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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