SmallBusinessManagementin the j j j j j
21st Century j
TableofContents j j
Table jof jContents...................................................................................................................................... 1
Chapterj1................................................................................................................................................. 4
FoundationsjforjSmalljBusiness .................................................................................................................. 4
SmalljBusinessjinjthejUSjEconomy ........................................................................................................... 4
SuccessjandjFailure jinjSmalljBusinesses.................................................................................................. 14
Evolution............................................................................................................................................ 21
Ethics................................................................................................................................................. 27
Chapterj1jReviewjQuestions ................................................................................................................. 36
Chapterj2jYourjBusinessjIdea:jThejQuestjforjValue ...................................................................................... 37
DefiningjthejCustomer’sjConceptjofjValue .............................................................................................. 37
KnowingjYourjCustomers ..................................................................................................................... 49
SourcesjofjBusinessjIdeas ..................................................................................................................... 58
Chapterj2jReviewjQuestions ................................................................................................................. 65
Chapterj3jFamilyjBusinesses..................................................................................................................... 66
FamilyjBusiness:jAnjOverview............................................................................................................... 66
FamilyjBusinessjIssues ......................................................................................................................... 74
Conflict .............................................................................................................................................. 90
Chapterj3jReviewjQuestions ................................................................................................................. 98
Chapterj4jE-BusinessjandjE-Commerce...................................................................................................... 99
E-BusinessjandjE-Commerce:jThejDifference.......................................................................................... 99
E-Commerce jOperations ....................................................................................................................110
Chapterj4jReviewjQuestions................................................................................................................125
Chapterj5jThejBusinessjPlan ....................................................................................................................126
DevelopingjYourjStrategy....................................................................................................................126
The jNecessityjforjajBusinessjPlan..........................................................................................................137
BuildingjajPlan....................................................................................................................................144
Chapterj5jReviewjQuestions................................................................................................................173
Chapterj6jMarketingjBasics.....................................................................................................................174
WhatjMarketingjIsjAlljAbout ................................................................................................................174
Saylor jURL: jhttp://www.saylor.org/books Saylor.org
Editedj2017: jTillamookjBayjCommunityjCollege 1
, The jCustomer ....................................................................................................................................186
MarketingjResearch ...........................................................................................................................201
Chapterj6jReviewjQuestions ................................................................................................................210
Chapterj7jMarketingjStrategy..................................................................................................................211
ThejImportancejofjajMarketingjStrategy................................................................................................211
ThejMarketingjStrategyjProcess ...........................................................................................................212
Segmentationjandjthe jTargetjMarket ...................................................................................................216
DifferentiationjandjPositioning ............................................................................................................220
MarketingjStrategyjandjProduct...........................................................................................................225
MarketingjStrategyjandjPrice ...............................................................................................................244
MarketingjStrategyjandjPlace...............................................................................................................249
MarketingjStrategyjandjPromotion ......................................................................................................258
Chapterj7jReviewjQuestions................................................................................................................273
Chapterj8jThejMarketingjPlan..................................................................................................................274
The jNeedjforjajMarketingjPlan .............................................................................................................274
ThejMarketingjPlan ............................................................................................................................278
Chapterj8jReviewjQuestions................................................................................................................316
Chapterj9jAccountingjandjCashjFlow ........................................................................................................317
UnderstandingjthejNeedjforjAccountingjSystems ..................................................................................317
FinancialjAccountingjStatements.........................................................................................................323
FinancialjRatiojAnalysis.......................................................................................................................348
Chapterj9jReviewjQuestions................................................................................................................357
Chapterj10jFinancialjManagement ..........................................................................................................358
The jImportancejofjFinancialjManagementjinjSmalljBusiness ...................................................................358
FinancialjControl................................................................................................................................370
FinancialjDecisionjMaking...................................................................................................................373
Chapterj10jReviewjQuestions ..............................................................................................................388
Chapterj11jSupplyjChainjManagement:jYoujBetterjGetjItjRight....................................................................389
The jSupplyjChainjandjajFirm’sjRole jinjIt..................................................................................................389
AjFirm’sjRolejinjthe jSupplyjChain...........................................................................................................401
ThejBenefitsjandjthe jRisksjofjParticipatingjinjajSupplyjChain.....................................................................406
Chapterj11jReviewjQuestions ..............................................................................................................411
Chapterj12jPeople jandjOrganization ........................................................................................................412
PrinciplesjofjManagementjandjOrganization .........................................................................................412
OrganizationaljDesign.........................................................................................................................423
Saylor jURL: jhttp://www.saylor.org/books Saylor.org
Editedj2017: jTillamookjBayjCommunityjCollege 2
, LegaljFormsjof jOrganizationjforjthejSmalljBusiness .................................................................................438
People ..............................................................................................................................................444
Chapterj12jChapterjQuestions .............................................................................................................463
Chapterj13jThe jSearchjforjEfficiencyjandjEffectiveness ...............................................................................464
PersonaljEfficiencyjandjEffectiveness....................................................................................................464
OrganizationaljEfficiency.....................................................................................................................472
GoingjLean ........................................................................................................................................487
Chapterj13jReviewjQuestions ..............................................................................................................495
Chapterj14jIcebergsjandjEscapes .............................................................................................................496
Icebergs ............................................................................................................................................496
Escapes:jGettingjOutjofjthe jBusiness.....................................................................................................506
ExitjStrategies ....................................................................................................................................509
Chapterj14jReviewjQuestions ..............................................................................................................525
Saylor jURL: jhttp://www.saylor.org/books Saylor.org
Editedj2017: jTillamookjBayjCommunityjCollege 3
, Chapter1 j
FoundationsforSmallBusiness j j j
Small Business in the US Economy
j j j j j
Learning Objectives j
1. Explain jthejsignificancejof jsmalljbusinessjin jAmerican jhistoryjandjthejUSjeconomy.
2. Definejsmalljbusiness.
3. Explain jhow jsmall jbusinessjcontributesjtojthejoverall jeconomy.
4. Explain jhow jsmall jbusinessjimpactsjUSjemployment.
It’sjan jexcitingjtimejtojbejinjsmalljbusiness.jThisjisjcertainlyjnotjanythingjnew,jbutjyoujmightjnotjkn
ow jit.j Scan janyjissuejofjthejpopularjbusinessjpress,jandjinjall jprobability,jyoujwilljfindjajcoverjstor
yjon jonejofj America’sjorjthejworld’sjmajorjcorporationsjorjajspotlightjonjtheirjCEOs.jNewspapers
,jtalkjradio,jandj televisionjseemjtojhavejanjunlimitedjsupplyjofjpunditsjandjpoliticiansjeagerjtojpon
tificatejon jfirmsjthatj havejbeenjlabeledjasj“tooj bigjtojfail.”jListenjtojanyjbroadcastjof jajweekday’sj
eveningjnewsjprogram,jandj therejwill jbejajsegmentjthatjhighlightsjthejupsjandjdownsjof jthejDow j
JonesjIndustrial jAveragejandj thejStandardjandjPoor’sj(S&P)j500.jThesejmarketjmeasuresjprovi
dejan jinsightjintojwhatjisjgoingjonjinjWallj Street.jHowever,jtheyjarejclearlyjbiasedjtojnotjonlyjlarge
j firmsjbutjalsojhugejfirms.jThisjcreatesjthejfalsej notionjthatj“real”jbusinessjisjonlyjaboutj bigjbusin
ess.jItjfailsjtojrecognizejthatjsmalljbusinessesjarejthej overwhelmingjmajorityjofjalljbusinessesjin j
America;jnotjonlyjarejthejmajorityjof jjobsjinjsmalljbusinesses,j butjsmall jbusinessesjhavejalsojbe
en jthejmajorjdrivingjforcejinjnewjjobjcreationjandjinnovation.jSmallj businessjisjthejdynamojofjinn
ovation jin jourj economy.jIn j2006,jThomasjM.jSullivan,jthejchiefjcounsel jforjadvocacyjofjthejSmallj
BusinessjAdministrationj(SBA),jsaid,j“Smalljbusinessjisjajmajorjpartjof jourj economy…small jbus
inessesjinnovatejandjcreatejnewjjobsjatjajfasterjratejthanjtheirjlargerjcompetitors.jTheyjarejnimbl
e,jcreative,jandjajvital j partjof jeveryjcommunityjacrossjthejcountry.”1
Thisjtextjisjdevotedjtojsmall jbusiness,jnotjentrepreneurship.jTherejhasjalwaysjbeen ja
Saylor jURL: jhttp://www.saylor.org/books Saylor.org
Editedj2017: jTillamookjBayjCommunityjCollege 4
21st Century j
TableofContents j j
Table jof jContents...................................................................................................................................... 1
Chapterj1................................................................................................................................................. 4
FoundationsjforjSmalljBusiness .................................................................................................................. 4
SmalljBusinessjinjthejUSjEconomy ........................................................................................................... 4
SuccessjandjFailure jinjSmalljBusinesses.................................................................................................. 14
Evolution............................................................................................................................................ 21
Ethics................................................................................................................................................. 27
Chapterj1jReviewjQuestions ................................................................................................................. 36
Chapterj2jYourjBusinessjIdea:jThejQuestjforjValue ...................................................................................... 37
DefiningjthejCustomer’sjConceptjofjValue .............................................................................................. 37
KnowingjYourjCustomers ..................................................................................................................... 49
SourcesjofjBusinessjIdeas ..................................................................................................................... 58
Chapterj2jReviewjQuestions ................................................................................................................. 65
Chapterj3jFamilyjBusinesses..................................................................................................................... 66
FamilyjBusiness:jAnjOverview............................................................................................................... 66
FamilyjBusinessjIssues ......................................................................................................................... 74
Conflict .............................................................................................................................................. 90
Chapterj3jReviewjQuestions ................................................................................................................. 98
Chapterj4jE-BusinessjandjE-Commerce...................................................................................................... 99
E-BusinessjandjE-Commerce:jThejDifference.......................................................................................... 99
E-Commerce jOperations ....................................................................................................................110
Chapterj4jReviewjQuestions................................................................................................................125
Chapterj5jThejBusinessjPlan ....................................................................................................................126
DevelopingjYourjStrategy....................................................................................................................126
The jNecessityjforjajBusinessjPlan..........................................................................................................137
BuildingjajPlan....................................................................................................................................144
Chapterj5jReviewjQuestions................................................................................................................173
Chapterj6jMarketingjBasics.....................................................................................................................174
WhatjMarketingjIsjAlljAbout ................................................................................................................174
Saylor jURL: jhttp://www.saylor.org/books Saylor.org
Editedj2017: jTillamookjBayjCommunityjCollege 1
, The jCustomer ....................................................................................................................................186
MarketingjResearch ...........................................................................................................................201
Chapterj6jReviewjQuestions ................................................................................................................210
Chapterj7jMarketingjStrategy..................................................................................................................211
ThejImportancejofjajMarketingjStrategy................................................................................................211
ThejMarketingjStrategyjProcess ...........................................................................................................212
Segmentationjandjthe jTargetjMarket ...................................................................................................216
DifferentiationjandjPositioning ............................................................................................................220
MarketingjStrategyjandjProduct...........................................................................................................225
MarketingjStrategyjandjPrice ...............................................................................................................244
MarketingjStrategyjandjPlace...............................................................................................................249
MarketingjStrategyjandjPromotion ......................................................................................................258
Chapterj7jReviewjQuestions................................................................................................................273
Chapterj8jThejMarketingjPlan..................................................................................................................274
The jNeedjforjajMarketingjPlan .............................................................................................................274
ThejMarketingjPlan ............................................................................................................................278
Chapterj8jReviewjQuestions................................................................................................................316
Chapterj9jAccountingjandjCashjFlow ........................................................................................................317
UnderstandingjthejNeedjforjAccountingjSystems ..................................................................................317
FinancialjAccountingjStatements.........................................................................................................323
FinancialjRatiojAnalysis.......................................................................................................................348
Chapterj9jReviewjQuestions................................................................................................................357
Chapterj10jFinancialjManagement ..........................................................................................................358
The jImportancejofjFinancialjManagementjinjSmalljBusiness ...................................................................358
FinancialjControl................................................................................................................................370
FinancialjDecisionjMaking...................................................................................................................373
Chapterj10jReviewjQuestions ..............................................................................................................388
Chapterj11jSupplyjChainjManagement:jYoujBetterjGetjItjRight....................................................................389
The jSupplyjChainjandjajFirm’sjRole jinjIt..................................................................................................389
AjFirm’sjRolejinjthe jSupplyjChain...........................................................................................................401
ThejBenefitsjandjthe jRisksjofjParticipatingjinjajSupplyjChain.....................................................................406
Chapterj11jReviewjQuestions ..............................................................................................................411
Chapterj12jPeople jandjOrganization ........................................................................................................412
PrinciplesjofjManagementjandjOrganization .........................................................................................412
OrganizationaljDesign.........................................................................................................................423
Saylor jURL: jhttp://www.saylor.org/books Saylor.org
Editedj2017: jTillamookjBayjCommunityjCollege 2
, LegaljFormsjof jOrganizationjforjthejSmalljBusiness .................................................................................438
People ..............................................................................................................................................444
Chapterj12jChapterjQuestions .............................................................................................................463
Chapterj13jThe jSearchjforjEfficiencyjandjEffectiveness ...............................................................................464
PersonaljEfficiencyjandjEffectiveness....................................................................................................464
OrganizationaljEfficiency.....................................................................................................................472
GoingjLean ........................................................................................................................................487
Chapterj13jReviewjQuestions ..............................................................................................................495
Chapterj14jIcebergsjandjEscapes .............................................................................................................496
Icebergs ............................................................................................................................................496
Escapes:jGettingjOutjofjthe jBusiness.....................................................................................................506
ExitjStrategies ....................................................................................................................................509
Chapterj14jReviewjQuestions ..............................................................................................................525
Saylor jURL: jhttp://www.saylor.org/books Saylor.org
Editedj2017: jTillamookjBayjCommunityjCollege 3
, Chapter1 j
FoundationsforSmallBusiness j j j
Small Business in the US Economy
j j j j j
Learning Objectives j
1. Explain jthejsignificancejof jsmalljbusinessjin jAmerican jhistoryjandjthejUSjeconomy.
2. Definejsmalljbusiness.
3. Explain jhow jsmall jbusinessjcontributesjtojthejoverall jeconomy.
4. Explain jhow jsmall jbusinessjimpactsjUSjemployment.
It’sjan jexcitingjtimejtojbejinjsmalljbusiness.jThisjisjcertainlyjnotjanythingjnew,jbutjyoujmightjnotjkn
ow jit.j Scan janyjissuejofjthejpopularjbusinessjpress,jandjinjall jprobability,jyoujwilljfindjajcoverjstor
yjon jonejofj America’sjorjthejworld’sjmajorjcorporationsjorjajspotlightjonjtheirjCEOs.jNewspapers
,jtalkjradio,jandj televisionjseemjtojhavejanjunlimitedjsupplyjofjpunditsjandjpoliticiansjeagerjtojpon
tificatejon jfirmsjthatj havejbeenjlabeledjasj“tooj bigjtojfail.”jListenjtojanyjbroadcastjof jajweekday’sj
eveningjnewsjprogram,jandj therejwill jbejajsegmentjthatjhighlightsjthejupsjandjdownsjof jthejDow j
JonesjIndustrial jAveragejandj thejStandardjandjPoor’sj(S&P)j500.jThesejmarketjmeasuresjprovi
dejan jinsightjintojwhatjisjgoingjonjinjWallj Street.jHowever,jtheyjarejclearlyjbiasedjtojnotjonlyjlarge
j firmsjbutjalsojhugejfirms.jThisjcreatesjthejfalsej notionjthatj“real”jbusinessjisjonlyjaboutj bigjbusin
ess.jItjfailsjtojrecognizejthatjsmalljbusinessesjarejthej overwhelmingjmajorityjofjalljbusinessesjin j
America;jnotjonlyjarejthejmajorityjof jjobsjinjsmalljbusinesses,j butjsmall jbusinessesjhavejalsojbe
en jthejmajorjdrivingjforcejinjnewjjobjcreationjandjinnovation.jSmallj businessjisjthejdynamojofjinn
ovation jin jourj economy.jIn j2006,jThomasjM.jSullivan,jthejchiefjcounsel jforjadvocacyjofjthejSmallj
BusinessjAdministrationj(SBA),jsaid,j“Smalljbusinessjisjajmajorjpartjof jourj economy…small jbus
inessesjinnovatejandjcreatejnewjjobsjatjajfasterjratejthanjtheirjlargerjcompetitors.jTheyjarejnimbl
e,jcreative,jandjajvital j partjof jeveryjcommunityjacrossjthejcountry.”1
Thisjtextjisjdevotedjtojsmall jbusiness,jnotjentrepreneurship.jTherejhasjalwaysjbeen ja
Saylor jURL: jhttp://www.saylor.org/books Saylor.org
Editedj2017: jTillamookjBayjCommunityjCollege 4
