Transcription
233Seventh EditionEssentials of Entrepreneurshipand Small Business ManagementGlobal EditionNorman M. Scarborough/Presbyterian CollegePEARSONBoston Columbus Indianapolis New York San Francisco Upper Saddle RiverAmsterdam Cape Town Dubai' London Madrid Milan Munich Paris Montreal TorontoDelhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei TokyoI
ContentsPrefaceCorporate Dropouts1240Retiring Baby BoomersSECTION IThe Challenge ofEntrepreneurship 17HANDS ON . . . HOW TO Launch aSuccessful Business WhileYou Are Still In CollegeChapter 1 The Foundations ofEntrepreneurship 17The World of the EntrepreneurWhat Is an Entrepreneur?401842Putting Failure into Perspective43How to Avoid the Pitfalls2041The Power of "Small" Business45Know Your Business in Depth 45The Benefits of Entrepreneurship25Develop a Solid Business Plan 45Opportunity to Create Your Own Destiny 25Manage Financial ResourcesOpportunity to Make a DifferenceUnderstand Financial Statements 25YOU BE THE CONSULTANT WhereDo Ideas Come From? 26Uncertainty of IncomeRisk of Losing Your Entire Investment28Complete ResponsibilityConclusion29Chapter Summary by LearningObjective48 DiscussionQuestions49 Beyond the50 EndnotesCreativity, Innovation, andEntrepreneurship 56 30YOU BE THE CONSULTANTThe Ideal Place to Launcha Business 33College:60YOU BE THE CONSULTANTDarwin Was Right 63Barriers to Creativity Women EntrepreneursMinority Enterprises35Immigrant Entrepreneurs3778Step 1. Preparation78 Step 2. Investigation79Part-Time Entrepreneurs37Step 3. TransformationHome-Based Businesses38Step 4. IncubationFamily BusinessesCopreneurs3838Corporate Castoffs396973HANDS O N . . . HOW TO Be aSuccessful Innovator 77The Creative Process3669Enhancing Organizational CreativityEntrepreneurship34Charles64How to Enhance CreativityEnhancing Individual Creativity345860The Cultural Diversity ofYoung Entrepreneurs51Inside the EntrepreneurialMind: From Ideasto Reality 55Creative Thinking29Entrepreneurial Fire4747Can Creativity Be Taught?Behind the Boom: What's Feeding the 47Maintain a Positive AttitudeCreativity—Essential to SurvivalHigh Levels of Stress 29DiscouragementCompetitionChapter 2Long Hours and Hard Work 28Lower Quality of Life Until the Business GetsEstablished 2946Set Your Business Apart from theClassroom.2846Learn to Manage People EffectivelyOpportunity to Reach Your Full Potential 26Opportunity to Reap Impressive Profits 27Opportunity to Contribute to Society and BeRecognized for Your Efforts 27Opportunity to Do What You Enjoy and HaveFun at It 27The Potential Drawbacks ofEntrepreneurship 28 ,468081Step 5. Illumination82Step 6. Verification82Step 7. Implementation82"
CONTENTSTechniques for Improving the CreativeStep 8. Translate Strategic Plans into ActionProcessPlans83BrainstormingStep 9. Establish Accurate Controls83Mind MappingConclusion85Force-Field AnalysisTRIZ132Chapter Summary by Learning85Objective86Rapid Prototyping133135136Questions87 138Classroom.Discussion Beyond the139 Endnotes140Intellectual Property: Protecting YourIdeas88Patents Chapter 4 Conducting a FeasibilityAnalysis and Crafting aWinning Business Plan 14288HANDS ON . . . HOW TOProtectYour Company's I n t e l l e c t u a lPropertyCopyrightsConducting a Feasibility Analysis9394Protecting Intellectual PropertyProduct or Service Feasibility Analysis95Chapter Summary by LearningObjective95Questions 96 Discussion Classroom.Beyond the97 Endnotes98Building a Competitive AdvantageThe Strategic Management Process149DoesYour Business Model GEL?149152In-Home Trials152Financial Feasibility Analysis153Why Develop a Business Plan?154The Elements of a Business Plan Designing a CompetitiveBusiness Modeland Building a SolidStrategic Plan 102Battle of the PlansExecutive Summary157Company History159159Vision and Mission Statement107156YOU BE THE CONSULTANTTitle Page and Table of Contents104144YOU BE THE CONSULTANTPrototypesSECTION II Building the BusinessPlan: BeginningConsiderations 102Chapter 3144Industry and Market Feasibility Analysis160160Business and Industry Profile160Step 1. Develop a Clear Vision and TranslateIt into a Meaningful Mission StatementGoals and ObjectivesVisionDescription of the Company's Product or108Step 2. Assess the Company's Strengths andWeaknesses111Business StrategyService160161161Marketing Strategy162Step 3. Scan the Environment for SignificantOpportunities and Threats FacingDocumenting Market Claimsthe BusinessShowing Customer Interest 111YOU BE THE CONSULTANTThe BestCompetitor Analysis163163165Little Pizza Chain No OneDescription of the Management TeamEver Heard OfPlan of Operation114HANDS ON . . . HOW TOBig GuysBeat t h e115166Pro Forma (Projected) FinancialStatements166Step 4. Identify the Key Factors for Success inThe Loan or Investment Proposalthe Business 117Step 5. Analyze the Competition119Objectives 123Business Plan 124Capital170170Collateral170Engineering's Triple g the Business PlanYOU BE THE CONSULTANTStrategies Etched in Chocolate169170CapacityETHICS ANDENTREPRENEURSHIP167Launch aWhat Lenders and Investors Look for in aStep 7. Formulate Strategic Options and Selectthe Appropriate StrategiesHANDS ON . . . HOW TOLean S t a r t - u pStep 6. Create Company Goals and165131Presentation172
CONTENTSConclusion172 Business Plan FormatChapter Summary by ChapterThe Drawbacks of Buying aObjective175 DiscussionFranchiseQuestions176 Beyond theClassroom.177 178EndnotesOperations185186Evaluate Yourself190193Talk to Existing Franchisees194232232Changing Face of Franchisees199 201232HANDS O N . . . HOW TO201International Opportunities203The Professional Corporation Which204234Russia: ARising Star for Franchisors236Conversion Franchising205237Multiple-Unit FranchisingObjective207Area Development and MasterQuestions207 DiscussionBeyond the Endnotes209'214QuestionsChapter 7240 Discussion Beyond the241 Endnotes242Buying an ExistingBusiness 246247The Advantages of Buying an Existing'216BusinessBusiness218Site Selection and Territorial Protection218247Disadvantages of Buying an Existing217Greater Chance for Success240Buying an Existing Business216Proven Products, Processes, and BusinessCentralized Buying Power239Classroom.214215National Advertising ProgramsFormatsObjective214215Financial Assistance239Chapter Summary by LearningStandardized Quality of Goods andServices239Conclusion212Management Training and SupportBrand-Name Appeal238BoomersThe Benefits of Buying a FranchiseA Business SystemFranchisingCobranding237Serving Dual-Career Couples and Aging BabyFranchising and theEntrepreneur 210Types of Franchising235YOU BE THE CONSULTANTChapter Summary by Learning208233Smaller, Nontraditional Locations204YOU BE THE CONSULTANTClassroom.Select t h eIdeal Franchise—-For You\The Limited Liability Company229230Trends Shaping Franchising197The Disadvantages of the Corporation 229232Make Your Choice195The Advantages of the CorporationThe Joint VentureyAsk the Franchisor Some ToughQuestionsOther Forms of Ownership227Get a Copy of the Franchisor's UFDDMaking195Form Is Best?228Consider Your Franchise OptionsLimited Liability PartnershipsThe S Corporation223227Research Your Market192How to Incorporate223223Franchising and the Law189YOU BE THE CONSULTANTa Partnership Work Less Freedom223The RightVJay to Buy a FranchiseThe Disadvantages of the PartnershipCorporations222Unsatisfactory Training Programs187Limited Partnerships222222Contract Terms and RenewalMarket SaturationThe Advantages of the Partnership Limited Product Line185The Disadvantages of a Proprietorship220221Restrictions on PurchasingThe Advantages of a ProprietorshipThe Partnership220Strict Adherence to Standardizeda HANDS ON . . . HOW TO Come Upwith the Perfect Moniker for YourBusiness 183The Sole ProprietorshipWould219Franchise Fees and Ongoing RoyaltiesChapter 5 Forms of BusinessOwnership 180Chapter 6YOU BE THE CONSULTANTYou Buy This Franchise?173 218249YOU BE THE CONSULTANTSaga of Selling M y Business:Part 1252The
CONTENTSThe Steps in Acquiring a Business253Analyze Your Skills, Abilities, andInterestsThe Value of Market ResearchHow to Conduct Market Research253254How to Build aPrepare a List of Potential Candidates254Competitive Edge298Investigate and Evaluate Potential Companies:Guerrilla Marketing PrinciplesThe Due Diligence Process254 Explore Financing Options255Ensure a Smooth Transition256307HANDS O N . . . HOW TOM a k e SocialYOU BE THE CONSULTANTCompany With SoulConclusion312A317324Chapter Summary by LearningObjective259324Questions260Financial Condition 256258Market PotentialTweetM e d i a W o r k f o r Your Business258Asset ValuationYOU BE THE CONSULTANTBook Evaluating an Existing Business: The DueDiligence Process298Pie: The World's Shortest RecipeNegotiate a Reasonable Deal with theOwner 255Legal Issues295Plotting a Guerrilla Marketing Strategy.Develop a List of CriteriaMotivation293Classroom.261YOU BE THE CONSULTANTThe Sagaof Selling My Business: Part 2264 Discussion325, Beyond the327 Endnotes327Chapter 9 E-Commerce and theEntrepreneur 331Methods for Determining the Value of aFactors to Consider before LaunchingBusinessinto E-Commerce265Balance Sheet Techniques: Net Worth Assets - LiabilitiesEarnings ApproachMarket Approach Ten Myths of E-CommerceMyth 1. If I Launch a Site, Customers Will Flock269to It 335273Myth 2. Online Customers Are Easy toThe Sagaof Selling M y Business: Part 3Understanding the Seller's SideStructuring the Deal274Please337Myth 3. Making Money on the Web IsEasy275 276338YOU BE THE CONSULTANTon the Go277Negotiating the DealHANDS ON . . . HOW TOBecome aSuccessful N e g o t i a t o r281Questions282283Classroom. 284and the Rest Will Take Care of Itself"Discussion340Myth 6. The Most Important Part of AnyBeyond the 340Myth 5. "Strategy? I Don't Need a Strategy toSell on the Web! Just Give Me a Web Site,Chapter Summary by LearningObjectiveSelling339Myth 4. Privacy Is Not an Important Issue on279the WebD335266YOU BE THE CONSULTANTExit Strategies333E-Commerce Effort Is TechnologyEndnotes284341Myth 7. Customer Service Is Not as ImportantOnline as It Is in a Traditional Retail StoreSECTION III Building the BusinessPlan: Marketingand FinancialConsiderations 286Chapter 8 Building a PowerfulGuerrilla MarketingPlan 286Building a Guerrilla Marketing PlanPinpointing the Target MarketSimple Ones 343Myth 9. It's What's Up Front That Counts . 343Myth 10. It's Too Late to Get intoE-Commerce344Strategies for E-Success 289291344YOU BE THECONSULTANT287Determining Customer Needs and Wantsthrough Market ResearchFulfillmentComplete345Designing a Killer Web Site 354YOU BE THE CONSULTANTMakeoverA Total355YOU BE THE CONSULTANTTracking Web ResultsLearnvest: Giving Women ControlEnsuring Web Privacy and Securityof Their Financial Lives292342Myth 8. Flashy Web Sites Are Better ThanPrivacy364363364
CONTENTSSecurity 364Projected Financial Statements for a SmallHANDS O N . . . HOW TOIncreaseYour Web Site's Conversion Rate365Chapter Summary by Learning Objective367Questions369Classroom.Discussion Beyond the 370 375YOU BE THE CONSULTANTFocus on Value376 383Part 2Is the384386ENTREPRENEURSHIPDeal—Or Not?437438YOU BE THE CONSULTANTWhere Do W e Break Even?A GoodUsing Break-Even Analysis439439Chapter Summary by Learning390Pricing Strategies and Methods for392Objective440Questions441 Classroom. DiscussionBeyond the442 Endnotes442392Pricing Concepts for ManufacturersDirect Costing and Pricing394Chapter 12 Managing Cash Flow 444Cash Management394Computing the Break-Even Selling PriceD436437Break-Even Point in Units388YOU BE THE CONSULTANTMarkupAdding a Profit The Ethicsof Dynamic PricingAll Is435Constructing a Break-Even ChartETHICS ANDRetailers434YOU BE THE CONSULTANTCalculating the Break-Even PointYOU BE THE CONSULTANT432Not Paradise in Eden's Garden:383Pricing Established Goods and Services All Is429Break-Even Analysis377Introducing a New Product Part 1376379Price Right?428YOU BE THE CONSULTANTWhat Do All of These Numbers Mean?Pricing Strategies and Tactics 423Not Paradise in Eden's Garden:TheBenefits of Premium PricingCompetition and Prices420YOU BE THE CONSULTANTInterpreting Business Ratios Price Conveys Image417YOU BE THE CONSULTANTThe Perils of Debt: Part 2Three Potent Forces: Image, Competition, 416The Perils of Debt: Part 1EndnotesChapter 10 Pricing Strategies 373and Value412Twelve Key Ratios 370BusinessRatio AnalysisHANDS ON . . . HOW TO395Calculate445Cash and Profits Are Not the SameThe Cash Budget448449Your Company's Pocket PriceStep 1: Determining an Adequate MinimumBand 397Cash Balance451Pricing Strategies and Methods forStep 2: Forecasting SalesService FirmsStep 3: Forecasting Cash Receipts398The Impact of Credit on PricingCredit Cards399Trade Credit402Balance 402 DiscussionQuestions403 Beyond the404EndnotesChapter 11 Creating a SuccessfulFinancial Plan 406Basic Financial Statements407407The Income StatementCreating Projected Financial458YOU BE THE CONSULTANTInSearch of a Cash Flow Forecast404The "Big T h r e e " of CashManagement461Accounts ReceivableAccounts Payable 461466HANDS ON . . . HOW TOControlYour Company's Accounts409The Statement of Cash Flows412457Step 5: Estimating the End-of-Month CashObjectiveStatements454Step 4: Forecasting Cash Disbursements402Chapter Summary by LearningThe Balance Sheet453YOU BE THE CONSULTANTA Short Season400Installment CreditClassroom . . . 452Receivable411Inventory467469Avoiding the Cash CrunchBarter472472459
10CONTENTSTrim Overhead Costs 472Negotiate Fixed Loan Payments to Coincidewith Your Company's Cash Flow Cycle 475Establish an Internal Security and ControlSystem 475 Develop a System to Battle Check Fraud 475Change Your Shipping Terms 475Start Selling Gift Cards 475Switch to Zero-Based Budgeting476Be on the Lookout for Shoplifting andNonbank Sources of Debt Capital 512Small Business Lending Companies 516Federally Sponsored Programs 516Economic Development AdministrationDepartment of Housing and UrbanDevelopment 516U.S. Department of Agriculture's RuralBusiness-Cooperative Service 517Small Business Innovation ResearchProgram 517Invest Surplus Cash 476Small Business Technology TransferProgram 518The Small Business Administration (SBA) Employee Theft476Build a Cash Cushion476YOU BE THE CONSULTANTFoul Play 477Keep Your Business Plan Current 478Conclusion478479Chapter Summary byObjective 479 Questions 480 Classroom. 481LearningDiscussionBeyond the EndnotesLeasingSECTION IV Putting the BusinessPlan to Work: Sourcesof Funds 484Chapter 13 Sources of Financing: Equityand Debt 484Planning for Capital Needs 487Equity Capital versus Debt Capital 487Sources of Equity Financing 488Crowd FundingAngels 489490490HANDS O N . . . HOW TO StructureFamily and Friendship FinancingDeals 491PartnersCorporate Venture CapitalLocation: A Source of CompetitiveAdvantage 536Choosing the Region499YOU BE THE CONSULTANT InSearch of Growth Capital 506The Nature of Debt Financing 506Sources of Debt Capital 507Choosing the City543Choosing the Site549Location Criteria for Retail and ServiceBusinesses 550 YOU BE THE CONSULTANT "Pop"Goes the Store552Transportation NetworkShort-Term Loans 508HANDS ON . . . HOW TO Get aBank to Say "Yes" to Your LoanApplication 510552Visibility553554Physical and Psychological BarriersCustomer TrafficReputation509552Reilly's Law of Retail GravitationAdequate Parking 551552The Index of Retail SaturationCommercial Banks 507Intermediate- and Long-Term Loans537540Degree of Competition499530Chapter 14 Choosing the Right Locationand Layout 535Retail Compatibility495Public Stock Sale ("Going Public") Credit Cards 527Chapter Summary by LearningObjective 527 DiscussionQuestions 528 Beyond theClassroom. 530 EndnotesTrade Area Size494Venture Capital Companies526526Choosing the StatePersonal Savings 488Friends and Family Members520State and Local Loan DevelopmentPrograms 524Other Methods of Financing 526Factoring Accounts Receivable481518YOU BE THE CONSULTANTThe Never-Ending Hunt forFinancing 519Other SBA Loan ProgramsYOU BE THE CONSULTANTThe Challenges of Cash Flow516554554554555555Location Options for Retail and ServiceBusinesses 555Central Business District555
CONTENTSNeighborhood Locations556Shopping Centers and MallsNear Competitors,'Political Barriers556Cultural Barriers560 .Nontraditional Locations561Home-Based Businesses561On the Road 561The Location Decision forManufacturers'562Foreign Trade Zones562Business Incubators563Layout and Design Considerations 563International Trade Agreements 616Conclusion 617Chapter Summary by LearningObjective '618 DiscussionQuestions 619 Beyond theClassroom. 620 Endnotes 620Leadership in the New Economy 624Building an Entrepreneurial Team: Hiringthe Right Employees 630565Construction and External AppearanceEntrancesHow to Hire Winners 631Create Practical Job Descriptions and JobSpecifications 635566567The Americans with Disabilities Act614Chapter 16 Building a New VentureTeam and Planning for theNext Generation 623YOU BE THE CONSULTANT BusinessIncubators: A Nurturing Environmentfor Small Companies 564Size613Business Barriers 613560Inside Large Retail Stores567Plan an Effective InterviewSigns 568 636ETHICS AND ENTREPRENEURSHIP568Honesty in Job DescriptionsSight, Sound, Scent, and Lighting 569Sustainability and Environmentally FriendlyDesign 570Conduct the Interview 639Contact References and Conducta Background Check 641Building InteriorsLayout for Retailers 571, CultureCreate the YOU BE THE CONSULTANTFired over Facebook 647Motivating Employees to HigherLevels of Performance: Rewardsand Compensation 649A FreshLayout for Manufacturers 576Factors in Manufacturing Layout 576Types of Manufacturing Layouts 576Chapter Summary by LearningObjective 578 DiscussionQuestions 579 Beyond the Classroom . 580 Endnotes 581Management Succession: Passingthe Torch of Leadership 652 Chapter 15 Global Aspects ofEntrepreneurship 585YOU BE THE CONSULTANTGoing Global from the Outset YOU BE THE CONSULTANTA Really Bright Future 599 YOU BE THE CONSULTANTA Small Company Goes GlobalBarriers to International TradeDomestic Barriers HANDS O N . . . HOW TOInternational Barriers611Selling to InsidersChapter Summary byObjective 661 Questions 662 Classroom. 663590609609Successful Global CompanyBuild a610660Selling to Outsiders588 HANDS ON . . . HOW TO Make YourSmall Business a Great Placeto Work 653Exit Strategies586Strategies for Going Global642Job Design 646YOU BE THE CONSULTANTNew Look 575Why Go Global?637Creating an Organizational CultureThat Encourages Employee Motivationand Retention 642Layout: Maximizing Revenues, IncreasingEfficiency, or Reducing Costs 571 HANDS ON . . . HOW TOIdeal Layout 57211660660LearningDiscussionBeyond the EndnotesAppendix: The Daily Perc Business Plan607Cases 689Name IndexSubject Index704713664667
A Business System 214 Management Training and Support 214 Brand-Name Appeal 215 Standardized Quality of Goods and Services 215 National Advertising Programs 216 Financial Assistance '216 Proven Products, Processes, and Business Formats 217 Centralized Buying Power 218 Site Selection and Territorial Protection 218 Greater Chance for Success 218
