CHAPTER 8 Selecting Your Business

Listen to your market!

Product or Service?  Product – something that exists in nature or is made by human beings – tangible, can be touched  Service – work that provides time, skills, or expertise in exchange for money – intangible, and can’t be touched

Four Basic Business Types  Manufacturing – makes a tangible product  Wholesale – buys in quantity from the manufacturer and sells to the retailer  Retailer – sells to the consumer  Service – sells an intangible product to the consumer

Turning hobbies, skills, and interests into business – refer to Star Profile

Your Strategy for Beating the Competition  Quality  Price  Location  Selection  Service  Speed/turnaround

Ethics of Conducting Business  Not against the law  Will not hurt others  Not spread negative messages or ideas in the marketplace

Start-up Considerations  Naming your business  Risks of using your name in the business  Money alone is not a good reason to start a business  How could your dream help the community?  What is the value of your time?  Entrepreneurs and philanthropy 100 business ideas for young entrepreneurs

CHAPTER 9 The Costs of Running a Business

Understanding Costs  Define your unit of sale  Three kinds of costs

Varied and Fixed Costs  Costs of goods sold or costs of services sold  Materials  Labor  Other variable costs  Commissions  Shipping and handling

Measuring Profits and Costs  Calculating gross profit per unit  Total Costs Per Unit  Selling price – cost of goods sold – other variable costs – gross profit  Calculating gross profit  Cost of Services Sold (COSS)  Handling Economics of One Unit per sale (EOUs) when selling more than one product  An EOU with a variety of costs

Fixed Costs  Overhead – costs such as  Utilities  Salaries  Advertising  Insurance  Interest  Rent  Depreciation  Depreciation – method used to save the money that will be needed to replace expensive pieces of equipment  Fixed costs do change – over time

Addressing Fixed Costs  Economics of scale  Spread fixed costs over as much output as possible  Get better deals from suppliers  Make your fixed costs variable whenever possible  Fully allocating your fixed costs  Keep at least three months in reserve to cover fixed costs

CHAPTER 10 What is Marketing?

Marketing  Identifying and responding to customer needs  Marketing – satisfying the customer at a profit – the art of getting the customer to come to the product.  Meet your customer’s needs to gain their loyalty  Marketing explains the benefits of a product  The marketing vision drives all business decisions  Marketing establishes your brand

Branding in Marketing  Focus your brand  Ford’s examples  Costly failure – the Edsel  Marketing success – the Mustang

How to Build Your Brand  Choose a business name that is easy to remember, describes your business, and establishes mind share (the degree your business comes to mind when a customer needs something)  Create a logo that symbolizes your business to the customer  Develop a good reputation  Create a brand personality  Communicate your brand personality to your target market

Side Notes  Represent your brand  Mind share vs. market share

The 4 “P”s 1. Product - should meet the need or create a consumer need 2. Place - place your product where customers who need it do their shopping 3. Price - the product has to be priced low enough so the public will buy it, and high enough for the business to make a profit. 4. Promotion - consist of advertising, publicity, and promotional items

Success  The Basics of Business Success  How can you tell if your promotions are working?  Philanthropy can bring positive publicity  Cause-related marketing – social, environmental, or political cause

CHAPTER 11 Market Research

Performing Research  Listen to the consumer  Tangible market demographics  Types of market research  Surveys  General research  Statistical research  Industry research  Your research method is important

Performing Research (cont’d)  Market research questions  Research your market before you open your business  Do you know ten people who love your product? You may have a winner  Make market research ongoing  Who is in your market segment?  Researching your market segment  Market research avoids costly mistakes

CHAPTER 12 Keeping Good Records

Daily Records  Keep Daily Financial Records  Three reasons to keep good records every day  Keeping good records will show you how to make your business more profitable  Keep accurate records to create financial statement and ratios that will show your business is doing well  Keeping good records will prove that payments have been made

The Banking Relationship  Savings accounts  Checking accounts  Writing a check  Technology tip: 24-hour banking and online banking

Accounting  A basic accounting system (will be covered in the QuickBooks section)  Save receipts for tax time  Basic accounting principles  Keep up your records daily  Support your records with receipts and invoices  Use business checks for business expenses Avoid using cash for business Deposit money from sales right away  Assets, liability, owner’s equity review