Entrepreneurship: Starting and Operating a Small Business (with Business Plan Pro)

by Mariotti, Steve; Glackin, Caroline

• ISBN13: 9780131197671
• ISBN10: 0131197673
• Edition: 2nd
• Format: Package
• Copyright: 2010-01-01
• Publisher: Prentice Hall

Summary

For courses in Entrepreneurship, Small Business Management, How to Start your own business courses in continueing education. Written by an award-winning expert, Entrepreneurship: Starting and Operating A Small Business, First Edition, demystifies the process of starting a business by presenting difficult economic, financial and business concepts in a manner easily understood by beginning business students. This book is based on a proven curriculum from the National Foundation for Teaching Entrepreneurship (NFTE) and draws from Steve Mariotti's 25 years of entrepreneurial teaching experience. Clear and energetic, it is supported by two business plan building software packages; BizBuilder and Business Plan Pro. Students will begin building their business plan as soon as they open the text! In a step by step process students will learn how to start a small business, operate a small business and turn their ideas into viable business opportunities.

Table of Contents

UNIT 1 WHAT BUSINESS DO YOU WANT TO START?	1	(60)
Entrepreneurs Recognize Opportunities	2	(32)
What Is an Entrepreneur?	3	(2)
The Economic Questions	5	(1)
Voluntary Exchange	5	(1)
Benefits of Free Enterprise	6	(1)
What Is a ``Small'' Business?	6	(1)
A Business Must Make a Profit to Stay in Business	7	(1)
Profit Is the Sign That the Entrepreneur Is Adding Value	7	(1)
Profit Results from the Entrepreneur's Choices	8	(1)
Why Be an Entrepreneur?	8	(1)
The Desire to Make Money Is Not a Good Reason to Start a Business	9	(1)
Costs and Benefits of Becoming an Entrepreneur	10	(1)
Cost/Benefit Analysis	11	(1)
Opportunity Cost	12	(2)
How Do Entrepreneurs Find Opportunities to Start New Businesses?	14	(1)
Entrepreneurs Creatively Exploit Changes in Our World	15	(1)
Where Others See Problems, Entrepreneurs Recognize Opportunities	15	(1)
Train Your Mind to Recognize Business Opportunities	16	(1)
Entrepreneurs Use Their Imaginations	16	(2)
An Idea Is Not Necessarily an Opportunity	18	(1)
Opportunity Is Situational	19	(1)
The Five Roots of Opportunity in the Marketplace	19	(1)
Get Your Hands on a Computer	19	(1)
Maximize Your Phone!	20	(1)
Protect Your Computer and Data	21	(1)
The Younger Generation's Advantage	22	(1)
Internal Opportunities	23	(1)
External Opportunities	23	(1)
Do Not Rip Off Someone Else's Creativity	24	(1)
Seven Rules for Building a Successful Business	24	(1)
The Team Approach	24	(1)
What Is a Business Plan?	25	(1)
Why Do You Need a Business Plan?	26	(1)
Writing a Business Plan Will Save You Time and Money	26	(8)
Creating Business from Opportunity: The Economics of One Unit	34	(27)
Apple Creates the Personal Computer	35	(1)
Business Definition	36	(2)
What Is Your Competitive Advantage?	38	(1)
Find Your Competitive Advantage by Thinking about What Consumers Need	38	(1)
You Have Unique Knowledge of Your Market	38	(1)
Competitive Strategy: Business Definition + Competitive Advantage	39	(1)
Strategy vs. Tactics	40	(1)
Sometimes Giving Away Your Product Is a Smart Tactic	40	(1)
Is Your Competitive Advantage Strong Enough?	41	(1)
The Six Factors of Competitive Advantage	42	(1)
Naming Your Business	42	(1)
Your Company's Core Beliefs	43	(1)
Analyzing Your Competitive Advantage	43	(1)
The Most Chocolate Cake Company	44	(1)
Checking Out the Competition	45	(1)
Mission	46	(1)
Can You Make a Profit?	46	(1)
Defining the Unit of Sale	47	(1)
Cost of Goods Sold and Gross Profit	48	(1)
Your Business and the Economics of One Unit	48	(2)
The Cost of Labor in the EOU	50	(1)
Hiring Others to Make the Unit of Sale	51	(1)
Going for Volume	51	(1)
Becoming a Business Leader	52	(1)
How Entrepreneurship Creates Wealth	52	(9)
Unit 1 Business Plan Practice	59	(2)
UNIT 2 Who Are Your Customers?	61	(82)
What Is Marketing? Analyzing Customers and Your Market	62	(24)
What Is Marketing?	64	(1)
A Business That Markets vs. a Market-Driven Business	64	(1)
How Customers Decide to Buy	65	(1)
Owning a Perception in the Customer's Mind	65	(1)
Developing a Marketing Plan	66	(1)
Features Create Benefits	66	(1)
Home Depot: Teaching Customers so They Will Return	67	(1)
Needs, Wants, and Demands	67	(1)
Your Company's Mission Is to Satisfy Customers	68	(1)
Market Research Helps You Visualize Your Customer	68	(1)
Do You Know Ten People Who Love Your Product? You May Have a Winner!	69	(1)
Types of Market Research	70	(2)
Your Research Method Matters	72	(1)
Research Your Market before You Open Your Business	73	(1)
Focus Your Brand	73	(1)
Ford's Costly Failure---The Edsel	73	(1)
Ford's Focus on Success---The Mustang	74	(1)
How to Build Your Brand	74	(2)
Make Market Research an Ongoing Part of Your Business	76	(1)
Which Segment of the Market Will You Target?	76	(1)
Successful Segmenting: The Body Shop	76	(1)
Applying Market Segmentation Methods	77	(1)
The Product Life Cycle	78	(1)
Is Your Market Saturated?	79	(1)
Market Positioning---Drive Home Your Competitive Advantage	79	(7)
Developing the Right Marketing Mix	86	(32)
Price: What It Says about Your Product	88	(1)
Keystoning: The Retailer's Rule of Thumb	89	(1)
Other Pricing Strategies	89	(1)
Place: Location, Location, Location!	90	(1)
Promotion: Publicity + Advertising	90	(3)
Making Your Own Marketing Materials	93	(1)
Logos and Trademarks	93	(2)
Logos Help Customers Make Quick Decisions	95	(1)
Copyright	95	(1)
Electronic Rights	96	(1)
Protect Your Electronic Rights	96	(1)
Marketing Materials Should Reinforce Your Competitive Advantage	97	(1)
Print, Audio, and Video Brochures	97	(1)
Image Is Important	98	(1)
Where to Advertise? Visualize Your Customer	98	(1)
The Media	98	(1)
Generating Publicity	99	(1)
What's Your Story?	100	(2)
Sample Press Release	102	(1)
Follow Up a Press Release by Phone	102	(1)
Philanthropy	103	(1)
Cause-Related Marketing	103	(1)
Gaining Goodwill	104	(1)
Nonprofit Organizations	104	(1)
Teach for America and Upromise	105	(1)
What Entrepreneurs Have Built	105	(1)
You Have Something to Contribute	106	(1)
Relationship Marketing	106	(1)
Marketing Online	107	(1)
Marketing Is a Fixed Cost	107	(1)
How To Calculate Your Breakeven Point	108	(1)
Breakeven Analysis of a Restaurant	109	(1)
The Spreadsheet---A Powerful Tool for Projection	110	(8)
Smart Selling and Effective Customer Service	118	(25)
From Sales to Owning Your Own Business	120	(1)
Selling Is a Great Source of Market Research	120	(1)
The Essence of Selling Is Teaching	121	(1)
The Principles of Selling	121	(2)
The Sales Call	123	(1)
E-Mail and Newsgroups	123	(1)
Prequalify Your Sales Calls	124	(1)
Focus on the Customer	124	(1)
The Eight-Step Sales Call	124	(2)
Three Call Behaviors of Successful Salespeople	126	(1)
Analyze Your Sales Calls to Become a Star Salesperson	126	(1)
Turning Objections into Advantages	127	(1)
Use Technology to Sell	127	(1)
The One-Minute Sales Call	128	(1)
Do Not Forget the Sales Receipt	129	(1)
Successful Businesses Need Customers Who Return	129	(1)
Customer Service Is Keeping Customers Happy	129	(1)
The Costs of Losing a Customer	130	(1)
Customer Complaints Are Valuable	131	(1)
The Better Business Bureau	131	(1)
Customer Service Is Marketing	131	(1)
Customer Service Is a Valuable Source of Market Research	132	(1)
The Customer Database	132	(1)
Mailing Lists	133	(1)
Ask Customers to Refer You to New Customers	134	(1)
Build a Web Site	134	(9)
Unit 2 Business Plan Practice	140	(3)
UNIT 3 Show Me the Money!: How to Track Costs and Find Financing	143	(104)
Tracking Fixed and Variable Costs	144	(36)
Ford: Lowering Costs through Assembly-Line Manufacturing	145	(1)
Define Your Unit of Sale	146	(1)
Costs: Fixed and Variable	146	(1)
Calculating Total Gross Profit and Contribution Margin	147	(1)
Calculating EOU When You Sell More Than One Product	148	(2)
COGS	149	(1)
Other Variable Costs	149	(1)
Fixed Operating Costs	150	(1)
How Inflation Hurts Small Business Owners	151	(1)
Insurance Protects Your Business from Disaster	151	(1)
Basic Coverage for Small Business	152	(1)
Liability Insurance Protects You and Your Customers	153	(1)
How Insurance Companies Make Money	153	(1)
Keep at Least Three Months of Fixed Operating Costs in Reserve	154	(1)
Fixed Operating Costs Do Change over Time	154	(1)
Allocate Your Fixed Operating Costs Where Possible	154	(2)
The Dangers of Fixed Costs	156	(1)
Start-Up Investment	156	(1)
Brainstorm to Avoid Start-Up Surprises	157	(1)
Keep a Reserve Equal to One-Half of Start-Up Investment	158	(1)
Payback	158	(1)
Using Accounting Records to Track Fixed and Variable Costs	159	(1)
Three Reasons to Keep Good Records Every Day	159	(1)
Accounting Software	160	(1)
Receipts and Invoices	161	(1)
Keep Two Copies of Your Records	161	(1)
Use Business Checks for Business Expenses	161	(1)
Get Organized!	162	(1)
``Cash Only'' Accounting	162	(3)
Journal Categories	163	(1)
Using the Journal	164	(1)
Creating Financial Statements from the Journal	165	(1)
Monthly Income Statement	165	(1)
ROI (Return on Investment)	165	(1)
Monthly Ending Balance Sheet	166	(1)
Sample Accounting Journal	166	(4)
Three Rules for Managing Your Cash	170	(1)
Keep Your Accounting Current	170	(10)
Using an Income Statement to Guide a Business	180	(20)
A Score Card for the Entrepreneur	182	(1)
The Eight Parts of an Income Statement	182	(2)
A Simple Income Statement	184	(1)
The Double Bottom Line	184	(1)
Create an Income Statement from Your Ledger	185	(1)
Return on Investment	185	(1)
Calculating ROI	186	(1)
An Income Statement for a More Complex Business	187	(2)
Financial Ratio Analysis	189	(1)
Same Size Analysis	190	(1)
Return on Sales	190	(1)
Computerized Financial Statements	191	(1)
Creating Wealth by Selling a Profitable Business	192	(8)
Financing Strategy: Debt or Equity?	200	(26)
Family and Friends	202	(1)
How Often Do Small Businesses Really Fail?	202	(1)
Investors Want Their Money to Grow	203	(1)
The Time Value of Money	204	(1)
The Future Value of Money	204	(1)
The Present Value of Money	205	(2)
How You Can Compensate Investors	207	(1)
Debt Financing: Pros and Cons	208	(1)
Equity Financing: Pros and Cons	208	(2)
Debt Financing	209	(1)
Equity Financing (Stock, Percentage of Company)	210	(1)
The Six ``C's'' of Bank Borrowing	210	(1)
Establishing a Credit History	211	(1)
Sometimes Credit Reporting Agencies Goof	211	(1)
You Can Avoid Personally Signing for Business Debt	212	(1)
Micro-Loan Financing	212	(1)
Line of Credit	212	(1)
Venture Capitalists Seek High ROI	213	(1)
Venture Capitalists Want Equity	213	(1)
How Venture Capitalists Reap ROI	214	(1)
``Angel'' Financing	214	(1)
Online Networking	214	(1)
Financing for Minorities and Women	215	(1)
Youth Financing	215	(2)
Bootstrap Financing	217	(1)
Floating Accounts Payable	217	(1)
Your Business Plan Is the Key to Raising Capital	218	(1)
Writing a Business Plan Will Save You Time and Money	218	(8)
Cash Flow: The Lifeblood of a Business	226	(21)
The Income Statement Does Not Show How Much Cash You Really Have	228	(1)
Rules to Keep Cash Flowing	229	(1)
Noncash Expenses Can Distort Your Financial Picture	229	(1)
The Cyclical Nature of Cash Flow	230	(1)
Reading a Cash Flow Statement	230	(2)
The Cash Flow Equation	230	(2)
Forecasting Cash Flow	232	(1)
Risking Your Cash on Inventory	233	(1)
Credit Squeeze	233	(1)
The Burn Rate	233	(1)
Working Capital: How Much Cash Does the Company Have to Grow?	234	(1)
Cash and Taxes	234	(1)
Filing Tax Returns	235	(1)
Collecting Sales Tax	235	(1)
Two ID Numbers You Will Need to Obtain	235	(1)
Tax Issues for Different Legal Structures	236	(1)
Make Tax Time Easier by Keeping Good Records	237	(1)
URLs	237	(1)
Tax Forms for the Entrepreneur	237	(1)
As a Taxpayer, You Can Ask Questions	238	(9)
Unit 3 Business Plan Practice	244	(3)
UNIT 4 Operating a Small Business Effectively	247	(54)
Choosing Legal Structures and Distribution Channels	248	(30)
The Four Basic Business Types	249	(1)
Manufacturing: Makes Products	250	(1)
Wholesale: Buys Products from Manufacturer and Sells to Retailer	250	(1)
Buying from a Wholesaler	250	(1)
Retail: Buys Products from Wholesaler and Sells to Consumer	251	(1)
Service: Sells Time, Skills, or Expertise	251	(1)
The Production-Distribution Chain	252	(1)
Each Link Marks Up the Price	252	(1)
A Typical Markup	253	(1)
Percentage Markups	254	(1)
Use Search Engines to Find Wholesalers	254	(1)
Markdowns and Discounts	254	(1)
Contracts: The Building Blocks of Business	255	(3)
Why Manufacturing Is Unique	258	(1)
The Idea-to-Product Process	258	(1)
Job Shops	258	(2)
Public Domain	260	(1)
When Filing a Patent Is Necessary	260	(1)
Manufacturing Tips	261	(1)
Just-in-Time Manufacturing	262	(1)
The Four Parts of a Business	262	(1)
Business Legal Structures	263	(1)
Sole Proprietorship	263	(1)
How to Register a Sole Proprietorship	264	(1)
Licenses, Permits, and Certificates	264	(1)
Other Regulations	265	(1)
Sales Tax Identification Number	265	(1)
Partnership	265	(1)
Corporation	266	(1)
Types of Corporations	266	(2)
Electronic Storefront (Web site)	268	(1)
Tips for Entrepreneurs Who Want to Start Not-for-Profit Organizations	268	(10)
Effective Leadership: Managing Resources and Employees	278	(23)
Leadership Comes from Self-Esteem	279	(1)
Manage Your Time Wisely	280	(1)
How Will You Pay Yourself?	280	(1)
Adding Employees to the Mix	281	(1)
Hiring Employees	282	(1)
Office Intranet	282	(1)
Growing Your Team	283	(1)
Getting the Best Out of Your Employees	283	(1)
Encourage Your Employees to Be Socially Responsible	284	(1)
Corporate Management---Building a Team	284	(1)
What Do Managers Do?	285	(2)
The Entrepreneur Sets the Tone for the Company	287	(1)
Managerial Styles That Work	287	(1)
Ethical Employer/Employee Relationships	288	(1)
Corporate Ethical Scandals	288	(2)
Firing and Laying Off Employees	290	(1)
Human Resources	291	(10)
Compensation and Payroll	291	(1)
Benefits	291	(1)
Organizational Development	292	(1)
Training and Development	292	(1)
Labor Law and HR Compliance	292	(1)
Human Resources Strategy	292	(1)
Could You Start an HR Business?	293	(5)
Unit 4 Business Plan Practice	298	(3)
UNIT 5 What You Need to Know to Grow	301	(68)
Raising Capital: Tracking Debt and Equity on the Balance Sheet	302	(32)
Wal-Mart's 100-Year Bond	303	(2)
Short- and Long-Term Assets	305	(1)
Current and Long-Term Liabilities	305	(1)
The Balance Sheet Equation	306	(1)
Where to Find Capital	306	(1)
How Stock Works	306	(1)
A Stock's Price Reflects Opinions about the Company	307	(1)
Reading Stock Tables	308	(1)
Stock Table Terms	308	(1)
How Bonds Work	309	(1)
Reading Bond Tables	310	(1)
Bond Table Terms	311	(1)
The Balance Sheet Shows Assets and Liabilities Obtained through Debt or Equity	311	(1)
The Balance Sheet Shows How a Business Is Financed	312	(1)
Analyzing a Balance Sheet	312	(3)
Assets	312	(1)
Liabilities	313	(2)
Quick and Current Ratios	315	(1)
Depreciation	315	(1)
Debt Ratios: Showing the Relationship between Debt and Equity	315	(2)
Operating Efficiency Ratios	317	(17)
Franchising, Licensing, and Harvesting: Cashing in Your Brand	334	(18)
Focus Your Brand	336	(1)
Diversification Comes with a Price	337	(1)
When Licensing Can Be Effective	337	(1)
How a McDonald's Franchise Works	338	(1)
Royalty Fees	338	(1)
Profits Follow Quality	339	(1)
Do Your Homework before You Get Involved with a Franchise	339	(1)
The Franchise Agreement	340	(1)
Think Big from the Start	341	(1)
When to Harvest Your Business	341	(1)
The Net Present Value of Money	342	(1)
How to Value a Business	342	(1)
The Science of Valuation	342	(1)
Sell Online	343	(1)
Harvesting Options	343	(2)
Investors Will Care about Your Exit Strategy, Too	345	(1)
Exit Strategy Options	345	(7)
Investing for a Secure Future	352	(17)
Always Save 10 Percent of Your Income	353	(1)
Make Your Money Work for You	354	(1)
How Inflation Affects Investments	354	(1)
Future Value of an Annuity	354	(1)
The Risk-Reward Relationship	355	(1)
Time and Liquidity Affect Investment Risk	356	(1)
How Much Risk Can You Tolerate?	356	(2)
Choosing Investments: Stocks, Bonds, or Cash?	358	(1)
Keep an Emergency Fund in Cash	358	(1)
Diversification	359	(1)
The Stock Market Goes Up over Time	359	(1)
Mutual Funds: Diversification You Can Afford	359	(1)
Index Funds	360	(1)
Creating Your Portfolio	360	(1)
Rebalance Your Portfolio Once a Year	361	(8)
Unit 5 Business Plan Practice	368	(1)
Appendix 1 100 Business Ideas	369	(12)
Appendix 2 Sample Student Business Plan	381	(30)
Appendix 3 Advanced Business Plan	411	(11)
Appendix 4 Business Plan for Venture Magazine	422	(21)
Appendix 5 Resources for Entrepreneurs	443	(8)
Appendix 6 Useful Formulas and Equations	451	(2)
Appendix 7 Accounting Journal Distribution Guide	453	(5)
Appendix 8 Using Business Plan Pro	458	(1)
Appendix 9 Glossary	459	(6)
Index	465