Unit 5 Seminar MT209, Small Business Management. Course Check-In

Unit 5 Seminar

MT209, Small Business Management

Course Check-In

Final ProjectOur graded Final Project (Business Plan)

is due no later than the end of Unit 9To complete our Final Project, please

refer to Final Project Template in Doc Sharing:

In Units 2, 4, 5, 6, & 8, students are encouraged to work on specific elements of the Final Project

Completed Business Plans should be submitted via the DropBox (name file: Final Project Your Name)

The Final Project is worth 180 points

MT209 Final ProjectMini-Business Plan Outline for the

MT209 Final Project:Executive SummaryManagement Team & AdvisorsDefinition of the Market & Products/Services

Marketing & Sales StrategyFinancial InformationAnd, be sure to add a cover page and references page

© 2010 South-Western, Cengage Learning, Inc. All

rights reserved.7–5

What is Small Business Marketing?

Small Business MarketingBusiness activities that direct the creation,

development, and delivery of a bundle of satisfaction from the creator to the targeted user and that satisfy the targeted user.

Small Business Marketing ActivitiesIdentification of the target marketDetermining target market’s potentialPreparing, communicating, and delivering a

bundle of satisfaction to the target market

© 2010 South-Western, Cengage Learning, Inc. All

rights reserved.7–6

Marketing Research ActivitiesMarket Analysis

An evaluation process that encompasses market segmentation, marketing research, and sales forecasting

Developing the Marketing MixThe combination of product, pricing,

promotion, and distribution activities.

© 2010 South-Western, Cengage Learning, Inc. All

rights reserved.7–7

The Formal Marketing PlanMarket Analysis

Customer profileA description of potential customers in a target

marketSales forecasts

“Most likely,” “pessimistic,” and “optimistic

The CompetitionProfile of key management personnelOverall strengths and weaknesses (SWOT)Related products being marketed or testedLikelihood of competitors’ entry into target

market

© 2010 South-Western, Cengage Learning, Inc. All

rights reserved.7–8

The Formal Marketing Plan (cont’d)

Marketing StrategyProduct and/or service section

Decisions affecting the total productDistribution section

Decisions regarding product delivery to customersPricing section

Setting an acceptable value on the productPromotional section

Communicating information to the target market

© 2010 South-Western, Cengage Learning, Inc. All

rights reserved.8–9

Building a Management TeamManagement Team

Managers and other key persons who give a company its general direction

Characteristics of a Strong Management TeamCapable of securing the resources needed to

make business a successReassures investors about the their investment

and the continuity of businessDiversity of talent makes the team stronger

than an individual entrepreneur

© 2010 South-Western, Cengage Learning, Inc. All

rights reserved.8–10

Building a Management Team (cont’d)

Team Building and StructureThe required combination of education and

experience depends on the type of business and the nature of its operations

The key: achieving a balance of skills and competencies in functional areas

Designing an internal management structure that defines relationships and responsibilitiesOutside professional support can supplement the

skills of a management teamAn active board of directors can provide counsel and

guidance.

© 2010 South-Western, Cengage Learning, Inc. All

rights reserved.9–11

Exhibit 9.1 Location Options for the Startup

© 2010 South-Western, Cengage Learning, Inc. All

rights reserved.9–12

Exhibit 9.2 Five Key Factors in Determining a Good Business Location

© 2010 South-Western, Cengage Learning, Inc. All

rights reserved.9–13

Other Factors in Selecting a Location

Neighbor MixWho’s next door?

Security and SafetyHow safe is the

neighborhood?Services

Is there municipal trash pickup?

Past Tenants’ FateWhat happened to

them?The Life-cycle Stage

of the AreaIs the site in the

embryonic, mature, or declining stage?

© 2010 South-Western, Cengage Learning, Inc. All

rights reserved.9–14

Locating the Startup in the Entrepreneur’s Home

Home-Based BusinessA business that maintains its primary facility in

the residence of its ownerAttraction of a Home-Based Business

Low start-up and overhead costsConvenience for family and lifestyleTechnology

Advances in office equipment and connectivity allow home-based business to compete with commercial sites.

© 2010 South-Western, Cengage Learning, Inc. All

rights reserved.9–15

The Challenges of Home-Based Businesses

Business ImageA professional business image is difficult to maintain in a home environment.

Legal ConsiderationsLocal laws and zoning ordinances prohibit many types of home-based businesses.

Family and Business ConflictsThe need to observe regular business hours and establish spatial boundaries (specific work areas) to avoid distractions.

© 2010 South-Western, Cengage Learning, Inc. All

rights reserved.9–16

Locating the Startup on the Internet

E-CommerceThe paperless exchange of business

information via the Internet.Benefits of E-Commerce to Startups

Allows for competition with larger firms in larger markets.

Helps with cash flow problems by compressing the sales cycle.

Builds better customer relationships through better service.Electronic Customer Relationship Marketing (eCRM)

© 2010 South-Western, Cengage Learning, Inc. All

rights reserved.9–17

Factors Affecting the E-Commerce Choice

Technical LimitationsWebsite development

and maintenance costsInsufficient bandwidthUpgrading softwareIntegration of e-

commerce with brick-and-mortar operations

Customer access to the Internet and connectivity limitations

Non-Technical LimitationsPrivacy of customer

transactionsCustomer information

securityInability of customers

to touch or try on products

Unit 5 Check-In

Unit 5 InformationTheme: The Financial Plan & a Firms

Sources of FinancingReadings: Longenecker – Chapters 10, 11,

& 12 (pages 258 to 337)Discussion Board: BuiltNY (page 286) (40

points)Activity- Financial activity – for submission

gradeReview: Chapters 6 through 12 (Part 3 of

textbook) (40 points)Seminar: Conducted on Scheduled Day/Time

The basics of Cash Flow ManagementAs business owners, we all know it’s true:

cash is king! Without it, your business couldn’t survive. That’s because you need cash to operate and grow your business. How else will you ensure you’re able to purchase supplies, pay your rent, advertise, hire employees or take care of the myriad other business activities that require money?

Cash flow is the lifeblood of any business, and it’s imperative that you understand the inflows and outflows accordingly. So let’s take a closer look at just how cash flow works:

Cash is generated into a business through:???

Sales of your product or service Loan or credit card proceeds Asset sales Owner investments

Cash flows out of a business through:???

Business expenditures Loan or credit card principal payments Asset purchases Owner withdrawals

These cash inflows and outflows can be categorized into three main business parts:

Operating, which covers sales and business expenditures

Investing, which covers asset sales and purchases

Financing, which covers loan payments and proceeds, and owner investments and withdrawals

Ideally, you should be generating the majority of your cash flow from operating activities – that is, the sale of your products or services. This is critical for the long-term success of your business as the other two aspects – investing and financing – aren’t viable ways to manage and grow your business.

Operating activities generate cash inflows and outflows through the sale of your products and services and the purchase of supplies and other general business expenditures. Operating cash flow reflects the daily activities of your business. There will be times when cash inflows and outflows are generated by investing or financing activities, but these are supplemental aspects.

The generation of cash flow from investing activities relates to the purchase and sales of your fixed assets (for instance, your property, plant or equipment). Financing activities generate cash inflows through the investment of money into the business by owners or lenders, such as loans and credit cards.

When you pay off the principal of your loans and credit cards, you’re then causing a cash outflow related to financing activities. (The payment of the interest on the loans and credit cards is classified as an operating activity.)

When the owner invests or withdraws money from the business, it creates a change in their equity and is associated with financing activities.

It’s important to understand how the inflows and outflows of your business reflect the health of your company. There are times when you may want to generate cash flow from investing and financing activities. But for the long-term success of your business, you must be generating sales and therefore creating cash flow from your operating activities.

You can easily create a cash flow statement by simply taking into account all your business inflows and subtracting your cash outflows to equal the net change in your cash for any given time period, usually a monthly basis. If you don’t want to do it manually, one of the simplest ways to generate financial statements is to use an accounting software package.

Cash flow projections should be a part of your budgeting process to ensure that you’re being proactive in managing your business. If you don’t understand the basics of cash flow for your business, you may find yourself in a cash flow crunch where you’re waiting for payments from clients but are still expected to pay your operating bills.

That’s especially important if you have a lot of sales on account: then you have to have enough cash on hand to cover the daily bills until your clients pay you. This isn’t an easy situation for a business to be in, which is why it’s vital that you understand when you have cash flowing both out of and into your business.

It’s really very simple: understanding where your cash is coming from and going to is a critical part of smart business management.

You will need accurate and timely financial information to help you manage your business effectively. Your financial statements will also be critical budgeting tools as you seek to achieve financial milestones in your business.

Protecting Your Cash Flow

There's a golden rule in business you'd be smart to learn now: No matter how much you sell, if you don't collect the money, you're going to go out of business. As business owners, we often get so wrapped up in selling our products and services that we forget to take the time to ensure we're managing our cash flow and receiving the money for those sales. But when it comes to your bottom line, you'd be wrong to simply focus on total sales sales: You also need to focus on the cash collection of those sales.

To help get that money in the door, here are seven tips for improving your cash flow:

Require a down payment on projects so that your customers fund the project, not you. 

Set your terms as payment in full upon completion. Don't extend out 30 or 60 days after you've completed your work. You don't get to use your hard-earned cash until payment is received from your clients, so get it as soon as you can. 

Negotiate terms with your vendors for 30 days or more so you have an opportunity to complete the work, bill your customers and receive payments prior to paying your vendor. 

Have a collection process in place, and follow through. When your customers delay payments, they're using your cash. You need to ensure that you're being diligent in collecting from your customers. 

Set up a line of credit at your bank that you can use in case of emergency. Often, lenders’ rates will be less than the late fees your vendors will charge. This line of credit will help you cover a lapse in cash flow for short periods of time. 

Factoring of your receivables allows you to sell your receivables and get cash now instead of waiting 30 or 60 days. There's a fee for using a factoring service, so you need to ensure that the benefit of getting cash today exceeds the cost you'll pay for that expedience. 

Minimize the amount of draws you take personally from your business. Each rand you take from your company reduces the amount of cash flow you'll have available for the business to grow.

Not all these options will work for every business – you have to consider which of these will work for your specific needs.

Remember, your cash flow is not the same as your profits. You can have a profitable business, but a negative cash flow. Prepare a monthly cash flow statement to ensure that you don't get caught unexpectedly without enough cash to handle your day-to-day operations.

Don't ever think you're too busy making sales and working in your business to worry about your cash flow. This mindset is the very thing that can put a business out of business when there's no cash to pay the bills. So take the time to analyse your business's cash flow to locate – and make – some small changes that will have a big impact on your cash flow.

Questions?? Wrap-up