Student Manual

Chapter 1

What’s Entrepreneurship About? Do You Want to Start Your Own Business?

Practice Quiz

Multiple Choice

  1. Anne Beiler from Aunt Anne’s Pretzel’s thought mission statements should be:
    1. plastic, even transparent; and long.
    2. hard to remember to develop the brand name.
    3. a working philosophy: A team of people at Auntie Anne’s came up with the word RIGHT, which is a working philosophy for Auntie Anne's. "R" stands for being right all the time. "I" stands for invest in others. "G" stands for give freely. "H" stands for honor God. "T" stands for treat others with respect.
    4. a working philosophy: A team of people at Auntie Anne's came up with the word LIGHT, which is a working philosophy for Auntie Anne's. "L" stands for lead by example. "I" stands for invest in others. "G" stands for give freely. "H" stands for honor God. "T" stands for treat others with respect.
  2. Replicative entrepreneurs open conventional existing business such as which of the following?
    1. Retail store or restaurant.
    2. A watch that performs like a computer.
    3. An in-ground pool that doesn’t need to be covered in the winter.
    4. A car that drives by itself.
  3. Innovative entrepreneurs develop new products and services and/or new productive techniquessuch as:
    1. A shoe/sneaker Retail store
    2. A watch that performs like a computer.
    3. A new Greek Restaurant
    4. A new four-door sedan car.
  4. The U.S. Department of Labor’s commonly used definition of a small business:
    1. employs fewer than 100 workers.
    2. employs fewer than 500 workers. 
    3. employs 500 to 1,000 workers.
    4. employs 1,000 or more workers.
  5. Why are the highest rates of entrepreneurial start-ups in low-income countries?
    1. People are more creative in low income countries.
    2. People are more innovative in low income countries.
    3. People who can’t find good jobs tend to turn to self-employment.
    4. Low income countries have a large amount of seed money available.
  6. In the U.S., more than ___ percent of businesses are small.
    1. 25%
    2. 50%
    3. 75%
    4. 99%
  7. In the U.S., there are ___ million small businesses compared to around _____ large businesses.
    1. 12, 10,500
    2. 16, 12,500
    3. 24, 14,500
    4. 28, 18,500

True/False

  1. Entrepreneurship often refers to the “creation of castles,” or the recognition and exploitation of new business opportunities by founding new ventures.
  2. The creation of new business ventures is considered to be a central element of creativity.
  3. The European Union generally classifies a micro business as having fewer than (<) 50 employees.

Weblinks

Since this is Chapter 1, it is important for students to learn about some of the main magazines that discuss entrepreneurship and small businesses.

www.entrepreneur.com
www.fastcompany.com
www.inc.com

Additional Entrepreneur Profiles

Start a Business - http://smallbusinessschool.org/page1147.html

Shiv Krishnan from India, now Virginia, started in his spare bedroom. Today, with 500+ employees, he says:

  • Be willing to start small
  • Find and depend on mentors  

Think it Over: How do I start a business?

Grow a Business - http://smallbusinessschool.org/page1011.html

Meet Pamela Rodgers of Woodhaven (MI), a top GM dealer, who says, "Do what others won't do."

  • Make Service Your Backbone
  • Keep growing

Think it Over: What is a path for growth?

Additional Elevator Pitches

Emily McHugh – CEO Casauri – Fashionable line of laptop cases
http://www.nbcnews.com/video/your-business/31875791#31875791
Deborah Brenner – Wine by Women
http://www.nbcnews.com/video/your-business/31875791#31472949

Making Your Own 90-Second New Venture Pitch

A key exercise in our own entrepreneurship course is the 90-Second New Venture Pitch. Each student is required to make their own 90-second elevator pitch. We feel that making a pitch is not a group or team exercise. Each student should be responsible for creating, developing, presenting, and refining their own elevator pitch.

For Chapter 1 it is important for each student to read some literature on what makes a good elevator pitch. The Huffington Post article is one resource that students can use to learn the necessary elements: http://www.huffingtonpost.com/2012/03/15/elevator-pitch-5-things-you-need-to-know_n_1345524.html. 

Here are the five key points of the article;

  1. Establish your credibility. The pitchers have to show they are professional and serious about making their product a success.
  2. Your pitch needs to introduce your idea, not close the deal.  Your goal is to stimulate interest in your product. If the venture capitalist does show interest, then you can go into more details.
  3. Don't be afraid to toot your own horn. The pitchers, especially women, have to show they are serious business people ready to work hard on their new product or service.
  4. Being able to adjust to changing demands is a great quality of a business owner and the same should go for your pitch. Most pitchers think they have only one pitch. However, the goal is adapt your pitch to different audiences. Pitching in a competition is different than pitching to a room full of venture capitalists.
  5. Capture your elevator pitch on video. Having a video tape of your pitch allows you and other potential investors to watch your pitch via video or online.

Additional Application Exercises and Situations

  1. Global Entrepreneurship Monitor (http://www.gemconsortium.org/)
    1. What Is GEM?
    2. What is the GEM model?
    3. Why is GEM unique?
    4. How does GEM collect data?
    5. What does GEM measure?
  2. SCORE (www.score.org)
    1. What is the mission at SCORE?
    2. How does SCORE help small businesses?
    3. Where is the location of the closest SCORE chapter from your college or university?

Additional Business Plan

A key part of being an entrepreneur is being able to write a business plan to present your business ideas to banks, venture capitalists, and other interested people that may want to help you to start or grow your business.

Students should use the 21st Century Technology Training Centers business plan in Appendix B to help them visually to see the different parts of a business plan. Chapters 5–12 in this book will go over the different parts of a business plan. Chapter 5 also has a list of the 10 sections of the business plan.

The professor will decide if students should work alone or in groups to complete the business plan. We like to have our students write their business plan alone. However, we let our students use the product they developed in the 90-Second New Venture Pitch as the beginning of their business plan. By using their pitch product, students are off to a good start developing their business plan!

Since this is Chapter 1, the first step is to format the business plan. The students should use Appendix B to copy the layout for the Cover page and the Table of Contents. Your goal at this point is to just format the business plan—not to actually write the plan. You should fill in the different sections of the plan that are pertinent to the business you develop during the semester. You should begin to consider a business for which you (or your team) would like to write a business plan during the semester. REMINDER: We allow our students to write their business plan using the product they are pitching as part of the 90-Second New Venture Pitch.

The students should have an outline of the business plans as follows. The students (or the professor) will find these same sections of the Business Plan in Chapter 5.

Sections of the Business Plan

  1. The Executive Summary (written last, placed first)
  2. Introduction
  3. Strategy Formulation
  4. The Marketing Function
  5. Location and Layout
  6. The Production/Operation Function
  7. The Human Resources Function
  8. The Financing Function
  9. Controls
  10. Appendix

Appendix

Practice Quiz Answers

  1. D
  2. A
  3. B
  4. A
  5. C
  6. D
  7. D
  8. F
  9. F
  10. F

Chapter 2

New Venture Options: Do You Want to Start a New Business, Buy One, Be a Franchisee, or a Corporate or Nonprofit Entrepreneur?

Practice Quiz

Multiple Choice

  1. How much is the initial franchise fee for owning a Mingo Lee Wahoo Fish Taco restaurant?
    1. $15,000
    2. $35,000
    3. $50,000
    4. $100,000
    5. $250,000
  2. The franchisee pays ____ of monthly sales back to the Wahoo headquarters. 
    1. 1%
    2. 2%
    3. 3%
    4. 4%
    5. 5%
  3. What percentage of sales should be used for producing advertisements?
    1. 1%
    2. 2%
    3. 3%
    4. 4%
    5. 5%
  4. Corporate entrepreneurs are often called:
    1. intrapreneurs
    2. extrapreneurs
    3. expats
    4. entrepreneurs
  5. All of the following are reasons to start a non-profit business except:
    1. You can be your own boss.
    2. You can pursue your own ideas.
    3. You can earn a pay check.
    4. You can contribute to society.
    5. You can keep profits yourself.

True/False

  1. Having no established suppliers, vendors, or access to low-cost inputs is an advantage for a new small business.
  2. Partners combine needed resources to start the new venture.>
  3. A list of potential acquisitions includes businesses that are not for sale.
  4. Due diligence is the process of finding the hidden market.
  5. Over the past four decades, franchising has not grown very fast.

Weblinks

Since this is Chapter 2, it is important for students to learn about some articles that discuss the different methods for starting your own business.

Starting your own business –
http://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business
Starting your own family business in China
http://www.scmp.com/business/china-business/article/1324732/how-chinas-family-businesses-can-bridge-generation-gap
Top 100 Fastest Growing Franchises
http://www.entrepreneur.com/franchises/rankings/fastestgrowing-115162/2013,-1.html

Additional Entrepreneur Profiles

Buy a Business - http://smallbusinessschool.org/video.cfm?clip=963

Meet the Souto brothers of Cuba, now Miami. They are the global leader in espresso coffee roasting.

  • Acquire the competition.
  • Keep dreaming.

Think it Over: Can my business be my legacy?

Start a Business - http://smallbusinessschool.org/video.cfm?clip=1031

  • David Milly started his Theatrical Lighting Systems business when he was in college.
  • David is proof that you can grow your business by growing your industry. 
  • The key is to hire the right people and put a good team together.

Think it Over: How do you build a good team?

Additional Elevator Pitches

Jim Song – Inventor Germ Terminator
http://www.nbcnews.com/video/your-business/31875791#31028165
Scott Farrell – Creator of the HappeSeat
http://www.nbcnews.com/video/your-business/31875791#30417437

Making Your Own 90-Second New Venture Pitch

In Chapter 2, your goal is to brainstorm a profit or a nonprofit company that you might want to pitch to the class and venture capitalist later in the semester. For example, you could develop a pitch for a new nonprofit organization such as a summer camp for family members who have lost a loved one to suicide.

An example of a for-profit pitch is the development of a computer screen that would replace your eye glasses or contact lens. Thus, you wouldn’t have to wear glasses or contact lens while working on a computer.

Hopefully, students can also develop some nonprofit ideas that can lead to helping people in your local community. One student started a business to support the people in Africa by raising funds to install water pumps.

Additional Application Exercises and Situations

  1. International Franchising Association
    1. What is the IFA? (www.Franchising.org)
    2. Under the Franchising Opportunities link, what franchisees are available for Fitness & Gyms?
    3. Under the News and Information link, what are the topics covered in two of the news items?
  2. Franchise Direct (www.franchisedirect.com).
    1. What is the mission of Franchise Direct?
    2. In what countries does Franchise Direct help franchisers find franchisees?
    3. Select a country (such as France or Ireland), and select the Sports Franchises link. What sport franchises are listed in the country you selected?
    4. What is the minimum investment for two or three of the companies listed in the country that you selected?

Additional Business Plan

We don’t want students to remain “stuck” in the early stage of developing their business. Students need to push forward and not remain in the idea stage for too many weeks at the start of the semester. Since this is Chapter 2, the first step is to format the business plan. Your goal is to brainstorm three different types of businesses for which you would like to consider writing a business plan. You can look for product ideas using the Internet! You need to review three different business plan ideas, but you only have to select one for which to write a business plan for this course. You should write a brief paragraph on the three potential businesses with the goal of developing a business plan for the one in which you are most interested. Chapter 3 will help you to find new business opportunities and to refine your three selections.

Appendix

Practice Quiz Answers

  1. B
  2. E
  3. B
  4. A
  5. E
  6. F
  7. T
  8. T
  9. F
  10. F

Chapter 3

What Business? How Do You Find Opportunities and Develop a Business Model?

Practice Quiz

Multiple Choice

  1. The steps in the creative process include all of the following except:
    1. Investigation, or exploring the opportunity.
    2. Banking, taking a break and getting a loan from the bank.
    3. Illumination, recognizing the point when one gets the creative idea to exploit the opportunity.
    4. Evaluation, making sure the idea is in fact a profitable opportunity and finalizing it.
    5. Innovation, implementing the new venture idea.
  2. Which of the following is not an idea for generating creative ideas for new ventures?
    1. Brainstorming, the process of generating creative ideas to solve problems and exploit opportunities, without criticism.
    2. Focus group, to pose a question and listen to the discussion by people who are selected based on their relationship with the problem or opportunity.
    3. Library and Internet research, the activities included in and using sources recommended by a reference librarian, including databases, and using search engines to find ideas online.
    4. Identify the problem or opportunity.
  3. Which of the following is not one of the five characteristics of entrepreneurs?
    1. Their knowledge and industry experience provides a basis for recognizing opportunities.
    2. Their networking skills provide help going through the entrepreneurial process and gaining access to resources necessary for founding a new venture.
    3. Their aloofness towards actively finding opportunities while use  of the creative process leads to opportunity recognition.
    4. Their search to improve current products, services, and processes leads to new venture opportunities.
  4. Which of the following steps of the problem-solving and decision-making model is incorrect?
    1. Identify the problem or opportunity.
    2. Blame each other.
    3. Generate alternatives.
    4. Analyze alternatives and select the most feasible.
  5. Which of the following characteristics of entrepreneurs is incorrect?
    1. Their knowledge and industry experience provides a basis for recognizing opportunities.
    2. Their networking skills provide help going through the entrepreneurial process and gaining access to resources necessary for founding a new venture.
    3. Their alertness to actively finding opportunities while use of the creative process leads to opportunity recognition.
    4. Their management skills are not as strong as their marketing talents.
  6. Which of the following four questions does not answer how to develop a business model?
    1. What product and service value do you offer?
    2. Who are your customers and consumers?
    3. How do you measure cost of goods sold?
    4. How do you produce and deliver your products and services?
  7. The steps in the creative process do not include:
    1. Addition, jumping in quickly and making your product.
    2. Incubation, taking a break and letting the subconscious work on the opportunity.
    3. Illumination, recognizing the point when one gets the creative idea to exploit the opportunity.
    4. Evaluation, making sure the idea is in fact a profitable opportunity and finalizing it.

True/False Questions

  1. Innovation is the ability to originate new and better ways of doing things.
  2. Decision-making is the process of selecting a course of action that will overcome an obstacle or exploit an opportunity.
  3.  Creation theory states that opportunities arise from shifts in external factors in the market or industry, such as changes in government regulation, technology, and customer preferences; opportunities are out there waiting for someone to discover them.

Weblinks

Since this is Chapter 3, websites and articles on creativity, problem solving, decision making, and business models are all useful.

This is a Forbes article about Twitter before their IPO. The line from the article is that, “The social media business model is to profit from selling social media.” http://www.forbes.com/sites/jonathansalembaskin/2013/10/04/twitter-ipo-proves-the-social-media-business-model/

Five Creativity Exercises to Find Your Passion. One exercise is, “to start doing what you love, even without a business plan.”

http://www.entrepreneur.com/article/219709#ixzz2h5iz0GpFhttp://www.entrepreneur.com/article/219709

Additional Entrepreneur Profiles

Start a Business - http://smallbusinessschool.org/page1031.html

Debra St. Claire of EcoNatural Solutions.

Debra found Altoids in a health food store, and a light bulb went on in her head that there should be a strong breath mint for the health-food conscious. She decided to make her own peppermint; she was willing to compete with the industry's giants to help further her cause to preserve a very special part of the earth, the Ethno-Medicine Preservation Project in the Amazon Basin. Medicinals from those rain forests have a chemistry that heals in ways that pharmaceuticals do not.

  • Pay attention to spot opportunity.
  • Give customers more than they expect.

Think about it: Where is the next opportunity in your industry?  What product or service could you launch that would allow you to go with the flow that your customers are already in?

Grow a Business – http://smallbusinessschool.org/video.cfm?clip=2116

Key Question: How do I get started in business?

Wanda educated herself for the newest high-demand job; then, when she didn't like the big company culture, she quit and launched her own business.

Search more on the topic of startup and starting a business, and click on the question for more answers.

Think about It: What special knowledge or skill do you have that could be translated into a product or service you can sell?  What do you need to learn to launch the type of business you want to own?

Additional Elevator Pitches

Jeff Gabriele –CEO,  Ingenuity Express, Unique Children’s Shoes
http://www.nbcnews.com/video/your-business/31875791#29942522
John & Aly Boyd, CEO Cheesecake Aly
http://www.nbcnews.com/video/your-business/31875791#29581038

Making Your Own 90-Second New Venture Pitch

You should do more research on the product you expect to pitch in your course. You need to do the research to see if there is a product like the one you are considering. It is likely there is a similar product since it is hard to be truly unique; however, like all replicative entrepreneurs, you can modify your product idea to be unique and different.

Additional Application Exercises and Situations

  1. www.Groupon.com
    1. What is Groupon’s business model?
    2. Does Groupon have a sustainable business model?
    3. How is Groupon’s stock doing since their initial public offering (IPO)? 
  2. UPS and FED EX
    1. What roles do UPS and FED EX play in the development of many business models?
    2. Is UPS or FED EX a competitive advantage if your competitors also use their services?

Additional Business Plan

Since this is Chapter 3, you should be conducting as much research as possible about what new product idea or service you want to use to write your business plan.

We often let students write a business plan on their 90-second elevator pitch product. We feel the elevator pitch and business plan work well together.  However, each student has to consider if their business idea can be enlarged into a business plan. Can you develop a mission, a marketing plan, a financial plan, etc., with your 90-second pitch product? If you answered no, then it might be better to develop a different idea to develop into your business plan.

Appendix

Practice Quiz Answers

  1. B
  2. D
  3. C
  4. B
  5. D
  6. C
  7. A
  8. F
  9. T
  10. F

Chapter 4

How Do You Assess the Chances of Venture Success? Feasibility Analysis and Protecting the Business Model Legally

Practice Quiz

Multiple Choice

  1. Feasibility analysis is the four-part process of testing a business model. Which of the following is not part of the process?
    1. products and services
    2. industry and target market
    3. create a manual
    4. potential profitability through research
  2. The purchasing decision process begins with:
    1. A need for a product or service to solve a problem or to make things easier in some way.
    2. Wanting a product or service to fulfill a need.
    3. There are usually competing products and services to choose from to meet a need.
    4. Demand is the actual purchase of a product or service that best satisfies the need and wants within the customer’s limited resources.
  3. There are five legal methods that can be used to protect the ideas in a business model. Which of the following is not one of these methods?
    1. Contracts
    2. Trade secrets
    3. Feasibility Study
    4. Copyrights

True/False

  1. Feasibility analysis is the process of testing a business model to determine the viability of a business opportunity.
  2. There are two types of research: Secondary research is the process of collecting original data by the entrepreneur, commonly through survey (in person, phone, or mail), observation, and focus groups. Primary research is the process of finding data already collected by others, commonly through library and Internet searchers.
  3. The two methods for determining the feasibility of the demand for a product or service are the buying intention survey and sales.
  4. A target market asks about the business model, including the likelihood of actually purchasing the product or service.
  5. Through sales, the entrepreneur begins to build a starting customer base to support the feasibility of demand for the product or service before starting the new business venture.
  6. NAICS codes refer to the North American Industry Classification System that is commonly used to identify industries in the United States, Canada, and Mexico.
  7. NAICS is used by the U.S. Federal statistical agencies to classify businesses for the purpose of collecting, analyzing, and publishing statistical data. A feasibility analysis is based on research, so identifying the industry by its proper name and code aids in finding relevant data to determine if the new business venture is feasible or not.

Weblinks

Since this is Chapter 4, websites and articles on legal issues are important.

https://www.lexisnexis.com/

Lexisnexus.com

Lexis® Research System provides the most expansive collection of online content available anywhere and the tools you need to extract the essentials from the overwhelming amount of information available. Spend less time searching, more time developing your strategies with LexisNexis.

http://www.sba.gov/content/handling-legal-concerns

The Small Business Association states that all legal matters do not require a lawyer, but they do require understanding. 

Consumers Guide to Legal Help on the Internet
http://apps.americanbar.org/legalservices/findlegalhelp/home.cfm.
ABA Lawyer Referral Service
http://apps.americanbar.org/legalservices/findlegalhelp/faq_hiringlawyer.cfm
Links to American Bar Association guide by state
http://www.americanbar.org/groups/bar_services/resources/state_local_bar_associations.html
Understanding Legal Fees and Expenses
http://www.americanbar.org/groups/public_education/resources/law_issues_for_consumers/lawyerfees.html

Additional Entrepreneur Profiles

http://www.smallbusinessschool.org/page2488.html

Key Idea: Value Your Intellectual property

Attorney Mark Litvack says you should not be cavalier about your intellectual assets. College students began nabbing other people's "intellectual property" without regard for the consequences. Napster was one of the first sites in 1999 that allowed students to exchange song files. Their recruitment was viral. Not only did their business model encourage young fans and average folks to rip off artists because it was quick, easy, free, and anonymous, these otherwise decent people had begun acting and thinking like common thieves.

Think it Over:

Should it be illegal to download files from the internet even if they help you to build a small business?

Key Idea: Validation and Piracy

Maggie Sanchez of Microsoft says that one in five copies of software in the U.S. are pirated. If you can't tell your spouse and your children what you did today, you should probably change your behavior. You can visit www.microsoft.com/genuine to verify if the software running on your PC is authentic or pirated.

If you bought your PCs from a local systems' integrator, there is a strong chance that your software is pirated. You should go to the owner of the business and ask for the certificate verifying that your software is authentic.

Think about it:

Do you know for sure that you are running on authentic software? If not, when will you stop and find out? What will you do if you discover that you are using pirated software?

Additional Elevator Pitches

Jim Barbour, FunniBonz Barbaque Sauce
http://www.nbcnews.com/video/your-business/31875791#32348739
Kate Harrison, thegreenbrideguide.com
http://www.nbcnews.com/video/your-business/31875791#31993614

Making Your Own 90-Second New Venture Pitch

You should do more legal research on the product you expect to pitch in your course. You need to do the research to see if your product is patented or trademarked by another company. It is likely there is a similar product since it is hard to be truly unique; however, like all replicative entrepreneurs, you can modify your product idea to be unique and different. Does another product exist with the same name as your product?

Additional Application Exercises and Situations

  1. Quirky.com
    1. What is quirky.com?
    2. Sign up for a free account at quirky.com.
    3. Find three interesting products designed by other entrepreneurs. We happen to like the Contort Power, Drift, and Groove products.
  2. Chamber of Commerce
    1. What is the Chamber of Commerce?
    2. How can the Chamber help you with your small business?
    3. Click the Publications link and list two publications that the Chamber produces.

Additional Business Plan

You (or your team) can write a business plan during the semester. There are questions at the end of each chapter to help guide you through the thinking and analyzing process. Appendix B has a sample business plan of 21st Century Technology Training Centers that you can use as a template for developing your own new venture business plan.

Since this is Chapter 4, we will help you to determine if there are any legal issues you might have with your product.

  1. Are you using any copyrighted material by mistake?
  2. Is your product infringing on a competitor’s patent?  
  3. Can you use the legal sites on the Small Business Administration (SBA) site to help you with legal issues?
  4. Is there a similar product at Quirky.com?

Appendix

Practice Quiz Answers

  1. C
  2. A
  3. C
  4. T
  5. F
  6. T
  7. F
  8. T
  9. T
  10. T

Chapter 5

Business Planning: What’s Your Legal Form and Strategy?

Practice Quiz

Multiple Choice

  1. The business plan generally projects _____years ahead and outlines the route a company intends to take to reach its yearly milestones, including revenue projections.
    1. 1–2 years.
    2. 3–5 years.
    3. 5–6 years.
    4. 7–10 years.
  2. Which one of the following is not one of the 5 Cs of credit checked by sources?
    1. Character
    2. Choice
    3. Capital
    4. Conditions
    5. Collateral
  3. Which of the following is not typically a section of the business plan?
    1. The Executive Summary
    2. Introduction
    3. Gender and Diversity Issues
    4. The Marketing Function
  4. The internal environmental factors include all of the following except:
    1. mission and objectives
    2. resources
    3. the transformation process
    4. customers and competitors

True/False

  1. The executive summary of the business plan has to be written first because it can’t be summarized until after the plan is written.  
  2. The Introduction section includes the background of the business; a short review of the management credentials and organization structure; the form of ownership as a sole proprietorship, partnership, or corporation; and how any profits will be distributed.
  3. The partnership is a business owned by one person who has unlimited liability and pays personal income taxes on profits. 
  4. A sole proprietorship is an association of two or more people who carry on as co-owners of a business.
  5. The internal environment affects the firm’s performance from outside its boundaries.  
  6. The entrepreneur can control the internal environment, but has little or no control over the external environment.

Weblinks

Creating Your Own Business Plan from the Small Business Administration
http://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/how-write-business-plan
The Long-Term Benefits of Short-Term Thinking
http://www.fastcompany.com/3003670/long-term-benefits-short-term-thinking

Additional Entrepreneur Profiles

S.C.R.U.B.S. and Smartscrubs
Sue Callaway, Founder of S.C.R.U.B.S
http://www.smallbusinessschool.org/video.cfm?clip=2108

Think about It:

What do you use or do on a daily basis that might cause you some frustration? Are you the person to solve the problems that are causing the frustration for you and perhaps thousands or millions of others?

Key Question: How do I get started in business?

Sohrab Vossoughi, founder, Ziba Design, Portland, Oregon
Grow a Business

Portland, Oregon: One of the most successful industrial design firms in the world, everyone here constantly strives for a higher perfection. Their hearts, minds, and pocketbooks are vested in this business.

Key Question: How can I grow this business faster?

Additional Elevator Pitches

Tim Ferriss is the author of The 4-Hour Work Week. He pitches his book in 90 seconds in English and in German.  His pitch in German is for the Amazon website in Germany.

http://www.fourhourworkweek.com/blog/2008/05/03/prepping-for-warren-buffett-the-art-of-the-elevator-pitch-videos/

The California Institute of Regenerative Medicine (CIRM) had a series of 30-second elevator pitches asking for assistance to help them solve their medical problem.

http://www.ipscell.com/2013/03/my-top-3-favorite-cirm-elevator-pitches/

Making Your Own 90-Second New Venture Pitch

You should be practicing your pitch in class to prepare for the real elevator pitch competition. Although you only have 90 seconds, you should provide details that would be found in the executive summary. Practice makes perfect. Time permitted, you should make 2–3 pitches (at least) to improve your voice projection and overcome your nervousness.

Additional Application Exercises and Situations

  1. SWOT Template – Use the following free Word Template SWOT_analysis_template to create a SWOT for one of the businesses being developed in your course by another student. http://www.businessballs.com/swotanalysisfreetemplate.htm
  2. Business Plan Template – Use the following link to compare the business plan process at the site with the business plan process used in the textbook. Are they similar or different? http://www.businessballs.com/freebusinessplansandmarketingtemplates.htm#free business plan marketing plan sample template

Additional Business Plan

The professor should decide when they would like to collect the first draft of the business plan. Our suggestion is to collect it at the end of Chapter 5. This would allow the professor to verify the product or service each student is using to write their business plan.

Students should be able to complete the Introduction section of the business plan. Additionally, the students should have an outline of the plan that will be covered in the following sections.

Appendix

Practice Quiz Answers

  1. B
  2. B
  3. C
  4. D
  5. F
  6. T
  7. F
  8. F
  9. F
  10. T

Chapter 6

The Marketing Plan: Who Are Your Customers?

Practice Quiz

Multiple Choice

  1. Which of the following is not a step in the marketing research process?
    1. define the decision
    2. gather data
    3. analyze data
    4. defend the decision
  2. The 4 Ps do not include which of the following?
    1. product
    2. people
    3. place
    4. promotion
  3. Which of the following is not one of the three sales forecasting methods new ventures can use?
    1. market share
    2. comparable businesses
    3. industry and trade associations
    4. promotional associations
  4. Promotion methods do not include:
    1. personal selling
    2. advertising
    3. sales promotion
    4. marketing research
  5. Social marketing does include which of the following?
    1. websites
    2. Facebook
    3. Twitter
    4. Catalogs

True/False

  1. The feasibility of a new venture, and the future of an existing business, are based on its sales forecast.
  2. An implied warranty is an explicit claim made by the producer to the consumer.
  3. An express warranty is an unwritten guarantee that the product is adequate to meet reasonable expectations for intended purposes.
  4. Selling a product at a higher volume and higher price strategy is called price skimming.
  5. Choosing to sell a product at a higher volume and lower price strategy is called price penetration.

Weblinks

EntrepreneurialConnection.com,
http://www.entrepreneurialconnection.com/, powered by the National Association of the Self-Employed, offers free learning modules on topics vital to the success of the self-employed and micro-entrepreneurs. Some of the topics covered include creating a marketing plan, how to sell to women online, and marketing to baby boomers. You can also subscribe to a free newsletter, “Get Connected.”
WSJ Startup Journal,
http://www.startupjournal.com/ is part of the journal's Center for Entrepreneurs. It includes how-to advice, news, and articles on topics such as marketing and sales, franchising, financing, running a business, and e-commerce.

Additional Entrepreneur Profiles

  1. PC Flowers & Gifts, Internet Sales
    2. http://www.smallbusinessschool.org/video.cfm?clip=1879
    Bill Tobin, Founder

Think about it:

Do you add web functionality on a regular basis? What can customers buy from you on the web? Is it easy for them to buy from you?

  1. Log Homes On The Internet
    2. http://www.smallbusinessschool.org/video.cfm?clip=1881

Think about it:

How can you get more information about your web visitors? What kind of incentive can you give web visitors if they tell you who they are? Can you increase your traffic by forming some key web alliances?

Additional Elevator Pitches

http://www.nbcnews.com/video/your-business/29208083/
Jason Olim, Freshmen Fund - Saving for College
Jason believes that he can help students to save for college. He has a way for parents, grandparents, and friends to donate to the child’s college. Did Jason do a good job of selling his business idea?
http://www.nbcnews.com/video/your-business/29208083/#32257650
Fitted Swimsuits
Many women agree that it's hard to find a bathing suit that looks good, but Aerin Kwait-Taubin, the founder of Aerin Rose Swimwear, may have a solution with her fitted swimsuit line. Did Aerin do a good job of selling her bathing swimwear?

Making Your Own 90-Second New Venture Pitch

Since this is Chapter 6 about the marketing plan, you need to ask yourself how you are performing in regards to the 4 Ps of marketing—product, price, place, and promotion. Venture capitalists often ask marketing questions such as what is unique about your product? What price will you sell your product for? How will you promote your product? And how can you distribute your product against the major competitors already in the marketplace?

Additional Application Exercises and Situations

  1. Top 15 Social Media sites - http://www.ebizmba.com/articles/social-networking-websites
    1. What are the Top 15 Social Media sites?
    2. Which sites do you currently use that are listed?
    3. Could you be an entrepreneur and build a business around one of the popular social media sites?
  2. 9 New Social Media Sites - http://blog.sgrouples.com/new-social-networking-sites/
    1. What are the nine new social media sites?
    2. Do you use any of the nine new social media sites?
    3. On which new social media company would you take a risk and invest your money into the company?

Additional Business Plan

A business plan addresses as many marketing related issues as possible. The plan must include strategic ideas related to conducting marketing research, selecting target markets, providing the best possible customer service, and answering the 4 Ps of marketing. Investors want to know how your marketing is going to attract customers.

Appendix

Practice Quiz Answers

  1. D
  2. B
  3. D
  4. D
  5. D
  6. T
  7. F
  8. F
  9. F
  10. T

Chapter 7

The Location and Layout Plan: What Facilities Do You Need?

Practice Quiz

Multiple Choice

  1. Which of the following is not a general location factor you should consider when selecting a business location?
    1. proximity to the market
    2. transportation facilities
    3. availability of raw materials
    4. access to marketing software
  2. Which of the following is not a general location factor you should consider when selecting a business location?
    1. water power
    2. land costs
    3. sister plants/warehouse
    4. access to accounting software
  3. After examining the general location factors, you will be able to apply them to specific location requirements of which types of businesses?
    1. retail
    2. wholesale
    3. water power
    4. manufacturing firms.
  4. After examining the general location factors, you will be able to apply them to specific location requirements of which types of businesses?
    1. retail
    2. service
    3. manufacturing
    4. market

True/False Questions

  1. Location and layout are considered to be functional areas of the firm just like accounting, finance, marketing, production/operations, and personnel.
  2. Location is often determined by labor supply and market consideration.
  3. Layout is affected by decisions marketing and sales.
  4. The initial dot.com era led to the end of many entrepreneurial businesses, such as pets.com and toys.com. Soon after the dot.com bubble burst in 2000, the internet was no longer a viable option to start a business.
  5. Many businesses now sell their products directly to consumers (thus bypassing the wholesaler) on their own websites, such as Ebay or Amazon.
  6. A retail firm wants to minimize production costs, while a manufacturing firm wants to ensure that customers, upon entering the facility, have the opportunity to select high-profit impulse items.

Weblinks

  1. http://www.retailcustomerexperience.com/ is a free website devoted to the entire retail experience. Professors and students can request a daily e-mail to be sent to their personal e-mail accounts.
  2. http://www.progressivegrocer.com/ is a website devoted to everything that happens in the grocery store industry. You can use the search tool to find material on location and layout.

Additional Entrepreneur Profiles

http://www.smallbusinessschool.org/video.cfm?clip=1855

Flap Happy, Inc.
Laurie Snyder, Founder / CEO
2330 Michigan Avenue
Santa Monica, CA 90404
310-453-3527
Key Idea: Surpass Customer Expectations
Flap Happy products are sold by some tiny retail shops and in some of the world's biggest catalogs. Laurie Snyder is proud that her little business makes kids very happy.

Think it Over:

When was the last time you received an email or letter from a customer thanking you for your extraordinary service? How do you measure customer satisfaction? What percentage of your business do you expect to come from repeat customers?

Additional Elevator Pitches

Lush – Handmade Soap

http://www.forbes.com/sites/carminegallo/2012/07/17/how-to-pitch-anything-in-15-seconds/

How to Pitch Anything in 15 seconds. Watch the video about the 3-Step Message Map. 

  1. Create a Twitter-Like 15-Second Headline.
  2. Support the headline with three key benefits.
  3. Reinforce the three benefits with stories, statistics, and examples.

Now, you want to take your own elevator pitch product and create a 3-Step Message Map. Remember, this elevator pitch is only 15 seconds.

Making Your Own 90-Second New Venture Pitch

When pitching your product or service, it is important to briefly indicate where your business would be located. For example, if you wanted to start an organic restaurant, you would do well to include where you want to either build or rent your facility. You would impress the venture capitalist judges by choosing a town or city near the organic farms where the food is raised. You would also impress them by selecting a town or city where the people in that town support organic food. A college community would be a good location for an organic restaurant.

Additional Application Exercises and Situations

  1. How to Find the Best Location

    2. http://www.entrepreneur.com/article/73784

Use the link provided to access the Entrepreneur.com article on how to find the Best Location for a food or retail business. What are three suggestions provided by the author Karen E. Spaeder?

  1. 6 Tips for Creating an Optimal Retail Layout

    2. http://blog.intuit.com/marketing/6-tips-for-creating-an-optimal-retail-store-layout/

    Use the link provided to access the Intuit article on how to optimize the retail space in a small store location. What are the six tips provided by the author, Jan Fletcher?

Additional Business Plan

Most young entrepreneurs that try to write a business plan on their own forget to include a section on location and layout. However, it is important to determine where and why a new business should be located.

  1. Where is 21st located?
  2. Why did the owners select their location?
  3. What does the data provided about Hartford indicate?

Appendix

Practice Quiz Answers

  1. D
  2. D
  3. C
  4. D
  5. F
  6. T
  7. F
  8. F
  9. T
  10. F

Chapter 8

The Operations Plan: How Will You Make the Product?

Practice Quiz

Multiple Choice

  1. Which of the following is not one of the components of the transformation process?
    1. Inputs
    2. Conversion
    3. Outputs
    4. Location
  2. You arrive at Economics Order Quantity (EOQ) by
    1. balancing carrying cost.
    2. those costs associated with ordering material from the ordering cost through receiving.
    3. inspection and storage, and procurement costs, which are made up of requisition costs, follow-up tasks, and payment of invoices.
    4. Creating a time and motion study.

True/False

  1. A time study establishes the best way to accomplish a task.
  2. A motion study establishes how much time it should take to accomplish a task.
  3. In order to be profitable, the costs of this inventory must be maximized.
  4. The JIT approach delivers inventory in the production process when it is needed.
  5. While looking at the question of inventory control, it is necessary to understand the concept of EOQ, the amount of goods whose total costs, procurement, and carrying costs are at a minimum.
  6. Scheduling assigns work to a facility.
  7. Loading specifies the time and sequence in which the work is to be done and develops a schedule for it.
  8. Master scheduling establishes a production schedule for the facility on a first come/first served basis.
  9. Perpetual loading tabulates the time necessary to finish unfilled orders and determines how long it will take to finish this work.

Weblinks

  1. The following link helps to understand the Economic Order Quantity: http://www.readyratios.com/reference/analysis/economic_order_quantity_model_eoq.html, whereas this link is a YouTube video showing how to calculate an  EOQ: http://www.youtube.com/watch?v=AV6LLOMsJpM
  2. This link http://www.youtube.com/watch?v=ZJXwdcDxHak will help explain the Master Production Schedule (MPS). The video also reviews lead time.

Additional Entrepreneur Profiles

Oregon Log Homes, Inc.
Mike Neary, CEO, founder
1399 N. Highway 197
Maupin, OR 97037
Visit our web site: http://www.oregonloghomes.com

http://www.smallbusinessschool.org/video.cfm?clip=1177

Key Idea: Win An Award
Whenever there is an opportunity, submit your work for peer review within your national trade association.
Think about it
How would your customers, your employees, and your vendors react if you were recognized as an industry leader? Do you think going after that recognition is worth the effort it would take to get it?

Additional Elevator Pitches

https://www.openforum.com/videos/elevator-pitch-matrixx-power-suit/

Whether you’re an Olympian or not, getting in shape can be a challenge for anyone. Calvin Stewart, the CEO of Matrixx Power Suit, tries to convince our elevator pitch panel that his product is worth the workout.

Does Calvin do a good job with either the feasibility of his idea or his actual presentation?

Making Your Own 90-Second New Venture Pitch

Most students do not pitch a product that requires a heavy focus on the operational plan. However, we feel a student can make an impression upon the venture capital judges by properly including concepts such as quality control, economic order quantity, and a master planning schedule.

You shouldn’t add these topics just to be able to say you covered this chapter. However, if you have a product idea that is well defined to the point of calculating an economics order quantity or defining a system to measure quality, then the material should be added to your pitch.

Additional Application Exercises and Situations

  1. Conduct a time and motion study of someone doing their job either on your campus or at your job. For example, if you watch the security guard at your college, how long does it take the person to patrol the entire campus? Would the guard use his or her time more efficiently if he or she used an electric vehicle to move around campus?
  2. Review the ISO website: http://www.iso.org/iso/home/about.htm. Write about the mission of ISO and how they can help a small business.

Additional Business Plan

Unlike the 90-Second New Venture Pitch, where it can be difficult to include the operational plan in a 90-second pitch, students should include the operational plan in their business plan. Since including the operational plan is not an easy task for students that most likely have never worked in a factory-type situation, we believe students should try to use as many of the key terms as possible from the chapter. The following is a table of key terms found in the chapter. Try to use some of them in your business plan!

assemble

capital

carrying costs          

direct watch time study

economic order quantity (EOQ)

flow process chart

Gantt chart

grasp

ISO 9000

Just-in-Time (JIT) inventory system        

loading          

logistics

master scheduling               

material requirements planning (MRP)   

Motion study

outsourcing

perpetual loading

PERT

predetermined time standards

process chart

procurement costs

production/operations process     

production/operations variability

product warranties  

quality

scheduling    

statistical quality control

TQM

Appendix

Practice Quiz Answers

  1. D
  2. D
  3. C
  4. D
  5. F
  6. T
  7. F
  8. F
  9. T
  10. F

Chapter 9

The Human Resource Plan: How Do You Develop the New Venture Team and Employees?

Practice Quiz

Multiple Choice

  1. The new venture team can be any of the following professionals except for:
    1. The founder(s)
    2. The board of directors
    3. The board of advisors
    4. The customer(s)
  2. The new venture team can be any of the following professionals except for:
    1. Investors
    2. Lenders
    3. Mentors
    4. The government
  3. The new venture team can be any of the following professionals except for:
    1. Professional advisors
    2. Lawyers
    3. The local media
    4. Accountants
  4. The new venture team can be any of the following professionals except for:
    1. Bankers
    2. Internet Provider
    3. Insurance Agents
    4. Consultants
  5. Staffing, placing the right people in their respective jobs, includes all of the following activities except:
    1. recruiting
    2. hiring of people
    3. marketing
    4. training

True/False

  1. Job specifications are the duties and requirements of the job and serve to define the job.
  2. Job descriptions set forth the specific skills and training of the people hired to perform the job functions and define the characteristics or attributes necessary to do the job.
  3. Internal consistency means that high worth jobs (to the company) get paid more than low worth jobs, and it involves making certain that your firm's jobs and pay relate their worth to the organization.
  4. External consistency, where the pay structure corresponds to the community wage structure, ensures that your workers are rewarded at a rate of pay that is comparable to the market.
  5. Recruiting refers to the first step in staffing, which is finding people.

Weblinks

http://www.fastcompany.com/1677217/report-human-capital-new-venture-capital. This Fast Company article discusses the demographic data of founders. The data reveals that in most states new founders still tend to be white males. However, although we think investors are looking for teenagers like Zuckerberg at Facebook, in reality 67% of all founding teams fall within the 35–54 age group. The article can be used for a great deal of research and discussion.

http://www.adp.com/solutions/small-business/services/human-resources-management.aspx. ADP is an example of a human resource consultant often used by many small businesses. Students can be asked to make a list of the advantages of using ADP.

http://www.sba.gov/category/navigation-structure/starting-managing-business/managing-business/running-business/human-re. The SBA offers a site full of policies that a small business should incorporate to comply with human resources issues. These policies include workplace posters, child labor, unions, terminating employees, and hiring people with disabilities.

Additional Entrepreneur Profiles

Oberon Associates (A Stanley Company)
Jodi Johnson & David Young, Co-founders
9700 Capital Court, Suite 301
Manassas, VA 20110
Visit our web site: http://oberonassociates.com
Business Classification:
defense/government contracts
Year Founded: 2002
Key Question:
How do I build a big business fast?

Think about it

If you are trying to start a business now, can you think of a person or two whom you would love to have on your dream team?  What would keep you from recruiting them?  If you are stuck and need to find new talent to move your business ahead, can you think of a person or two you should try to go after?  Who are the people you most admire in your life?  Do they work for you now?  If not, why not?

Additional Elevator Pitches

Linda Ballentine. President, Crowning Touch Senior Moving Services

http://www.nbcnews.com/video/your-business/31875791#28962966

Would you invest $600,000 in Linda’s Senior Citizen Moving Service?

Making Your Own 90-Second New Venture Pitch

You should include a brief description of your new venture team as part of your elevator pitch. Including the names of well-known co-founders, lawyers that have been consulted about a patent, or a bank that is interested in providing a loan will increase the quality of the pitch. If a bank is interested in providing a loan, then venture capitalists will also become interested in including their own money.

Additional Application Exercises and Situations

  1. Visit the SBA and find the Human Resources webpage. List and explain five different areas that small businesses are required to follow.
  2. Find an article that discusses the formation of a new venture team. Review the article and discuss what a company learned from the article.

Additional Business Plan

Students should have a section of their business plan devoted to human resources and the new venture team. Students should determine who will be on their new venture team, which can consist of any of the following different professionals: the founder(s), the board of directors, the board of advisors, investors, lenders, mentors, professional advisors, lawyers, accountants, bankers, insurance agents, and consultants.

Besides the new venture team, students should consider the rate of pay for their owners, key managers, and non-management employees. Students can write job descriptions for key employees.>

Appendix

Practice Quiz Answers

  1. D
  2. D
  3. C
  4. B
  5. C
  6. F
  7. F
  8. T
  9. T
  10. T

Chapter 10

The Finance Plan: How Much Money Do You Need?

Practice Quiz

Multiple Choice

  1. Which of the following is not one of the three parts of the balance sheet?
    1.  assets, which are a tangible item or intangible rights owned by the firm
    2. liabilities, which are the obligations or debts that the firm owes
    3. revenue derived from sales
    4. net worth or owner's equity (assets minus liabilities), which is what remains
  2. Which of the statements below is not correct about the cash flow statement?
    1. One part of a cash flow statement is the actual dollars coming into the business as revenues.
    2. The second part of a cash flow statement is money going out of the business to pay its bills.
    3. Depreciation or any noncash items (accounts receivables) are not included in the cash flow statement.
    4. The third part of a cash flow statement is debits minus credits.
  3. Which of the following is not a tax paid by a small business?
    1. Income taxes are those taxes levied on the net income of the business. 
    2. You are also responsible for paying your share of an employee's social security taxes, which are taxes levied on employers and employees to provide for individual retirement and unemployment taxes which are collected in order to ensure those individuals who have lost their job.
    3. Taxes are determined on property and any excise taxes, which are taxes based on the assessed value of property.
    4. All of the above are taxes paid by a small business.
  4. Which form of ownership pays business taxation and, if they declare dividends, are also taxed at a personal income tax rate?
    1. The C corporation form of ownership
    2.  The owners of sole proprietorships
    3.  Partnerships
    4.  S corporations and limited liability companies (LLC)

True/False  Questions

  1. The three parts of the income statement are (1) Revenues minus (-) (2) expenses equals (=) (3) profit or loss.
  2. The breakeven point tells you the point at which the business actually can begin to make a profit. 
  3. The final task you or your accountant will perform is to establish a chart of accounts, which is a list of all of the accounts to which charges are made that is tailored to your business.
  4. The first service the accountant should perform is to recommend a system of internal control to prevent fraud.
  5. All the accounts of your business are tracked in the general ledger, which is a book or computerized listing in which entries are made concerning all of a firm's financial transactions.
  6. The act of preparing the pro forma cash flow will help determine your financial needs.
  7. The income statement is important because it is a snapshot view of the financial value of the firm.
  8. The balance sheet is important because it presents the financial performance as a profit or loss from operations during a given time period.

Weblinks

An Accounting Study Guide to help students to learn about debits and credits.

http://accountinginfo.com/study/je/

An accounting website from the Western Australia Small Business Development Center (SBDC). The information provided shows record keeping is important in every country.

http://www.smallbusiness.wa.gov.au/record-keeping-systems/

An example of a Profit and Loss Statement.

https://www.smallbusiness.wa.gov.au/example-profit-and-loss-statement

Additional Entrepreneur Profiles

International Wine Accessories (IWA) and Bob Orenstein http://smallbusinessschool.org/video.cfm?clip=1874

Key Idea: Keep Lowering Your Costs

Bob Orenstein started his business to serve people who, like himself, love fine wine. But it was not easy. Learn how perseverance paid off. Slowly his company served hundreds of thousands of customers around the world. He became the  authority on wine accessories, and his customers began to depend on him to find items they could not find elsewhere.

From a spare bedroom of his condominium in 1983, it took him more than ten years to break into the domain of the fast-growing businesses. He talks about business basics—delivering quality products and extraordinary service.

Think it Over:
How do you evaluate your cost of doing business?  What savings have you realized in the past five years through the increased use of technology?

Additional Elevator Pitches

Founder, Laurie Suzuki. Yumi & Laurie Inc.

Laurie Suzuki found the inspiration for her line of high-end blankets while on a trip in Japan. 

http://www.nbcnews.com/video/your-business/28842825/#28842825.

Did the VCs like her blankets?

Making Your Own 90-Second New Venture Pitch

You should realize that by this time of the semester it will be your turn to make your own elevator pitch. If you have been practicing your 90-second pitch throughout the course, then making the actual pitch to the VCs is not intended to be a difficult presentation. You want to use a conversational approach in your pitch. You don’t want to sound too much like a car salesman.

You want to hook the VCs in by grabbing their attention. Some students ask a question at the start of the 90 seconds to get a quick response about their product.

You want to describe to the VCs how your product overcomes a problem that many customers experience. The VCs will be interested in your product if you can solve a problem that many people experience . . . because this means higher sales and profits.

Since this is Chapter 10, you are adding the financial piece to the presentation. You can briefly include whatever financial advantages you do have to offer. VCs like when there is an accountant as part of the ownership team, or you may have a bank loan that supports your business. The VCs like it when a bank supports a young startup business—it indicates your business is less of a risk than other startups.

Additional Application Exercises and Situations

Students: The goal of these exercises is for you to “take classroom notes” at all three of these sites.  We believe you will gain more experience developing an income statement, balance sheet, and break-even analysis.

  1. Introduction to Income Statement.

    http://www.youtube.com/watch?v=Z7C4cz2HkeY

    This video is from Khan Academy. Students should watch the video and make their own income statement like the one that was developed in the video.

  2. What is a Balance Sheet?

    http://www.youtube.com/watch?v=DuKEcxVplnY

    Students should draw the balance sheet as developed in the video.

  3. Break-Even Investment Analysis.

    4. http://www.ext.colostate.edu/pubs/farmmgt/03759.html

    This site has a couple of extra break-even problems for students to analyze. The problems also come with answers—so students can test their own ability to solve a break-even problem. Students should take a problem from the site and add their own data. What is your own problem and the resultant answer?

Additional Business Plan

Since the semester will be ending in a few weeks, students have to add the financial section to their business plan. It is important to at least have a pro forma income statement to show the expected level of revenue, expenses, and profits from your own business idea.  

21st Century Technology Training Center was selected to show a business that is in the idea stage and thus had to use pro forma data as to what we expect will happen to our business.

  • Based upon our own experiences in the education industry, we projected revenues, expenses, and profits over a five-year period. Our experience tells us that we can expect a 20–25% rate of filling a classroom with students. So, we made projections based on different percentages (25%, 50%, 75%, and 100%) to show how revenue and profits would climb with increased enrollment. But we started with a conservative figure of 25%.
  • We researched marketing costs using the internet. We looked up our local television stations, radio stations, internet providers, and direct mail agencies to determine how much money would be spent on advertising.
  • We researched the cost of renting a space for our computer lab. We used data from a college that is entering a nearby city to rent office space to open an off-campus program.
  • We researched online for the cost of building three computer labs. We also used data on how much and what equipment was bought at the brand new high school in our area.
  • In the end, we made a pro forma income statement to show how much potential our business idea has going forward. As a final note, our experience in education has taught us that if students are paying tuition, then revenues for the school, college, university, or training center increase quite rapidly. The key is (like our additional entrepreneurial video in this chapter) to keep lowering costs.

Appendix

Practice Quiz Answers

  1. C
  2. D
  3. D
  4. A
  5. T
  6. T
  7. F
  8. F
  9. T
  10. T
  11. F
  12. F

Chapter 11

Sources of Funds: Where Do You Get the Money?

Practice Quiz

Multiple Choice

  1. Which of the following is not one of the threebasicquestions an entrepreneur should answer beforeinitiatingasearchforcapital?
    1.  How much effort do I need to exert?
    2. How much capital will I need?
    3. What type of capital is required?
    4. Where can I get the funds?
  2. Which of the following is not one of the three major types of financing?
    1. short-term capital
    2. early stage capital
    3. long-term capital
    4. very-long term capital
  3. Which of the following potential sources of equity financing is Kickstarter classified?
    1. seed capital
    2. venture capital
    3. sale of public stock offering  (IPO )
    4. crowdfunding

  4. Which of the following is not a potential source of debt financing?
    1. bank loans
    2. a line of credit
    3. venture capital
    4. installment billing
  5. Which of the following is not an example of bootstrapping?
    1. using a home-based business
    2. credit cards
    3. a line of credit
    4. selling personal belongings
  6. Potential sources of equity financing include all of the following except:
    1. seed capital
    2. personal savings
    3. angels and venture capital
    4. bank loans

True/False Questions

  1. Local community banks provide loans to help spur local business.
  2. Factoring involves selling your receivables to a buyer, such as a commercial finance company, to raise capital and is very common in industries, such as the clothing industry, where long receivables are part of the business cycle.
  3. Factoring is a traditional method of exchanging items or services instead of using cash.
  4. Home equity loans are a popular financing device for new business owners because there's often substantial equity tied up in a home, and the loans are easier to come by.

Weblinks

  1. What company did Marc Andreessen originally create? Why is he an important venture capitalist? What are the two latest news articles about Andreessen?

    2. http://www.bloomberg.com/news/2010-08-25/andreessen-said-to-seek-650-million-for-startups-people-familiar-say.htm

  2. What is the mission of Valley Venture Mentors? What are the names and business ideas of any two of their alumni? What are the backgrounds of the people sitting on the board of VVM?

    3. http://www.valleyventurementors.org/about/

Additional Entrepreneur Profiles

Julie Hansen
http://www.youtube.com/watch?v=5-ZpP4j09s0
The 7-Second Elevator Pitch
Can you Sell Yourself  in 7 Seconds?
  1. Think of yourself as a movie preview.
  2. Make whatever you do sound interesting.
  3. Believe what you do is interesting.
  4. Kill the Buzzwords. Sound conversational—not like you’re selling.

Additional Elevator Pitches

Founder, Laurie Suzuki. Yumi & Laurie Inc.

Laurie Suzuki found the inspiration for her line of high-end blankets while on a trip in Japan. 

http://www.nbcnews.com/video/your-business/28842825/#28842825.

Did the VCs like her blankets?

Making Your Own 90-Second New Venture Pitch

You should answer three basic questions before initiating a search for capital: How much capital will I need? What type of capital is required? Where can I get the funds? The three major types of financing are short-term capital, early stage capital, and long-term capital.

However, within your 90-second pitch, you don’t normally have the time to answer all three questions. But, you should ask and answer the question, How much is their ASK? The ASK is how much money do they want from the VCs? Do you want to give the VCs a piece of the company in return for their knowledge and efforts? Do you want to ask the bank for financing? Do you want to ask VCs for funding? Would using Kickstarter make strategic sense? Remember, this is only the 90-second pitch. You would only have 30 seconds at the most to describe the funding request you want to grow your business, so figure out what your capital needs are and ask for that amount.

Additional Application Exercises and Situations

  1. What are the six bootstrapping strategies listed in the attached link?

    2. http://www.entrepreneur.com/article/80204-3

  2. Go to Kickstarter.com and select three business ideas you think are most feasible to get started and be successful.

    3. http://www.kickstarter.com/

 

Additional Business Plan

The financial plan requires answering three questions that can frame your plan: How much capital will I need? What type of capital is required? Where can I get the funds? The three major types of financing are short-term capital, early stage capital, and long-term capital. The following table could be used to help figure out which type of funding is best for your situation.

 

Equity Financing

Potential source of debt financing

Potential sources of Bootstrapping

Seed Capital

 Bank loans

1. Home-based business

Personal Savings

 Line of credit

2. Credit cards

Friends and Family

3. Installment billing

3. Selling personal belongings

Partners

4. Insurance/Retirement loans

4. Borrowing and sharing equipment

Angels

5. Vendors

5. Joining an incubator

Venture Capital

6. Local community banks

6. Bartering

Corporate Venture Capital

 

7. Refinancing your home

Private Placement

 

8. Borrowing against your retirement account

Sale of public stock (IPO)

 

9. Customer financing

Crowdfunding

 

10. Factoring

 

 

11. Referrals

Appendix

Practice Quiz Answers

  1. A
  2. D
  3. D
  4. C
  5. C
  6. D
  7. T
  8. T
  9. F
  10. T

Chapter 12

Sources of Funds: Where Do You Get the Money?

Practice Quiz

Multiple Choice

  1. Which of the following guidelines for controlling quality is incorrect?
    1. Use quality resources and systems.
    2. Set clear quality standards.
    3. Enforce quality standards.
    4. Keep records in your email.
  2. Which of the following guidelines for controlling costs is incorrect?
    1. Emphasize profits, not costs.
    2. Set clear cost standards.
    3. Talk about and reward cost consciousness.
    4. Keep records in your e-mail.
  3. Which of the following is not a liquidity ratio?
    1. the current ratio
    2. the quick ratio
    3. the debt ratio
    4. A and B
  4. Which of the following basic areas does not belong in a balanced scorecard?
    1. a financial perspective
    2. a customer perspective
    3. an internal operations perspective
    4. an engineering perspective
  5. Potential risks in owning a business include all of the following except:
    1. natural hazards
    2. contracts and legal relationships
    3. financial operations
    4. All are potential risks.
  6. Potential risks that need to be assessed include all of the following except:
    1. acts or omissions of third parties
    2. federal, provincial, and municipal laws or regulations
    3. economic conditions, dependence on outside resources, property loss, use of technology, and workforce issues
    4. All are potential risks.

True/False Questions

  1. The budget is a preliminary written plan for future specific application whose purpose is to control future company activities.
  2. JIT requires everyone in the organization to continually improve products and services.
  3. Inventory turnover ratio is an operating ratio that serves as an indication of how often merchandise is turning over.
  4. The balanced scorecard works better for small businesses than large organizations.

Weblinks

http://balancedscorecard.org/Resources/AbouttheBalancedScorecard/tabid/55/Default.aspx

Discussion and Diagram of The Balanced Scorecard.

http://www.bbt.com/bbtdotcom/business/small-business-resource-center/growing-a-business/financial-ratios.page

Ratio calculations and video presentations presented by Branch Banking and Trust Company (BBT). 

Additional Entrepreneur Profiles

http://smallbusinessschool.org/course.cfm?id=1

How were the Schroeders able to get a loan to buy their building?

Think about it

  1. How did the Schroeders use leverage (debt) to buy their building?
  2. What does it mean to “use other people's money” to grow your business?
  3. What bank would you work with that you think would understand your business?

Additional Elevator Pitches

We thought we would end the textbook with 10 LOUSY elevator pitches. What do you think is the problem with each pitch?

 

http://www.cbsnews.com/8301-505183_162-28545966-10391735/top-10-lousy-elevator-pitcheson-video/

Making Your Own 90-Second New Venture Pitch

Since this is the last chapter, you should be ready to make your own elevator pitch! You have had plenty of time to practice…so you should be well prepared. You should practice your pitch to make sure you take 90 seconds. The VCs do not like it when a pitch is too long or too short. Good luck in the competition!

Additional Application Exercises and Situations

  1. Use the Balanced Scorecard to analyze another business created by a fellow student in class. You might fill in the four sections while the other student presents their business plan. Remember, a Balanced Scorecard has the following four areas:
    • Customers: Measures your customers' satisfaction and their performance requirements—for your organization and what it delivers, whether it's products or services.
    • Financials: Tracks your financial requirements and performance.
    • Internal Business Process: Measures your critical-to-customer process requirements and measures.
    • Knowledge, Education, and Growth: Focuses on how you educate your employees, how you gain and capture your knowledge, and how you use it to maintain a competitive edge within your markets.
  2. Use the Small Business Insights video at http://toolkit.smallbiz.nsw.gov.au/part/6/30/143 to fill in the blanks of the financial ratios provided to analyze a business of your choice. You might consider Facebook or Twitter since they have fairly recently went from an entrepreneurial stage to a successful initial public offering (IPO) of stock.
  3. Use the Small Business Insights video at http://toolkit.smallbiz.nsw.gov.au/part/6/30/143. Although the video is short, it identifies TRENDS as being important in using financial ratios. Why are trends so important?

Additional Business Plan

Since this is the last chapter, these are the last instructions before the business plan should be handed in for grading.

A business plan should include controls built into the process so that management and employees build quality into the business system and not after the business has already been in business.

Students should include a Balanced Scorecard so they are not overly fixated on financial controls at the expense of focusing on the customer, internal business processes, and learning and growth. In regards to financial controls, students should highlight the ratios that will most likely impact their business. These ratios will most likely include gross, operating, and net profitability; debt-to-equity and debt-to-asset levels; and inventory turnover.

However, the goal of the business plan was for students to see the entire business operation and be able to see their idea for venture capitalists to invest. We do hope you find great success starting your own business. The world needs inventors and entrepreneurs to solve the problems of customers . . . people.

Appendix

Practice Quiz Answers

  1. D
  2. D
  3. C
  4. D
  5. D
  6. D
  7. T
  8. F
  9. T
  10. F