those unhappy customers will tell their stories to at least 20 other people! Slide 45

Any Questions ? Slide 46

Unit 8 - Discussion Question 2 How does devotion to quality impact a marketing plan? How do you address this in your marketing plan? Whom do you target with this company trait? How does your definition of quality compare to your competition? Slide 47

How does devotion to quality impact a marketing plan? According to author Josh Gordon – explains that almost 60% of customers who change suppliers say they switched because of problems with a company’s products or services. TQM – Total Quality Management The philosophy of producing a high-quality product or service and achieving quality in every aspect of the business and its relationship with the customer; the focus is on continuous improvement in the quality delivered to customers. Slide 48

How does devotion to quality impact a marketing plan? Some strategies for developing and retaining loyal customers: Let’s discuss each one ① Devotion to quality ② Attention to convenience ③ Concentration on innovation ④ Emphasis on speed Slide 49

Any Questions ? Slide 50

Unit 8 - Discussion Question 3 How does concentration on innovation impact a marketing plan? How does innovation make your company stand out? Why is innovation good? Slide 51

How does concentration on innovation impact a marketing plan? Innovation is the key to future success. Markets change too quickly and competitors move too fast for a small company to stand still and remain competitive. Thanks to their organizational and managerial flexibility, small businesses often can detect and act on new opportunities faster than large companies. Slide 52

Unit 8 - Discussion Question 3 (Part 2) How does innovation make your company stand out? Why is innovation good? Slide 53

Unit 8 - Discussion Question 3 (Part 2) How does innovation make your company stand out? Why is innovation good? Keep raising the bar Quality and latest and greatest can be counted on Consistent feedback of customers wants and needs evidenced in your products or services Use the iPhone and smart phones as an example Slide 54

Any Questions ? Slide 55

Discussion Question 4 How does dedication to service impact a marketing plan? Define “dedication to service” in your marketing strategy. How will you ensure you achieve your goals in this area? How will you pass this assurance through the marketing strategy? Slide 56

Discussion Question 4 How does dedication to service impact a marketing plan? 46% of customers walked out of a store within the last year because of poor service – Pew Charitable Trusts Survey Amdocs company found that customers are willing to withstand just two negative customer service experiences before taking their business elsewhere. Providing incomparable service – not necessarily a low price - is one of the most effective ways to attract and maintain a growing customer base. Another study suggests that 73% of customers buy for reasons other than price. Slide 57

Discussion Question 4 Define “dedication to service” in your marketing strategy. How will you ensure you achieve your goals in this area? How will you pass this assurance through the marketing strategy? Define superior service Set standards and measure performance Examine your company’s service cycle Hire the right employee Train employees to deliver superior service Empower employees to offer superior service Treat employees with respect and show them how valuable they are Use technology to provide improved service Reward superior service Get Top Managers support View customer service as an investment, not as expense Slide 58

Any Questions ? Slide 59

Discussion Question 5 How does emphasis on speed impact a marketing plan? Is speed a draw for your target customers? Are you faster than the competition? By how much? How can you prove it? Slide 60

Discussion Question 5 How does emphasis on speed impact a marketing plan? Today’s customers expect business to serve them at the speed of light. Providing a quality product at a reasonable price once was sufficient to keep customers happy, but that is not enough for modern customers, who can find dozens of comparable products with just a few mouse clicks. Slide 61

Discussion Question 5 Is speed a draw for your target customers? Are you faster than the competition? By how much? How can you prove it? Victory in this time-obsessed economy goes to the company that can deliver goods and services the fastest, not necessarily those that are the biggest and most powerful. Business is moving so rapidly today that companies “need to accomplish in 90 days what traditionally took a year.” explains one entrepreneur. Business that can satisfy their customers’ insatiable appetites for speed have a distinct advantage. Slide 62

Reference Page Title: Essentials of Entrepreneurship and Small Business Management, 5 th edition Author(s): Thomas W. Zimmerer, Norman M. Scarborough Wikipedia: Slide 63

Unit 8 Assignments Read Chapter 8 – Building a Powerful Marketing Plan Discussion Question – Answer and post response to at least 2 classmates’ answers – Use articles from the Internet to support your answers Slide 64

Course Project Third portion of business plan (Marketing Plan) due! Analysis of info and write-up are real “meat” of the business plan – Competitive Edge, Marketing Strategy, Milestones Table, Explain Milestones Keep a copy to include in your final business plan for Unit 9 Slide 65

Questions?? Wrap-up Slide 66

Slide 73 Next Week – Unit 9 Seminar Sources of Equity: Debt & Equity Slide 67

you can contact me through my through AOL Instant Messaging my AOL IM name is jabatekaplan, (put me on your buddy list) my AOL IM “Office hours” are: Sundays 5:00 pm- 7:00 pm Eastern Time or through the “Instructor’s Office” link under the Course Home page Slide 68

T H A N K Y O U F O R A T T E N D I N G SEE YOU IN THE DISCUSSION THREAD QUESTIONS AND IN NEXT WEEK’S SEMINAR Slide 69

Questions?? Wrap-up Slide 70