CHAPTER 8

Selecting Your Business

Listen to your market!

Product or Service?

Product – something that exists in nature or is made by human beings – tangible, can be touched

Service – work that provides time, skills, or expertise in exchange for money – intangible, and can’t be touched

Four Basic Business Types

Manufacturing – makes a tangible product

Wholesale – buys in quantity from the manufacturer and sells to the retailer

Retailer – sells to the consumer Service – sells an intangible product to

the consumer

Turning hobbies, skills, and interests into business – refer to Star Profile

Your Strategy for Beating the Competition Quality Price Location Selection Service Speed/turnaround

Ethics of Conducting Business Not against the law Will not hurt others Not spread negative messages or ideas in

the marketplace

Start-up Considerations

Naming your business Risks of using your name in the business

Money alone is not a good reason to start a business

How could your dream help the community? What is the value of your time? Entrepreneurs and philanthropy

100 business ideas for young entrepreneurs

CHAPTER 9

The Costs of Running a Business

Understanding Costs

Define your unit of sale Three kinds of costs

Varied and Fixed Costs

Costs of goods sold or costs of services sold Materials Labor

Other variable costs Commissions Shipping and handling

Measuring Profits and Costs

Calculating gross profit per unit Total Costs Per Unit Selling price – cost of goods sold – other

variable costs – gross profit Calculating gross profit Cost of Services Sold (COSS) Handling Economics of One Unit per sale

(EOUs) when selling more than one product

An EOU with a variety of costs

Fixed Costs

Overhead – costs such as Utilities Salaries Advertising Insurance Interest Rent Depreciation

Depreciation – method used to save the money that will be needed to replace expensive pieces of equipment

Fixed costs do change – over time

Addressing Fixed Costs

Economics of scale Spread fixed costs over as much output as

possible Get better deals from suppliers

Make your fixed costs variable whenever possible

Fully allocating your fixed costs Keep at least three months in reserve to

cover fixed costs

CHAPTER 10

What is Marketing?

Marketing

Identifying and responding to customer needs Marketing – satisfying the customer at a profit – the

art of getting the customer to come to the product. Meet your customer’s needs to gain their

loyalty Marketing explains the benefits of a product The marketing vision drives all business

decisions Marketing establishes your brand

Branding in Marketing

Focus your brand Ford’s examples

Costly failure – the Edsel Marketing success – the Mustang

How to Build Your Brand

Choose a business name that is easy to remember, describes your business, and establishes mind share (the degree your business comes to mind when a customer needs something)

Create a logo that symbolizes your business to the customer

Develop a good reputation Create a brand personality Communicate your brand personality to

your target market

Side Notes

Represent your brand Mind share vs. market share

The 4 “P”s

1. Product - should meet the need or create a consumer need

2. Place - place your product where customers who need it do their shopping

3. Price - the product has to be priced low enough so the public will buy it, and high enough for the business to make a profit.

4. Promotion - consist of advertising, publicity, and promotional items

Success

The Basics of Business Success How can you tell if your promotions are

working? Philanthropy can bring positive publicity

Cause-related marketing – social, environmental, or political cause

CHAPTER 11

Market Research

Performing Research

Listen to the consumer Tangible market demographics Types of market research

Surveys General research Statistical research Industry research

Your research method is important

Performing Research (cont’d) Market research questions Research your market before you open

your business Do you know ten people who love your

product? You may have a winner Make market research ongoing Who is in your market segment? Researching your market segment Market research avoids costly mistakes

CHAPTER 12

Keeping Good Records

Daily Records

Keep Daily Financial Records Three reasons to keep good records

every day Keeping good records will show you how to

make your business more profitable Keep accurate records to create financial

statement and ratios that will show your business is doing well

Keeping good records will prove that payments have been made

The Banking Relationship

Savings accounts Checking accounts Writing a check Technology tip: 24-hour banking and

online banking

Accounting

A basic accounting system (will be covered in the QuickBooks section)

Save receipts for tax time Basic accounting principles

Keep up your records daily Support your records with receipts and invoices Use business checks for business expenses

Avoid using cash for business Deposit money from sales right away

Assets, liability, owner’s equity review