Chapter 12 Managing a Small Business

Identifying the Small-Business Owner Independence; control; the chance to set your own schedule and make your own decisions are some of the positives to owning your own business. However, long hours; customer complaints; meeting a payroll; and taking responsibility for every problem are some of the drawbacks of being a small-business owner. What it Takes –Fewer than half of all new businesses will survive for five years. Characteristics of a small business owner: –Self motivation-internal vs. external motivation (intrinsic vs.extrinsic) –Risk taking

Identifying the Small-Business Owner Characteristics of a small business owner: –Persistence-”Persistence pays off” –Knowledge –Skills Management Finance Marketing Human Relations Who Owns Small Business –Years ago, the majority of small-business owners were middle aged (white) males with less than a college education. –Today, small business-owners are more educated, younger, and are more likely to be female or minorities. –Women now make up over 30 percent of all small- business owners. –Minority business ownership has nearly doubled since the early 1980’s.

Starting the Small Business An Idea plus Experience –Business ideas come from hobbies, interests, and business experience. –Several years of training in various aspects of business operations will prepare you for the role of owner. (Rick Stone- Premier Sound and Design) Right Place and Time –Good customer traffic is essential to small business success. – Timing is another important factor in starting a business. Team Approach –Employees must be selected carefully for their ability to work as a team. –Small-business owners will require assistance from bankers, lawyers, accountants and other people with specialized business knowledge. Preparation and Research-(the most important step in starting a business)

Starting the Small Business Preparation and Research-(the most important step in starting a business) –Information (knowledge) is power! –Knowing about customers, competitors, operations, and activities, government regulations are key research in starting a small business. Developing a Business Plan –Owners of successful businesses develop and follow a business plan. –A business plan is: a written description of the business idea and how it will be carried out, including all major business activities. –Key features: 1.General description of the company 2.Qualifications of owner 3.Description of the product or service 4.Analysis of the market (demand, customers, competition) 5.Financial plan

Steps in Developing the Small Business The most popular use of business plans is to persuade lenders and investors to finance the venture. Business Plan Steps: 1.Gather and review information Review other business plans and study information on the activities and financial performance of similar businesses, competitors. 2.Develop a “game plan” Alternatives for production, marketing, staffing and financing 3.Write out the plan 4.Have other business professionals review plan for strengths and weaknesses. (SBA)

Financing the Small Business –Types of Financing 1.Start-up Financing-amount of money needed to open business (includes cost of buildings (rent or own) equipment, inventory, supplies, licenses) 2.Short-term financing-money to pay current operating - obtained for period less than a year,one or 2 months. 3.Long term financing-money borrowed for such things as land, buildings, equipment. Paid off over many years. Sources of Financing Money to start a new business usually come from a combination of owner-supplied money and borrowed funds. Borrowed funds are obtained through loans from banks and other financial institutions, or through financing provided by other companies. (venture capitalists)