Effective Small Business Management An Entrepreneurial Accroach Ninth Edition Norman M. Scarborough Presbyterian College Douglas L Wilson University of Oregon Thomas W. Zimmerer Saint Leo University PEARSON, : Prentice h : * '< Kail - Pearson Education International
Contents Preface 12 Acknowledgments 15 SECTION 1 The Challenge of Entrepreneurship 17 Chapter 1 Entrepreneurs: The Driving Force Behind Small Business 17 What Is an Entrepreneur? 21 How to Spot Entrepreneurial Opportunities 25 The Benefits of Owning a Small Business 29 The Potential Drawbacks of Entrepreneurship 31 Why the Boom: The Fuel Feeding the Entrepreneurial Fire 34 The Cultural Diversity of Entrepreneurship 37 The Contributions of Small Businesses 43 Putting Failure into Perspective 46 How to Avoid the Pitfalls 47 Conclusion 49 Chapter Review 50 Discussion Questions 51 SECTION 2 Building the Business Plan: Beginning Considerations 54 Chapter 2 Strategic Management and the Entrepreneur 54 Building a Competitive Advantage 57 The Strategic Management Process 59 Conclusion 85 Chapter Review 86 Discussion Questions 87 Chapter 3 Choosing a Form of Ownership 90 The Sole Proprietorship 92 The Partnership 96 The Corporation 105 Alternative Forms of Ownership 111 Summary of Selecting the Form of Ownership 115 Chapter Review 117 Discussion Questions 118
8 CONTENTS Chapter 4 Franchising and the Entrepreneur 120 What Is a Franchise? 121 Types of Franchising 122 The Benefits of Buying a Franchise 123 Drawbacks of Buying a Franchise 130 Franchising and the Law 132 The Right Way to Buy a Franchise 135 Franchise Contracts 140 Trends in Franchising 142 Franchising as a Growth Strategy 145 Conclusion 148 Chapter Review 148 Discussion Questions 149 Chapter 5 Buying an Existing Business 151 Buying an Existing Business 152 The Right Way to Buy a Business 160 Methods for Determining the Value of a Business 168 Negotiating the Deal 178 Chapter Review 186 Discussion Questions 187 Chapter 6 Conducting a Feasibility Analysis and Crafting a Winning Business Plan 189 Conducting a Feasibility Analysis 190 The Benefits of a Business Plan 200 The Elements of a Business Plan 203 What Lenders and Investors Look for in a Business Plan 216 Making the Business Plan Presentation 217 Conclusion 219 Suggested Business Plan Format 219 Chapter Review 222 Discussion Questions 223 SECTION 3 Building a Business Plan: Financial Issues Chapter 7 Creating a Solid Financial Plan 225 Basic Financial Reports 226 Creating Projected Financial Statements 230 Ratio Analysis 237 Interpreting Business Ratios 251 Breakeven Analysis 257 Chapter Review 261 Discussion Questions 263 225 Chapter 8 Managing Cash Flow 265 Cash Management 266 Cash and Profits Are Not the Same 269 The Cash Budget 272 Preparing a Cash Budget 272 The "Big Three" of Cash Management 282 Avoiding the Cash Crunch 291 Conclusion 296 Chapter Review 296 Discussion Questions 297
CONTENTS SECTION 4 Building a Business Plan: Marketing Your Company 299 Chapter 9 Building a Guerrilla Marketing Plan 299 Creating a Guerrilla Marketing Plan 300 Market Diversity: Pinpointing the Target Market 302 Determining Customer Needs and Wants Through Market Research 304 How to Conduct Market Research 306 Plotting a Guerrilla Marketing Strategy: Building a Competitive Edge 309 Marketing on the World Wide Web 329 The Marketing Mix 331 Chapter Review 334 Discussion Questions 335 Chapter 10 Creative Use of Advertising and Promotion 338 Define Your Company's Unique Selling Proposition 339 Creating a Promotional Strategy 341 Selecting Advertising Media 346 How to Prepare an Advertising Budget 373 How to Advertise Big on a Small Budget 374 Chapter Review 375 Discussion Questions 376 Chapter 11 Pricing and Credit Strategies 378 Pricing: A Creative Blend of Art and Science 379 Three Powerful Pricing Forces: Image, Competition, and Value 382 Pricing Strategies and Tactics 387 Pricing Techniques for Retailers 394 Pricing Techniques for Manufacturers 395 Pricing Techniques for Service Businesses 398 The Impact of Credit on Pricing 400 Chapter Review 403 Discussion Questions 404 Chapter 12 Global Marketing Strategies 406 Why Go Global? 408 Going Global: Strategies for Small Businesses 412 Exporting 423 Barriers to International Trade 434 International Trade Agreements 439 Conclusion 441 Chapter Review 442 Discussion Questions 443 Chapter 13 E-Commerce and Entrepreneurship 445 E-Commerce and Entrepreneurship Benefits of Selling on the Web 448 Factors to Consider Before Launching into E-Commerce Twelve Myths of E-Commerce 452 Strategies for E-Success 462 Designing a Killer Web Site 470 Tracking Web Results 478 Ensuring Web Privacy and Security 480 Chapter Review 483 * Discussion Questions 484 450
10 CONTENTS SECTION 5 Putting the Business Plan to Work: Finding Financing 486 Chapter 14 Sources of Equity Financing 486 Planning for Capital Needs 489 Sources of Equity Financing 490 Chapter Review 519 Discussion Questions 520 Chapter 15 Sources of Debt Financing 522 Sources of Debt Capital 525 Non-Bank Sources of Debt Capital 530 Federally Sponsored Programs 538 Small Business Administration (SBA) 541 State and Local Loan Development Programs 546 Internal Methods of Financing 548 Where Wot to Seek Funds 550 Chapter Review 551 Discussion Questions 553 SECTION 6 Location and Layout 554 Chapter 16 Location, Layout, and Physical Facilities 554 The Logic of Location: From Region to State to City to Site 556 Location Criteria for Retail and Service Businesses 566 Location Options for Retail and Service Businesses 571 The Location Decision for Manufacturers 575 Layout and Design Considerations 580 Layout: Maximizing Revenues, Increasing Efficiency, and Reducing Costs 586 Chapter Review 594 Discussion Questions 596 SECTION 7 Managing a Small Business: Techniques for Enhancing Profitability 597 Chapter 17 Supply Chain Management 597 Creating a Purchasing Plan 599 Quantity: The Economic Order Quantity (EOQ) 606 Timing When to Order 616 Managing the Supply Chain: Vendor Analysis and Selection 622 Legal Issues Affecting Purchasing 630 Chapter Review 633 Discussion Questions 634 Chapter 18 Managing Inventory 635 Inventory Control Systems 638 Just-In-Time Inventory Control Techniques 645 Turning Slow-Moving Inventory into Cash 649 Protecting Inventory from Theft 652 Conclusion 665 Chapter Review 665 Discussion Questions 666
CONTENTS 11 SECTION 8 Managing People: A Company's Most Valuable Resource 668 Chapter 19 Staffing and Leading a Growing Company 668 The Entrepreneur's Role as Leader 669 Hiring the Right Employees: The Company's Future Depends on It 673 Building the Right Culture and Organizational Structure 683 Communicating Effectively 689 The Challenge of Motivating Workers 692 Chapter Review 706 Discussion Questions 707 SECTION 9 Legal Aspects of Small Business: Succession, Ethics, and Government Regulation 709 Chapter 20 Management Succession and Risk Management Strategies in the Family Business 709 Family Businesses 710 Exit Strategies 714 Management Succession 718 Developing a Management Succession Plan 721 Risk Management Strategies 730 The Basics of Insurance 731 Controlling Insurance Costs 742 Chapter Review 744 Discussion Questions 746 Chapter 21 Ethics and Social Responsibility: Doing the Right Thing 747 An Ethical Perspective 749 Who Is Responsible for Ethical Behavior? 751 Establishing Ethical Standards 757 Social Responsibility and Social Entrepreneurship 761 Putting Social Responsibility into Practice 762 Conclusion 779 Chapter Review 779 Discussion Questions 780 Chapter 22 The Legal Environment: Business Law and Government Regulation 782 Appendix 821 Cases 855 Endnotes 883 Credits 907 Index 909 The Law of Contracts 784 The Uniform Commercial Code (UCC) 790 Protection of Intellectual Property Rights 796 The Law of Agency 805 Bankruptcy 806 Government Regulation 808 Chapter Review 816 Discussion Questions 818