Sunday, January 9, 2011

Second Year Students- Competency 4 Review

Business Plan:
  • Serves as a manual to help during the design, start up, and operating phases of the business.
  • Evaluates financial feasibility and allows an entrepreneur to see the possibility of success
  • helps to obtain financing and guide the opening of the business
  • is a written proposal/document that describes a business to potential investors and serves as a road map for the business.
  • Includes proposed marketing/promotion plan. This includes details of the proposed product/service and the proposed pricing policy. Also includes market analysis information, and the plan for product distribution. Proposals for advertising are included in the marketing plan.
  • The final decision to start a small business is made after completion of the business plan.
  • The proposed financing plan is the part of the business plan that includes information about repayment of borrowed funds, and a projected income/cash flow statement is included as well.
A balance sheet is created at the end of each day. It shows how much of the assets belong to the owner. Tells the entrepreneur what his/her business is worth.

The cash flow statement will show whether cash is available to pay the bills. It is one of the most important statements created at the end of each day. Expenses, net income or loss, and expenses are used to construct the cash flow statement.

When making sales projections, it is important to know the target customer-the consumers that will buy a specific product or service.

To make sales predictions based on a NEW product or service, there are many pricing variables.

Sales projections or forecasting may be done after conducting a market analysis.

In order to make a profit, MOST businesses that purchase or manufacture goods for resale use markup.
Cost + markup = price is the formula for the basic markup concept.
An item that costs $20 with a 50% markup will sell for $30.
If an item is marked up 100% above cost, the price will be double.
With 100% markup and 1 cent removed to give the impression of bargain prices, the retail price of an item that costs $20 wholesale is $39.99.
In pricing, a break even analysis can help a business by showing how many items must be sold to break even.
Fixed and variable expenses determine the price required to make a profit.
Fixed expenses do not change with the number of items produced. Rent is a fixed expense.
If a price markdown is taken, more items must be sold to reach the break even point.
To calculate the break even point, divide fixed costs by (variable costs subtracted from the selling price). If the selling price is $6, variable costs are $2, and fixed costs are $200, fifty items would have to be sold to break even. 200 divided by 4 is 50.

Mail-order catalogs/online retailing are most effective as a profit maker. Very little expenses compared to a retail location.

Product development is moving from idea to design to model. It is also the highest risk area of start-up for a small business. A prototype is a working model of a product.
Even though it is very expensive initially, automation can cut production time, reduce errors, and simplify procedures.

To select a business site, it is important to refer to the area's demographics: basic objective descriptive classifications of consumers, such as their age, sex, income, education, size of household, ownership of home, etc. Opinions and attitudes are NOT demographics.
An area with a growing economic base is important when selecting a site for a new business.
Number and size of competing businesses are a good criteria for selecting a retail business site.
Lower taxes: an incentive offered by a community for new enterprises
Access to supplies is a physical layout planning consideration for a manufacturing business.
Location of competition is critical to consider when selecting a location for a new business.

To help meet future financial goals and objectives, a business should prepare a budget.

Product standards are developed to benefit the consumer. (Think Flammable Fabrics Act)
A business uses quality control to verify and maintain the desired standards in a product or service.
Quality control is a responsibility of the entire production team.
An Inspector checks goods to ensure quality control.

Distribution is the process of getting merchandise to the proper locations.
Many jobs are available in the area of product distribution; most are paid by hourly wages.
How and where products are offered to customers is the part of distribution known as place.
Indirect distribution is the channel that delivers a product through wholesalers.
Direct distribution is the channel that moves a product from producer to customer with no one in between.
A primary use of floor space in a retail business facility is selling.
Logistics are the details of the product's movement from the manufacturer to the consumer.

Outsourcing: the process of hiring specialists to do specific work, rather than use company employees.
Outsourcing provides opportunities for an entrepreneur to supply services to other companies.

Marketing objectives: Goals
Place is the part of the marketing mix that involves delivery of goods and services to the customer.
Package: Physical container or wrapper that holds the product
Label: part of the product's package used to present information.

Capitalism: free enterprise system
Entrepreneur: Self-employed
Target Market: specific group
Investment capital: Money
Policy: General statements of intent
Trade associations: provide information about specific industries.
Feasibility analysis: process used to test a business idea.
"The customer is always right": customer complaint motto used by most businesses.
Technical skill: involves the use of tools, equipment, procedure, and techniques
If a person wants to start a small business, math skills will help calculate profits and establish record keeping.
Job description: a specific statement that describes the responsibilities of an individual employee and who the employee reports to; describes the objectives of the job and its duties and responsibilities.
Management-by-objectives: a type of scheduling that involves employees setting their own objectives and gauging their own progress.
An effective time management technique is to delegate work to others.

Perpetual inventory is used for accurate and instantaneous accounting of product by warehouses or storage facilities.
Manufacturers use the just-in-time inventory system for effective and minimal inventory.
Visual inventory could be used by a small produce store for a quick inspection.

Portfolios are used to evaluate student work. It should be graded by the student and teacher. A DISADVANTAGE of using a portfolio is more time and work are involved in preparing one. Self-evaluation of the portfolio provides excellent feedback to the student.
Portfolios represent a cooperative effort between students, teacher, and parents.

When a class is beginning to discuss the kind of project to make and sell, a primary consideration would be resources available.
Make the decision if a business is possible or within reason after exploring whether a product or business service is feasible. Same thing for ideas for a class project.

If the class project is a 6"x60" scarf, the fabric is 60" wide @ $6/yd. It would be possible to get 6 scarves per yard (36" divided by 6 = 6). That is a cost of $1 per scarf.
If the class plans to sell them at the ballgame, if they aren't finished by the pep rally, they need to stay in class and finish.
If an order form is written incorrectly, call the customer and explain the mistakes before completing the order.
Cold weather may increase sales.
If a student is not available to market scarves at games, other students will volunteer to take their place for extra credit.
Home ballgames would be the BEST market for selling the scarves.

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