Small Business Management: Launching & Growing Entrepreneurial Ventures, Twentieth Edition
By Justin G. Longenecker, J. William Petty, Leslie E. Palich and Frank Hoy
Contents:
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