Vous êtes sur la page 1sur 17

Eleventh Edition

Global Edition

Entrepreneurship and
Small

Business

Effective

Management

Norman M. Scarborough
Presbyterian College

Jeffrey R. Cornwall
Belmont University

PEARSON
Boston Columbus Indianapolis New York San Francisco Upper Saddle River
Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto
Delhi Mexico City So Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

Contents

Preface 23
Acknowledgments 26
SECTION I
Chapter 1

The Rewards and Challenges


of Entrepreneurship 29
Entrepreneurs: The Driving Force Behind Small
Business 29
The Role of the Entrepreneur 30
What Is an Entrepreneur? 33
ENTREPRENEURSHIP IN ACTION Space: The Next Entrepreneurial
Frontier? 37
How to Spot Entrepreneurial Opportunities 38
Monitor Trends and ExploitThem Early On 38
Traveland Be Inspired 39
Take a Different Approach to an Existing Market 39
Put a New Twist on an Old Idea 39
Look for Creative Ways to Use Existing Resources 40
Realize That Others Have the Same Problem You Do 40
Take Time to Play 40
Notice What Is Missing 40
The Benefits of Owning a Small Business 41
Opportunity to Gain Control over Your Own Destiny 41
Opportunity to Make a Difference 41
Opportunity to Reach Your Fll Potential 42
Opportunity to Reap Impressive Profits 42
Opportunity to Contribute to Society and Be Recognized for Your Efferts 42
Opportunity to Do What You Enjoy Ding 43
The Potential Drawbacks of Entrepreneurship 43
Uncertainty of Income 43
Risk of Losing Your Entire Invested Capital 43
Long Hours and Hard Work 44
Lower Quality of Life Until the Business Gets Established 44
High Levels of Stress 44
Complete Responsibility 45
Discouragement 45
Why the Boom: The Fuel Feeding the Entrepreneurial Fire 45
Entrepreneurs as Heroes 45
Entrepreneurial Education 45
Shift to a Service Economy 45
Technology Advancements 45
Outsourcing 46
Independent Lifestyle 46
E-Commerce, the Internet, and Mobile Computing 46
International Opportunities 47
IN THE ENTREPRENEURIAL SPOTLIGHT Collegiate Entrepreneurs 47

CONTENTS
The Cultural Diversity of Entrepreneurship 48
Young Entrepreneurs 48
Women Entrepreneurs 49
Minority Enterprises 50
Immigrant Entrepreneurs 51
Part-Time Entrepreneurs 52
Home-Based Business Owners 52
Family Business Owners 52
Copreneurs 54
Corporate Castoffs 55
Corporate "Dropouts" 55
Retired Baby Boomers 56
The Contributions of Small Businesses 56
LESSONS FROM THE STREET-SMART ENTREPRENEUR Bulletproofing Your
Start-Up 58
Putting Failure into Perspective 59
How to Avoid the Pitfalls 60
Know Your Business in Depth 60
Prepare a Business Plan 61
Manage Financial Resources 61
Understand Financial Statements 61
Learn to Manage People Effectively 62
Set Your Business Apart from the Competition 62
Maintain a Positive Attitde 62
Condusionand a Look Ahead 62
Chapter Review 63 Discussion Questions 64
Chapter 2

Ethics and Social Responsibility: Ding the Right


Thing 65
An Ethical Perspective 67
Three Levels of Ethical Standards 68
Immoral, Amoral, and Moral Management 69
The Benefits of Moral Management 70
Establishing an Ethical Framework 71
Why Ethical Lapses Occur 72
An Unethical Employee 73
An Unethical Organizational Culture 73
Moral Blindness 73
Competitive Pressures 73
Opportunity Pressures 73
Globalization of Business 73
Establishing and Maintaining Ethical Standards 74
Establishing Ethical Standards 74
Maintaining Ethical Standards 74
ENTREPRENEURSHIP IN ACTION Don't Just Do It, Do It Right 77
Social Entrepreneurship 77
IN THE ENTREPRENEURIAL SPOTLIGHT Making a Profit and Making
a Difference 78
Social Responsibility 79
Business's Responsibility to the Environment 80
Business's Responsibility to Employees 81
Cultural Diversity in the Workplace 82
DrugTesting 85

CONTENTS
HIV/AIDS 86
Sexual Harassment 87
LESSONS FROM THE STREET-SMART ENTREPRENEUR How to Avoid Sexual
Harassment Charge; 90
Privacy 92
ENTREPRENEURSHIP IN ACTION Think Before You Hit "Post"
on Facebook 92
Business'; Responsibility to Customers 93
Right to Safety 93
Right to Know 94
Right to Be Heard 94
Right to Education 94
Right to Choice 95
Business's Responsibility to Investors 95
Business's Responsibility to the Community 95
Condusion 96
Chapter Review 96 Discussion Questions 97
Chapter 3

Creativity and Innovation: Keys to Entrepreneurial


Success 99
Creativity, Innovation, and Entrepreneurship 100
CreativityEssential to Survival 104
Can Creativity Be Taught? 106
Creative Thinking 106
IN THE ENTREPRENEURIAL SPOTLIGHT The Ingredients of Creativity 107
Barriers to Creativity 109
LESSONS FROM THE STREET-SMART ENTREPRENEUR Questions to Spur
the Imagination 113
How to Enhance Creativity 114
Enhancing Organizational Creativity 114
Enhancing Individual Creativity 119
IN THE ENTREPRENEURIAL SPOTLIGHT How to Create a Culture
of Creativity and Innovation 124
The Creative Process 125
Step 1. Preparation 125
Step 2. Investigation 126
Step 3. Transformation 126
Step 4. Incubation 127
Step 5. Illumination 129
Step 6. Verification 129
Step 7. Implementation 130
Condusion 130
Chapter Review 131 Discussion Questions 131

Chapter 4

Strategie Management and the Entrepreneur 133


Building a Competitive Advantage 136
The Strategie Management Process 138
Step 1. Develop a Clear Vision and Translate It into a Meaningful Mission Statement 139
LESSONS FROM THE STREET-SMART ENTREPRENEUR Thriving
on Change 141
Step 2. Assess the Company's Strengths and Weaknesses 142
Step 3. Scan the Environment for Significant Opportunities andThreats Pacing
the Business 143
Step 4. Identify the Key Factors for Success in the Business 144

CONTENTS
Step 5. Analyze the Competition 146
Step 6. Create Company Goals and Objectives 150
ENTREPRENEURSHIP IN ACTION Vizio: Disrupting Another Market 152
Step 7. Formulate Strategie Option: and Select the Appropriate Strategie: 153
IN THE ENTREPRENEURIAL SPOTLIGHT Strategie; for Success 158
Step 8. Translate Strategie Plans into Action Plans 159
Step 9. Establish Accurate Controls 160
Condusion 162
Chapter Review 163 Discussion Questions 164
SECTION II Launching a Venture: Entry Strategies
Chapter 5

Chapter 6

165

Choosing a Form of Ownership 165


The Sole Proprietorship 167
Advantages of a Sole Proprietorship 168
LESSONS FROM THE STREET-SMART ENTREPRENEUR Get That Name
Right! 169
Disadvantages of the Sole Proprietorship 170
ENTREPRENEURSHIP IN ACTION The Pain of Partnership 171
The Partnership 172
The Uniform Partnership Act 174
Advantages of the Partnership 174
LESSONS FROM THE STREET-SMART ENTREPRENEUR How to Avoid
a Business Divorce 176
Disadvantages of the Partnership 177
Limited Partnerships 178
Limited Liability Partnerships 179
The Corporation 179
Requirements for Incorporation 179
Advantages of the Corporation 180
Disadvantages of the Corporation 182
Professional Corporations 183
The S Corporation 183
Advantages of an S Corporation 184
Disadvantages of an S Corporation 185
When Is an S Corporation a Wise Choice? 185
The Limited Liability Company 185
Sodal Enterprises 188
IN THE ENTREPRENEURIAL SPOTLIGHT From the Life on the Street
to Running a Business 188
Nonprofit Organization 189
Chapter Review 191 Discussion Questions 192
Franchising and the Entrepreneur 193
What Is a Franchise? 195
Types of Franchising 196
The Benefits of Buying a Franchise 196
A Business System 197
Management Training and Support 198
Brand-Name Appeal 199
Standardized Quality of Goods and Services 199
National Advertising Programs 199
Financial Assistance 200
Proven Products and Business Formats 201

CONTENTS
Centralized Buying Power 201
Site Selection and Territorial Protection 201
Increased Chance for Success 202
Drawbacks of Buying a Franchise 203
Franchise Pees and Ongoing Royalties 203
Strict Adherence to Standardized Operations 204
Restrictions on Purchasing 204
Limited Product Line 205
Market Saturation 205
Limited Freedom 206
No Guarantee of Success 206
Franchising and the Law 206
ENTREPRENEURSHIP IN ACTION After the Cheering Stops 209
The Right Way to Buy a Franchise 210
Evaluate Yourself 211
Research the Market 211
Consider Your Franchise Options 212
Get a Copy of the FDD and Study It 212
Talk to Existing Franchisees 213
Ask the Franchisor Some Tough Questions 213
Make Your Choice 215
LESSONS FROM THE STREET-SMART ENTREPRENEUR Make Sure You Select
the Right Franchise 215
Franchise Contracts 216
Termination 218
Renewal 218
Transfer and Buybacks 218
IN THE ENTREPRENEURIAL SPOTLIGHT The Allure of Franchising 218
Trends in Franchising 219
Changing Face of Franchisees 219
Multiple-Unit Franchising 220
International Opportunities 220
IN THE ENTREPRENEURIAL SPOTLIGHT The Middle East: A Hot Spot
for Franchising 221
Smaller, Nontraditional Locations 223
Conversion Franchising 223
Refranchising 223
Area Development and Master Franchising 223
Cobranding 224
Serving Dual-Career Couples and Aging Baby Boomers 225
Franchising as a Growth Strategy 225
Unique Concept 225
Replicable 225
Expansion Plan 226
Due Diligence 226
Legal Guidance 226
Support for Franchisees 226
Condusion 226
Chapter Review 226 Discussion Questions 227
Chapter 7

Buying an Existing Business 229


Buying an Existing Business 231
Advantages of Buying an Existing Business 231
Disadvantages of Buying an Existing Business 233

10

CONTENTS
The Search Stage 236
Self-Inventory 236
Develop a List of Criteria 237
Potential Candidates 237
Investigation 238
LESSONS FROM THE STREET-SMART ENTREPRENEUR Don't Get Burned
When You Buy a Business 240
The Deal Stage 240
Methods for Determining the Value of a Business 241
IN THE ENTREPRENEURIAL SPOTLIGHT Bond Coffee 250
Negotiating the Deal 251
Letter of Intent 254
The Due Diligence Process 255
ENTREPRENEURSHIP IN ACTION What's the Deal? 259
The Transition Stage 260
Chapter Review 261 Discussion Questions 262
Chapter 8

New Business Flanning Process: Feasibility Analysis,


Business Modeling, and Crafting a Winning Business
Plan 263
Conducting a Feasibility Analysis 265
Industry and Market Feasibility Analysis 265
Product or Service Feasibility Analysis: Is There a Market? 270
Financial Feasibility Analysis: Is There Enough Margin? 271
Entrepreneur Feasibility: Is This Idea Right for Me? 273
Developing and Testing a Business Model 275
Value Proposition 275
Customer Segments 276
Customer Relationships 276
Channels 276
Key Activities 276
Key Resources 276
Key Partners 276
Revenue Streams 277
Cost Structure 277
ENTREPRENEURSHIP IN ACTION The Evolution of CoolPeopleCare's
Business Model 278
The Benefits of Creating a Business Plan 279
Three Tests That Every Business Plan Must Pass 280
Reality Test 280
CompetitiveTest 280
Value Test 280
IN THE ENTREPRENEURIAL SPOTLIGHT The Battie of the Plans 281
The Elements of a Business Plan 282
Title Page and Table of Contents 283
The Executive Summary 283
Mission and Vision Statement 283
Company History 284
IN THE ENTREPRENEURIAL SPOTLIGHT A Business Plan: Don't Launch
Without It 284
Description of Firm's Product or Service 285
Business and Industry Profile 286
Goals and Objectives 286
Business Strategy 286

CONTENTS
CompetitorAnalysis 287
Marketing Strategy 287
Visualizirig a Venture's Risks and Rewards 291
What Lenders and Investors Look for in a Business Plan 293
Capital 293
Capacity 293
Collateral 293
Character 293
Conditions 293
The Pitch: Making the Business Plan Presentation 294
Condusion 296
Suggested Business Plan Elements 296
Chapter Review 299 Discussion Questions 300
SECTION III Building a Marketing Plan
Chapter 9

301

Building a Bootstrap Marketing Plan 301


Creating a Bootstrap Marketing Plan 302
IN THE ENTREPRENEURIAL SPOTLIGHT Bootstrap Marketing
in the New Music Industry 304
Market Diversity: Pinpointing the Target Market 305
Determining Customer Needs and Wants Through Market Research 306
How to Conduct Market Research 308
IN THE ENTREPRENEURIAL SPOTLIGHT Bootstrap Marketing Using
Databases 310
Plotting a Bootstrap Marketing Strategy: Building a Competitive Edge 311
Find a Niche and Pill It 312
Retain Existing Customers 313
Concentration on Innovation 313
The Marketing Mix 316
Product 316
Promotion 324
LESSONS FROM THE STREET-SMART ENTREPRENEUR Marketing
to Millenniais 326
Price 330
Place 331
Chapter Review 332 Discussion Questions 332

Chapter 10 Creative Use of Advertising and Promotion 333


Define Your Company s Unique Solling Proposition 334
Creating a Promotional Strategy 335
Publicity 335
Personal Selling 337
ENTREPRENEURSHIP IN ACTION Should an Ambulance Service Hire
Its First Sales Reprsentative? 339
Advertising 340
Selecting Advertising Media 342
Media Options 344
LESSONS FROM THE STREET-SMART ENTREPRENEUR E-Mail Ads That
Produce Results 350
How to Prepare an Advertising Budget 367
How to Advertise Big on a Small Budget 368
Cooperative Advertising 368
Shared Advertising 369

11

Stealth Advertising 369


Other Ways to Save 369
Chapter Review 369 Discussion Questions 370
Chapter 11 Pricing and Credit Strategies 371
Pridng: A Creative Blend of Art and Science 372
Three Powerful Pricing Forces: Image, Competition, and Value 376
Price Conveys Image 376
Competition and Prices 377
Focus on Value 378
Pricing Strategies and Tactics 379
New Product Pricing: Penetration, Skimming, or Sliding 380
Pricing Techniques for Established Products and Services 382
IN THE ENTREPRENEURIAL SPOTLIGHT How to Compete with Cheap
Knockoffs of Your Successful Product 383
ENTREPRENEURSHIP IN ACTION Social Coupons: Beneficialor Just Piain
Badfor Business? 387
LESSONS FROM THE STREET-SMART ENTREPRENEUR Enhancing Your
Company s Pricing Power 389
Pricing Techniques for Retailers 390
Markup 390
Pricing Techniques for Manufacturers 392
Direct Costing and Pricing 393
Computing a Break-Even Selling Price 393
Pricing Techniques for Service Businesses 395
The Impact of Credit on Pricing 397
ENTREPRENEURSHIP IN ACTION To Accept Credit Cards or Not:
That Is the Question 397
Credit Cards 398
Chapter Review 400 Discussion Questions 401
Chapter 12 Global Marketing Strategies 403
Why Go Global? 406
Going Global: Strategies for Small Businesses 409
Creating a Presence on the Web 409
IN THE ENTREPRENEURIAL SPOTLIGHT Going Global One Step
ata Time 411
Relying on Trade Intermedianes 412
The Value of Using Trade Intermediaries 413
Joint Ventures 415
Foreign Licensing 416
International Franchising 416
ENTREPRENEURSHIP IN ACTION Growing Beyond the Borders 419
Countertrading and Bartering 420
Exporting 420
LESSONS FROM THE STREET-SMART ENTREPRENEUR Finding Your Place
in the World 428
Establishing International Locations 430
Importing and Outsourcing 430
Barriers to International Trade 432
Domestic Barriers 432
International Barriers 433
Political Barriers 434

CONTENTS
Business Barriens 434
Cultural Barriers 435
International Trade Agreements 436
World Trade Organization 436
North American Free Trade Agreement 437
The Dominican Republic-Central America Free Trade Agreement 437
Condusion 437
Chapter Review 439 Discussion Questions 439
Chapter 13

E-Commerce and Entrepreneurship 441


Factors to Consider Before Launching into E-Commerce 444
Ten Myths of E-Commerce 446
Myth 1. If I Launch a Site, Customers Will Flock to It 446
Myth 2. Online Customers Are Easy to Please 448
Myth 3. Making Money on the Web Is Easy 448
Myth 4. Privacy Is Not an Important Issue on the Web 448
Myth 5. "Strategy? I Don't Need a Strategy to Seil on the Web! Just Give Me a Web Site,
and the Rest Will Take Care of Itself" 449
Myth 6. The Most Important Part of Any E-Commerce Effort Is Technology 450
Myth 7. On the Web, Customer Service Is Not as Important as It Is in a Traditional Retail
Store 450
Myth 8. Flashy Web Sites Are Better Than Simple Ones 451
Myth 9. It's What's Up Front That Counts 452
Myth 10. My Business Doesn't Need a Web Site 452
Strategies for E-Success 453
Focus on a Niche in the Market 454
Develop a Community 454
Attract Visitors by Giving Away" Freebies" 455
Make Creative Use of E-Mail, but Avoid Becoming a "Spammer" 455
Seil the "Experience" 456
Make Sure Your Web Site Says "Credibility" 457
Make the Most of the Internets Global Reach 457
LESSONS FROM THE STREET-SMART ENTREPRENEUR How to Make Your
Business Ready for Global E-Commerce 459
Go Mobile 460
Promote Your Web Site Online and Offline 461
Use Social Media Tools to Attract and Retain Customers 461
ENTREPRENEURSHIP IN ACTION Enhancing E-Commerce with Social
Media 462
Capture Local Traffic 463
Develop an Effective Search Engine Optimization Strategy 463
Designing a Killer Web Site 466
Decide How to Bring Your Site to Life 467
Start with Your Target Customer 467
Give Customers What They Want 467
Select an Intuitive Domain Name 467
Make Your Web Site Easy to Navigate 469
Provide Customer Ratings and Reviews 470
Offer Suggestion: for Related Products 470
Add Wish List Capability 470
Create a Gift Idea Center 470
Establish the Appropriate Call to Action on Each Page 470

13

14

CONTENTS
Build Loyalty by Giving Online Customers a Reason to Return to Your Web Site 470
Establish Hyperlinks with Other Businesses, Preferably Those Selling Products or
Services That Complement Yours 470
Include an E-Mail Option, an Address, and a Telephone Number on Your Site 471
Give Shoppers the Ability to Track Their Orders Online 471
Offer Web-Only Specials 471
Ilse the Power of Social Media 471
Use Customer Testimonials 471
Follow a Simple Design 471
Assure Customers That Online Transactions Are Secure 473
Post Shipping and Handling Charges Up Front 473
Create a Fast, Simple Checkout Process 473
Provide Customers Multiple Payment Options 473
Confirm Transactions 473
Keep Your Site Fresh 473
Rely on Analytics to Improve Your Site 473
Test Your Site Often 473
Consider Hiring a Professional Designer 474
IN THE ENTREPRENEURIAL SPOTLIGHT Web Site Makeovers 474
Tracking Web Results 475
Software Solutions 475
Ensuring Web Privacy and Security 476
Privacy 476
Security 476
Chapter Review 479 Discussion Questions 480
SECTION IV Building a Financial Plan

481

Chapter 14 Creating a Solid Financial Plan 481


Basic Financial Reports 482
The Balance Sheet 483
The Income Statement 484
The Statement of Cash Flows 486
Creating Projected Financial Statements 487
Projected Statements for the Small Business 487
Ratio Analysis 493
12 Key Ratios 494
IN THE ENTREPRENEURIAL SPOTLIGHT Pitcher Strikes Out While
Trying to Hit a Home Run 503
Interpreting Business Ratios 504
What Do All These Numbers Mean? 507
LESSONS FROM THE STREET-SMART ENTREPRENEUR Gaining
a Competitive Edge 509
Break-Even Analysis 510
Calculating the Break-Even Point 511
Adding a Profit 512
Break-Even Point in Units 512
Constructing a Break-Even Chart 513
Using Break-Even Analysis 514
IN THE ENTREPRENEURIAL SPOTLIGHT Open Book
Management 515
Chapter Review 516 Discussion Questions 516

CONTENTS
Chapter 15 Managing Cash Flow 517
Cash Management 518
Cash and Profits Are Not the Same 521
IN THE ENTREPRENEURIAL SPOTLIGHT Cash Flow and Pass-Through
Entities 522
Preparing a Cash Budget 523
LESSONS FROM THE STREET-SMART ENTREPRENEUR A Short Season 524
Step 1: Determining an Adequate Minimum Cash Balance 526
Step 2: Forecasting Sales 526
Step 3: Forecasting Cash Receipts 530
Step 4: Forecasting Cash Disbursements 530
Step 5: Estimating the End-of-Month Cash Balance 532
ENTREPRENEURSHIP IN ACTION Rowena's Cash Budget 533
The "Big Three" of Cash Management 534
Accounts Receivable 534
Accounts Payable 538
Inventory 540
IN THE ENTREPRENEURIAL SPOTLIGHT Be Ready for Inflation! 542
Bootstrapping to Avoid the Cash Crunch 543
Bootstrapping Overhead 544
Bootstrapping Employee Costs 546
Bootstrapping Operating Costs 546
Other Tools for Bootstrapping and Preserving Cash 546
Condusion 549
Chapter Review 549 Discussion Questions 550
Chapter 16 Sources of Equity Financing 551
Flanning for Capital Needs 554
Fixed Capital 554
Working Capital 555
Sources of Equity Financing 555
Funding from Founders 556
IN THE ENTREPRENEURIAL SPOTLIGHT Bootstrapping a Technology
Start-Up 558
Friends and Family Members 559
Crowdfunding 560
Accelerators 562
ENTREPRENEURSHIP IN ACTION Launching a Business in a University
Accelerator 563
Angels 564
Strategie Investments Through Corporate Venture Capital 567
IN THE ENTREPRENEURIAL SPOTLIGHT Funding Does Not Ensure
Success 568
Venture Capital Companies 569
Policies and Investment Strategies 570
Public Stock Sale ("Going Public") 575
Chapter Review 577 Discussion Questions 578
Chapter 17 Sources of Debt Financing 579
IN THE ENTREPRENEURIAL SPOTLIGHT A Tale of Two Borrowers
Sources of Debt Capital 583
Commercial Banks 583

582

15

16

CONTENTS
Short-Term Loans 584
Intermediate- and Long-Term Loans 586
LESSONS FROM THE STREET-SMART ENTREPRENEUR How to Maintain
a Positive Relationship with Your Banker 586
Nonbank Sources of Debt Capital 587
Asset-Based Lenders 587
Trade Credit 589
Equipment Suppliers 590
Commercial Finance Companies 590
Stock Brokerage Houses 591
Insurance Companies 591
Credit Unions 591
Bonds 592
Private Placements 592
Small Business Investment Companies 593
Federally Sponsored Programs 594
Economic Development Administration 594
Department of Housing and Urban Development 594
U.S. Department of Agriculture's Rural Business and Cooperative Program
and Business Program 595
Small Business Innovation Research Program 595
ENTREPRENEURSHIP IN ACTION Where Do We Turn Now? 596
The Small Business Technology Transfer Program 596
Small Business Administration 596
SBA Express Loan Programs 597
SBA Loan Programs 597
State and Local Loan Development Programs 603
IN THE ENTREPRENEURIAL SPOTLIGHT Alternative Sources
of Financing 603
Other Methods of Financing 604
Factoring Accounts Receivable 604
Leasing 605
Cash Advances 605
Peer-to-Peer Loans 606
Credit Cards 606
Where Not to Seek Funds 606
Chapter Review 607 Discussion Questions 608
SECTION V Building an Operating Plan

609

Chapter 18 Location, Layout, and Physical Facilities 609


Stages in the Location Decision 610
Selecting the Region 611
Selecting the State 614
Selecting the City 617
The Final Site Selection 624
ENTREPRENEURSHIP IN ACTION The Ideal Spot 624
Location Criteria for Retail and Service Businesses 626
Trade Area Size 626
Customer Traffic 627
Adequate Parking 627
Reputation 628
Visibility 628
The Index of Retail Saturation 628
Reilly's Law of Retail Gravitation 629

CONTENTS
IN THE ENTREPRENEURIAL SPOTLIGHT Transformed Locations 629
Location Option; for Retail and Service Businesses 630
Central Business District 631
Neighborhood Locations 631
Shopping Centers and Mails 631
Near Competitors 634
Shared Spaces 635
Inside Large Retail Stores 635
Nontraditional Locations 635
Home-Based Businesses 635
On the Road 636
LESSONS FROM THE STREET-SMART ENTREPRENEUR How to Launch
a Successful Pop-Up Shop 636
The Location Decision for Manufacturers 638
Foreign Trade Zones 638
Business Incubators 639
Layout and Design Considerations 640
Size and Adaptability 641
External Appearance 641
Entrances 642
The Americans with Disabilities Act 642
Signs 643
Interiors 643
Drive-Through Windows 644
Sight, Sound, Scent, and Lighting 645
Sustainability and Environmental^ Friendly Design 647
Layout: Maximizing Revenue:, Increasing Efficiency, and Reducing Costs 647
Layout for Retailers 647
IN THE ENTREPRENEURIAL SPOTLIGHT The Secrets of Successful Retail
Layouts 649
Layout for Manufacturers 650
Chapter Review 653 Discussion Questions 654
Chapter 19 Supply Chain Management 655
LESSONS FROM THE STREET-SMART ENTREPRENEUR How to Manage
Supply Chain Risk 659
Creating a Purchasing Plan 660
Quality 662
Quantity: The Economic Order Quantity 667
Cost of Units 669
Holding (Carrying) Costs 669
Setup (Ordering) Costs 670
Solving for EOQ 670
EOQ with Usage 673
Price 674
Trade Discounts 674
Quantity Discounts 674
Cash Discounts 675
TimingWhen to Order 677
Managing the Supply Chain: Vendor Analysis and Selection 682
IN THE ENTREPRENEURIAL SPOTLIGHT Integrating Local Suppliers into
a Complex Supply Chain 683
Vendor Certification 685
The Final Decision 687

17

18

CONTENTS
IN THE ENTREPRENEURIAL SPOTLIGHT Back in the USA 688
Legal Issues Affecting Purchasing 690
Title 690
Risk of Loss 690
Insurable Interest 691
ENTREPRENEURSHIP IN ACTION Supply Chain Innovation
at Mother Dairy 691
Receiving Merchandise 692
Selling on Consignment 692
Chapter Review 693 Discussion Questions 693
Chapter 20 Managing Inventory 695
Inventory Control Systems 700
Perpetual Inventory Systems 700
IN THE ENTREPRENEURIAL SPOTLIGHT An Ideal Inventory
Solution 702
Partial Inventory Control Systems 702
Physical Inventory Count 706
Radio Frequency Identification Tags 706
LESSONS FROM THE STREET-SMART ENTREPRENEUR Best Practices
in Inventory Management 708
Just in-Time Inventory Control Techniques 709
Just-in-Time Techniques 709
Turning Slow-Moving Inventory into Cash 711
Protecting Inventory from Theft 713
Employee Theft 713
ENTREPRENEURSHIP IN ACTION A Thief Within 719
Shoplifting 720
ENTREPRENEURSHIP IN ACTION A Tale of Two Shoplifters 724
Condusion 728
Chapter Review 728 Discussion Questions 729
Chapter 21 Staffing and Leading a Growing Company 731
The Entrepreneur s Role as Leader 732
Hiring the Right Employees: The Company s Future Depends on It 735
How to Hire Winners 736
ENTREPRENEURSHIP IN ACTION Facebook Interview
Process 742
Conducting the Interview 743
ENTREPRENEURSHIP IN ACTION Building an Intentional Culture
at Zappos 747
Building the Right Culture and Organizational Structure 748
Managing Growth and a Changing Culture 750
IN THE ENTREPRENEURIAL SPOTLIGHT What a Great Place
to Work! 751
Team-Based Management 752
Communicating Effectively 753
Improving Communication 754
Listening 755
The Informal Communication Network: The "Grapevine" 756
The Challenge of Motivating Workers 756
Empowerment 756
Job Design 758
Rewards and Compensation 760

LESSONS FROM THE STREET-SMART ENTREPRENEUR Sabbaticals 763


Performance Feedback 764
Performance Appraisal 765
Chapter Review 767 Discussion Questions 768
SECTION VI Legal Aspects of Small Business: Succession,
Ethics, and Government Regulation 769
Chapter 22

Management Succession and Risk Management


Strategies in the Family Business 769
Family Businesses 770
enefits of Family Businesses 770
The Dark Side of Family Businesses 771
Characteristics of Successful Family Businesses 773
Exit Strategies 776
Selling to Outsiders 777
Selling to Insiders 777
LESSONS FROM THE STREET-SMART ENTREPRENEUR How to Set Up
an ESOP 779
Management Succession 780
IN THE ENTREPRENEURIAL SPOTLIGHT Can Your Family Business Survive
for Centuries? 783
Developing a Management Succession Plan 784
Buy-Sell Agreement 788
Lifetime Gifting 789
Setting Up a Trust 789
Risk Management Strategies 791
The Basics of Insurance 793
Types of Insurance 794
IN THE ENTREPRENEURIAL SPOTLIGHT The Aftermath of a Storm 798
Controlling Insurance Costs 805
Chapter Review 807 Discussion Questions 808

Chapter 23 The Legal Environment: Business Law


and Government Regulation 809
The Law of Contracts 811
Agreement 811
Contractual Capacity 814
Legality 815
Breach of Contract 816
The Uniform Commercial Code 816
Sales and Sales Contracts 817
Breach of Sales Contracts 819
Sales Warranties and Product Liability 819
Protection of Intellectual Property Rights 822
Patents 823
Trademarks 826
ENTREPRENEURSHIP IN ACTION Protecting Your Brand 827
Copyrights 828
Protecting Intellectual Property 828
The Law of Agency 829
Bankruptcy 830
Forms of Bankruptcy 831

IN THE ENTREPRENEURIAL SPOTLIGHT A Second Chance at Success 833


Government Regulation 834
Trade Practices 835
Consumer Protection 837
LESSONS FROM THE STREET-SMART ENTREPRENEUR Are Your Ads Setting
You Up for Trouble? 838
Consumer Credit 839
Environmental Law 840
ENTREPRENEURSHIP IN ACTION Small Businesses and Eminent
Domain 841
The Affordable Care Act 842
Chapter Review 843 Discussion Questions 844
APPENDIX
Cases 859
Endnotes 874
Index 912

The picturebooth co. 845