Small Business Management: Launching & Growing Entrepreneurial Ventures, 20th Edition PDF by Justin G Longenecker, J William Petty, Leslie E Palich and Frank Hoy


Small Business Management: Launching & Growing Entrepreneurial Ventures, Twentieth Edition

By Justin G. Longenecker, J. William Petty, Leslie E. Palich and Frank Hoy

Small Business Management: Launching & Growing Entrepreneurial Ventures, Twentieth Edition


Part 1

Entrepreneurship: A World of Opportunity

Chapter 1 The Entrepreneurial Life 1

Spotlight on Small Business: Energy Solutions

of Texas 2

1-1 Small Size, Big Significance 3

1-2 Small Business and Entrepreneurship 4

1-2a What Is a Small Business? 4

Living the Dream Always Go the Extra Mile 5

1-2b What Is Entrepreneurship? 6

Living the Dream Pursuing Your Calling 9

Living the Dream Don’t Let Challenges Stand in

Your Way 11

1-3 Can a Small Company Really Compete with

Big Companies? 12

1-3a Commitment to Integrity 12

1-3b Customer Focus 12

1-3c Quality Performance 12

Living the Dream If You See a Problem, Fix It 13

1-3d Innovation 13

1-3e Niche Markets 14

1-4 Motivations for Owning a Business 14

1-4a Types of Entrepreneurial Motivations 14

1-4b Influencers of the Decision to Own a Business 18

1-4c Why Your Perceptions Matter 18

1-5 What Do You Want Your Legacy to Be? 21

Ready to Begin? 22

Chapter 2 Integrity, Ethics, and Social

Entrepreneurship 28

Spotlight on Small Business: Bambino’s Frozen

Baby Food 29

2-1 What is Integrity? 30

2-2 Integrity and the Interests of Major

Stakeholders 31

2-2a The “Big Three” Stakeholders—Owners,

Customers, and Employees 32

2-2b Social Responsibility and Small Business 34

2-2c Integrity and Governmental Regulations 35

Living the Dream An Entrepreneur Who Leads

with Heart 36

2-3 The Challenges and Benefits of Acting with

Integrity 37

2-3a Small Companies and the Legitimacy Lie 37

2-3b Integrity Online 39

2-3c Integrity and Doing Business Abroad 41

2-3d The Integrity Edge 41

2-4 Building a Business with Integrity 42

2-4a The Foundations of Integrity 42

2-4b Leading with Integrity 43

2-4c An Ethical Organizational Culture 43

2-4d Better Business Bureaus 44

2-4e The Ethical Decision-Making Process 45

2-5 Social Entrepreneurship: A Continuing Trend 47

2-5a Social Entrepreneurship and the Triple

Bottom Line 47

2-5b Small Business and the Natural Environment 48

Living the Dream Don’t Let Your Landscaper Get

Your Goat! 49

Part 2

Starting from Scratch or Joining an Existing Business

Chapter 3 Starting a Small Business 57

Spotlight on Small Business: HARA Clean

Beauty 58

3-1 Developing Start-Up Ideas 59

3-1a Types of Start-Up Ideas 60

3-1b Common Sources of Start-Up Ideas 61

3-2 Using Innovative Thinking to Identify

Business Ideas 63

3-2a Identify “Pain Points” That Open the Door

to New Possibilities 63

3-2b Take a Cue from Existing Products or Services 63

3-2c Find New Ways to Deliver Products and Services 65

3-2d Tap into the Potential of Emerging Possibilities 67

Living the Dream More and More Entrepreneurs Are

Joining the Club 68

3-3 Using Internal and External Analyses to

Assess New Business Ideas 69

3-3a Outside-In Analysis 69

Living the Dream Delivering on Promises during a

Pandemic 73

3-3b Inside-Out Analysis 74

3-3c Integrating Internal and External Analyses 75

3-4 Selecting Strategies That Capture Opportunities 77

3-4a Broad-Based Strategy Options 77

3-4b Focus Strategies 78

3-5 Screening New Business Ideas 79

3-6 Is Your Start-Up Idea Feasible? 81

3-6a Market Potential 82

3-6b Industry Attractiveness 84

3-6c New Venture Leadership 84

Chapter 4 Franchises and Independent

Contracting in the Gig and Sharing Economies 91

Spotlight on Small Business: Duck Donuts 92

4-1 What Is a Franchise? 93

4-1a Franchising Terminology 93

4-1b The Impact of Franchising 94

4-2 The Pros and Cons of Franchising 95

4-2a The Pros of Franchising 95

4-2b The Cons of Franchising 96

4-2c The Costs of Being a Franchisee 97

4-3 Evaluating Franchise Opportunities 98

4-3a Selecting a Franchise 98

4-3b Investigating the Potential Franchise 98

4-3c Becoming a Franchisor 99

Living the Dream Building a Business and Opening

the Door for Others 100

4-3d Legal Issues in Franchising 101

4-4 Independent Contracting in the Gig

and Sharing Economies 103

4-4a Defining Independent Contractors 103

4-4b Defining the Gig and Sharing Economies 104

Living the Dream College Students in the Gig and

Sharing Economies 105

4-4c Independent Contracting versus Employment 107

4-4d The Future of the Gig and Sharing Economies 107

Chapter 5 The Family Business and Buyouts 113

Spotlight on Small Business: Dietz & Watson 114

5-1 What Is a Family Business? 115

5-1a Family and Business Overlap 116

5-1b Advantages and Disadvantages of a

Family Business 117

5-2 Family Roles and Relationships 118

5-2a Co-Preneurs 118

5-2b Parents as Founders 118

5-2c Children 119

5-2d Sibling Cooperation, Sibling Rivalry 119

Living the Dream A Sweet Sibling Success Story 120

5-2e In-Laws In and Out of the Business 121

5-2f The Entrepreneur’s Partner 122

5-3 Good Governance in the Family Business 122

5-3a Nonfamily Employees in a Family Firm 122

5-3b Family Retreats 123

5-3c Family Councils 124

5-3d Family Business Constitutions 124

5-4 Management and Ownership Succession 125

5-4a Available Family Talent 125

5-4b Preparing for Succession 125

5-4c Transfer of Ownership 126

5-5 Buying an Existing Business 127

5-5a Reasons for Buying an Existing Business 127

Living the Dream Buying an Existing Business to

Satisfy the Need for Independence 128

5-5b Finding a Business to Buy 129

5-5c Investigating and Evaluating Available Businesses 130

5-5d Quantitative Factors in Valuing a Business 131

5-5e Nonquantitative Factors in Valuing a Business 131

5-5f Negotiating and Closing the Deal 132

Part 3

Developing the New Venture Business Plan

Chapter 6 Visualizing Your Dream: The

Business Model and the Business Plan 138

Spotlight on Small Business: Maternova 139

6-1 The Business Model and the Entrepreneur 140

6-1a What Is a Business Model? 140

6-1b Creating a Business Model 140

6-2 Think Lean Start-up 144

6-3 The Purpose and Form of a Business Plan 144

6-3a What Is a Business Plan? 144

6-3b Who Cares about the Business Plan? 145

6-3c Execution Matters 146

6-3d What Form Will the Business Plan Take? 146

Living the Dream Jania and Desmin Daniels Believe

in Writing a Business Plan 147

6-4 Preparing a Business Plan: Content, Format,

and Quality 148

6-4a Cover Page 148

6-4b Table of Contents 149

6-4c Executive Summary (Overview) 150

6-4d Company Description 150

6-4e Industry, Target Customer, and Competitor Analysis 151

6-4f Product/Service Plan 151

6-4g Marketing Plan 151

6-4h Operations and Development Plan 152

6-4i Management Team Section 152

6-4j Critical Risks Section 152

6-4k Offering 153

6-4l Exit Strategy 153

6-4m Financial Plan 154

6-4n Appendix of Supporting Documents 154

6-5 Writing a Business Plan 155

6-5a Analyze the Market Thoroughly 155

6-5b Recognize Your Competition 155

6-5c Provide Solid Evidence for Any Claims 155

6-5d Think Like an Investor 155

6-5e Identify Potential Fatal Flaws 156

6-5f Pay Attention to Details 156

Living the Dream Writing a Sweet Business Plan 157

6-6 Pitching to Investors 158

Chapter 7 The Marketing Plan 163

Spotlight on Small Business: Barry Moltz 164

7-1 What Is Small Business Marketing? 165

7-1a Having a Marketing Orientation Makes a Difference 165

7-1b Choosing a Consumer Approach 166

7-2 The Formal Marketing Plan 166

7-2a Goals 166

7-2b Value Propositions 167

7-2c Competition 167

7-2d Customer Segments 168

7-2e Marketing Strategy 168

Living the Dream Promoting a Blissful Product 170

7-2f Metrics 172

7-3 Understanding Potential Target Markets 173

7-3a Market Segmentation and Its Variables 173

7-3b Marketing Strategies Based on Segmentation

Considerations 174

7-4 Finding Customers 175

7-4a Matching Value Propositions to Customer Segments 175

Living the Dream Building a Strong Network 177

7-4b Continuously Improving the Marketing Plan

through Feedback 177

7-5 Estimating Market Potential 179

7-5a The Sales Forecast 179

7-5b Limitations of Forecasting 179

Chapter 8 The Organizational Plan: Teams,

Legal Structures, Alliances, and Directors 184

Spotlight on Small Business: Bubbakoo’s Burritos 185

8-1 Building a Management Team 186

8-1a Achieving Balance 187

8-1b The Solo Start-up Is Still an Option 188

8-1c Expanding Social Networks 188

Living the Dream When the Start-Up Game Is Best

Played as a Team Sport 189

8-2 Common Legal Forms of Organization 191

8-2a The Sole Proprietorship Option 191

8-2b The Partnership Option 193

8-2c The C Corporation Option 196

8-3 Considerations in Choosing an

Organizational Form 197

8-3a Initial Organizational Requirements and Costs 198

8-3b Liability of Owners 198

8-3c Continuity of Business 199

8-3d Transferability of Ownership 199

8-3e Management Control 200

8-3f Attractiveness for Raising Capital 200

8-3g Income Taxes 200

8-4 Specialized Legal Forms of Organization 201

8-4a The Limited Partnership 201

8-4b The S Corporation 201

8-4c The Limited Liability Company 201

8-4d The Professional Corporation 202

8-4e The Nonprofit Corporation 202

8-4f The Benefit Corporation 203

8-5 Forming Strategic Alliances 204

8-5a Strategic Alliances with Large Companies 204

8-5b Strategic Alliances with Small Companies 205

8-5c Setting up and Maintaining Successful

Strategic Alliances 206

8-6 Making the Most of a Board of Directors 207

8-6a Selection of Directors 207

8-6b Contributions of Directors 208

8-6c Compensation of Directors 209

8-6d An Alternative: An Advisory Board 209

Chapter 9 The Location Plan 217

Spotlight on Small Business: On Location Tours 218

9-1 Locating the Start-up in a Traditional Physical

Facility 219

9-1a The Importance of the Location Decision 220

9-1b Key Factors in Selecting a Good Location 220

9-2 Designing and Equipping the Physical Facility 226

9-2a Challenges in Designing the Physical Facility 226

9-2b Challenges in Equipping the Physical Facility 227

9-2c Business Image 229

9-3 Locating the Start-up in the Entrepreneur’s

Home 229

Living the Dream There’s Something Fishy about

This Home-Based Business 230

9-3a The Attraction of Home-Based Businesses 231

9-3b The Challenges of Home-Based Businesses 232

9-4 E-Commerce: Locating a Start-up Online 233

9-4a Benefits of E-Commerce for Start-ups 233

9-4b E-Commerce Business Models 234

Living the Dream Getting Fired Up about Podcasting 241

9-4c Online Businesses and the Part-Time Start-up

Advantage 242

Chapter 10 Understanding a Firm’s

Financial Statements 249

Spotlight on Small Business: G&P Properties 250

The Lemonade Kids 250

Setting Up the Business 251

The First Saturday 252

Collecting Accounts Receivable 253

Planning for the Next Saturday 253

The Second Saturday of Business 254

10-1 The Income Statement 254

10-1a An Overview of the Income Statement 254

10-1b ACE, Inc.: The Income Statement Illustrated 255

10-2 The Balance Sheet 257

Living the Dream Avoiding the Path to Failure 258

10-2a An Overview of the Balance Sheet 258

10-2b ACE, Inc.: The Balance Sheet Illustrated 262

10-3 The Statement of Cash Flows 263

Living the Dream Understand Your Numbers, and

Take Important Relationships with You 264

10-3a Profits versus Cash Flows 265

10-3b An Overview of Measuring a Firm’s Cash Flows 265

10-3c ACE, Inc.: Statement of Cash Flows Illustrated 266

10-4 Evaluating a Firm’s Financial Position 268

10-4a Analyzing Financial Statements: An Overview 268

10-4b ACE, Inc.: Financial Position Analysis Illustrated 269

Chapter 11 Forecasting Financial

Requirements 276

Spotlight on Small Business: The Big Smoke 277

11-1 The Purpose of Financial Forecasting 277

11-2 Forecasting Profitability 278

11-2a An Overview of Forecasting Profitability 278

11-2b D&R Products, Inc.: Forecasting Profitability

Illustrated 279

11-3 Forecasting Asset and Financing Requirements 282

Living the Dream Financial Planning Makes

a Difference at REEcycle 283

11-3a An Overview of Determining Asset Requirements 285

11-3b D&R Products, Inc.: Determining Asset

Requirements Illustrated 286

11-3c An Overview of Determining Financing

Requirements 287

11-3d D&R Products, Inc.: Determining Financing

Requirements Illustrated 288

11-4 Forecasting Cash Flows 291

11-4a An Overview of Forecasting Cash Flows 291

11-4b D&R Products, Inc.: Forecasting Cash Flows

Illustrated 292

11-4c An Overview of the Cash Budget 293

11-4d D&R Products, Inc.: The Cash Budget Illustrated 293

11-5 Use Good Judgment When Forecasting 295

Chapter 12 Financing the Small Business 301

Spotlight on Small Business: Ready, Set, Food! 302

12-1 Firm Characteristics and Sources of Financing 303

12-1a A Firm’s Economic Potential 304

12-1b Company Size and Maturity 304

12-1c The Nature of a Firm’s Assets 304

12-1d Owner Preferences for Debt or Equity 304

12-2 Choosing Between Debt and Equity Financing 305

12-2a Potential Profitability 305

12-2b Financial Risk 307

12-2c Voting Control 308

12-3 Sources of Small Business Financing:

The Starting Point 309

12-3a Personal Savings 310

12-3b Friends and Family 311

12-3c Credit Cards 311

12-4 Bank Financing 312

12-4a Types of Bank Loans 312

12-4b Understanding a Banker’s Perspective 313

12-4c A Banker’s Information Requirements 314

12-4d Selecting a Banker 316

12-4e Negotiating the Loan 316

12-5 Business Suppliers and Asset-Based Lenders 318

12-5a Accounts Payable (Trade Credit) 318

12-5b Equipment Loans and Leases 318

12-5c Asset-Based Lending 319

12-6 Private Equity Investors 320

12-6a Business Angels 320

12-6b Venture Capital Firms 321

Living the Dream Collaborative Lending 322

12-7 Crowdfunding 323

12-8 Government Loan Programs 324

12-8a The Small Business Administration 324

12-8b State and Local Government Assistance 325

12-8c Community-Based Financial Institutions 326

12-9 Additional Sources of Financing 326

12-9a Large Corporations 326

12-9b Stock Sales 326

Chapter 13 Planning for the Harvest 332

Spotlight on Small Business: Will There Still

Be Life after Selling Your Business? 333

13-1 The Importance of the Harvest 334

13-2 Methods of Harvesting a Business 335

13-2a Selling the Firm 335

13-2b Distributing the Firm’s Cash Flows 339

13-2c Conducting an Initial Public Offering (IPO) 339

Living the Dream Finishing Well 340

13-2d Private Equity Recapitalization 342

13-3 Firm Valuation and Payment Methods 343

13-3a The Harvest Value 343

13-3b The Method of Payment 344

13-4 Developing an Effective Harvest Plan 344

13-4a Anticipate the Harvest 344

13-4b Expect Conflict—Emotional and Cultural 345

13-4c Get Good Advice 346

13-4d Understand What Motivates You 346

13-4e What’s Next? 347

Part 4

Focusing on the Customer: Marketing Growth Strategies

Chapter 14 Building Customer Relationships 352

Spotlight on Small Business: Jimyz Automotive 353

14-1 What Is Customer Relationship Management? 354

14-1a Benefits of CRM to a Small Firm 355

14-1b Essential Materials for a CRM Program 355

14-2 Outstanding Customer Relationships through

Extraordinary Service 356

14-2a Managing Customer Satisfaction 356

Living the Dream Excellent Customer Service Can Be

a Calling 359

14-2b Evaluating a Firm’s Customer Service Health 360

14-3 Using Technology to Support Customer

Relationship Management 363

14-3a Choosing a CRM Software Program 363

14-3b Choosing an Alternative CRM System 364

14-3c Creating a Customer Database 366

14-3d Using a Customer Database 367

14-3e Data Use and Privacy Concerns 368

14-4 Customers as Decision Makers 369

14-4a Need Recognition 370

14-4b Information Search and Evaluation 370

Living the Dream Thriving during a Pandemic,

Naturally 371

14-4c Purchase Decision 372

14-4d Post-Purchase Evaluation 372

14-5 Understanding Psychological Influences

on Customer Behavior 374

14-5a Needs 374

14-5b Perceptions 374

14-5c Motivations 375

14-5d Attitudes 375

14-6 Understanding Sociological Influences

on Customer Behavior 375

14-6a Cultures 376

14-6b Social Classes 376

14-6c Reference Groups 376

14-6d Opinion Leaders 377

Chapter 15 Product Development and

Supply Chain Management 384

Spotlight on Small Business: Chillhouse 385

15-1 To Grow or Not to Grow 386

15-2 Innovation: A Path to Growth 388

15-2a Gaining a Competitive Advantage 388

15-2b Achieving Sustainability 389

Living the Dream Business for Dummies 391

15-3 The Product Life Cycle and New Product

Development 392

15-3a The Product Life Cycle 392

15-3b The New Product Development Process 393

15-4 Building the Total Product 396

15-4a Branding 396

15-4b Packaging 399

15-4c Labeling 400

15-4d Warranties 400

15-5 Product Strategy 400

15-5a Product Marketing versus Service Marketing 401

15-5b Product Strategy Options 402

15-6 The Legal Environment 403

15-6a Consumer Protection 403

15-6b Protection of Intellectual Property 404

15-7 Supply Chain Management 406

15-7a Intermediaries 407

15-7b Channels of Distribution 407

Living the Dream “Meating” the Specific Needs

of Customers 409

15-7c The Scope of Physical Distribution 410

Chapter 16 Pricing and Credit Decisions 417

Spotlight on Small Business: The Barefoot Spirit 418

16-1 Setting a Price 419

16-1a Know the Costs When Setting Your Prices 420

16-1b Pricing Starting with Customers 421

Living the Dream You Can Have My Business Plan! 422

16-2 Applying a Pricing System 423

16-2a Break-Even Analysis 423

16-2b Markup Pricing 425

16-3 Selecting a Pricing Strategy 426

16-3a Penetration Pricing 427

16-3b Price Skimming 427

16-3c Follow-the-Leader Pricing 427

16-3d Variable Pricing 428

16-3e Price Lining 428

16-3f Optional Product and Service Pricing 428

Living the Dream Pricing to Grow 429

16-4 Offering Credit 429

16-4a Benefits of Credit 430

16-4b Factors That Affect Selling on Credit 430

16-4c Types of Credit 431

16-5 Managing the Credit Process 433

16-5a Evaluation of Credit Applicants 433

16-5b Sources of Credit Information 434

16-5c Aging of Accounts Receivable 435

16-5d Billing and Collection Procedures 436

16-5e Credit Regulation 437

Chapter 17 Promotional Planning 441

Spotlight on Small Business: The Dyrt 442

17-1 Promotion Is Communication 443

17-1a The Promotional Mix 443

17-1b The Costs of Promotion 444

17-1c Promoting the Characteristics of Products

or Services 444

17-1d Learning from Competitors 444

17-1e Listening to Customers 444

17-2 Determining the Promotional Budget 445

17-2a Budgeting a Fixed Percentage of Sales 445

17-2b Spending Whatever Is Left Over 445

17-2c Spending at the Same Level as Competitors 445

17-2d Determining How Much Is Needed to Achieve

Objectives 446

17-3 Promotion Using Websites and

Social Media 446

17-3a The Small Business Website 446

17-3b Social Media 448

17-3c Additional Ways to Promote Your Product

or Service on the Internet 448

17-4 Personal Selling in the Small Firm 451

Living the Dream Matching the Salesperson to

the Customer 452

17-4a The Importance of Product Knowledge 452

17-4b The Sales Presentation 452

17-4c Cost Control in Personal Selling 454

17-4d The Compensation of Salespeople 455

17-5 Advertising Practices 456

17-5a Advertising Objectives 456

17-5b Types of Advertising 456

17-5c Advertising Specialists 457

17-5d Frequency of Advertising 457

17-5e Where to Advertise 458

Living the Dream Playing Games and

Watching Ads 459

17-6 Sales Promotion 459

17-6a Specialties 460

17-6b Trade Show Exhibits 460

17-6c Coupons 461

17-6d Publicity 461

17-6e When to Use Sales Promotion 462

Chapter 18 Global Opportunities

for Small Businesses 467

Spotlight on Small Business: CrateBind 468

18-1 Small Businesses as Global Enterprises 469

18-2 The Primary Forces Driving Global Businesses 471

18-2a Expanding Markets 472

18-2b Gaining Access to Resources 474

18-2c Cutting Costs 475

18-2d Capitalizing on Special Features of Location 477

18-3 Strategy Options for Global Firms 478

18-3a Exporting 478

18-3b Importing 480

18-3c Foreign Licensing 481

Living the Dream Importing Satisfaction to New

Yorkers with a Taste for Authentic Asian Veggies 482

18-3d International Franchising 483

Living the Dream A Small Company That Refused

to Get Mugged by Counterfeiters 484

18-3e International Strategic Alliances 485

18-3f Locating Facilities Abroad 486

18-4 Challenges to Global Businesses 487

18-4a Political Risk 487

18-4b Economic Risk 487

18-4c The Ease of Doing Business Index 488

18-5 Assistance for Global Enterprises 489

18-5a Analyzing Markets and Planning Strategy 489

18-5b Connecting with International Customers 490

18-5c Financing for Small Global Enterprises 492

Part 5

Managing Growth in the Small Business

Chapter 19 Professional Management

and the Small Business 499

Spotlight on Small Business: Learning to Lead

at ASRV Sportswear 500

19-1 Small Business Leadership 501

19-1a What Is Leadership? 501

19-1b Leadership Qualities of Founders 501

19-1c What Makes a Leader Effective? 502

19-1d Leadership Styles 503

19-1e Shaping the Culture of the Organization 504

19-2 The Small Firm Management Process 506

19-2a From Founder to Professional Manager 506

19-2b Firm Growth and Managerial Practices 508

19-3 Managerial Responsibilities of Entrepreneurs 510

19-3a Planning Activities 510

19-3b Creating an Organizational Structure 511

19-3c Delegating Authority 512

Living the Dream You May Not Be the Best “You”

After All: Charlie Chaplin 514

19-3d Controlling Operations 515

19-3e Communicating Effectively 515

Communication Tools 516

19-3f Negotiating 517

19-4 Personal Time Management 519

19-4a The Problem of Time Pressure 519

19-4b Time Savers for Busy Managers 519

19-5 Outside Management Assistance 521

19-5a The Need for Outside Assistance 521

19-5b Sources of Management Assistance 522

Living the Dream When You’re Doggin’ It in

the Game of Small Business, It’s Important

to SCORE 523

Chapter 20 Managing Human Resources 531

Spotlight on Small Business: Kitu Life, Inc. 532

20-1 Recruiting Personnel 533

20-1a The Need for Quality Employees 534

20-1b The Lure of Entrepreneurial Firms 534

Living the Dream What to Do When a Bad-Fruit

Start-Up Runs Out of Juice 536

20-1c Sources of Employees 537

20-1d Diversity in the Workforce 540

20-1e Job Descriptions 541

20-2 Evaluating Prospects and Selecting Employees 542

20-2a Step 1: Use Application Forms 542

20-2b Step 2: Interview the Applicants 542

20-2c Step 3: Check References and Other

Background Information 544

20-2d Step 4: Test the Applicants 546

20-2e Step 5: Require Physical Examinations 546

20-3 Training and Developing Employees 547

20-3a Basic Components of Training and

Development 547

20-3b Orientation for New Personnel 548

20-3c Employee Training 548

20-3d From Training to Implementation 550

20-3e Development of Managerial and Professional

Employees 551

20-4 Compensation and Incentives for Employees 552

20-4a Wage and Salary Levels 552

20-4b Financial Incentives 553

20-4c Stock Incentives 553

20-4d Employee Benefits 554

Living the Dream Sorry Charlie, Your Unlimited

Vacation Plans Have Been Canceled 555

20-5 Special Issues in Human Resource Management 556

20-5a Co-Employment Agreements 556

20-5b Legal Protection of Employees 557

20-5c Labor Unions 559

20-5d Formalizing Employer–Employee Relationships 559

20-5e The Need for a Human Resource Manager 560

Chapter 21 Managing Small Business

Operations 567

Spotlight on Small Business: Roscoe

Village Bikes 568

21-1 Competing with Operations 569

21-2 The Operations Process 570

21-2a The Operations Process in a Service Business 570

21-2b The Operations Process in a Manufacturing

Business 572

21-2c Capacity Considerations 573

21-2d Planning and Scheduling 573

Living the Dream Some Employees Always Have a

Chip on Their Shoulders—Or in Their Bellies 574

21-3 Inventory Management and Operations 575

21-3a Objectives of Inventory Management 576

21-3b Inventory Cost Control 577

21-3c Inventory Recordkeeping Systems 579

21-4 Quality and Operations Management 579

21-4a Quality as a Competitive Tool 579

21-4b The Customer Focus of Quality Management 581

21-4c “The Basic Seven” Quality Tools 583

21-4d Quality Inspection Versus Poka-Yoke 584

21-4e Statistical Methods of Quality Control 584

21-4f International Certification for Quality

Management 585

21-4g Quality Management in Service Businesses 586

21-5 Purchasing Policies and Practices 586

21-5a The Importance of Purchasing 586

21-5b Measuring Supplier Performance 589

21-5c Building Good Relationships with Suppliers 590

21-5d Forming Strategic Alliances 590

21-5e Forecasting Supply Needs 591

21-5f Using Information Systems 591

21-6 Lean Production and Synchronous Management 592

21-6a Lean Production 592

21-6b Synchronous Management 593

Living the Dream Some Small Business Problems Can

Be Cutting! 594

Chapter 22 Managing the Firm’s Assets 601

Spotlight on Small Business: Nathan Perry,

founder, Cutting Edge Elite, Inc. 602

22-1 The Working Capital Cycle 603

22-1a The Timing and Size of Working

Capital Investments 604

22-1b Examples of Working Capital Management 605

22-2 Managing Cash Flows 610

22-3 Managing Accounts Receivable 611

22-3a How Accounts Receivable Affect Cash 611

22-3b The Life Cycle of Accounts Receivable 611

22-3c Accounts Receivable Financing 613

22-4 Managing Inventory 614

22-4a Reducing Inventory to Free Cash 614

22-4b Monitoring Inventory 614

22-4c Controlling Stockpiles 615

Living the Dream Taking Stock of Inventory

Management 615

22-5 Managing Accounts Payable 616

22-6 Cash Conversion Period Revisited 617

22-7 Capital Budgeting Techniques 618

22-7a Accounting Return on Investment 619

22-7b Payback Period 620

22-7c Discounted Cash Flows 620

22-8 Capital Budgeting Practices in Small Firms 621

Chapter 23 Managing Risk 627

Spotlight on Small Business: Collin Street Bakery 628

23-1 What Is Business Risk? 629

23-2 Basic Types of Pure Risk 629

23-2a Property Risks 629

23-2b Liability Risks 630

23-2c Personnel Risks 634

23-3 Risk Management 635

23-3a The Process of Risk Management 635

23-3b Risk Management in the Small Business 636

23-4 Basic Principles of a Sound Insurance Program 638

23-5 Common Types of Business Insurance 638

23-5a Property and Casualty Insurance 638

Living the Dream Duffy Group 642

23-5b Life and Health Insurance 643

Living the Dream Ten Security Tips for Small

Businesses 644

Cases/Video Cases 649

Index 702

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