Friday, December 9, 2011

ENT640 Financial Analysis Section of the Business Plan Overview

What should be included in your financial analysis section?

This section explains in great detail with documentation, how much money is needed and how do you plan on making a profit. Provide documentation to support how this is going to happen. In start-up cases, you will need to use projections.  People have a tendency to over project what they think the business can do in 6 months, 1 year, and 5 years. Lenders want to see realistic data.

Projected income statements, balanced sheets and cash flow statements are required. If it is not a start-up then it is necessary to provide three years of data. You are asking for a loan so explain why it is needed and how do you plan on paying it back. Again provide personal commitment figures. Lenders like to see the individuals putting up their own capital.  

ENT640 Market Analysis Section of the Business Plan Overview

What should be included in your market analysis section?

In this section your market, your niche and the demand for your product supported by documentation. The potential market share should be listed.  In order to do this section justice, you should have completed plenty of market research. If someone is going to invest in your company then they want a return on their money. The more evidence that can be shown through documentation of the potential market share, then the more feasible your plan becomes.

The three C’s should be included; customer, competition and company. The customer demographics for your product are very important. Those individual must be identified.  Any company that does not know the characteristics of their customer does not know how to market to their target audience. Whether your business is a start-up company or an existing business, it critical that you understand who and what the completion is doing. Also it needs to be explained why your company can do it better than others. 

ENT640 Management Section of the Business Plan Overview

What should be included in your management section?

In the management section the experience of your management team should be highlighted. If you are asking for money from a lender to start a retail business and no one has any experience in the area then what is the likely hood that the lender is going to give the loan. However, if you spell out in detail that your team has these qualifications for this type of business then it becomes a plus.
This section should also go into great detail as to what type of business structure and how the decisions will be made. Again the lender or investor wants a return on their money. The business must be sound; no one is going to invest in a chaotic structure. Also include the chain of command and how the pay structure is set up.

ENT640 Executive Summary of the Business Plan Overview

What should be included in your executive summary?

The executive summary is the most critical piece of your business plan. It is the first part that someone will read so it sets the tone for the reader. The key to a strong executive summary is to keep it concise. The section should include the product or service you are producing, market analysis, overview of your management team, your strategies, current competition, funds needed and summary of past operations and future projections. This sounds like the plan itself. The intent is to give concise information that catches the interest of the reader.

Again the best way to write an executive summary is after you have completed your plan. This allows you to include the key points that need to be included. The summary should flow do not just make a list. This is your resume for your company so you want it stand out.

International Operations - High Tech Impacted International Sales (Week #8)

International Operations #21 Selling Opportunities Personal Experience

How has the high tech industry facilitated international selling opportunities for small businesses?

It goes without saying, the internet has influenced how we do business from the individual that is selling products on e-Bay to large corporations handling many transactions via the web. China now has more users on the internet than any other country. Many small businesses now have access to customers all over the world. This is also a two way street, the reverse can be done. Because of advances in technology, manufacturing, logistics and improved communication channels, small businesses can sell their products overseas.

As technology advances so do our methods of how we do business. In my previous job I was a marketing and sales manager for family owned machine manufacturing business in the US. For several years we searched for manufactures to produce a molded product in the US market at a competitive rate. Then with no luck in the US markets, we turned to the international market. The technology was available in the US but the initial costs were not realistic. Once the technology was available in India then it became a potential product. Originally several years back the ability due to lack of technology was not possible. However, time changes that possibility.

I no longer work with this company but the product developed is now sold in the US, Mexican and Chinese markets. The product is a high tech molded item that combines a special chemical plastic support guide with a piece of stainless steel insert. This is produced in India, shipped to US for an additional assembly to complete the final product. With out advancements in technology this could never have been accomplished.

My previous international ventures opened my eyes to what potential is available. This is only one example. We developed many items in this manner because of advancements in technology. Sometimes it was necessary to go half way around the world in order to improve or develop new products.   

Production management - JIT Inventory Control (Week #7)

Production Management #19 Pro’s & Con’s of JIT Inventory Control

What are the pro’s and con’s of JIT inventory control?

First, what do we mean by just in time inventory control? The concept is to reduce the amount of inventory that is on hand at any given time, which reduces overhead cost. Secondly, additional warehouse or space requirements can be reduced because of only keeping small amounts of inventory on hand. JIT saves money bottom line the manufacturer but make increase overhead for the supplier.

The biggest pro to just in time frees up resources. Retail stores do not need as much space requirements because items are replenished as they are sold. Manufacturers are able to free up both space requirements and labor. The processes can become more stream lined.

A major disadvantage is the complexity. Management must rethink the entire workflow of the company. JIT means just enough raw materials, assembly parts; products etc only have a short period of flow. If the item it not restock, supplied delivered then you process stops until the product is available. It puts a tremendous amount of pressure on the supply chain members. In certain types of industries where the machinery must continue running then this type system make not be beneficial.

JIT concept has worked well in the automotive industry. Companies are able to make large reductions in cash outlay resulting in huge savings. Dell the computer company has adopted a philosophy “only manufacture what their ask them to make and when they ask them.” Dell has benefited in higher profit margins and reduced their overall cost in production by adopting this approach.

JIT has both advantages and disadvantages for companies. Every business must determine if it is beneficial for their business model.

Production Management - Viability of Small Business Production (Week #7)

Production Management #18 Small Business Production in US Today

One must consider the viability of small business production in the US today. How can a small business be successful in manufacturing in U.S. today?

Since 2009, our economy has experienced a long lasting recession that has impacted all facets of business both small and large. In the past year, however trends are indicating stronger demand and better business conditions. Typically, the small businesses and entrepreneurs are the driving force for growth. Even though our US market has lost many manufacturing jobs to outsourcing, small business manufactures and niche producers in on the increase.

Several trends seem to be driving the growth of small and micro manufacturing. These trends are making us redefine how we view modern production.
1)      Technology and variable cost models are making it easier to produce niche and customized products
2)      The weaker dollar combined with increased overseas production cost is making more attractive to produce in our markets
3)      Developing world group is creating stronger export opportunities
4)      The internet and online network is allowing small businesses the opportunities the ability to find new customers globally.
5)      The growth of social media is allowing small businesses to connect with customers on social networks such as Twitter and Facebook.
6)      The social media created growth in the area of social commerce sites such as Groupon creating demand through various social sites.

The ever-changing technology sector growth is influencing how everyone does business. Many small businesses are taking advantage of improved technology and niche market opportunities. Over the past few years tremendous growth has taken place in health care, petroleum related businesses and software providers. Because of this growth, the need to make and produce products in the US for niche markets is becoming more of a necessity.

I have a friend that owns a small business that produces machined parts for the forklift industry. Over the past year, his business with this company has tripled due to price increases and lead times from overseas producers. Since his company is meeting a niche market, he has been able to adapt to the needs of the customer and provide cost efficient products. Again niche manufacturing is on the increase.

Accounts Receivable Management (Week #6) Factoring, Types of Credit & Four C's of Credit

Accounts Receivable Management #15 Factoring

Factoring is a tool that businesses use in order to speed up their accounts receivable accounts. Companies that run into a cash flow problem sell their invoices or accounts receivable. The factor company advances the invoice amount between 70% and 90% to you. Once the bill is paid by the customer then the balance is paid minus the factoring fees. Normally, a company can have their money paid in 24 to 48 hours. Most companies that select this method tend to have a credit issue with their lender so this is an alternate choice for obtaining funds.

Factoring adds additional cost to the bottom line of doing business. For this reason companies will affect their profitability so for the long term it will increase your operating expenses. However, the reverse is true some businesses may use factoring when they are starting up to increase the cash flow. As the business grows, they are then able to increase revenues until they no longer need the factoring company.  

Accounts Receivable Management #16 Three Types of Credit

There are three types of credit accounts that a company uses to support its credit sales:

Revolving Credit
In a revolving account, you may pay in full or a partial payment. Interest or finance charge accrues on the unpaid balance.

Charge Agreement
In a charge agreement, you agree to pay the entire balance with the store or merchant that you have the account. No interest charges accrue because the balance is paid monthly.

Installment Agreement
The customer signs a contract to pay a set amount each month, over a period, to pay for the product. Autos, furniture, appliances and other durable goods are paid in this manner.

Accounts Receivable Management #17 Four C’s of Credit

The four C’s of credit refer to character, capacity, capital and conditions. All of these are found in a company’s credit report.

This includes the history of the company, number of years in business, number of employees, location, lawsuits, judgments, stock performance, liens, and overall status

This C is concerned with ability to meet obligations, cash flow. Capacity is concerned with the structure of debt, secured and unsecured along with lines of credit.

This C is concerned with the financial resources to repay creditors. Much attention is given to the balance sheet, net worth and cash flow. Capital is the more important C because of the ability of a company to meet its obligations.

This section focuses on external factors affecting the business such as market fluctuations, industry growth, legal concerns and currency rates.

The four C’s are taken into consideration by creditors, insurance providers and lines of credit with vendors, etc. in order to conduct business.  These four C’s determine the risk involved of doing business.

Fraud (Week #6) Impact on Small Businesses

Fraud #12 Scope of Fraud on Small Businesses

Fraud impacts small businesses greater than larger businesses, why? According to the Association for Certified Fraud Examiners the smallest organizations (100 employees or less) suffered higher average losses than the largest organizations (10,000 employees or more). Small businesses losses average 25% - 30% higher.

Fraud is something that all business owners must deal with as part of doing business. Fraud tends to occur more in small businesses due to the level of trust, less formal setting, familiar with employees and greater areas of responsibility. Workers compensation fraud is higher in small businesses too.

Some of the following steps can help reduce fraud but will not eliminate fraud. A positive step is to tell your employees that you watching for fraud. This becomes a powerful deterrent. Each business can consider the following to help prevent fraud:

·         Hire the right employees and conduct background checks
·         Establish strong internal controls of checks and balances
·         Establish procedures for approving expenditures
·         Use security cameras to monitor cash areas
·         Conduct surprise audits
·         Provide a tip line for reporting fraud
·         Enforce mandatory vacations

Implementing checks and balances will help prevent fraudulent activity. The more proactive approaches businesses can take are the best ways to reduce fraud.

Thursday, December 8, 2011

E-Commerce (Week #5) Doing Business Entirely Online

#10 Pros & Cons of Doing Business Entirely Online

What are the pros and cons of doing business entirely online without a physical storefront or presence?

Many years after the invention of the internet, e-commerce is growing each year. Starting an internet-based business is becoming both easier and cost effective due to advancement in technology. Now we are seeing some companies using both platforms to conduct business. Who would image being able to purchase an automobile, real estate or car insurance via the internet? All of these products or services are purchased both ways, sold sometimes by the same company.

So which is better or do they each have advantages and disadvantages? Several factors come in play when comparing the delivery methods, online or traditional brick and mortar. Let’s consider the following for e-business:
·         Audience – your customers are now all over the world
·         Segmentation – your customers become segmented due to search platforms
·         Upfront Costs – significant different in cost, online is much cheaper
·         Adaptability – you can change your products easier online
·         Ease of Use – purchases can be made from your home
Taking each of these factors into consideration, you can understand why e-commerce is growing.

E-commerce improves the efficiency of traditional models, storefront businesses. Online provides the following advantages:
·         Reduces Business Cost
·         Decreases Stock
·         Decreases Waste
·         Shorter production Cycles
·         Increases Businesses Opportunities
·         Cuts Out the Middle Man
·         Opens International Sales Opportunities

The need for the traditional business model is necessary. Some items even though you could purchase most items online, you must consider the convenience.

E-Commerce (Week #5) Environmental Scanning

E-Commerce #9 Environmental Scanning a Management Concept NOT Entrepreneurial Concept

Why is environmental scanning a management concept, not and entrepreneurial concept?

Environmental scanning has always looked at by management from a strategic standpoint. First lets understand what is meant by this term, environmental scanning. From a management standpoint, both internal and external factors that affect and influence the success of any business. This gives managers a better snapshot of patterns, trends, threats, opportunities, etc that impact their business. This provides a framework in the decision making process.  This type of strategy can benefit companies in the following ways:
·         Provides information for strategic planning
·         Detects new opportunities
·         Executive decisions based on data
·         Monitor market trends
·         Monitor the changing dynamic business environment
As our markets become more competitive, it is necessary to adjust quickly to the ever-changing needs.

From an entrepreneurial perspective, this concept is being done but not called environmental scanning. Entrepreneurs are constantly looking for new products or services that are being met by existing companies, large corporations or other small business. Many times these new ventures provide the consumer with innovative products. Environmental scanning is an essential tool used by top-level management. Because of the size and organizational structure, this becomes a critical tool for companies to understand trends in the market place and adjust according. Entrepreneurs are doing this on a daily bases as to how to improve or offer the next product or service.   

The landscape of business changes daily. Companies that are scanning for trends are able to capture the market but great opportunities are over looked. Entrepreneurs are able to fill those gaps by improving, modifying, redesigning or providing an alternative. I think about the I-pad, now look at what the competition has developed, the tablets. Bill Gates, Sam Walton and Henry Ford all had ideals that were put into action because they saw something others did not. True entrepreneurs are constantly looking for the next product or service to fill the void. It is called innovation and creativity.

Buying A Venture: "Good Will" (Week #4)

“Good Will” Transferable, Why or Why Not (Item #7)

What exactly is “good will” in a business? Good will is the value placed on the business over the years established in the reputation, logos, trademarks, customer list and relations, vendor list, branding, marketing, and any other intangibles that makes up the business. The good will is all those things that make it what it is. It is very hard to put an actual price on this intangible.

The good will is made of the sweat and equity that goes into making a business “what it is”. We would like to think that good will is transferable but in many cases, I think it is not. For example, I know several businesses that either have transferred ownership from the original owner or have transferred to other family generations. In most cases the businesses change or transition to a business that is different. In some situations only slight changes while others, the change was so significant that the business shut down.  No one can put a price on good will.

I have worked for a corporation that was family owned while it went through a generation change due to the death of the president. The company was able to continue because of the vast amount of infrastructure established prior to the leader’s death. However slowly things policies, rules, operations changed. Some things were for the better but some items hurt the business. For example, an HR policy that created a lot of displeasure deal with seniority and experience. In the past seniority was the main selection criterion for promotions within the same job classification. The new owner did away with this guideline and changed the criteria to amount of skills or knowledge. Reality was that seniority was not taken into consideration. A person employed for a short amount of time was given the promotion over someone that had more company seniority.  

Buying A Venture: Advantages and Disadvantages (Week #4)

Advantages and Disadvantages of Buying verses a Start-Up (Item #6)

Which do you think is better, buying an existing business or starting from scratch. The individual seeking a business and their situation can only determine this question. Both have advantages and disadvantages that must be considered.

Starting a business from ground up can be very rewarding both financially and self-achievement. The risk of failure is much greater. According to Michael Gerber, the author of “The E-Myth Revisited” 40 % of businesses fail in the first year and 80% fail in five years. These percentages can be quite sobering and discouraging at the same time.

However, purchasing an existing business reduces this risk with certain ventures. Individuals should consider the following reasons that minimize the loss:

·         Proven Concept – an established business helps reduce the unknown factor. It also may be easier to get financing for an established business over a start-up. You can also see if the current way is working

·         Brand – By purchasing an existing business then you are buying an established name. The customers understand the business.

·         Relationships – You automatically have a customer base established. In addition, some agreements provide that the previous owner will help with the transition.

·         Focus – The foundation for an existing business is established so the efforts now can focus improving and growing.

·         People – Well-trained employees are in place to help with the business.

·         Cash Flow – Start-up owners typical starve doing the initial year due to all the expenses but buying an existing business the cash flow is level or predictable.

·         Risk – Some individuals may not want to pay for the established business because of the cost. They had rather take the risk on a lesser amount of money.

Entrepreneurs can purchase an existing business or they can purchase a franchise or do a start-up. The question then becomes, which will work best for the individual. In tough economic times, it is critical to consider the amount of cash outlay versus the benefits.  

ENT630 – Franchising #5 What Does A Franchisor Provide & Failure Rate (WEEK #3)

What is Provided by the Franchisor or Franchisees. Failure Rate of Franchises

When you buy a franchise, you are not only going into business, but you are buying a known entity with a proven performance data, good or bad. According to a franchisor will offer the following:
·         Financial Assistance – some provide additional financial assistance
·         Location Selection – since the franchisor has experience in location selection, then this benefits the franchise to rely on their knowledge and experience
·         Training / Operations Manuel – most companies provide intensive training from a proven operations manual
·         Advertising – the cost for advertising is split out over all the franchises which reduces the franchise expense but benefits from a national campaign
·         Support – Franchise owners always have access to a wealth of knowledge and experience

Most franchises are looking for a specific individual same as the investor is looking for the right fit. According to Cliff Ennico the host of Money Hunt on PBS, “individuals can operate under a trademark that has instant brand recognition, you are your own boss and the failure rate for franchises is lower than it is for mom and pop businesses.” When these benefits are compared to a new start up then everything you do has to be tried and proven. Many individuals are not willing to take a risk because of these facts. A franchise helps provide the foundation for a business that has an established record. However, this still does not guarantee each business will be a success.

Purchasing a franchise may give a owner a false sense of security because of the support from the parent company. Someone that buys a franchise must still work hard at making sure the business is a success. It is the owner’s job to do everything necessary to develop and grow the business. Certain categories tend to have a higher failure rate than others. According to, fast food including juice bars and ice cream shops tend to have a higher failure rate than service franchises. Just because some decides to go this route does not mean instant success. All of the principles concerning building a successful business apply.

ENT630 – Franchising #4 Franchisee Verses Company Owned Store (WEEK #3)

Franchisee Verses Company Owned Store within a Franchise

“What is the difference between a franchisee and a company owned store within a franchise chain?” It appears that the biggest issue is ownership of the company or control of the business. There are benefits to both situations. A chain is a group of more than one store that sells the same products and has guidelines and rules set by corporate. A franchisee is considered, an outside investor, that invests own capital in order to use the recourses of the franchise system.

The corporate owned chain is responsible for the daily operations and benefits from profits or reversely shares in the losses. Each unit or store must follow all corporate policies set forth by owners, board, executives, etc.  A franchise owner may have put up the money for the franchise but must still follow rules set forth by the parent company. Each owner must adhere to the types of products, the operating procedures, and follow set pricing standards establish. This is not much different than a company owned store’s guidelines.

Then the question considered, why would you buy a franchise? The answer is quite simple; a franchise is buying a proven system. When someone purchases a franchise, you are buying a proven product or service that has an established brand in the market. As a franchise owner, you do not need to reinvent the wheel from scratch. The business plan or model works. You are paying royalties to a parent company that has an established record.

A franchise is responsible for the success of the business. They also have a vested stake to loose, their investment. On the other hand, a manger is an employee of the company without an investment in the company but can loose their job. Becoming a franchise owner would be the next best thing to starting your on company. It has its on perks and flexibility.

Wednesday, December 7, 2011

Small Business & Entrepreneurship Personal Considerations (WEEK#2)

Personal Considerations: #3 Examination of Self

Over the past 25 years, I have worked for four employers. Prior to going into teaching as a full time instructor, I worked for a privately owned family business. This is where I gained a vast amount of knowledge of what it takes to run a business. Even though I have worked with some major corporations in my career with multi levels of management, the education with the family business was priceless.

I had several responsibilities as a sales and marketing manager but also learned very quickly that it was necessary to wear many hats. This position gave me an insight into what it would be like if I had my own business and I loved it. I think one of the biggest characteristics is personal self-motivation and drive. If your heart and desire is not in any job then you will be miserable. On important point to remember, not everyone is leadership material. Some people prefer to take direction instead of being the one handing it out. If someone is not able to deal with these types pressures then self-employment is not the answer.

I also think that entrepreneurs must be very flexible or versatile because of the every changing environment that exists in ownership. Each day can bring new opportunities or obstacles depending on how you look at the situation. I think you must be able to take risk but they need to be calculated risks. Sometimes it requires an individual to make decisions that involve some amount of uncertainty. Again, certain personalities can not deal with the unknown.   

 Scott Hutchins

Small Business & Entrepreneurship Personal Considerations (WEEK#2)

Personal Considerations: #2 Characteristics That Impact Success in Business

Each individual has one or more characteristics that affect success in business. We must consider, “why are some entrepreneurs more success than others?” My research has found that each individual has their on personal motivation that drives them, whether it is past experiences, career displacement, education or parental influences that directed them to that role. A great amount of research studies conducted over the decades in diverse fields as child development, sociology, demography, and career development show a correlation. Parental influences do play a major role in both career decisions and education choices. (Naylor, 2011)

According to research developed by Splete and Freeman-George (1985), “significant family influence factors that affect a child's career and educational decisions: (1) geographic location, (2) genetic inheritance, (3) family background, (4) socioeconomic status, (5) family composition, (6) parenting style, and (7) parent work-related attitudes. Whereas the first four of these factors have a strong influence on a child's physical and mental abilities, education and employment opportunities, and financial resources, the last three have a profound effect on a child's personality type, preference for certain types of interpersonal relationships, work attitudes, and willingness to pursue a non-traditional career.” (Splete, H. and A. Freeman-George, 1985) The research and evidence support individuals make certain choices based on parental influences that have made an impact. Just think of the number of parents that chose one career then when their children were considering a career, it just happen to be the same choice.  Each one of us can relate to someone close that had their children follow their example. This can also relate to the small business owner.

Everyone realizes there is no special formula that if followed you will be successful. However, small business owners and entrepreneurs tend to have some basic common traits. Small business owners have six personality traits in common, according to an article in Inc. Magazine and research done by Guardian Life Small Business Research Institute. The institute is trying to explain why some businesses survive while others fail. The study is an analysis of 1,100 businesses with employees ranging from 2-99, “Six Dimensions That Characterize Success Oriented Small Business Owners.” At the top of the list was the ability to collaborate, which relates to successful relationships internally with employees and externally with customers. The remaining five traits are as follows: being self fulfilled, future focused, curious, tech savvy and action oriented. (Ruben, 2010) The evidence tends to relate a positive correlation between success of business and certain traits that an individual possess.

According to the research institute director, Mark Wolf, “Success-oriented small business owners are a special breed of highly motivated, caring and curious individuals. They effectively balance their personal and business goals, take advantage of others' expertise and continually seek to learn the best practices exhibited by peer companies.” (Ruben, 2010) Even though this research does not absolutely point out exactly how to become successful in owning your own business, it does correlation certain traits that you must possess. Some individuals are influenced by family and education or socioeconomic status while others may through life experiences or career displacement. One thing is clear, the owner must be motivated and success driven or the business will fail.

Works Cited:

Naylor, Michele. “Family Influences on Employment and Education.” Apr. 2011: Web. 5 April 2011.

Splete, H. and A. Freeman-George. "Family Influences on the Career Development of Young Adults." JOURNAL OF CAREER DEVELOPMENT 12(1) (September 1985): 55-64

Rubin, Courtney. “The Six Traits of a Successful Small Business Owner,” Inc. Magazine 1 Jul. 2010: n. pag. Web. 5 April 2011

Friday, March 25, 2011

Welcome to My Blogsite

Hello ENT 630 Students,

I am looking forward to understanding more about blogging and the benefits it brings to your business. As many of you read my post, please feel free to share your personal experiences about blogs. I am looking forward to our class.