Survey of Entrepreneurship Class 14 Local Speakers King Saud University -- Kent State University Partners in Entrepreneurship

14_Objectives The plan is for Talal Althefery to arrange for local business speakers to address the classes. If no local speaker is available, then the alternative is to discuss handout 14_Managing_the_Business

INTERACTIVITIES 14_Interactivities If an outside speaker is available, then the class will be interacting with the speaker, and a handout will be given as homework. If an outside speaker is not available, then the handout will be the basis for the class.

Alternative to Speaker If the local speaker is not available, handout 14_Managing_the_Business will be distributed and discussed.

Managing the Business Please refer to the handout

Managing the Business Entrepreneurs most often focus on “high visibility” areas of the business To be profitable and grow, they must increase sales and/or control costs “Managing the business” focuses on controlling business costs. Managers’ key contributions are to plan, organize, lead/direct, control, and evaluate.

Managing Operations, Assets, and Risks Operations Process: creates the product or service for customers. Managing Assets: enables the entrepreneur to successfully control the daily flow of resources. Managing Risks: consists of all efforts to preserve assets and earning power.

Managing the Operations Process Operations Management includes both service and manufacturing processes. Operations include a wide variety of business activities: – Purchasing – Inventory management – Production planning and scheduling – Manufacturing – Maintenance – Productivity improvement – Quality management – Information systems

Managing Assets Managing Assets – controlling the daily flow of resources within the working capital cycle Accounting Systems – enables the management of cash, accounts receivable, inventory, accounts payable, etc. Working Capital Management – manage current assets (cash, accounts receivable, inventory) and current liabilities (accounts payable, accrued expenses, short term notes)

Why Managing Working Capital Is Important One of two key tools that enables the entrepreneur to manage the receipt and payment of dollars. Cash Budget: a planning document only concerned with the receipt and payment of dollars The mantra is – cash flow, cash flow, cash flow!

Working Capital Cycle Step 1 – Accumulate inventory for sale Step 2 – a) Sell the inventory (which increases cash) or b) Sell the inventory for credit (which increases accounts receivable) Step 3 – a) Pay the accounts payable (which decreases accounts payable and decreases cash) b) Pay operating expenses and taxes (which decreases cash) Step 4 – Collect the accounts receivable when due (which decreases accounts receivable and increases cash) Step 5 – Begin the cycle again.

Cash Budget – the single most important planning document Cash sales (inflow) Owner's investment (inflow) Borrowed funds (inflow) Sale of fixed assets (inflow) Collection of accounts receivable (inflow) Payment of expenses (outflow) Payment for inventory (outflow) Payment of dividends (outflow) Purchase of fixed assets (outflow)

Example Monthly Cash Budget Estimate

Managing Risk What is Risk – A condition in which there is a possibility of an adverse deviation from a desired outcome Two types of small business risks: – Market Risk – uncertainty associated with an investment decision – Pure Risk – a situation where only loss can occur. This is the only insurable risk.

Pure Risks Property Risk – Real Property – Personal property Liability Risk – Statutory liability – Contractual liability – Tort liability Personal Risk – Premature death, poor health, insufficient retirement income

Risk Management Risk Control – minimizing loss through – Loss prevention (eg., contingency planning) – Loss avoidance (eg., hazard identification) – Loss reduction (eg., crisis planning) Risk Financing – covering losses – Risk transfer (eg., insurance, sub-contracting) – Risk retention (eg., self insurance)

HANDOUTS 14_Managing_the_Business

HOMEWORK 14_Homework Apply the learning from 14_Managing_the_Business to your business plan.

19 Questions