1. 1.to relate the personal and professional challenges of running a business. 2.to demonstrate...

Starting a Small Business

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Objectives 1. To relate the personal and professional

challenges of running a business.

2. To demonstrate knowledge of the key features constructed in a business plan.

3. To design entrepreneurial research analysis tools.

4. To explain organizational structures available to an entrepreneur.

5. To distinguish the various logistical components of starting a small business.

6. To discover help resources for small businesses.

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Starting a Small Business

• Begins with answering one primary question:– Do I have what it takes?

• Involves planning, organization and flexibility

• Can be costly and risky• Brings many rewards and a sense of

accomplishment

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Do I Have What It Takes? • Requirements include:

– self-motivation: you will ultimately be the person responsible and accountable for project development, time management and oversight of the creation of your business

– tough decisions: you will need to make timely critical business decisions, especially in the planning and start-up phase

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Do I Have What It Takes? – organization: the key to developing and

running a business– drive: you cannot develop a business

overnight; you will need flexibility and stamina

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Do I Have What It Takes?• Consider the following:

– family life: how important is it to you; prepare yourself for twelve hour workdays six to seven days a week

– finances: to make money you have to spend money

– support: do you have a good support group to encourage you on your new endeavor; Starting a business has many challenges and you will be challenged many times, you will need a support system to help you

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Business Plan• Is crucial for success• Identifies your strengths

and available opportunities • Develops important

aspects of your business– mission: a clear broad

statement which describes the purpose of the organization

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Business Plan– goals: general statement of what

needs to be achieved and accomplished to achieve the mission

– objectives: specific, time-sensitive accomplishment used to measure the progress towards achieving goals and the mission statement

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Mission Statement Examples

• “To be, and be recognized as, the leader in quality, integrity and performance for deployed systems, engineering and mission operations for the U.S. government.” –Lockheed Martin

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• “To sustain profitable growth by providing the best customer experience and dealer support.”– Toyota Company

• “Bringing exceptional packaged entertainment to communities by being the best retailer of new, used and rental entertainment.” –Hasting Entertainment

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• "Target is committed to the pursuit of profitable and sustainable growth, consistent with our unwavering dedication to the social, environmental and economic well-being of the global community in which our guests, team members and shareholders live and work..“– Target

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Examples of Goals & Objectives

Goal ObjectiveTo be recognized as one of the top four companies in our industry.

To exceed the revenues of each firm in 10 years.

To bring better technology to our customers.

To develop a new iPhone within the next year incorporating GPS navigation.

To increase our brand recognition. To market a new cutting edge commercial during each quarter of the year.

To expand our business into the western region of the US.

To open four stores in the first quarter, three stores in the second and third quarters and two stores in the fourth quarter.

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Business Plan• Includes five key elements:

– market analysis– organization & management– marketing & sales– service or product line– financials

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Market Analysis • Illustrates extensive knowledge of the

industry• Describes the current condition of the

industry and forecast where the industry is moving in the next three to five years

• Identifies a target market• Summarizes market tests conducted• Includes a competitive analysis• Explains any regulatory restrictions

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Industry Description & Outlook

• Provides background information on the industry, such as:– size of the industry– growth rate (date back 10 years

and project the next 3 to 5 years)– customer base within the industry

(i.e., government, private, non-profit)

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Market Analysis

Target Market• Describes for whom you are providing

services • Should be narrow, focused and manageable• May lead to failure if too many customer

bases are included• Identifies the needs of customer base• Assesses the size of the market and projected

growth• Evaluates the portion of the market the

business will obtain

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Market Analysis

Market Tests• Describe potential customers

contacted and their willingness to pledge their business

• Discuss any focus group feedback• Evaluate potential customers

willingness to participate in your products at varying prices– which price is the best?

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Market Analysis

Types of Market Tests

• Include:– focus groups: soliciting individuals to

consume your product and provide proactive feedback

– surveys: questionnaire asking various questions about peoples’ interest in your product

– networking: engaging with potential customers

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Market Analysis

Focus Groups • Are a quick and easy way to get

feedback • Can be conducted in larger groups• Enable the facilitator to receive

emotional feedback • Should avoid groupthink

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Market Analysis

Groupthink • Explains the phenomenon of a dominant

individual leading the group and silencing any opposition of other viewpoints

• Demonstrates the desire for individuals to want to get along and avoid conflict and not critically analyze ideas, in an effort to reach a consensus

• Does not allow a representative sample– i.e., the opinions of all members of the group

are not taken into consideration

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Market Analysis

Prevention of Groupthink

• Begins with an experienced facilitator • Calls for a member of the group being

assigned the role of devils advocate • Demands multiple focus group sessions

discussing one product and comparing responses

Facilitator: company representative conducting the market analysis, the mediator; the person who keeps the group on task 21

Devils Advocate: person who will critically evaluate and disagree with each and every idea populated during the group discussion

Market Analysis

Surveys • Capture a large audience with risks, such

as:– online surveys capture only those who

can afford the Internet– phone surveys capture only those who

have a house phone • Need to exclude biased terms and include

vocabulary understood at a high school education level

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Market Analysis

Surveys• Should include demographics assisting in

the validation of a representative sample, for example:– do not have all males surveying car

products– do not have all participants from one

geographic area surveying farm equipment

– do not have people without children surveying toys

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Market Analysis

Networking • Identifies potential customers• Involves taking customers to events such as

lunch, dinner and baseball games, demonstrate or discuss your product

• Engages the snowball effect, for example– one potential client gives five names of people

who might be interested– each of the five additional contacts gives five

more contacts• May even find an investor to finance the small

business

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Market Analysis

Competitive Analysis

• Identifies competitors • Assesses competitors’ strengths and

weaknesses• Demonstrates how you plan to

overcome their strengths and take their weaknesses into account

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Market Analysis

Regulatory Restrictions

• Summarize related regulatory restrictions• Explain how you plan to comply with those

restrictions• Conclude with governing body

– who makes sure you are following regulations?

• Environment Development Administration, Office of Comptroller, Fire Marshall, State Banking Authority, Federal Drug Administration

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Market Analysis



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Organization & Management • Presents the structure of the

organization, which includes:– organizational structure– ownership information– management profile

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Organizational Structure

• Demonstrates a clear managerial structure for each function of the business

• Has two basics types – hierarchical – learning-based

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learning-based: formerly known as flat or horizontal organizational structure

Organization & Management

Hierarchical Structures

• Include business functions where one is subordinate to the other

• Adopt the chain-of-command methodology• Are essential for large organizations

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CEO

Vice President(production)

Designer Writer

Vice President(marketing)

Designer


Learning-Based Structures

• Do not centralize control• Allow each function to work together

and are not subordinate to each other• Promote growth, innovation and

increased knowledge of how the business functions as a whole

• Work great with small businesses

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Ownership Information

• Distinguishes the following: – who has ownership of the

organization– to what degree does a person have

ownership (percentage)– each owner’s involvement with the

company

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Management Profile

• Identifies managers• Describes their function within the

organization• Summarizes their education• Discusses their prior employment history• Includes any distinguishing characteristics

– industry recognition– community involvement

• Shows their salary and additional forms of compensation

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• Discuss how you plan to enter the industry

• Illustrate a timeline for growing your business

• Provide scripts for television advertisements, fliers and newspaper articles

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Marketing & Sales



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Service or Product Line

• Should be the bulk of your business plan

• Describes the various products you are selling

• Explains how the product or service will be produced

• Provides a narrative of why your target market would buy your product or utilize your service

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Financials • Should provide estimated data, such as:

– how much do you plan to sell?– what price?– what will your expenses be?– profit?

• Compose funding sources, such as:– grant from Small Business Administration– loans

• bank• amount• maturity: when do you plan to pay this

loan back? 39

Logistics • Cannot occur until the business plan is

developed• Are supported by the business plan• Involve

– naming your business– finding a location for your business– buying/leasing equipment– obtaining licenses and permits

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Naming Your Business • Involves more than creativity and marketing • Requires you to select the form of business

– partnership– incorporation– corporation– limited liability company

• Entails formal registration with the Secretary of State

• Can require obtaining a domain name on the World Wide Web

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Picking a Location • Is one of the most important factors

in making your business flourish• May result in the failure of your small

business startup, even if you planned accordingly

• With the advice of professional consulting site locators can increase the chance of your business being successful

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Equipment • Requires asking the question: “Do I buy or lease

my equipment?” • Entails the use of a popular tool known as a t-

chart • Can have major tax consequences on your

business depending on whether you lease or buy your equipment

• Needs to be a team decision, involving accountants, attorneys (e.g., compliance and regulatory issues involving specific equipment), purchaser and of course yourself

43t-chart: a listing of the pros and cons of a situation

Pros Cons

Assessment1. You have been given startup money to

start your own business selling pet supplies. Write your mission statement.

2. When conducting a market analysis you should forecast the next

a. 1 to 3 years

b. 3 to 5 years

c. 5 to 8 years

d. 8 to 10 years

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Assessment3. Kyle is composing a business plan for his

new venture. Kyle plans to market and sell air fresheners. Kyle has identified the following customer base: women, dog owners, teenage girls, cleaning industry and single men. Identify the problem with his customer base and explain.

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Assessment4. New small businesses should design a

__________ business structure.

a. bureaucratic

b. hierarchical

c. learning-based

d. none of the above

5. Management profiles do NOT include which of the following:

a. a list of community relations

b. a description of their function in organization

c. a list of industry relations

d. a description of family 46

Assessment6. With what office do you register your

business name?

a. Office of Comptroller

b. Secretary of State

c. Small Business Administration

d. Courthouse

7. Circle the appropriate answers.Site locators can increase/decrease your ability to promote your business and be successful.

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Assessment8. You have employed a marketing firm to provide you with a

report about the desirability of one of your products. Analyze the following results and recommend improvements, if any.

– Product: Greener Grass Formula– Women participated: 57%– Men participated: 43%– People who lived in a house: 45%– People who lived on a farm: 8%– People who lived in an apartment: 47%– South Carolina Residents: 12%– New Yorker Residents: 28%– Georgia Residents: 30%– Nevada Residents:14%– Ohio Residents: 16% 48

Assessment9. Describe groupthink in your own words

and give an example of when you were in a situation involving groupthink.

10. All of the following are acceptable prevention techniques to avoid groupthink ,EXCEPT:

a. trained facilitator

b. personality tests

c. devils advocate

d. comparing responses from multiple focus group sessions 49

Resources • GoHastings.Com. (1996-2004). Retrieved September 30, 2008,

from GoHastings.Com: http://www.gohastings.com/catalog/• Hitt, Miller and Colella. Organizational Behavior: A Strategic

Approach. Wiley, 2006• Lockheed Martin. (2008). Retrieved September 30, 2008, from

Lockheed Martin: www.lockheedmartin.com• Toyota. (2008). Retrieved September 30, 2008, from Toyota:

www.toyota.com• U.S. Small Business Administration. (n.d.). Retrieved September

30, 2008, from U.S. Small Business Administration: www.sba.gov/• Verizon. (2008). Retrieved September 30, 2008, from Verizon:

www.verizon.com• Walmart.com. (2008). Retrieved September 30, 2008, from

Walmart.com: www.walmart.com

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http://www.gohastings.com/catalog/

Acknowledgements

Project Coordinator:Maggie Bigham

Production Manager:Dusty Moore

Executive Producers:Gordon Davis, Ph.D.,

Jeff Lansdell

Production Coordinator:Aaron Carlson

Graphic Designer:Ann Adams

© MMIXCEV Multimedia, Ltd. 51

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