Small business management launching and growing entrepreneurial ventures part 2

Part Focusing on the Customer: Marketing Growth Strategies ters ips chap 13 h ations er Rel m Custo ng Buildi pply C d Su uct an rod 14 P ns ecisio dit D nd Cre ga ricin 15 P rom 16 P 17 g annin l Pl otiona ng arketi lM Globa ment nage in Ma ch r e apt Building Customer Relationships Text not available due to copyright restrictions Looking AHEAD After studying this chapter, you should be able to Define customer relationship management (CRM) and explain its importance to a small firm Discuss the significance of providing extraordinary customer service Illustrate how technology, such as the Internet, can improve customer relationships Describe the techniques for creating a customer profile Explain how consumers are decision makers and why this is important to understanding customer relationships Describe certain psychological influences on consumer behavior Describe certain sociological influences on consumer behavior Always remember that the customer (consumer) is the heartbeat of every firm A better understanding of consumers and the transactional relationships a firm has with them will lead to a healthier small business Chapter 13 is the first in a sequence of chapters comprising Part 4, Focusing on the Customer: Marketing Growth Strategies It examines customer relationship management (CRM) and argues that CRM is a key factor in small business survival and growth Chapter 13 also discusses the importance of building a behavioral profile of customers Chapters 14 through 17 discuss additional marketing topics essential to growth, based on the all-important customer focus developed in this chapter What Is Customer Relationship Management? Customer relationship management (CRM) means different things to different firms To some, it is symbolized by simple smiles or comments such as “thank you” and “come again” communicated by employees to customers who have just made a purchase For others, CRM embodies a much broader marketing effort, leading to nothing short of complete customization of products and/or services to fit individual customer needs The goals of a CRM program for most small companies fall somewhere between these two perspectives Regardless of the level of a firm’s commitment to customer relationship management, the central message of every CRM program is “Court customers for more than a one-time sale.” A firm that strongly commits to this idea will appreciate the many benefits a CRM program can offer Formally defined, customer relationship management (CRM) is a “company-wide business strategy designed to optimize profitability and customer satisfaction by focusing on highly defined and precise customer groups.”3 In a way, CRM is a mind-set—the implementation of customer-centric strategies, which put customers first so that the firm can succeed CRM involves treating customers the way the entrepreneur would want to be treated if he or she were a customer—the business version of the Golden Rule The central theme of CRM isn’t new For decades, entrepreneurs have recognized the importance of treating customers well; “the customer is king” is an old adage What is new is giving this idea a name and using technology to implement many of its techniques Modern CRM focuses on (1) customers rather than products; (2) changes in company Define customer relationship management (CRM) and explain its importance to a small firm customer relationship management (CRM) A company-wide business strategy designed to optimize profitability and customer satisfaction by focusing on highly defined and precise customer groups 349 350 Part Focusing on the Customer: Marketing Growth Strategies processes, systems, and culture; and (3) all channels and media involved in the marketing effort, from the Internet to field sales The forerunners of many modern CRM techniques were developed in the 1960s by marketers like Sears and various book clubs They simply stored information about their customers in computers for reasons other than invoicing Their goal was to learn who their customers were, what they wanted, and what sort of interests they had Then along came marketers with ideas about the potential benefits of adopting a customer orientation, followed by the rise of the Internet It should be noted that CRM, in its purest form, has nothing to with technology, although Internet technology has definitely been a major force in CRM’s development Just as putting on the latest $300 pair of technologically designed basketball shoes doesn’t make the wearer a WNBA or NBA player, buying or developing CRM computer software does not, in itself, lead to higher customer retention But it can help if it is used properly ( The role of technology in CRM is discussed later in this chapter.) Most importantly, there must be company-wide commitment to the concept if CRM is to be productive The Importance of CRM to the Small Firm As depicted in Exhibit 13-1, a firm’s next sale comes from one of two sources—a current customer or a new customer Obviously, both current and potential customers are valued by a small firm, but sometimes current customers are taken for granted and ignored While marketing efforts devoted to bringing new customers into the fold are obviously important, keeping existing customers happy should be an even higher priority A CRM program addresses this priority Some firms, however, appear not to recognize this simple truth, and this results in different levels of CRM initiatives One interesting study of CRM involvement among family and nonfamily firms concluded that nonfamily businesses are ahead of family-owned companies with respect to starting and completing CRM initiatives.”4 Brian Vellmure of Initium Technology, a provider of CRM solutions to small firms, has identified five economic benefits of maintaining relationships with current customers:5 Acquisition costs for new customers are huge Long-time customers spend more money than new ones Happy customers refer their friends and colleagues Order-processing costs are higher for new customers exhibit Old customers will pay more for products 13-1 Sources of the Next Sale Current Customers New Customers Happy Customers Pay more to buy product Refer friends and colleagues Unhappy Customers Buy from a competitor next time Have high acquisition costs and order-processing costs exhibit Building Customer Relationships 13-2 Chapter 13 351 Essential Materials of a Successful CRM Program Successful CRM Program Building Block 1: Outstanding Transactional Relationships with Customers Material: Extraordinary Customer Service Material: Technology Support Building Block 2: Knowledge of Customer Behavior Material: Customer Profiles Material: Decision Making Material: Psychological Influences Material: Sociological Influences Essential Materials for a CRM Program When you build something—a house, for example—you have a plan (a blueprint) that lists appropriate materials or component parts Likewise, assembling a CRM program requires a plan so that the entrepreneur knows what people, processes, and so on (parts) she or he needs—and there are many parts in a successful CRM program In the remainder of this chapter, we consider two vital building blocks of any CRM program: (1) outstanding relationships with customers and (2) knowledge of consumer behavior These blocks may be constructed with a variety of “materials,” as depicted in Exhibit 13-2 In the sections that follow, we examine those materials we believe to be tremendously important in constructing these two building blocks Creating Positive Transactional Relationships Through Extraordinary Service To be successful in the long run, small firms need to concentrate on building positive transactional relationships with customers A transactional relationship is an association between a business and a customer that relates to a purchase or a business deal Consumers who have positive interactions with a business usually become loyal customers Three basic beliefs underlie our emphasis on providing exceptional customer service: Small businesses possess greater potential for providing superior customer service than large firms Superior customer service leads to customer satisfaction Customer satisfaction results in a positive transactional relationship As these beliefs suggest, failure to emphasize customer service jeopardizes any effort to attain a positive customer relationship “My message to small companies is that big companies are coming after you with better customer service, so you’d better be paying attention,” says Edward Reilly, president and CEO of the American Management Association.6 Discuss the significance of providing extraordinary customer service transactional relationship An association between a business and a customer that relates to a purchase or a business deal 352 Part Focusing on the Customer: Marketing Growth Strategies How They See It: Maintaining Customer Relationships Denny Fulk No matter what type of business you operate, building and If you operate a business, no matter how small or large, maintaining customer relationships is essential to its success customers like to feel there is a person who really cares about A friend of mine who operates a very successful e-commerce– their needs Whether the information shared is by telephone based business responds regularly to his customers’ questions, or e-mail, promptness and a personal approach are keys to the even if he is traveling outside of the United States Since customer’s having a good feeling about your company Regard- many of his customers are located in other parts of the world, less of whether your business is a startup or a very established customer inquiries arrive and are answered from several dif- company, a customer who receives a prompt, accurate, and un- ferent time zones His response mentions that he is traveling derstanding response will be very likely to continue doing busi- and is sending the e-mail from the city where he is located on ness with your company In the business-to-business setting, that particular day His staff is required to respond to all cus- when I am dealing with a busy purchasing person or project tomer phone calls and e-mail within 24 hours manager, I like to say, “My job is to make your job easier.” Components of Customer Satisfaction A number of factors under a firm’s control contribute to customer satisfaction One classic article identifies the following four elements as keys to customer satisfaction:7 Providing the most basic benefits of the product and/or service—the elements that customers expect all competitors to deliver Offering general support services, such as customer assistance Setting up a system to counteract any bad experiences customers may experience Delivering extraordinary services that excel in meeting customers’ preferences and make the product and/or service seem customized Small firms are in a unique position to offer extraordinary service Relationship marketing advocate Patrick Daly, who oversees a customer relations program for a company in Redwood City, California, suggests the following ways to provide extraordinary service:8 Naming names In today’s detached,“just give me your account number” world, nothing is more well received than individual, personalized attention Even though you may already be courteous and friendly to customers, greeting them by name is valued 10 times more on the “worthy of loyalty” scale Custom care Customers pretty much know what they and don’t want from your company If you remember what they want on an individual basis—even if it’s something as simple as knowing a dry cleaning customer likes light starch in his collars— then you have mastered one of the key elements of a strong loyalty program Keeping in touch.You can’t communicate enough on a me-to-you basis with your customers And don’t just connect to make a pitch Clip out a newspaper or magazine article that pertains to a customer’s business and send it to him or her with a note saying “FYI—thought you’d be interested.”When customers know that you’re taking time to think about them, they don’t forget it “Boo-boo research.” Part of any customer loyalty program is taking the time to reach out to lost customers to learn why they went elsewhere In many cases, just contacting them and showing them that you really care about getting their business will win them back—along with their contribution to your profits Building Customer Relationships Chapter 13 Living the Dream 353 putting technology to work Put Me on Hold Please No one likes being put on hold, but entrepreneur and veteran radio talk show host Perry Wright knows how to keep you entertained while you wait Known as the On-Hold Guy, Wright sells, through his website, software containing one-liners, odd facts, and puns to play for waiting customers Photo by Scott Stewart/Scott Stewart Photography “While I was doing radio, I spent a lot of time on the phone and on hold, listening to sterile, irritating messages,” he says “I thought there had to be a better way, an off-the-wall approach.” Automated phone systems can save on costs but frustrate callers According to Wright’s website, “70% of business phone callers are put on hold, almost 60% of these callers hang up, and 30% will not call back ever!” Wright’s software randomly plays his messages, with the goal of putting customers in a good mood before they are connected to salespeople One caller’s comment was “Put me back on hold, QUICK; I want to hear the rest.” To hear a sample of the On-Hold Guy’s product, go to http://www.onholdguy com/demos.htm Sources: Bill Hudgins, “Hold Please,” MyBusiness, April/May 2005, p 50; and http://www.onholdguy com, accessed March 1, 2007 http://www.onholdguy.com Providing exceptional customer service will give small firms a competitive edge, regardless of the nature of the business Small firms must realize that it costs far more to replace a customer than to keep one Offering top-notch customer service is something they can better than large firms can Evaluating a Firm’s Customer Service Health Establishing an effective customer service program begins with determining the firm’s “customer service quotient,” which indicates how well the firm is currently providing service to its customers Then strategies can be developed to improve the effectiveness of customer service efforts Exhibit 13-3 shows some popular approaches to creating customer service strategies; it also provides space for evaluating how well your small firm is currently performing in each area and what it can to improve its customer service How good or bad is the quality of customer service among both large and small firms? One extensive survey of consumers, reported in USAToday, described the situation this way:9 On the phone Some 80% of the nation’s companies still haven’t figured out how to a decent job getting customers the assistance they need, says Jon Anaton, who oversees Purdue University’s Center for Customer-Driven Quality and is research director at the consulting firm BenchmarkPortal Online Some 35% of all email inquiries to companies don’t get a response within seven days, according to industry estimates And about 25% never get a response at all, Forrester [Research] estimates 354 exhibit Part 13-3 Focusing on the Customer: Marketing Growth Strategies Customer Service Strategies Which of the following can be used to support your marketing objectives? For each strategy, comment below on: How well your company is doing Improvements to pursue further Provide an exceptional experience throughout every transaction by ensuring that customers are acknowledged, appreciated, and find it easy to business with you Note that this requires you to (1) make a list of the typical chain of contacts between you and your customers—from when they first see your advertisement until you send them a customer survey after the sale and (2) evaluate your company’s performance on each contact point Provide sales materials that are clear and easy to understand, including website, marketing materials, retail displays, and sales conversations Respond promptly to customers’ requests and concerns by acting with urgency and responsibility in customer inquiries, transactions, and complaints Have a service recovery plan in place Listen to customers and respond accordingly by soliciting feedback, encouraging interaction, staying engaged throughout transactions, and taking the appropriate action necessary to please the customer Stand behind products/services by providing guarantees and warranties and ensuring customers that you deliver on your promises Also, create products and deliver services that exceed expectations Treat customers as family members and best friends by valuing them the same way you honor those you care most about Stay in the hearts and minds of customers by not taking customers for granted and finding ways to let them know you hold their best interests Other initiatives? List them here Source: “Exceptional Customer Experiences,” FastTrac, Ewing Marion Kauffman Foundation, 2006 In “IVR” hell To save on labor costs, many of America’s largest companies have installed software that the industry calls Interactive Voice Response (IVR) systems Yet more than 90% of financial service consumers say they don’t like these systems, Forrester reports Building Customer Relationships Chapter 13 355 In a rage Nearly one in three customers say they have raised their voices at customer service reps and nearly one in 10 say they have cursed at them over the past year, according to a national phone survey by Customer Care Measurement & Consulting In response Two-thirds of the estimated 800,000 consumer complaints that have been passed along over the past three years to PlanetFeedback.com’s trouble shooting Web site share the same theme: not getting a response from a company, says Sue MacDonald, marketing director Although customer service issues may be identified through a formal review process within the small firm, they often surface via customer complaints in the course of normal daily business operations (Later in this chapter, we will show how complaint activity is part of the overall consumer behavior process.) Every firm strives to eliminate customer complaints When they occur, however, they should be analyzed carefully to uncover possible weaknesses in product quality and/or customer service What is the special significance of customer complaints to small businesses? It is that small firms are potentially in a much better position than are big businesses to respond to such complaints and, thereby, to achieve customer satisfaction Why? Because most problems are solvable by simply dealing with issues as they arise, thus giving customers more attention and respect And showing respect is often easier for a small firm, because it has fewer employees and can give each of them the authority to act in customers’ best interests In contrast, a large business often assigns that responsibility to a single manager, who does not have daily contact with customers What consumers when they are displeased? As Exhibit 13-4 shows, consumers have several options for dealing with their dissatisfaction, and most of these options threaten repeat sales Only one—a private complaint to the offending business—is desirable to the business Customers’ multiple complaint options emphasize the importance of quality customer service, both before and after a sale Managers can also learn about customer service concerns through personal observation and other research techniques By talking directly to customers or by playing the customer’s role anonymously—for example, by making a telephone call to one’s own business—a manager can evaluate service quality Some restaurants and motels invite feedback on customer service by providing comment cards to customers Consider the efforts of Jason Belkin, owner of Hampton Coffee Company, with two coffee-house locations in New Jersey Belkin had always used a mystery shopper service to evaluate customer experiences but decided to turn to comment cards for the information he wanted, offering a free cup of coffee or tea to customers who fill out a card Since he implemented the new approach, Belkin’s business has increased, despite competition How They See It: The CRM Advantage John Stites The advantage that a small firm has over a larger firm in firm with only 100 customers must value those customers far customer relationship management is that the owner of the more than the owner of a larger firm with 1,000 customers company is closer to the customers and more likely to get The loss of one customer has a far greater impact on the accurate feedback, unfiltered by layers of management Un- smaller firm However, a larger firm has more resources to ad- fortunately, the small business owner’s time is often taken up dress its customer relationship issues and can spread the cost with the urgent happenings in the company and customer of CRM over a greater customer base relationship management may be neglected Most small business owners don’t have the luxury of not being involved in customer relations, because an owner of a 356 exhibit Part 13-4 Focusing on the Customer: Marketing Growth Strategies Consumer Options for Dealing with Product or Service Dissatisfaction Dissatisfaction Occurs Publicly Obtain Legal Action Against Business Publicly Complain to Governmental Agency Privately Complain to Business Privately Seek Redress from Business Stop Buying Product or Service Warn Friends About Product or Service Take No Action from new stores opened by Starbucks nearby.10 Belkin attributes this success partly to effectively using the information collected on the comment cards Whatever method is used, evaluating customer service is critical for any business Reflect on the success that Sewell Village Cadillac had after developing customer service tactics This car dealership in Dallas, Texas, is famous for customer service Its owner, Carl Sewell, started the customer service focus in 1967 when Sewell Village was in third place among three Dallas Cadillac dealers He realized that most people didn’t like doing business with car dealers Therefore, he simply began asking customers what they didn’t like about car dealers Three major areas of dissatisfaction were identified—service hours, being without a car during service, and poor or incorrect repairs By responding to these concerns—for example, by scheduling more service hours—Sewell Village Cadillac improved its customer satisfaction image Although many types of customer service cost very little, there are definite costs associated with superior customer service before, during, and after a sale These costs can be reflected in the price of a product or service, or they can sometimes be recouped separately, based on the amount of service requested—through extended product warranties, for example Most customers are willing to pay a premium for good service Illustrate how technology, such as the Internet, can improve customer relationships Using Technology to Support Customer Relationship Management Long-term transactional relationships with customers are fostered by good information A logical time to gather such data is during direct customer contacts, such as when a product is being sold Customers may be contacted in many ways, including phone calls, letters, faxes, personal interactions, and e-mail The ability to enjoy one-on-one contact with customers has always been a competitive advantage for small firms Numerous software 732 Index Corporation, 216 C, 216–219 nonprofit, 223 professional, 223 S, 222 website of, 432 Correa, Tony, 652 Corrective maintenance, 535 Cost-based commitment, 127–128 Cost-based strategy, 84 Cost determination for pricing, 398–400 Cost management, 538–541, 543–545, 586 Cost of goods sold, 263 Costs carrying, 544 of channels of distribution, 388–389 of financing, 264 of franchising, 99–100 globalization and, 450–451 inventory management and, 586 labor, 450 opportunity, 336 ordering, 544 revenue and, 402–403 Council, family, 138 Counterfeit activity, 457 Countertrend, 73 Country Supply, 370, 648 Covenants, loan, 313 Coverall Cleaning Concepts, 107 Covey, Stephen R., 25, 28, 485 CPES, 331 Cranium, Inc., 515 Credit, 398 benefits of, 407–408 Five C’s of, 411 lines of, 308–309, 312 managing, 410–415 selling on, 408–409 types of, 409–410 Credit bureaus, 413 Credit cards, 308, 408, 409–410, 584 Credit report, 508 Crimson Consulting Group, 18 Crisis planning, 559 Cristek Interconnects, Inc., 15 Cristich, Cristi, 15 Critical risks, 163 CRM See Customer relationship management Crocetti, Al, 652 Crocetti, Stacie, 652 Croker, Larry, 83 Cross-border acquisition, 458, 459 Crowdstorm, 438 Culpepper Sales, 10 Cultural phenomenon, 528 Culture of family business, 126–129 global business and, 444 as influence on customers, 364 organizational, 51–53, 476–478, 527–528 Culver, Craig, 98 Culver, Lee, 98 Culver’s, 98, 105 Current assets, 268–269, 295 Current debt, 270 Current ratio, 283 Currie, Malcolm, 68 Currie Technologies, 68 Curves for Women, 99 Customer accessibility, 238–239 Customer Care Measurement & Consulting, 355 Customer demand, pricing and, 400–401 Customer-initiated contacts, 426 Customer profile, 184, 359 Customer relationship management (CRM), 349–351, 353–356 building customer profiles for, 359 using technology to support, 356–358 Customers, 193 as decision makers, 360–362 feedback from, 527 focusing on, 16 international, 462–465 pricing and, 400–401 profile of, 184, 359 psychological influences on, 362–364 quality expectations of, 526–527 relationship with, 39, 349–358 satisfaction of, 352–353, 646 served by e-commerce, 250–252 sociological influences on, 364–365 Cyber insurance, 563 Cybex, 62 Cycle counting, 545 D DacEasy, 599 D’Agostino-Smith, Diane, 10 Dahlgren & Company, Inc., 447 Dain Rauscher Inc., 339 Dali, Salvador, 72 Daly, Patrick, 352 Damages, in tort actions, 556 Dammeyer, Bob and Cathy, 10 D’Andrea, Christian, 67, 68 D’Andrea Brothers LLC, 68 Danko, William D., DAVACO, 10, 22, 357, 366, 509 David Rio Coffee & Tea Inc., 130 Davies, Peggy, 580 Davies Corporation, 580 Davis, Charles (Skip), 25 Davis, Don, 635 Davis, Rick, 10, 22, 25, 357, 366, 509 DCF technique, 588, 590 DCI, 266 DDS System, 373 De Bunsow, Emma Wilson, 25 Debt, 270–271, 295 convertible, 317 use of, 609 Debt-equity ratio, 609 Debt ratio, 283, 609 Decisions, 360–362 ethics and, 53–54 make-or-buy, 538–539 purchase, 361 strategic, 87 Decker, Megan, 312 Dedmon, Bill, 340 Dee Electronics, Inc., 537 Degiorgio, Alexandra, 166 DeGraft, Jeff, 260 Dehydrated plan, 155 Delaney, Laurel, 542 Delawder, Tim, 531 Delegation of authority, 484–485 DeLello, Judy, 275 Delice, Ronald, 481 Delice, Rony, 481 Delivery terms, 391 Dell, 379, 542 Demand, product, 400–401, 403 Democratic leaders, 475 Demographic segment, 77 Demographic variables, 193 Dennis, Jeff, 38 Denny’s, 99 Depreciable assets, 269 Depreciation, accumulated, 269 Depreciation expense, 264, 295 DePree, Max, 35 Descriptive statistics, 192 Design patent, 386 Desire-based commitment, 127 Developer, area, 101, 102 Development Counselors International (DCI), 266 Differentiation-based strategy, 84, 85 Digg.com, 69 Dilbert, 10 Diner’s Club, 410 Direct channel, 388 Direct forecasting, 200 Direct loss, 554 Direct selling, 39 Directors See Board of directors Disability, of employee, 557 Disability insurance, 564–565 Disciplined Investors, 185 Disclosure document, 108, 109 Index Discounted cash flow (DCF) technique, 588, 590 Dissonance, cognitive, 362 Distribution channels, 388–389, 648 Distribution section, of marketing plan, 186–187 Diversification, 72–73 Diversity, workforce, 504–506 Dividends, 221, 265, 295 DNS, 432 Doan, Lurita, 337 Doerr, John, Dogwise, 431 Domain name, 187, 432 Domain Names System (DNS), 432 Donnelly, Harriet, 227 Donnelly Corporation, 339 Dornan, Jim, 47 Double-entry system, 601–602 Douglas Electrical Supply, Inc., 656–657 Dr Pepper, 101 Drinking Water Depot, 85 Drucker, Peter, 71, 72, 154, 662 Drug screening, 510 Dual distribution, 388 Duane, Renee, 435 Dubai Internet City, 451 Due diligence, 111 Dun & Bradstreet, Inc., 281, 412, 603 Dunkin’ Donuts, 107 Dunn, Michelle, 583 Dunn, Steve, 373 Durst, Christine, 227 Dwyer Group, 52 Dylan’s Candy Bar, 375 Dynamic pricing strategy, 406 Dynamic Sales Co., Inc., 562 Dyson, James, 242 E E-commerce, 248–253, 388 E-mail employee, 48 promotion by, 431–432 Earl Walls Associates, 332 Earnings before interest, taxes, depreciation, and amortization (EBITDA), 691 Earnings before taxes, 264 Earnings multiple, 691–693 Easyjournal, 253 EasyWalker, 373 eBay, 75, 236, 251, 431, 442, 443, 455, 478, 540 eBay Express, 252 EBITDA, 691 eBusiness pricing, 407 Economic damages, 556 Economic order quantity (EOQ), 543, 544 Economic risk, in global business, 460–461 Economics, 64 Economies of scale, 449 eCRM, 249 Eddins, Luke, 23 Eddy, Brian, 86 Edible Arrangements, 107 Edwards, Mike, 583 eHarmony, 180, 633 El Chico, 78 Elastic demand, 401 Elasticity of demand, 401 Electronic Customer Relationship Marketing (eCRM), 249 Eli Lily, 206 Eliot, T.S., 72 Elliot, Todd, 82 Ellis, Eilene, 635 Emerald Packaging Inc., 459 Emerging markets, 447 Eminent-domain risk, 560 Employee stock ownership plans (ESOPs), 330, 514 Employees, 501–502 compensation and incentives for, 513–516 e-mail of, 48 empowerment of, 476 handbook for, 518 incentives for, 514–516 leasing of, 517 legal protection of, 517–518 liability coverage for, 556 morale of, 338 personnel risks and, 557 recruiting, 501–506 referrals by, 504 selecting, 506–510 selling firm to, 330–332, 514 sources of, 503–504 total quality management and, 528 training and developing, 510–512 valuing, 36, 39–42 Empowerment, 476 Empyrean Management Group, 134 Engardio, Pete, 18 Enterprise Miner, 357 Enterprise value, 690 Enterprise zones, 240 Entertainment credit cards, 410 Entertainment Earth, 455 Entrepreneurial alertness, 63 Entrepreneurial opportunities, 4–6 age and, 18–19 change-based sources of, 71 evaluating, 75–83 selecting strategies for, 83–87 Entrepreneurial team, 15 Entrepreneurs, 6–7, 19–21, 24–28 artisan, 13 integrity and, 33–36 leadership of, 473–478 legacy of, 24 733 location preferences of, 240–241 managerial tasks of, 482–488 opportunistic, 13 reluctant, 10 spouse of, 134–136 women as, 14–15 Entrepreneurs’ Organization, 490 Entrepreneurship advantages of, 15–18 rewards of, 8–12 social, 54–57 varieties of, 12–18 EntreQuest, 40 Environment, 239–240 competitive, 76, 78–79 general, 76–77 industry, 76, 77–78 Environmental Protection Agency (EPA), 56 Environmentalism, 55–57 Envisionet, 123 Eons.com, 77 EOQ, 543, 544 EPA, 56 Epoch 5, 559 ePolicy Institute, 48 EPS, 96 Equal Credit Opportunity Act, 415 Equal Employment Opportunity Commission, 509 Equifax, Inc., 413 Equinox Corporation, 18 Equipment, 244–245 leasing vs buying, 244 loans for, 314–315 manufacturing, 244 Equity, 268 external/internal, 283 harvesting, 334 ownership, 270, 271 return on, 303 Equity value, 690 ESOPs, 330, 514 Espresso Connection, 511 Essinger, Jim, 656–657 Estes Lobster House, 83, 84 Ethical imperialism, 49 Ethical issues, 36, 37 challenges and benefits of, 46–47 in decision-making process, 53–54 in direct selling, 39 Ethical relativism, 49 Ethics, 622 code of, 51–53 training in, 40 Ethics Resource Center, 53 Etrema Products, Inc., 374 Eure, Van, 362 European Union (EU), 445, 451 Evaluative criteria, 361 Evans, Ross, 55 Everyone Is a Customer, 228 734 Index Evoked set, 361 Exchange rates, 461 Executive search firms, 503–504 Executive summary, in business plan, 157–158, 160–161 Exiting, 327 See also Harvest plan; Harvesting Expedia, 431, 473 Expenses accrued, 270 depreciation, 264 interest, 295 operating, 263 Experian, 413 Experience curve efficiencies, 449 Expert power, 365 Existing businesses evaluating, 111–113 reasons for buying, 110–111 valuing, 113–114 Export agents, 464 Export Management companies, 464 Export Trading Companies, 464 Exporting, 453–455 Express Personnel Services (EPS), 96 External analysis, 80–83 External equity, 283 External financing, 299 External locus of control, 19 F Face-to-face selling, 39 Facilitators, 102 Factoring, 315, 585, 642 Fads, 73 Fair Credit Billing Act, 414 Fair Credit Reporting Act, 414, 508 Fair Debt Collection Practices Act, 415 Fair Labor Standards Act (FLSA), 518 Fait, David, 17 Fait, Warren, 17 Faith, Mike, 513 Family, 130–136 vs business 123–124 commitment of, 127 as financing source, 307–308 Family and Medical Leave Act, 518 Family business, 122–123, 129–136 advantages of, 124–126 family and, 123–124, 628, 629 founder of, 126 harvesting of, 334 leadership succession in, 138–143 nonfamily employees in, 136–137 organizational culture of, 126–129 outside board and, 229 professional management of, 136–138 Family business constitution, 138 Family council, 138 Family retreat, 137–138 Fantastic Florals, 186 Farrell, Brian, 503 FastTrac Entrepreneurial Training Program, 170 Fatal flaws, of startups, 65 Favier, Eric, 302 Federal Reserve Bulletin, 198 Federal Trade Commission (FTC), 102, 104, 109, 432 FedEx, 542 Felix, Pam, 358 Fernandes, John, Ferris, Matt, 155 FHS, 94, 104, 105 Financial forecasting, 276–287 Financial leverage, 609 Financial performance, evaluating, 602–613 Financial plan, 164 balance sheet in, 267–272, 282, 293 cash flow statement in, 272–276, 294–296 forecasting and, 278–287 income statement in, 262–266, 293 Financial ratios, 603, 604 Financial risk, 303–305 Financial Services Inc., 281 Financial statements, 261–276, 640 See also Balance sheet; Cash flow statement; Income statement of existing business, 112 pro forma, 276–277, 279 Financing See also specific types accounts receivable, 585 costs of, 264 debt or equity, 300–305 international, 465–466 requirements for, 282–285 risk, 559–560 sources of, 299–300, 305–320, 642–643 spontaneous, 283 Finding the Love of Your Life, 180, 633 Firehouse Subs (FHS), 94, 104, 105 Firm value, 690 Fischer, Farrah F., 635 Fisher, Jake, 20 Five C’s of credit, 310, 411 501(c) (3) organization, 223 Stones Group, 583 Fixed asset records, 599 Fixed asset turnover, 608, 609 Fixed assets, 269, 599 Flahive, Colin, 452 Flat Rock Furniture, 559 Flatley, Kelly, 436 Flatt, Wesley P., 25 Flexible benefit programs, 516 Flowers & Partners, 429 FLSA, 518 F.O.B origin, 391 Focus strategy, 84–87, 193 Follow-the-leader pricing strategy, 406 Ford Motor Company, 122, 453 Forecasting, 276–287 of asset requirements, 282 of assets and cash flows, 279–281 direct/indirect, 200 profitability, 278 sales, 185, 197–200, 403 Foreign Corrupt Practices Act, 49, 461 Foreign licensing, 457 Forgatch, Greg, 180, 633 Formal venture capitalists, 316 Forrester Research, 354 Forst, Mark, 111 Forst, Mel, 111 Foster Grant, 24 Founders, 12, 130 See also Entrepreneurs; Owners of family business, 126, 130 leadership qualities of, 474 as managers, 478–479 Foust, Dean, 18 Franchise Company, The, 102 Franchise Connections, 102 Franchise contract, 101, 109, 541 Franchise Opportunities Guide, 104 Franchise Opportunities Handbook, 104 Franchise Registry, 98, 106 Franchisees, 12, 96, 100, 101, 103 financial assistance for, 98 restrictions on, 100 Franchises, 101 costs of, 99–100 evaluating opportunities in, 103–109 fastest-growing, 107 operating benefits of, 99 Franchising, 96 financial assistance for, 98 global opportunities in, 108–109, 457 legal issues in, 109 options in, 101–102 pros and cons of, 95–101 sources of information on, 104–106 structure of, 102 Franchisors, 96, 101, 103 lack of support from, 101 as source of information, 108 training by, 96–97 FranCorp, 106 Franklin, Benjamin, 552 Fraser, Jill Andresky, 170 Fraser, Neal, 317 Free on board (F.O.B.) origin, 391 Free Trade Agreement (FTA), 444 Freedom, as entrepreneurial incentive, 10 Friedman, Matt, 106 Friedman, Milton, 38 Friedman, Stan, 105 Friedman, Thomas, 17 Friends, as financing source, 307–308 Friis, Janus, 443 Index Fringe benefits, 514, 516, 517 Front-loading, 39 FTA, 444 FTC, 102, 104, 109, 432 Fulk, Denny, 22, 25, 154, 352, 565 Fulk Equipment Company, Inc., 22, 154 Fuller, Steve, 43, 44 Fund, venture capitalist, 316 Furst, Jack, 340 FutureShop, 75 G Gadodia, Sam, 23 Gaebler Ventures, 108 Gegax, Tom, 644 Gage, David, 215 Gates, Perry, 652–653 Gazelle, 12–13 GE Healthcare, 225, 246 General Electric, 5, General environment, 76–77 General Motors, 501 General partner, 222 General purpose equipment, 244 Generation Now Fitness, 74 George, Amy, 630 George, Chip, 309 Gertmenian, Dennis, 229 Gibson, Ethel, 658, 659 Gibson, Max, 658 Gibson Mortuary, 658–659 Gilliland, Paula, 600 Gingerbread House, The, 438 Ginelli, Gino, 635 Glenfiddich Farm Pottery, 19 Glidden Point Oyster Company, 652 Global businesses, 443–445, 654–655 assistance for, 462–466 challenges to, 460–462 forces driving, 445–453 franchising and, 457 managerial limitations and, 461–462 strategic alliances and, 458 strategy options for, 453–459 Global segment, of general environment, 76 Globalization, 443 See also Global businesses costs of, 450–451 resource access through, 449–450 Gofer delegation, 485 Goff, Mark, 384 Goldberg, Everet H., 500 Golden Rule, 53 Goldfarb, Gregory, 493 Gompers, Paul, 164 Good, Cynthia, Goodman, Doug, 624 Goodwin, Martin, 448 Goodyear, 101 Google, 7, 69, 431, 435, 438 Google Earth, 76 Goshow, Eric, 472 Goshow, Nancy, 472 Goshow Architects, 472 GoSMG.com, 425 Gotham Cycles, 540 Government regulations, 44–45, 517 environmental, 55 global business and, 451 Gow, Gleen, 18 Grace restaurant, 317 Gray, Caroline, 19 GRC Wireless, 56 Greene, Kelli, 308 Greenfield venture, 458 Greening Your Business: A Primer for Smaller Companies, 55 Greif, Mitchell, 237 Griffiths, Malcolm, 266 Gross, Pat, 228 Gross fixed asset, 269 Gross profit, 263 Gross working capital, 268–269 Growth organizational stages of, 480–482 in small firms, 371–372 strategies for, 162 Guanxi, 452 Gucci, 49 Guderian, Shannon, 4, Gullett, Don, 644 Gumpert, David, 151 Gunning, Marie, 275 Gupta, Vinay, 153 Gurwitz, Gary, 11 Gutschick, Matthew, 223 Gyalzen, Tsering, 239 H H&R Block, 380 H2O2Go, 85 Haaren, Michael, 227 Haedrich, Jan, 131 Haedrich, Todd, 131 Hafner, Steve, 431 Hagelberg, Richard, 186 Hall, Craig, 42 Hall, Jody, 19 Hall, Robert, 329 Hall Financial Group, 42 Hallmark Cards, 542 Hallmark Gold Crown Stores, 542 Hamburger University, 96 Hamel, Gary, 79 Hammer, Michael, 536 Hampton Coffee Company, 355 Hanft, Adam, 478 Hanft Unlimited Inc., 478 Hardy Boat Cruises, 652 Harley-Davidson, 79 Hart, Stuart L., 57 735 Harvest plan developing, 338–341 firm valuation and, 336–337 importance of, 327–328 method of payment in, 337 Harvesting, 327 See also Harvest plan conflict and, 339 managing for, 338–339, 644 methods of, 328–336 Hat World Corporation, 238 Hauke, Tom, 196 Headhunters, 503–504 Headsets.com, 513 Health insurance, 516, 557, 559, 562 Heathfield, Susan, 506 Heaviside, Katherine, 559 Help-wanted advertising, 503 Henderson, Jim, 562 Henry, Bob, 448 Heritage Academies, 50 Heritage Partners, 338 Herman Miller, Inc., 35 Hermann, Peter, 338, 339, 341 Herrin, Jessica, 150 Heskett, James, 47 Hi-Tech Manufacturing, 493 High-potential venture, 12–13 Highland Capital Partners, 153 Hilsen, Bruce, 438 Historic Newspapers, Ltd., 86–87 Hitt, Michael, 125 Hitz, Darren, 74 HM Capital, 340 Hobbies, startups and, 69 Hoffman, Steve, 524, 660 Holiday Inn, 99 Holyoak, Hugh Kenneth, 81 Home and Garden Party, Inc., 572 Home-based business, 245 attraction of, 245–247 challenges of, 247–248 financial considerations of, 246 lifestyle considerations of, 246–247 technology and, 248 Home Depot, 8, 57 Hooker, Lisa, 456 Hooker, Thad, 456 Hoorah! Bar, 68 Hope, Jeremy, 582 Hot Headz of America LLC, 140 How to Start a Successful Home Business, 214 Howroyd, Janice Bryant, 225 Huang, Sunny, 654–655 Hughes, Timothy, 87 Hulzenga, J C., 50 Human resource management, 501–510, 519, 658–659 employee leasing and, 517 employee protection and, 517–518 employee training and, 510–512 labor unions and, 518 736 Index Hundley, Lars, 56 Hunters Row Properties, 22 Husband-wife teams, 130 Hutcheson, James, 308 I i.thinkinc., 190 Iatria Day Spas and Health Center, 481 IBM, 48, 250, 380, 386 ICANN, 432 Idea Village, 492 Ideachain, 252 IFA, 102, 104 Ikea, 124 Ilicic, Dann, 426 Image, building, 245 Immigrants, as source of workers, 504 Impersonal referrals, 425 Importing, 455–456 Improbable losses, 561 In-laws, in family business, 134 In-N-Out Burger, 527 Incentives, for employees, 514–516 Income adjusted, 274 net, 264 operating, 264 ordinary, 221 retirement, 557 Income statement, 262–266, 293 Income taxes, 45, 220–221, 239 Incubators, 241, 491–492 Independence as entrepreneurial incentive, 9–10 loss of, in franchise, 100–101 Index of Economic Freedom, 443 Indirect channel, 388 Indirect forecasting, 200 Indirect loss, 554 Industry environment, 76, 77–78 Inelastic demand, 401 Inform Inc., 56 Informal groups, 484 Informal venture capital, 315 Information systems, 537 Informational need, in marketing research, 189 Informed Systems, Inc., 275 Initial public offering (IPO), 320 as a harvest strategy, 332–334 private, 334, 335 Initium Technology, 350 Innovation, 17–18, 72–74 competitive advantage and, 372–373 global business and, 446 sustainability and, 373–376 Inputs, 532 Inside-out analysis, 79–83 Inspection, 528–529 Inspection standard, 529 Installment account, 409 Institute of Management Consultants USA, 493 Institutional advertising, 428 Insurance principles of, 561 self-, 559 types of, 516, 557, 559, 561–565 Insurance register, 599 Insurance to value, 563 Intangible assets, 300, 457 Intangible resources, 79–80 Integrity, 16, 35, 49–54 challenges and benefits of, 46–47 in an expanding economy, 47–49 framework for, 36–45 Internet and, 48–49 organizational culture and, 51–53 Intellectual property, 48–49, 379, 662 Interactive Voice Response (IVR), 354 Interest expense, 295 Interest rate, 311 Intermediaries, 388 Internal control, 602 Internal equity, 283 Internal financing, 299 Internal locus of control, 19 Internal rate of return (IRR), 590 Internal Revenue Service, 45 International Business Machines (IBM), 48, 250, 380, 386 International Franchise Association (IFA), 102, 104 International franchising, 102, 104, 457 International Organization for Standardization, 530, 531 International outsourcing, 449 International strategic alliances, 458 International Trade Administration, 462 Internet, 72, 239 advertising on, 430 buying on, 539–540 customer relationship management and, 350, 358 export activity and, 455 home-based businesses and, 248 integrity and, 48–49 recruiting on, 504 as source of secondary data, 189 as startup location, 236, 248–253 in supply chain management, 387 surveying on, 190 Internet Corporation for Assigned Names and Numbers (ICANN), 432 InterNIC, 432 Interns, 505 Interviews, of applicants, 507–508 Intrastate offering, 335 Inventory, 269 management of, 543–545, 586 record-keeping systems and, 545, 598 turnover of, 606 Investment costs, for franchise, 99–100 Investors attracting, 168–169 private equity, 315–320 short attention span of, 167–168 IPO, 320, 332–334, 335 IRM Corporation, 279 IRR, 590 ISO 9000, 530, 531 ISO 14001, 531 iSold It, 478 IVR, 354 J J&S Construction Company, Inc., 23 Jackson Hewitt Tax Service, 107 Jacobs, Mike, 39 Jan-Pro Franchising International Inc., 107 Jani-King, 107 Janitron, 504 Januz, Lauren, 247 Jao, Frank, Jarman, Matt, 390 Jazzercise, 107 Jennison, Tom, 139 Jennison Manufacturing Corporation, 139 Jiffy Lube, 98 Jim Moran Institute for Global Entrepreneurship, 302 Job descriptions, 506 Job Instruction Training, 511, 512 Job shops, 534 Job specification, 506 Jobs, Steve, 72, 380 Johnson, Laurie, 68 Johnson, Spencer, 167 Johnson, Vaneese, 493 Jones, Catesby, 457 Jones, Terrie, 15 Joseph’s Lite Cookies, 32, 622 JR’s Sports Collectibles, 407 Judeo-Christian values, 50 Juice It Up!, 553 Jung, Matt, 309 Just-in-time inventory system, 545 K Kaboodle, 438 Kalinsky, Michael, 134 Kamprad, Ingvar, 124 Kant, Immanuel, 54 Kaplan, Sam, 601 Kar, Christian, 511 Katz, Marc, 39 Katz Deli, 39 Kauffman, Ewing Marion, 154 Kauffman Center for Entrepreneurial Leadership, 170 Index Kay, Lorraine, 505 Kay Construction, 505 Kay’s Kloset, 406 Kayak.com, 431 Kearney, Jack, 339 Kelleher, Herb, 533 Keller, Aaron, 216 Keller, Bill, 638 Keller, Joan, 638 Kelly, Kevin, 459 Kelly Services, 504 Kelo v City of New London, 560 Kemp, Michelle Rousseff, 132 Ken’s Hatchery and Fish Farms, 81 Kenworthy, Bruce, 134 Key indicator report, 667 Key-person insurance, 564 Keyway Associates, 22 KFC, 99 Khayelitsha Cookie Co., 55 KidSmart Corporation, 155 Kidstuff Playsystems, 186 King, Annette, 21 King, Dave, 21 Kini, Mark, 435 Kirkham Motorsports, 450 Kirzner, Israel, 63 Klump, Alex, 438 Knauer, Amanda, 458 Knister, Jim, 339 Koh, David, 132 Koh, William, 132 Konheim, Bud, 397, 650 Kopeikina, Luda, 18 Kosher.com, 226 Kotler, Philip, 85 Kotter, John, 47 Kreitner, Robin, 505 Krispy Kreme, 101 Kwik Kopy Printing, 96 L Labeling, 381–382 Labor costs of, 450 supply of, 240 Labor unions, 518 Labowitz, Aaron, 455 Labowitz, Jason, 455 Lanham Trademark Act, 385 Latemodel Restoration Supply, 4–5 Lauren, Dylan, 375 Lawsuits, negligent hiring and, 508 LBO, 329–330 Le Travel Store, 638 Leader, 474 attitude of, 477 organizational culture and, 476–478 Leadership, 473–474 in family business, 138–143 styles of, 474–476 Learning effects, 449 Leasing vs buying, 244 employee, 517 equipment, 314–315 of real property, 553 Leasing agreement, 241–242, 555 Leegin Creative Leather Products, 406 Legal entity, 216 Legal environment, 385–387 Legal forms of organization, 211–223 Legal Guide for Starting and Running a Small Business, 215 LeGette, Brian, 373 Legitimate power, 365 Leidenheimer, George, 550 Leidenheimer Baking Company, 550, 551 LemonAid Crutches, 68 Leonard, Stew Jr., 436 Lessons from the Edge, 214 Letter of credit, 465 Leveraged buyout (LBO), 329–330 Leveraged ESOP, 330 Levi Strauss, 122, 372 Levine, Andrew, 266, 267 Levine, Cecilia, 22, 25, 280, 397, 451 Lewis, Linda, 485 Lewis, Russ, 485 Liability contractual, 555 of directors, 556 of employees, 556 limited, 313 of owners, 220 personal, 215 statutory, 555 of stockholders, 218 tort, 555–556 unlimited, 212 Liability risks, 555–556 Liberty Tax Service, 107 LIBOR, 311 Licensee, 101, 102, 457 Licensing, 379, 457 Licensor, 457 Life insurance, 564 Lifestyle business, 13, 14 Lifland, Sally, 22, 214, 405, 427 Lightsey, Martin, 335 Limited liability, 218, 313 Limited liability company, 222–223 Limited partner, 222 Limited partnership, 222 Line-and-staff organization, 483 Line of credit, 308–309, 312 Line organization, 483 Linkage, 432 Liquidation value method, 691 Liquidity, 283, 604–605 Little, Tom, 25 Litvack, Mak, 663 Loan covenants, 313 737 Loans asset-based, 315 bank, 308–314 equipment, 314–315 maturity date of, 312 negotiating, 311–314 types of, 308–310 Location plan, 237–238 for brick-and-mortar startup, 237–242 designing physical facilities and, 242–246 entrepreneur’s home and, 245–248 Internet and, 248–253 selection factors in, 238–242, 638 Lock box, 584 Locus of control, 19 Logistics, 388, 389–391 Logo design, 380 London InterBank Offered Rate (LIBOR), 311 Long, John E., 45 Long-range plan, 482 Long-term debt, 270 Longley, William, 373 Loranger Manufacturing Corporation, 453 Loss direct/indirect, 554 probability of, 561 Loss avoidance, 559 Loss prevention, 559 Loss reduction, 559 Louis Vuitton, 382 Lovering, Judson, 492 Lowe, Keith, 579 Lowe, Roger, Jr., 18 Lowe, Roger, Sr., 18 Lowe, Scott, 130 Lowe’s Supermarkets, 18 Lown, Aaron, 260 Lubin, Daniel, 167 Luxe Jewels, 150 M MacDonald, Sue, 355 Macroeconomic segment, of general environment, 76 M.A.D Collections, 583 MAG Innovision, 298 MagicMouth Productions, 223 Mail Boxes Etc., 101, 107 Mail-order marketing, 388 Mail surveys, 190 Maine Gold, 652–653 Maintenance, plant, 535 Make-or-buy decisions, 538–539 Making Sense of Strategy, 75 Management, 478–479 capabilities of, 64–65 cost, 538–541 738 Index customer relationship, 349–351, 356–359 of family business, 136–138 human resource, 501–512, 517–518 inventory, 543–545, 586 operations, 525–534 outside assistance and, 490–495 quality, 526–531 risk, 557–561 supply chain, 387–391 time, 489–490 working-capital, 573, 575–582 Management buyout (MBO), 330 Management consultants, 493, 656–657 Management control, 220 Management team, 163, 164, 208–210 Managing Your Hazardous Waste: A Guide for Small Businesses, 56 Mangrum, Erika, 481 Manhattan Feather Dusters, Inc., 500 Manning, Tony, 75 Manpower Inc., 504 Mantz, Maria, 266, 267 Manufacturing equipment, 244 Manufacturing operations, 534 MapInfo, 239 Marco Polo, 446 MarCon Inc., 14 Marion Labs, 154 Market, 192 analysis of, 183, 184–185 existing business and, 113 expansion of, 447–449 factors in, 64 potential of, 197–200 target, 185, 192–196 Market awareness, 361 Market-comparable valuation, 113 Market niche, 85, 86, 87 Market risk, 552 Market segmentation, 85, 193, 194–197 Market share, 266 Marketer-initiated contacts, 426 Marketing, 182–183 mass, 194 product vs service, 382–383 strategies in, 185–187, 194–197, 633 Marketing mix, 183 Marketing plan, 162–163, 184–187 Marketing research, 188–192 Markup pricing, 403–405 Marriott Corporation, 122 Marsh, Inc., 555 Marshall, John, 216 Martin, Earl, 196 Martin, Elaine J., 14, 15 Mass marketing, 194 Master licensee, 101, 102 MasterCard, 410 Matchmakers, 111 Materials handling, 391 Maui Wowi Fresh Hawaiian Blends, 105 Maxwell, John, 47 Mayer, Richard, 68 Mayfield Fund, 341 Mayne, Lincoln, 188 M.B Wellington, 225 MBO, 330 McAlister’s Deli, 99 McCann, Chris, 357 McConnell, Mac, 359 McDonald’s, 96, 99, 379, 457 McDowell Research, 196 McEntee, Cindy, 626 McGrath, Linda, 635, 636, 637 McGuire Woods, 335 McHugh, Hugh, 584 McKinney, Julian, 465 McMasters, Karen, 371 McQueen, Van, 559 Mechlinski, Joe, 40 Medical payments coverage, 564 Medical Reimbursement Specialists (MRS), 246 MedMined, 243 Meehan, Deborah, 652–653 Mega Rentals, Inc., 312 Melman, Richard, 533 Mentoring, 21, 23, 25, 139 Merchant middlemen, 388 Metro, Marty, 56 Metro-Goldwyn-Mayer Studios v Grokster, 662–663 Meyer, Danny, 475 MFI International Mfg., LLC, 22, 280 MFIL, 131 Microbusiness, 13 Microdyne Outsourcing, 123 Microsoft Corporation, 227, 315, 385, 515, 537 Mill Valley Lumber Company, 110 Miller, Brian, 213 Miller, Jennifer, 69 Miller, Ken, 69 Miller, Nicole, 397, 650 Miller, Tom, 447 MillerWhite, LLC, 213 Millionaire Next Door, The, Milton, Jerry, 563 MindPrime, Inc., 252 Minimum wage, 513 Minnetonka, 88 MIT Enterprise Forum, 151 Mitchell, Chris, 236 Mitsui & Co., Ltd., 542 Miura, Rio, 130 Mo’s Chowder, 626 Mobile bookkeepers, 599 Mochari, Ilan, 25 Modern Postcard, 524, 660 Modified book value method, 691 Molander, Scott, 238 MOM, 642 Monster.com, 70, 77 Monster Worldwide, 70 Monthly Labor Reviews, 198 Mooney, Mary Ellen, 454, 461 Mooney, Scott, 370, 648 Mooney Farms, 454, 461 Moore, Nicholas G., 49 Moore, Trey, 5, 6, 12, 22, 73, 187, 225, 246 Moot Corp Competition, 155 Morgan Stanley, 612 Mortgage, 270, 310 Motivation of customers, 363–364 for harvest, 340–341 Moyes, Frank, 153 MP4 Solutions, 5–6, 187, 225 MRS, 246 MSS Global, 448, 457 Multiple-unit ownership, 101 Multisegment strategy, 194–195 Munchkin, Inc., 373 Musser, Warren, 315 My Flat in London (MFIL), 131 MYOB, 599 MySpace, 77, 425, 438 Mystery shopping, 190 N NAFTA, 108, 451, 455 NAICS, 200 Naisbitt, John, 85 Named-peril approach, 563 NameSecure, 432 NASA, 227 NASAA, 109 National Association of Corporate Directors, 229 National Association of Professional Organizations, 517 National Business Incubating Association (NBIA), 243 National Federation of Independent Business (NFIB), 11, 44, 122, 224, 243, 409, 510, 588, 590 National Trade and Professional Associations of the United States, 198 NBIA, 243 Near cash, 583 Need-based commitment, 128 Needs, consumer, 193, 363 Negotiation, 487 accounts payable and, 586 of loans, 311–314 Neimi, Mohava, 626 Nelson, Peter, 241 Net fixed assets, 269 Net income, 264 Net income available to owners, 264 Net present value (NPV), 590 Net working capital, 274, 295 Net worth, statement of, 267 NetSuite, 599 Networking, 493–494 Index Never Run Out of Cash: The 10 Cash Flow Rules You Can’t Afford to Ignore, 265 New & Improved, 477 New product development, 377–378 New Technologies Management, Inc., 337 Newtex, 585 NFIB, 11, 44, 122, 224, 243, 409, 510, 588, 590 Niches, special, 18 Nichols, Marvis, 509 Nicole Miller, Inc., 397, 650 Nike, 372, 380 1968 Truth-in-Lending Act, 414 Nipert, Jeff, 442 Nissanoff, David, 75 Noncompete agreements, 110 Noneconomic damages, 556 Nonfamily employees, 136–137 Nonprofit corporation, 223 Nordsiek, Chris, 209 Normalized earnings, 692 Norman, Jan, 272 North American Free Trade Agreement ( NAFTA), 108, 451, 455 North American Industry Classification System ( NAICS), 200 North American Securities Administrators Association ( NASAA), 109 Northcutt, Julie, 538 Norwood, Derek, 72, 73 NPV, 590 Nutrition Labeling and Education Act of 1990, 385 O OADI, 243 Obligation-based commitment, 127, 128 Observational methods, for primary data collection, 190 Occupational Safety and Health Act of 1970, 518 Occupational Safety and Health Administration (OSHA), 518 Offering, 163–164 Offering memorandum, 169 Office Depot, 252, 542 Office equipment, 245 Office for the Advancement of Developing Industries (OADI), 243 Offshoring, 18, 449 Ogborne, Dave, 444 Okano, Naoko, 452 Olympic Optical, 23 Olympic Recreation, 186 Omidyar, Pierre, 251, 252 On-Hold Guy, 353 On the Move Staffing, 493 1-800-flowers.com, 357 1-800-GOT-JUNK?, 97 180s LLC, 373 100 percent inspection, 529 Online business presence, 252 Online Business Services, Inc., 485 Online employee recruiting services, 505 Online resources, for preparing business plans, 177 Open charge account, 409 Operating expenses, 263 Operating income, 264, 295 Operating profit margin, 606–607 Operations analyzing, 537–538 cash flows from, 273–274, 294–295 controlling, 485–486 planning and scheduling of, 534–535 Operations and development plan, in business plan, 163 Operations management, 532 quality goals of, 525–531 in service business, 532–534 Operations process, 525, 531–535 Opinion leader, 365 OPM, 642 Opportunistic entrepreneur, 13 Opportunities in Exporting, 462 Opportunity cost of funds, 336 Opportunity recognition, 63 Ordering costs, 544 Ordinary income, 221 Oreck, Adam H., 84 OrganicBouquet.com, 41 Organizational culture, 51–53 of family business, 126–129 leadership and, 476–478 total quality management and, 527–528 Organizational plan board of directors and, 228–230 choosing a legal form in, 211–223 management team and, 208–210 strategic alliances and, 224–228 Organizational structure, 482–484, 635–637 Organizational test, 223 Orientation, of new personnel, 510–511 OSHA, 518 Osher, John, 65 Oshman, Ken, 315 Other assets, 269 Out of the Cubicle and Into Business, 216 Outputs, 532 Outside-in analysis, 76–79 Outsourcing, 18, 449, 450, 539 Overhill Flowers Inc., 584 Overstock.com, 251 Owens, Doyle, 373 Owner’s value, 690 Owners See also Entrepreneurs; Founders integrity of, 33–36, 50–51 liability of, 220 739 promoting interests of, 38–39 residual, 270 Ownership multiple-unit, 101 transfer of, 142–143, 220 Ownership equity, 270, 271 Oxenhorn, Jay, 140 P Pacesetting leaders, 475 Pacific Data Designs, 308 Packaging, 380–381 PaeTec Communications, 40, 41 Page, Larry, Paige’s Music, 384 PaloAlto Software, Inc., 291 Pampered Chef, 365 Panel Study of Entrepreneurial Dynamics (PSED), 210 Pappas, Jason, 40 Parent, Curtis, 83 Parker, Sarah Jessica, 404 Parking Spot, 380 Parrack, Shari L., 15 Parsa, H G , 626 Partain, Jill-Anne, 249 Partner, 212–215 agency power of, 215 general, 222 limited, 222 rights and duties of, 215 Partnership, 212–216, 218, 221 See also Partner advantages and disadvantages of, 213 income taxes in, 220 termination of, 215–216 Partnership agreement, 215 Patent, 386–387 Patterson, James, A., 373, 624 Payback period technique, 588, 589–590 PayPal, 251, 408 Payroll records, 598 Peace Frogs, 457 Peachtree by Sage 2007, 599, 600 Peale, Norman Vincent, 51 Penetration pricing strategy, 405 Penn and Teller, 217 Pennsylvania Optical, 24 PEOs, 517 Pepsico, 553 Percentage-of-sales technique, 282, 423 Perceptions, of customers, 363 Perceptual categorization, 363 Performance-based compensation, 514 Performance review system, 518 Performance testing, 508–509 Peril, 554 Perpetual inventory system, 545 Perry, Rusty, 56 Personal experience, startup ideas and, 68–69 740 Index Personal fulfillment, as entrepreneurial incentive, 10–12, 151–152 Personal interviews, 190 Personal property, 553 Personal referrals, 425 Personal savings, as financing source, 306–307 Personal selling, 422, 424–428 Personalized pricing strategy, 406 Personnel See Employees; Management Personnel policy manual, 518 Personnel risks, 557 Pfeffer, Jeffrey, 476, 506 Phenix and Phenix, Inc., 511 Phifer, Sherwood T (Woody), 14 Phifer Designs and Concepts, 14 Philanthropy, corporate, 43 Phillips, Inc., 617 Physical distribution, 388, 389–391 Physical facilities, designing and equipping, 242–246 Physical inventory system, 545 Picasso, Pablo, 72 Piecework, 514 Piggyback franchising, 101 Piggyback marketers, 464 Pilgrim Designs, 249 Pink, PIP Printing, 99 PlanetFeedback.com, 355 Planning time, 482 Plant maintenance, 535 Plant patent, 386 Pledged accounts receivable, 585 Pluck, 253 PocketScope.com, 600 Polak, Alicia, 55 Polaroid, 386 Political/legal segment, of general environment, 76 Political risk, in global businesses, 460 Pollock, Josh, 452 Polosa, Vito, 166 PondSweep Manufacturing, 120 Pop-up ads, 431 Porter, Cypriana, 438 Porter, Jim, 338, 339, 341 Porter, Michael, 77, 88, 193 Porter, Swain, 450 Portero.com, 75 Poss, James, 56 Post-purchase evaluation, 361–362 Potomac Swim School, 373 Powell, Brad, 217 Powell, Cameron, 5, 12, 73 Power of attorney, 212 Power of Ethical Management, The, 51 Pre-emptive right, 216 Precipitating event, 21 Premature death, 557 Premier Inc., 391 Premises liability, 556 Presentation of business plan, 167–169 sales, 424–427 tips for, 488 Prestige pricing, 401 Prete, Michael,, 540 Preventive maintenance, 535 Prevor, Barry, 84 Price, 397 of existing business, 110 setting See also Pricing, 398–401 Price Improvement Team, 650 Price lining strategy, 406 PricewaterhouseCoopers, 49 Pricing See also Price average, 400 competitive advantage and, 401 cost determination for, 398–400 customer demand and, 400–401 markup, 403–405 prestige, 401 selecting strategies for, 405–407, 650 system for, 401–405 Pricing section, of marketing plan, 187 Primary data, 190 Prime rate, 311 Pritzker, Penny, 380 Privacy, e-commerce and, 249 Privacy policy, 48 Private banks, 465–466 Private carriers, 390 Private employment agencies, 503 Private equity, as a harvest strategy, 334–336 Private equity investors, 315–320 Private IPO, 334, 335 Private placement, 320 Pro Flora, 596 Pro forma statements, 164, 276–277, 279 Problem recognition, 360–361 Procter & Gamble, 88 Producers, The, 33, 34 Product advertising, 428 Product and trade name franchising, 101 Product item, 382 Product liability, 556 Product line, 382, 383 Product mix, 382, 383 Product mix consistency, 382 Product-oriented philosophy, of marketing, 183 Product/services plan, in business plan, 162, 186 Product strategy, 382–387 Productivity, 536–538 Products, 383 advertising of See Advertising building, 378–382 demand for, 400–401, 403 development of new, 377–378 global promotion of, 448 knowledge of, 424 labeling of, 381–382 life cycle of, 376 packaging of, 380–381 sampling of, 436 warranty on, 382 Professional corporation, 223 Professional employer organizations (PEOs), 517 Professional liability, 556 Professional manager, 478 Profit and loss statement, 262–266 Profit retention, 283, 299 Profit-sharing plans, 514 Profits, vs cash flows, 272, 273 ethical issues and, 46, 47 forecasting, 278 gross, 263 potential, 300–303 true, 612 Project manufacturing, 534 Prolman, Gerald, 41 Promotion, 421, 436–438, 652–653 budget for, 423–424 communication process in, 421–423 by e-mail, 431–432 global, 448 Promotional mix, 422 Promotional Products Association International, 437 Promotional section, of marketing plan, 187 Property insurance coverage for, 562–563 personal, 553 real, 552 Property risks, 552–555 Prospecting, 424–426 Prospectus, 169 ProWorth, 455, 456 Proximate cause, 556 Prudent person standard, 555 PSC Info Group, 275 PSED, 210 PTO, 385, 386 Public employment offices, 503 Public sale, 320 Publicity, 437–438 Punitive damages, 556 Purchase decision, 361 Purchasing, 538–543 Purchasing power, 193 Pure risk, 552 Pyramid schemes, 39 Q Q3 Innovations, 86 Qara Argentina, 458 QR, 373, 624 Index Quality as competitive tool, 525–526, 660 control of, 529–530 See also Quality management of customer service, 353–356 See also Customer relationship management Quality circle, 528 Quality management customer focus of, 526–527 international certification for, 530–531 in service businesses, 531 total, 526–530 Quality performance, 16 Quantity discounts, 544 Questioning methods, for primary data collection, 190 Questionnaire, 190, 191 Quick, Rebecca, 372 Quick Relief (QR), 624 QuickBooks, 599 R Rackspace Managed Hosting, 612 RadarGolf, 74 Radio Advertising Bureau, 631 Radisson, 101 Raimondo, Tony, 458 Raissi-Dehkordy, Ali, 85 Ramirez, Austin, 141 Rapaport, Bernard, 25 Raphael, Rose Anne, 246 Ratios, 603, 604 bad-debt, 414 current, 283 debt, 283, 609 debt-equity, 609 times interest earned, 609 Raving Brands, 18 Raw materials, 240 RCA, 390 RE/MAX International Inc., 107 Ready Pac Produce, Inc, 229 Real estate mortgage, 310 Real property, 552 Realtors, 111 Reasonable (prudent person) standard, 555 Receivables See Accounts receivable Reciprocation, 210 Record-keeping system, 598–599 for inventory, 598 outside accounting services as, 599 software for, 599 Recruiting personnel, 501–506 Reed, Shirley, 11 Reengineering, 536–537 Reengineering the Corporation, 536 Reference groups, 365 References, employment, 508 Referrals employee, 504 impersonal/personal, 425 Refugee, 10 Regeneration Partners, 308 Reilly, Edward, 351 Rejuvenation Lamp and Fixture Company, 359 Relationship selling, 427 Reliability, 509 Reluctant entrepreneur, 10 Renaissance Entrepreneurship Center, 493 Repayment schedule, 312–313 Repetitive manufacturing, 534 Replacement value, 553 Replacement value method, 691 Research, marketing, 188–192 Residual owners, 270 Resources, 79 availability of, 240 global access to, 449–450 human See Employees; Human resource management Responsibility, 16 Responsible Entrepreneur, The, 42 Retail store equipment, 244 Retailer credit cards, 410 Retained earnings, 270, 283 Retirement income, 557 Retreat, family, 137–138 Return on assets, 301, 606–609 Return on equity, 303, 610–612, 613 Revenue, and costs, 402–403 Revolution Cleaners, 56 Revolving credit agreement, 309, 409 Reward power, 365 Reynolds, Paul, 19 Reynoso, Juan Ochoa, 25 Rhoads, Jeff, 407 Rich, Stanley, 151 Richards, Ann, 11 Rick Davis Properties, 22 Rigsbee, Ed, 234 Rigsbee Research, 234 Rip’s Uniforms, 111 Risk, 552 classifying, 552–557 critical, 163 eminent-domain, 560 financial, 303–305 liability, 555–556 market, 552 personnel, 557 political, 460 property, 552–555 pure, 552 Risk control, 559 Risk financing, 559–560 Risk management, 557–561 Risk retention, 559 Risk transfer, 559 Risucci, Damon, 401 R.J Grunt’s, 533 RMA Annual Statement Studies, 277 741 Robert Morris Associates, 281, 603 Robert Smith & Associates, 412 Rochor Original Beancurd, 132 Rockwell, Phil, 252 Rockwell, Stephanie, 252 Rodgers, Pamela, 348, 646 Rodgers Chevrolet, 348, 646 Rolm Corporation, 315 Ronnebaum, Chad, 86 RoofAds, 76 Rose, Kevin, 69 Ross, Glenn, 476 Ross School of Business, 260 Rotary Club International, 53, 210 Rothenberg, Randall, 67 Rottenberg, David, 228 Rotter, J B., 19 Royalties, 99, 457 Rudsinski, Gary, 105 Rule 436 of the Federal Trade Commission (FTC), 109 S S corporation, 222 S3 Software LLC, 22 Saber, Jay, 76 Safeguard Scientifics, 315 Safety-sleeve, 530 Safety stock, 545 Safilo USA, 505 Sahlman, William A., 78, 169 Salary.com, 48 Salary levels, 513–514 Sales forecast, 185, 197–200, 403 Sales-oriented philosophy, of marketing, 183 Sales presentation, 424–427 Sales promotion, 436–438 Salesforce.com, 42, 43 Salespeople, compensation of, 428, 514 Salmans, Scott J., 23, 25, 35, 103, 135, 329, 502 Salvador’s Kunming Food and Beverage Co., Ltd., 452 Sambazon, 553 Sampling, of products, 436 Sams, Howard, 25 Santoli, Lorraine, 74 Sarbanes-Oxley Act, 320, 599 Savage, Norman, 110 Savarese, Chris, 74 Savitz, Scott, 433 SavRow Bespoke Technology, 85 SBA, 3, 56, 98, 106, 170, 189, 300, 453, 462, 466 SBDCs, 493 SBICs, 318 SBIR Program, 318 SCA, 374, 375 Schechter, Jeff, 485 Schechter, Joshua, 485 742 Index Scheduling, operations planning and, 534–535 Schell, Jim, 640, 667 Schools, as source of employees, 503 Schramski, Tom, 331 Schultz, Howard, 19 Schumpeter, Joseph, 372 Scientific Intake, 373 Scogin, Hal, 214 SCORE (Service Corps of Retired Executives), 170, 492 Scott, Adam, 106 Scott, Richard C., 25 Scott, Weina, 20 Scott & Stringfellow, 335 Scully, Barbara, 652 Seahorse Power Company, 56 Search engine optimization (SEO), 435 Search engines, 435 Sears, 350 SEC, 320, 335 Secondary data, 189 Secondary target markets, 162 Section 1244 stock, 221 Securities and Exchange Commission (SEC), 320, 335 Security threats, 553, 554 Seeing What’s Next, 17 Segmentation variables, 193 Selame, Elinor, 380 Self, Tyler, 19 Self-insurance, 559, 560 Semel, Scott, 190, 372 Semprevivo, Joseph, 32, 622 SEO, 435 Serendipity, 69–71 Service business operations in, 532–534 quality management in, 531 Service Corps of Retired Executives (SCORE), 170, 492 Service mark, 380 Service sector, women entrepreneurs in, 14 7(a) Loan Guaranty Program, 318 7(m) Microloan Program, 318 Sevin Rosen Funds, 316 Sewell, Carl, 355 Sewell Village Cadillac, 355 Sexual harassment, 517 Shatas, Remigius, 62 Sherman Antitrust Act, 406 Shipman, Marisa, 247 Shipman Associates, 247 Shoebuy.com, 433 Shopping.com, 431 Shore, Steve, 84 Short-range plan, 482 Short-term liability, 270 Short-term notes, 270 Shortt, Yvonne, 399 Shuman, Jeffrey, 228 Shurman, Anthony, 401 Siblings, in family business, 132–134 SignalONE Safety, 155 Silber, Jane, 74 Silver Zephyr Restaurant, 635–637 Simply Accounting 2007, 599 Single-entry system, 601 Single-segment strategy, 195–197 Sirmon, David, 125 Site availability of, 241 costs of, 241–242 software for selection of, 239 Skimming, 45 Skimming price strategy, 405 Skype, 443, 444 Slashdot, 69 Small business, 7–8 See also specific types accounting activities in, 598–602 advertising practices in, 428–435 customer relationship management and, 350 ethical issues facing, 37 legal organizational forms of, 211–223 management characteristics of, 478–482 personal selling in, 424–428 risk management and, 559–560 social responsibility and, 38, 42–44 vulnerability of, 46–47 Small Business Administration (SBA), 3, 56, 98, 106, 170, 189, 300, 453, 462, 466 Small business development centers (SBDCs), 493 Small Business Gateway, 56 Small Business Innovative Research (SBIR) Program, 318 Small Business Investment Companies (SBICs), 318 Smiles Coffee, 450 Smith, Gordon, 335 Smith, Jason, 425 Smith, Norman, R., 13 Smith, Robert, 412 Smith, Tim, 167 Smith and Wesson, 379 Smyk, Stephen, 246 Snow, Dick, 504 Social capital, 210 Social class, as influence, 364–365 Social entrepreneurship, 54–57 Social networks, expanding, 209–210 Social responsibilities, 38, 42–44 Social Security, 557 Social shopping websites, 438 Society of Financial Service, 48 Sociocultural segment, of general environment, 76 Software anti-spam, 432 business plan, 169, 177 comparison shopping, 431 customer relationship management, 357 for record keeping, 599 for site selection, 239 submission, 435 Sole proprietorship, 211–212, 218 income taxes of, 220–221 insurance for, 565 Solon, 552 Soma Beverage Company LLC, 130 Sony, 17 Sorensen, Chris, 94, 104 Sorensen, Robin, 94, 104 Sorenson, Chad, 155 Sosnick, Anthony, 404 South Texas College (STC), 11 Southwest Airlines, 533 Southwest Ink, 10 Southwest Securities, 340 Spam, 431, 432 Span of control, 484 SPANX, 5, 22, 25, 479 Special niches, 18 Special-purpose equipment, 244 Specialties, 437 Specialty Blades, Inc., 335 Spectrem Group, 327 Spencer, Chris, 20 Spencer, Kipchoge, 55 Spinelli, Stephen, 16, 20 Spirer, Lowell J., 123 Spirit of Asia, 456 Sponsorship, Web, 432 Spontaneous financing, 283, 299 Spouse, of entrepreneur, 134–136 Staffcentrix, 227 Stakeholders, 36, 47 Standard & Poor’s, 603 Standards, inspection, 529 Stanley, Thomas J., Staples, 152 Starbucks, 19, 80, 355 Startup, 64–74, 620–621, 624 brick-and-mortar, 237–242 change in, 166 e-commerce and, 249 evaluation criteria for, 66 financing sources for, 305–320 home-based, 245–248 Internet location of, 248–253 opportunity analysis of, 75–83 StartUpBuilder.com, 166 Statement of net worth, 267 Statistical process control, 529 Statistics descriptive, 192 in quality control, 529–530 Statutory liability, 555 Steingold, Fred, 215 Stemberg, Thomas, 152 Stephen A Goldman Historic Newspapers, 87 Index Steve and Barry’s University Sportswear, 84 Stevens, Mark, 167 Stevens, Terry, 315 Stewardship delegation, 485 Stewart, J O., 25 Stewart, Martha, 378 Stites, John (Johnny), 23, 25, 45, 143, 262, 338, 355, 603, 610 Stock, 295 common, 320 convertible preferred, 317 section 1244, 221 Stock certificate, 216 Stock incentives, 514 Stockholders death or withdrawal of, 218 limited liability of, 218 rights and status of, 216–217 Stockout situations, 545 Stockpiles, 586 Stone, Christie, 492 Stoner, Todd, 185 Storage, 390–391 Straight salary, 428 Strassberg, Gerson, 71 Strategic alliance, 224, 542–543 international, 458 with large companies, 224–225 setting up and maintaining, 227–228 with small companies, 225–227 Strategic buyers, 329 Strategic decision, 87 Strategic plan, 482 Strategy, 83–87 broad-based, 83–84 cost-based, 84 differentiation-based, 84, 85 focus, 84–87, 193 global, 462 marketing, 185–187, 194–197 unsegmented, 194 variable pricing, 406 Strickland, Lea A., 216 Strum, Stanley, 25 Student consulting teams, 492 StyleChic, 438 Subchapter S corporation, 222 Subcultural analysis, 364 Submission software, 435 Subway, 96, 107 Succession, stages of, 138–143 Sunny Designs, Inc., 654–655 Suppliers diversifying, 541 as financing source, 314–315 relationships with, 541–543 Supply chain management, 387–391 Survey of Current Business, 198 Surveys, 190 SurveySite, Inc., 189 Sustainable competitive advantage (SCA), 374, 375 Sutter Hill Ventures, 338 Swartz, Addie, 381 Swartz, John Roscoe, 260 SWD Inc., 531 Switchpod, 20 SWOT analysis, 80–81, 185 Synergy Fitness Club, 401 Synott, Brendan, 436 Szaky, Tom, 56 T T-ShirtKing, 432 Taco Bell, 536 Taco Bueno, 78 Tait, Richard, 515 Talucci, Mark, 82 Tangible assets, 300 Tangible resources, 79 Target customer, 162 Target market, 185 Target stores, 102, 380 Tariffs, 444 Taxes earnings before, 264 of existing business, 112 fraud and, 45 income, 220–221, 239 Taylor, Jeff, 70, 77 Taylor, Karen, 10 [TC]2, 372 Technological segment, of general environment, 76 Technology home-based business and, 248 startup and, 74 Technovative Marketing, 227 Telephone surveys, 190 Temporary Help agencies, 504 Term loan, 309 Terms of purchase, 114 TerraCycle, 56, 57 Texas Motor Transportation Consultants, 15 THE SAK, 82 ThisNext, 438 Thomas, Bill, 10 Thomas, Joyce, 246, 247 Thompson, John Alf, 624 Thousand Miles, 69 THQ Inc., 502 THW, 241 Ticobeans, 492 Time and motion studies, 537 Time-based compensation, 513 Time management, 489–490 Times interest earned ratio, 609 Timmons, Jeffry, 16, 20 Timothy Hughes Rare & Early Newspapers, 87 Tires Plus, 644 TissueKups, 74 Title company, 114 743 Tolerance limits, 529 Topu Ranch, 438 Tort liability, 555–556 Torts, 555 Total asset turnover, 606, 607 Total cost, 399 Total fixed costs, 399 Total quality management (TQM), 526 organizational culture and, 527–528 techniques of, 528–530 Total variable costs, 399 Tote Le Monde, 70 Toyota, TQM, 526–530 Trade association, 192 Trade credit, 270, 314, 409, 410, 587, 642 Trade-credit agencies, 412 Trade dress, 387 Trade intermediary, 464, 465 Trade leads, 463 Trade mission, 454, 464 Trade show exhibits, 437 Trademark, 380, 385–386 Trademark Search Library, 385 TradePort, 462 Traffic counts, 110 Training of employees, 510–512 by franchisors, 96–97 Transaction-based model, 252 Transactional relationship, 351–356 Transfer of ownership, 142–143, 220 Transportation availability of, 240 costs of, 450 physical distribution and, 390 TransUnion Corporation, 413 Travelocity, 431 Trebond, Isabella, 192 TreeHouse Workshop (THW), 241 Trends, 73 Triple Crown Sports, 21 Triumph Group Inc., 444 True profit, 612 Truth-in-Lending Act, 414 TRW Credit Data, 413 Turnover ratios, 606–609 Twain, Mark, 602 24/7 e-tailing, 250 TwinStar Industries, 438 Twombly, Janice, 228 Type A ideas, 67 Type B ideas, 67, 68 Type C ideas, 67, 68 U UFIT, Inc., 84 UFOC, 109 Ukrop’s Super Markets, 50 Ultralife Batteries, 196 Unclaimed Baggage, 373, 374 Underlying values, 50 744 Index Understanding Your Financial Statements, 640, 667 Unforgettable Honeymoons, 435 Unger, William, 341 Uniform Franchise Offering Circular (UFOC), 109 Unigate, Ltd., 78 Union contracts, 114 Union Square Café, 475 United Nations, 227 Univenture Media Packaging, 530 Universal Tours, 50 Unlimited liability, 212 Unsegmented strategy, 194 UPS, 107, 542 U.S Chamber of Commerce, 631 U.S Commercial Service, 455 U.S Department of Commerce, 200, 432, 444, 447, 462 U.S Department of Labor, 506 U.S Export Assistance Centers (USEACs), 462 U.S Patent and Trademark Office (PTO), 385, 386 USEACs, 462 Utility patent, 386 V Validity, 509 Valkirs, Gunars, 206 Values, 50 Valuation, 113, 114, 563, 690–694 Valuation based on comparables, 691–693 Value-to-earnings ratio, 691 Variable inspection, 529 Variable pricing strategy, 406 Variables, types of, 193 Vehar, Jonathan, 477 Vehicular liability, 556 Veiga, John F., 476 Vellmure, Brian, 350 Ventura Transfer Co., 138 Venture capital, 315, 316 Venture capital firms, 316 Vérité Coffee, 19 Verizon Communications, 536 Vernon, Raymond, 448 Very Special Chocolates, 454 Virgin, 25 Virgin Galactic, 65 Virtual company, 246 VISA, 410 Visador Corporation, 329, 330 Vision Research Organization, 19 Vital Marketing, 477 Vitti, Gary, 624 Vizio, Inc., 298 Vo, Kera, 105 Voting control, 305 Vuitton, Louis, 49 W Waddevah, 399 Wage levels, 513–514 Wakefield, Thomas, 98 Wal-Mart, 18, 57, 102, 113, 122, 373, 390, 501, 536 Walk-ins, 503 Walker, Devra, 600 Walker Pharmacy & Gifts, 600 Walper, George, 327 Walsh, Steve, 505 Wang, William, 298 Ward, John L., 126, 136 Warranty, 382 Warren, Neil Clark, 180, 633 Watermarket Store, The, 85 Waterside Productions, 227 Watson, Thomas, 380 Waugh, Bill, 78 Web advertising, 431–435 Web logging, 253 Web sponsorship, 432 Weber, Bill, 428, 429 Website corporate, 432 design tips for, 432–434 e-commerce and, 249 employee recruitment using, 504 international trade leads and, 463 level of online presence and, 252, 435 monitoring competition through, 102, 185 promoting, 433, 435 WebWasher, 432 Weinroth, Adam, 253 Weiss, Carter, 260 Wellington, Mary Boone, 225 Weston, Graham, 612 Wettach, Megan, Wetzel, Elise, 478, 479 Wetzel, Rick, 478, 479 Wetzel’s Pretzels, 39 WFC, 102 Whann, Sandy, 550 What the market will bear pricing, 406 Wheeler, Scott, 505 Whispering Windows, 374 White Mountain Footwear, 380 Whiting, Ben, 223 Wilkinson, Huber, 252 Wilkinson, Jane, 252 Williams, Bob, 444 Wilson, Andy, 620, 621 Wilson, Ron L., II, 373 Windows Live Local, 76 Windows of Opportunity, 55 Wing Zone, 99, 100, 103, 104, 105, 106, 108 Winston, Tom, 50 Wish list, website, 434 Wittstock, Greg, 120 Wizzard Software, 20 Wolfe, Winston, 23, 25, 170, 277, 379 Women entrepreneurs, 14–15 Women’s Franchise Committee (WFC), 102 Won, Tia, 70 Wong, James, 277, 608 Woodward, Charlene, 431 Woodward, Larry, 431 Wordsworth, William, 473 Work teams, 476, 528 Workers’ compensation, 555, 561 Workforce diversity, 504–506 Working capital gross, 268–269 net, 274, 295 Working-capital cycle, 573–579 Working-capital management, 573, 664–666 cash flows and, 579–582 examples of, 575–579 World Is Flat, The, 17 World Trade magazine, 462 Wow! A Branding Company, 426 Wright, Bianca, 246 Wright, Perry, 353 WRS Group Ltd., 23 X Xerox, 72 XSAg.com, 540 Xtracycle, 55 Y Yahoo!, 69 Yes We Do Windows, 185 Yosha Enterprises Inc., 401 Young Presidents’ Organization, 490 Youngers, Wayne, 450 Youngers & Sons Manufacturing Company, Inc., 450 Youngs, Ross O., 530 Z Zahn, David, 166 Zane, Chris, 87 Zane’s Cycles, 87–88 Zennstrom, Niklas, 443 Zero Stage Capital, Inc., 339 Zillow.com, 77 Zoning ordinances, 247 Integrated Learning System Getting Started Getting Started Chapter Living the Dream 75 A Three-Word Revolution: “Buy It Used” © Portero.com Daniel Nissanoff, author of the book FutureShop, describes how eBay and other auction services are turning the world of business upside-down By his report, “Sixty million dollars in Rolex watches traded on eBay last year, and Rolex didn’t get a dime for that.” What does this mean? Out with the old (approach) and in with the new (way of doing business) Whereas the old standards of consumer culture socialized us to prefer to buy new products and keep them for a lifetime, the new eBay mindset says, “Used is fine, and I can sell it when I am done with it.” This opens the door to innovative business ideas that simply would not have worked under the old way of doing business Nissanoff himself is tapping into new opportunities created by the growing popularity of online exchanges and auctions In 2004, he co-founded Portero.com, an online resale company that deals in high-end jewelry, watches, fine housewares, collectibles, fashion accessories, and other luxury items Nissanoff believes that people are starting to ask questions that few had thought to ask before For example, you may choose the brand of shoes you purchase based, in good part, on the eBay value you expect it to have a year from now (when you anticipate selling the shoes) This new mindset could change the calculus of nearly all buying decisions, and savvy companies, like Portero, are positioning themselves to be leaders of that parade At the very least, the surge in online sales and auction activity could give you and your startup a great medium through which to reach a worldwide market And it’s only a few mouse clicks away! ▲ “Looking Back” Summaries in the text are organized by learning objective, so that students can easily check their grasp of each objective’s key concepts putting technology to work • To represent a good investment opportunity, a product or service must meet a real market need with respect to benefits offered and price • The fundamental requirements for a good business idea relate to market factors, competitive advantage, economics, management capability, and fatal flaws Give several reasons for starting a new business from scratch rather than buying a franchise or an existing business • Some entrepreneurs start businesses from scratch when they want to market a new product or service • Other entrepreneurs hope to tap into unique resources • Another reason that entrepreneurs start a new business from scratch is that they want to avoid undesirable features of existing companies • Still other entrepreneurs want the challenge of succeeding (or failing) on their own Distinguish among the different types and sources of startup ideas http://www.portero.com In his book Making Sense of Strategy, Tony Manning points out that there are two general approaches to evaluating business opportunities: inside-out and outside-in In other words, entrepreneurs can evaluate their own capabilities and then look at new products or services they might be able to offer to the market (inside-out), or they can first look for needs in the marketplace and then relate those opportunities to their own capabilities (outsidein).30 Of course, there is yet another approach—both inside-out and outside-in This is the path that we recommend and that we will discuss in greater detail later in this section It is important to understand the finer points of the two basic methods, since they can reveal business ideas that may otherwise be overlooked In addition, the perspective that an entrepreneur gains through these analyses can help identify opportunities with potential from among the many business ideas that are sure to surface Remember, an opportunity is not just an idea A business opportunity must grow from an idea with the potential to develop into an enterprise that has a reasonable chance • Type A startup ideas are concerned with products or services that exist but are not present in all markets • Type B ideas involve new or relatively new technology • Type C ideas are based on new and improved ways of performing old functions • Sources of startup ideas include personal experience, hobbies and personal interests, accidental discovery, and a deliberate search process Describe external and internal analyses that might shape new venture opportunities ▲ Numbered Icons in the text margins with their learning objectives mark where each objective is covered Looking AHEAD After studying this chapter, you should be able to Identify several factors that determine whether an idea for a new venture is a good investment opportunity Give several reasons for starting a new business from scratch rather than buying a franchise or an existing business Distinguish among the different types and sources of startup ideas Describe external and internal analyses that might shape new venture opportunities Explain broad-based strategy options and focus strategies It was just a 1985 Volvo with a lot of miles and an odd yellow paint job, but John was thrilled with his first car and grateful to his parents for the surprise gift With 163,000 miles of “character” behind it, his new ride was pretty worn out, but John was sure his bananacolored European classic was unusual enough to turn heads the next day at his high school Or was it? On the short drive to class the next morning, he passed two other Volvos just like his—same model, nearly the same color What was going on? Only two explanations were possible Either more of these cars had mysteriously appeared overnight, or John just hadn’t noticed them in the past Of course, there was no magic involved The only thing that had changed was John’s level of awareness of yellow Volvos The fact that he could now spot one at a moment’s glance is evidence that people can learn to sharpen their ability to recognize specific features of the world around them that they overlooked in the past—such as potential new business ideas The identification of potential new products or services that may lead to promising businesses is so central to the entrepreneurial process that it has its own name: opportunity recognition Business opportunities are like air—they are always around, even though you may not realize it What sets entrepreneurs apart from everyone else is their ability to see the potential businesses that others overlook and then take the bold steps necessary to get them up and running How they it? These entrepreneurs have uncommon observational skills and the motivation to act on what they see In some cases, the identification of a new business opportunity may be the result of an active search for possibilities or insights derived from personal experience or work background In other cases, the search for opportunities may be a less deliberate and more automatic process.1 Israel Kirzner, a well-known economist, proposed that entrepreneurs have a unique capability, which he called entrepreneurial alertness According to this view, entrepreneurs are not actually the source of innovative ideas; rather, they are simply “alert to the opportunities that exist already and are waiting to be noticed.”2 When these opportunities are aligned with an entrepreneur’s knowledge and aspirations, they are even more likely to be spotted While a discussion of the finer points of the entrepreneurial alertness concept is beyond the scope of this textbook, it is important to understand that thinking about the world around you and being aware of conditions that might lead to new business opportunities can really pay off.3 Try it and see what opportunities become apparent to you Over the next week or so, instead of just passing through life and enjoying the experience, take note of trends, changes, or situations that might support a new business You will probably be surprised at how many potential opportunities you can identify If you continue this rather deliberate search, over time you may find that it becomes more of a habit and mostly automatic And all it will cost you is a little time and mental effort ▲ Text “Looking Ahead” Learning Objectives break up the material into manageable portions for students and provide a structure for self-testing and review opportunity recognition Identification of potential new products or services that may lead to promising businesses entrepreneurial alertness Readiness to act on existing, but unnoticed, business opportunities ▲ 63 All Lecture Support Materials come together under their appropriate objectives in the Instructor’s Manual Lecture Notes, for thorough coverage of all objectives Annotations tell you the appropriate times to integrate PowerPoint slides into your lectures In addition, there are suggestions for additional instructional materials and suggested questions and answers related to the “Small Business School” videos ▲ PowerPoint 89 Looking BACK Identify several factors that determine whether an idea for a new venture is a good investment opportunity Sources: Max Chafkin, “Three Scary Words: ‘Buy It Used,’” Inc., Vol 28, No (September 2006), pp 29–31; http://www.portero.com/about_portero.html, accessed December 7, 2006; April Y Pennington, “Bid on It,” Entrepreneur, Vol 34, No (May 2006), p 20; Daniel Nissanoff, “The eBay Economy,” http://www washingtonpost.com/wp-dyn/content/discussion/2006/01/10/DI2006011000714.html, accessed January 26, 2006; and “FutureShop,” http://www.auctionculture.com, accessed December 7, 2006 Using Internal and External Analyses to Evaluate an Opportunity Chapter look at franchise and buyout opportunities and help you figure out whether you want to join a family-owned business These are all forms of entrepreneurship And what’s the next step in moving toward the launch of the business of your dreams? A business plan! Chapters through 12 will show you how to sort out the specifics of your business opportunity, from start to finish After showing the importance of the business plan and providing a model to get you started (Chapter 6), the rest of Part will help you plan for marketing (Chapter 7), organization (Chapter 8), location and physical facilities (Chapter 9), and financial requirements (Chapters 10 and 11) Looking down the road a bit, Chapter 12 even shows you how to plan for the eventual harvest of your venture Let’s continue the journey! Video • Business ideas can also be spurred by innovative thinking that can result from the following: borrowing ideas from existing products and services or other industries, combining businesses to create a market opening, focusing on a problem, responding to a trend, improving an existing product or service, making customers’ lives easier, meeting customer needs in a new way, expanding the market for a product or service, or tapping into new technologies Describe external and internal analyses that might shape new venture opportunities • Outside-in analysis considers the external environment, including the general, industry, and competitive environments • The major segments of the general environment are the macroeconomic, sociocultural, political/legal, global, technological, and demographic segments • The major forces that determine the level of competition within the industry environment are the threat of new competitors, the threat of substitute products or services, the intensity of rivalry among existing competitors, the bargaining power of suppliers, and the bargaining power of buyers • Opportunities arise for small businesses that are alert to changes in the general, industry, and competitive environments • Inside-out analysis helps the entrepreneur to understand the internal potentials of the business • Tangible resources are visible and easy to measure, whereas intangible resources are invisible and difficult to quantify • Capabilities represent the integration of several resources in a way that boosts the firm’s competitive advantage Small Business Management Online http://SBMonline.swlearning.com New to This Edition An exciting new feature of Small Business Management is the addition of a new Web site, Small Business Management Online Access to SBM Online is packaged with every new text to provide you with an array of learning tools to enrich your course experience Resources for Each Chapter A Practice Quiz has been created for each chapter to help you review and prepare for in-class quizzes and exams Each chapter also includes an eLecture, a flashbased tutorial reviewing key concepts Tools for the Future Creating a business plan for your own venture begins here with Business Plan Templates to get you started Videos SBM Online is also your portal to the Small Business School Videos, the PBS series on the web ... a Brand Identity Brand Identity Tangible Tangible Intangible Lou''s Lures Brand Mark Brand Name Brand Image Product and Supply Chain Management Chapter 14 379 The tangible components of brand... tangible components of brand identity are brand names and brand marks A brand name is a brand that can be spoken—like the name Dell A brand mark is a brand brand name that cannot be verbalized—like... 376 brand, p 378 brand image, p 378 brand name, p 379 brand mark, p 379 trademark, p 380 service mark, p 380 warranty, p 3 82 product strategy, p 3 82 product item, p 3 82 product line, p 3 82 product