1. Chapter 2: What Skills Do Entrepreneurs Need?

2. Communication Skills: Section 2.1
Goals
Develop good skills for writing, speaking, and listening.

3. What do you think?
Can you think of a situation where you dealt with a business and communication was poor on unclear? Maybe walked into a restaurant and you couldn’t understand the menu? As a consumer were you likely to give that business return business?

4. Good Entrepreneurs Need To Effectively Communicate.
Many entrepreneurs need to communicate with customers, suppliers, and employees, among others.
Entrepreneurs need good business writing skills to communicate ideas clearly.

5. Writing Skills Good writers communicate ideas clearly.
Good business writing gets results by being positive and persuasive.
Good business writing should convince the reader that they should accept what the writer is communicating.

6. Business Communication Tip (From Mr. McLead)
If you need a record of a communication: PUT IT IN WRITING.
People conveniently forget conversations; if it is not in writing, it may be hard to prove that a discussion ever existed.

7. Business Letters Basic rules for writing business letters.
Key all formal correspondence.
Be sure to spell all names correctly and have the correct address.
Always date you business correspondence.
Use names and titles appropriately.
(Dr., Mr., Mrs. Ms., or Miss.)

8. Business Letters Basic rules for writing business letters continued.
Be direct and positive.
Be persuasive and specific.
Avoid using fancy language.
Be polite.
Use and appropriate closing.
(Sincerely, Cordially, Sincerely yours, Cordially yours,)
Proofread for spelling and grammatical errors.

9. Did you know? (Page 27)
Today, 25 percent of the students enrolled at America’s top business schools are from foreign countries.
Why do you think so many people come to America to study business?
Do you think as a country we provide a good example of business practices and ethics to the rest of the world?

10. Effective Business Memos
A memorandum is a short form of business communication with a set format.
Memo is short for memorandum.

11. Business Communication Tip (From Mr. McLead)
With memos remember K.I.S.S.

12. No not these guys from the 80’s rock group.

13. K.I.S.S.
K.I.S.S. stands for Keep It Simple Stupid (Silly according to Mrs. McLead)
Memorandums like most business communications should convey information in a clear precise manner, without a lot of extra wording.

14. What Do You Think? In small groups of no greater than three:
Suggest at least nine situations where a business letter is the most appropriate form of communication.
Suggest at least nine situations where a memo would be an appropriate form of business communication.

15. Speaking Skills
Just like in the rest of your life most of your communication as an entrepreneur will be verbal communication.

16. Telephone Conversations
A lot of business communications are made over the telephone.
Remember the following tips for effective telephone conversation.

17. Telephone Conversation Tips.
Speak clearly, and talk directly into the receiver.
Be cheerful.
Always speak politely.

18. Telephone Conversation Tips Continued.
Think about what you are going to say before you make the call.
If you have a lot to go over, write out the questions or topics you want to discuss beforehand.
And consult your notes during the phone conversation.
Take notes about the conversations.
I highly recommend that you keep a log of who you talk to, what you talked about, and when you talked to them.

19. Meeting With Customers and Suppliers
Many times you will have to meet with customers and suppliers face to face.
Be prepared. (Time is money. So know what you want to cover beforehand.)

20. Tips for Meetings with Customers and Suppliers
Shake hands and make eye contact with the person you are meeting.
Show an interest in what the other person is saying.
Speak clearly.
Do not appear rushed or anxious to be somewhere else.
Thank the person at the end of the meeting.

21. Listening Skills
Listening skills are an essential part of business communication.

22. Listening Skills Tip
Focus your attention on the person who is speaking.
Think about and try to understand what the other person is saying.
Ask questions to make sure that you understand what the other person is saying.
Take notes to confirm what you are hearing.

23. Assessment 2.1 page 31 Think Critically Make Connections
Answer questions 1, 2, and 3.
Make Connections
Answer questions 4 and 5.

24. Communication Skills: Section 2.2
Goals
Use basic math skills.
Complete sales transactions.
Calculate percentages for business purposes.

25. Basic Math Skills
You will need to have good knowledge of basic math skills to run a business.
Basic math skills helps to keep you from making costly mistakes.
Or worst getting ripped off by someone.

26. Addition And Subtraction
It seems so simple but basic addition and subtraction skills essential to running a business.
Purchase price + markup = sale price.
All about $$$$$$
You don’t know what you have unless you can add it up.
Basic accounting.

27. Multiplication
Multiplications solves a whole host of business problems.
Average Monthly Sales X Months in a Year = Income
$24, X 12 = $288,

28. Averages Using Division
Averages are great for giving a round figure.
Averages are great for giving an estimate, either for a quick answer or to predict the future.
Whenever an exact number either cannot be obtained or is cost prohibitive to obtain.

29. Averages Using Division
Average for all three months sales.
Month Month Month 3 = Total Sales
= 48
Sales Total / Number of Months = Average
/ =

30. Sales Transactions.
Most entrepreneurs make sales transactions every day.
The sales transactions an entrepreneur deals with are:
Purchase order.
Invoices.
Sales tax.
Sales slips.

31. Purchase Orders.
Purchase orders are a record of fact that a buyer has placed an order with a company.
Purchase orders help the company keep track of order and are proof that an order was placed.

32. Purchase Orders. Purchase orders should include.
The address of both the buyer and the seller.
A purchase order number.
The date of the transaction.
A listing of:
Each item purchased.
The quantity of each item purchased.
The cost of each item.
The total item cost.
The total amount due.

33. Purchase Orders. Total item cost.
Quantity of item X Unit Cost = Amount Due.
X $ = $24.95

34. Sales Tax. Retail sales transactions involve sales tax. Federal.
U.S.A. 0%
Canada 0%
Mexico 10% in Mexican / U.S. boarder areas; 15% throughout the rest of the country.
State.
PA 6%
NJ 7% (3.5% state + 3.5% municipality)
DE 0%
Local Government.
Philadelphia 1% on most items.

35. Sales Tax. For retail sales you have to charge and collect sales tax.
Just times the price the goods are being sold at times the sales tax amount.

36. Sales Tax.
Price of purchase X Tax Rate = Amount of Sales Tax
$ X = $1.67
Price of Amount of = Total Sales
purchase Sales Tax Charge
$ $ = $25.59

37. Sales Slip Sales Slips are used for two types of transactions:
Cash sales.
Credit card sales.

38. Case Sales Slip for Adventure World
Cash Sales Slip for Adventure World
Stock No.
Qty.
Description
Unit Cost
Total
784 2
Skateboard
$32.50
$65.00
912 1
Helmet
$15.00
Subtotal
$80.00
Sales Tax
$4.80
$84.80

39. Sales Slips
Remember that credit card purchases are not as profitable for a business as cash purchases.
Credit card companies charge businesses a fee for being able to accept their card.

40. Internet Activity www.ideas-in-action.swlearning.com Go to website:
Click on: the book 3rd Edition.
Click on: Student Activities
Select Chapter 2
Download Texas Sales and Use Tax Return (01-114) using link.
Complete Chapter 2 activity.

41. Managing a Cash Drawer
Most businesses use electronic cash drawers to generate sales slips
You still need to verify the beginning cash amounts and balance the cash drawer at the end of the day.
If the drawer does not balance, then an employee might be making errors in giving change, or there might be fraud or theft. 41

42. To verify the starting cash in the drawer, you should manually count the money and record each amount on a form or a piece of paper.
Some businesses always begin with a set amount in their cash drawer, such as $50. 42

43. Balancing the cash Drawer
Add all receipts
Paper money
Checks
Credit slips
Subtract amount of cash you started with 43

44. Cash $348.62 Checks $154.20 + Credit sales $218.98 Total receipts
$721.80
- Refunds
$21.47
Adjusted receipts
$700.33
- Opening cash
$50.00
Actual receipts
$650.33
Add these receipts
Subtract refunds from total receipts
To get total receipts
Finally, subtract the opening cash from the adjusted receipts
To get the adjusted receipts
To determine your actual receipts 44

45. checkpoint What are the four types of sales transactions?
Purchase orders, invoices, sales tax, and sales slips 45

46. checkpoint Describe how you balance a cash drawer.
Add all receipts, subtract refunds, and subtract opening cash balance. 46

47. Percentages Important in: Calculating growth rates Interest payments
Markups and markdowns 47

48. Working with Percents Requires converting percents to decimals
Remember – 100% in decimal form is 1.00
To convert a percent to a decimal, move the decimal two places to the left
So… 23% becomes .23
And 7% is .07 48

49. Please convert from a percent to a decimal.
45% % % % % 0.762 49

50. To go from decimals to percents, move the decimal two places to the right.
So becomes 34.5%
And 0.58 is 58% 50

51. Please convert from a decimal to percent.
% % % % % 51

52. Growth Rates Sales in one period Sales in another period
Calculate by comparing sales for one period with sales for a different period
Sales in one period
Sales in another period
Sales increase
Sales growth rates are expresses as percents 52

53. August Sales $26,710 July Sales $26,533 August Increase $177
Maria wants to know how sales at her pharmacy business grew in August, when sales reached $26,710. Comparing August sales with July sales of $26,533.
August Sales
$26,710
July Sales
$26,533
August Increase
$177 53

54. Percent Increase Percent Increase 0.00667, or 0.7% August increase
Now, Maria wants to determine her percent increase in total sales.
Percent Increase
, or 0.7%
August increase
$177
July Sales
$26,533 54

55. Average Monthly Growth Rate
Please refer to the chart on the top of page 37 of your text book.
To determine Maria's average growth rate, she must find the total monthly growth and divide by the number of months for which Maria has data. 55

56. Using Math to Project Sales
Maria will use the average monthly growth to project sales into the next year
She multiplies each month sales by the growth rate to create sales projections for the next six months. 56

57. checkpoint
On page 37, you can see Maria’s projections through June. Please project from July though December
July - $30,658
August - $31,026
September - $31,398
October- $31,775
November - $32,156
December - $32,542 57

58. Interest Earned
interest – an amount that can be earned on money that is invested or paid on money that is borrowed Methods your bank uses to calculate interest affects the rate at which your savings grows 58

59. Simple interest is paid at the end of the year and only one time per year on the average balance of your savings account.
Compound interest is paid on the principal amount you deposited on the interest your money has earned. 59

60. Simple Interest
If you invested $100 for one year at a rate of 3%, you would calculate your interest at the end of the year like so:
Investment
Rate of interest
Interest earned
$100
0.03 $3 60

61. Compound Interest
The same $100 invested for 1 year at a 3% interest rate compounded quarterly will give you an extra 4 cents at the end of the year.
Let’s divide 3% into 4 parts – that’s .75% interest each quarter 61

62. Investment Rate of interest Interest earned $100 0.75 $0.75 $100.75
$0.76
$101.51
0.75
$0.76
$102.27
0.75
$0.77 62

63. checkpoint
How much interest will a $1,000 investment earn for one year invested at 4% using the simple interest method?
$40 63

64. checkpoint
How much interest will a $1,000 investment earn for one year invested at 4% using the compound interest method compounded quarterly? 64

65. Interest Payments Principal – amount of money borrowed in a loan
Rate of interest – the percent that is the basis for interest earned or paid
Term – number of year for which the loan is extended 65

66. Loan Amount
Rate of interest
Interest paid
Suppose you borrowed $25,000 at a rate of 9.5%, you can apply the above formula to find out how much interest you would have to pay in a year.
$25,000
0.095
$2,375 66

67. Now, suppose you only pay interest for five years. You would pay:
Interest each year
Number of years
Total interest
$2,375 5
$11,875 67

68. Exact Interest Method Time $2,000 0.05 $23.29
Interest is not always calculated for a full year; a daily rate is used – let’s say you borrowed $2,000 at 5% exact interest for 85 days.
Amount Borrowed
Rate of interest
Time
Total Interest
$2,000
0.05
$23.29 68

69. Ordinary Interest Method
Also called the banker’s interest method; same as exact interest method, but we use 360 days instead.
Amount Borrowed
Rate of interest
Time
Total Interest
$2,000
0.05
$23.61 69

70. checkpoint
How much simple interest would you pay a year on a $30,000 loan at a rate of 8.25%?
How much would you pay for 65 days using the exact interest method?
Using the ordinary interest method?
$2,475
$440.75
$446.88 70

71. Markups and Markdowns
Markup – an amount added to the cost price to determine the sales price (allow you to cover expenses and earn a profit)
Markdown – an amount deducted from the retail price to determine the sales price 71

72. Calculating Markups
Please use the following formulas to complete the In-Class Activity on page 39.
Purchase Price
Percent Markup
Markup
Purchase Price
Markup
Selling Price 72

73. Calculating Markdowns
Original Price
Sales Price
Markdown
Markdown
Original Price
Markdown Percentage 73

74. checkpoint
How much of a markup is there on an item that you purchase for $45 and sell for $54?
20% 74

75. Discounts
Discount – a reduction in the retail or wholesale price of a product or service
Retail price
Discount percent
Amount of discount 75

76. Assessment 2.2 page 41 Think Critically Make Connections
Answer questions 1, 2, and 3.
Make Connections
Answer questions 4 and 5. 76

77. Problem Solving Skills: Section 2.3
Goals
Use the six step problem-solving model.
Recognize the importance of group decision making.

78. Use a Problem Solving Process
A formal problem solving model helps business people solve problems in a logical manner.
A problem solving process helps guide you to making an informed decision.

79. Problem-Solving Process
Define the Problem
Gather Information
Identify Various Solutions
Evaluate Alternative and Select the Best Option
Take Action
Evaluate the Action

80. Step #1 Define the Problem
It is important to define the problem.
Remember you must identify the problem at this point.
Make sure you treat the problem itself not just a symptom.

81. Step #1 Define the Problem
Try to quantify the problem if possible.
This allows you to set a goal and realize you have achieved it.
Quantifying the problem helps you to realize how much solving the problem is worth to you.

82. Example of Quantifying a Problem.
Problem: Shipments of inventory come in late every day and you miss customer sales on Friday afternoons.
So, if you on miss 5 sales every Friday afternoon at the approximately $75 per sale in 3 months (12 weeks) you lost $ in those three months.

83. Step # 2 Gather Information
Gather information that will help you solve the problem.
Talk to anyone affected by the problem:
Suppliers, employees, customers etc...
Look at company records, industry data, etc…

84. Step #3 Identify Various Solutions
Many problems will have more than one solution.
You will want to come up with as many solutions as possible.

85. Step #4 Evaluate Alternative and Select the Best Possible Solution
You will have to look at all of the solutions and evaluate them.
Make lists.
Look at the pros and cons of each solution.

86. Step #5 Take Action You must implement your solution.
This is where you work your plan.

87. Step #6 Evaluate the Action
Is your plan working?
Do you need to change your plan?
Would you have done anything differently?

88. Group Problem Solving
Most of the problem solving an entrepreneur completes is on his or her own.
Sometimes it is best to solve a problem in a group.

89. Brainstorming
This is where a group of people try to come up with creative new ideas to solve a problem.
Usually the meeting is informal, and everyone is encouraged to participate ideas.
Usually at this stage the ideas are not critiqued just generated; and no idea is thrown out.

90. Consensus-Based Decision Making
A consensus is an agreement among a group of people.
At this stage all parties are heard out of mutual respect.

91. Assessment 2.3 page 47 Think Critically Making Connections
Questions 1, 2, and 3.
Making Connections
Questions 4, 5, and 6.