Small Business Management Launching And Growing Entrepreneurial Ventures Entrepreneurial

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During this such a brief paper around small business management launching and growing entrepreneurial ventures entrepreneurial.

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15e
Launching & Growing
Entrepreneurial Ventures
Launching & Growing
Entrepreneurial Ventures
Small Business
Management
Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States
Justin G. Longenecker
Baylor University
J. William Petty
Baylor University
Leslie E. Palich
Baylor University
Carlos W. Moore
Baylor University
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
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Small Business Management: Launching &
Growing Entrepreneurial Ventures,
Fifteenth Edition
Justin G. Longenecker, J. William Petty,
Leslie E. Palich, Carlos W. Moore
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in remembrance
I
t is with deep sadness that we inform you of the deaths of our two co-authors and dear
friends. We cannot put into words the loss we feel. Their deaths cannot be measured
by their absence in revising this book. They were not only our colleagues, but also
our con?dants and mentors. They were tremendous role models for us and for literally
thousands of individuals who knew and loved them. In this book, we encourage you to
consider the legacy you will leave at the end of your entrepreneurial journey. Justin and
Carlos left a legacy that few can ever dream of leaving. They will be missed for many
years to come.
In working with Justin and Carlos for over a decade, we have developed a shared
vision about the book. So, while the speci?c responsibilities have changed for this edi-
tion, the dream of helping others become entrepreneurs lives on. Be assured that we will
continue to build on the great legacy of this textbook. Justin and Carlos would be disap-
pointed with anything less, and we are not about to let them down.
Justin G. Longenecker
Professor Emeritus of Management
Hankamer School of Business
Baylor University
May 4, 1917 – September 14, 2005
Carlos W. Moore
Edwin Streetman Professor of Marketing
Hankamer School of Business
Baylor University
February 3, 1943 – May 27, 2007
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iv
Part 1 Entrepreneurship: A World of Opportunity 1
1 The Entrepreneurial Life 2
2 Entrepreneurial Integrity and Ethics 31
Part 2 Starting from Scratch or Joining an Existing Business 59
3 Getting Started 60
4 Franchising and Buyouts 93
5 The Family Business 120
Part 3 Developing the New Venture Business Plan 147
6 The Business Plan: Visualizing the Dream 148
7 The Marketing Plan 175
8 The Human Resources Plan: Managers, Owners, Allies, and Directors 200
9 The Location Plan 230
10 Understanding a Firm’s Financial Statements 258
11 Forecasting Financial Requirements 286
12 A Firm’s Sources of Financing 309
13 Planning for the Harvest 338
Part 4 Focusing on the Customer: Marketing Growth Strategies 361
14 Building Customer Relationships 362
15 Product and Supply Chain Management 389
16 Pricing and Credit Decisions 418
17 Promotional Planning 440
18 Global Opportunities for Small Business 464
Part 5 Managing Growth in the Small Business 493
19 Professional Management in the Entrepreneurial Firm 494
20 Managing Human Resources 521
21 Managing Operations 547
22 Managing the Firm’s Assets 575
23 Managing Risk in the Small Business 601
Cases 623
Appendix A Sample Business Plan 675
Appendix B Valuing a Business 696
Endnotes 701
Glossary 719
Index 729
brief contents
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©
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contents
Preface xiii
About the Authors xxiii
Part 1
Entrepreneurship:
A World of Opportunity 1
Chapter 1 The Entrepreneurial Life 2
In the Spotlight: Bridgecreek 2
Entrepreneurship and Small Business 4
Who Are the Entrepreneurs? 4
What Is Small Business? 5
Entrepreneurial Opportunities 6
Three Success Stories 6
So You Want to Be an Entrepreneur 9
Living the Dream The Entrepreneurial Gene 10
Making Meaning 10
Develop Financial Wealth 11
Be Your Own Boss 12
Escape a Bad Situation 12
Enjoy Satisfying Work 13
Finding Ful?llment 13
The Many Varieties of Entrepreneurship 14
Founder Entrepreneurs versus Other Business
Owners and Franchisees 14
High-Potential Ventures versus Attractive
Small Firms and Microbusinesses 14
Artisan versus Opportunistic Entrepreneurs 15
Women Entrepreneurs 15
Living the Dream Stand Your Ground 16
Entrepreneurial Teams 17
The Competitive Edge of Entrepreneurs 17
Customer Focus 17
Quality Performance 18
Integrity and Responsibility 18
Innovation and Globalization 18
Special Niche 19
Getting Started 20
Age and Entrepreneurial Opportunity 20
Characteristics of Successful Entrepreneurs 21
The Importance of Mentors 22
Success in Business and Success in Life 23
Beginning with the End in Mind 24
Winning the Wrong Game 24
Crafting a Worthy Legacy 25
Where to from Here 26
Chapter 2 Entrepreneurial
Integrity and Ethics 31
In the Video Spotlight: Joseph’s Lite Cookies 31
Integrity and Entrepreneurship 32
What Is Integrity? 32
Integrity and the Interests of Major Stakeholders 33
Promoting the Owners’ Interests 34
Caring about Customers 36
Valuing Employees 37
Living the Dream Integrity Is Serious Business 38
Social Responsibility and Small Business 39
Governmental Laws and Regulations 41
Living the Dream Not-So-Sweet Surrender 42
v
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vi
The Challenges and Bene?ts of Acting
with Integrity 43
The Vulnerability of Small Companies 43
The Integrity Edge 44
Integrity in an Expanding Economy 45
Integrity and the Internet 45
International Issues of Integrity 46
Building a Business with Integrity 47
The Foundations of Integrity 47
Leading with Integrity 48
A Supportive Organizational Culture 48
Better Business Bureaus 49
An Ethical Decision-Making Process 51
Social Entrepreneurship: A Fast-Emerging Trend 52
The Burden of Environmentalism 53
The Potential of Environmentalism 54
Part 2
Starting from Scratch
or Joining an Existing Business 59
Chapter 3 Getting Started 60
In the Spotlight: Hanover Community Bank 60
Coming Up with Startup Ideas 62
Types of Startup Ideas 62
Common Sources of Startup Ideas 64
Using Innovative Thinking to Generate
Business Ideas 67
Living the Dream The U.S. Military Gives Fly
Fishermen a Fighting Chance 70
Using Internal and External Analyses
to Identify Business Ideas 71
Outside-In Analysis 71
Inside-Out Analysis 74
Integrating Internal and External Analyses 75
Selecting Strategies That Capture Opportunities 77
Broad-Based Strategy Options 77
Focus Strategies 79
Living the Dream A Niche Market That Is Out
of This World 81
Is Your Startup Idea Feasible? 83
Market Potential 84
Industry Attractiveness 85
New Venture Leadership 86
Looking Forward 86
Chapter 4 Franchising and Buyouts 93
In the Spotlight: Country Place Living: Doing Well
While Doing Good 93
What Is Franchising? 94
Living the Dream Choosing Franchising 95
Franchising Options 95
The Impact of Franchising 96
The Pros and Cons of Franchising 97
The Pros 97
The Cons 100
The Costs of Being a Franchisee 102
Evaluating Franchise Opportunities 103
Selecting a Franchise 103
Investigating the Potential Franchise 103
Living the Dream Knowing Jack 107
Becoming a Franchisor 108
Legal Issues in Franchising 110
Buying an Existing Business 111
Reasons for Buying an Existing Business 111
Finding a Business to Buy 112
Investigating and Evaluating Available Businesses 112
Living the Dream Do Your Homework 114
Valuing the Business 115
Nonquantitative Factors in Valuing a Business 115
Negotiating and Closing the Deal 116
Chapter 5 The Family Business 120
In the Spotlight: Graeter’s Ice Cream 120
What Is a Family Business? 121
Why Should Anyone Care about Families in Business? 121
Family and Business Overlap 122
Advantages of a Family Business 123
Disadvantages of a Family Business 125
Family Business Momentum 125
The Founder’s Imprint on the Family Business Culture 126
The Commitment of Family Members 126
Why Should Anyone Care about Commitment? 128
Family Roles and Relationships 129
Mom or Dad, the Founder 129
Co-Preneurs 130
Sons and Daughters 130
Sibling Cooperation, Sibling Rivalry 131
Living the Dream Developing Ventures
and Contributing to Communities 132
In-Laws In and Out of the Business 133
The Entrepreneur’s Spouse 133
The Need for Good Management
in the Family Firm 134
Nonfamily Employees in a Family Firm 135
Contents
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vii Contents
Family Retreats 135
Family Councils 136
Family Business Constitutions 137
The Process of Leadership Succession 137
Available Family Talent 138
Stages in the Process of Succession 139
Reluctant Parents and Ambitious Children 140
Transfer of Ownership 141
Part 3
Developing the New Venture
Business Plan 147
Chapter 6 The Business Plan:
Visualizing the Dream 148
In the Spotlight: Stella & Dot 148
An Overview of the Business Plan 149
The Purpose of a Business Plan 149
Do You Really Need a Business Plan? 150
How Much Planning? 152
Preparing a Business Plan 153
The Content and Format of a Business Plan 153
Making an Effective Written Presentation 161
Presenting the Business Plan to Investors 163
The Investor’s Short Attention Span 164
Business Plan Features That Attract
or Repel Investors 164
Living the Dream College Students Write
Business Plans, Too 165
Resources for Business Plan Preparation 165
Computer-Aided Business Planning 166
Professional Assistance in Business Planning 167
Keeping the Right Perspective 168
Chapter 7 The Marketing Plan 175
In the Spotlight: Spira 175
What Is Small Business Marketing? 176
Marketing Philosophies Make a Difference 177
A Consumer Orientation—The Right Choice 177
The Formal Marketing Plan 179
Market Analysis 179
The Competition 180
Marketing Strategy 180
Marketing Research for the New Venture 183
The Nature of Marketing Research 184
Living the Dream Market Driven Restoration 184
Steps in the Marketing Research Process 185
Understanding Potential Target Markets 189
Market Segmentation and Its Variables 190
Marketing Strategies Based
on Segmentation Considerations 190
Estimating Market Potential 193
The Sales Forecast 193
Limitations to Forecasting 194
The Forecasting Process 195
Chapter 8 The Human
Resources Plan: Managers,
Owners, Allies, and Directors 200
In the Video Spotlight: Biosite, Inc. 200
Building a Management Team 201
Achieving Balance 202
Living the Dream Friends in Fashion 203
Expanding Social Networks 204
Specifying Structure 205
Choosing a Legal Form of Organization 205
The Sole Proprietorship Option 205
The Partnership Option 207
The C Corporation Option 210
Living the Dream The Pain Potential
of Partnerships 211
Criteria for Choosing
an Organizational Form 213
Specialized Forms of Organization 216
Forming Strategic Alliances 218
Strategic Alliances with Large Companies 218
Strategic Alliances with Small Companies 220
Setting Up and Maintaining
Successful Strategic Alliances 220
Making the Most of a Board of Directors 222
Contributions of Directors 222
Selection of Directors 223
Compensation of Directors 224
An Alternative: An Advisory Council 224
Chapter 9 The Location Plan 230
In the Spotlight: Vintage Advertising in the 21st Century 230
Locating the Brick-and-Mortar Startup 231
The Importance of the Location Decision 232
Key Factors in Selecting a Good Location 233
Living the Dream There’s Something Fishy about
This Location 235
Designing and Equipping the Physical Facilities 239
Challenges in Designing the Physical Facilities 239
Challenges in Equipping the Physical Facilities 239
Business Image 241
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viii Contents
Locating the Startup in the
Entrepreneur’s Home 241
The Attraction of Home-Based Businesses 242
The Challenges of Home-Based Businesses 243
Technology and Home-Based Businesses 244
Locating the Startup on the Internet 244
Living the Dream Home Is Where the Heart
Is—And Sometimes the Business, as Well 245
What Is E-Commerce? 245
Bene?ts of E-Commerce to Startups 246
E-Commerce Business Models 246
Internet-Based Businesses and the Part-Time
Startup Advantage 252
Chapter 10 Understanding
a Firm’s Financial Statements 258
In the Spotlight: The Hogan Group 258
The Lemonade Girls 260
Setting Up the Business 261
Opening Day 261
Collecting Accounts Receivable 262
Strategic Planning for the Following Saturday 262
The Second Saturday of Business 262
The Income Statement 263
The Balance Sheet 267
Assets 268
Debt and Equity 268
Viewing the Income Statement and Balance
Sheet Together 271
The Cash Flow Statement 273
Pro?ts versus Cash Flows 273
Measuring a Firm’s Cash Flows 274
Evaluating a Firm’ s Financial Performance 276
Living the Dream Collect Early and Pay Later 277
Gilbert & Associates’ Liquidity (Ability to Pay
Its Debt) 277
Gilbert & Associates’ Pro?tability on Its Assets 278
Gilbert & Associates’ Debt 280
Gilbert & Associates’ Return on Equity 280
Chapter 11 Forecasting Financial
Requirements 286
In the Spotlight: Planning for Growth 286
The Purpose and Need for Financial Forecasting 287
Forecasting Pro?tability 289
Forecasting Asset and Financing Requirements 291
Living the Dream Surviving a Financial Crisis 292
Determining Asset Requirements 294
Determining Financing Requirements 295
Forecasting Cash Flows 298
Living the Dream The Problem with Unplanned
Growth 299
Pro Forma Statement of Cash Flows 300
The Cash Budget 301
Use Good Judgment When Forecasting 303
Chapter 12 A Firm’s Sources
of Financing 309
In the Spotlight: J.W. Hulme Co. 309
The Nature of a Firm and Its Financing Sources 310
A Firm’s Economic Potential 310
Living the Dream Adapting to a New
World of Finance 311
Company Size and Maturity 312
Types of Assets 312
Owner Preferences for Debt or Equity 312
Debt or Equity Financing? 312
Potential Pro?tability 312
Financial Risk 315
Voting Control 316
Sources of Financing 317
Sources Close to Home 318
Bank Financing 320
Business Suppliers and Asset-Based Lenders 325
Private Equity Investors 327
Living the Dream On the Hunt 329
The Government 330
Where Else to Look 332
Living the Dream Micro-Business Loans as
a Financing Source 333
Chapter 13 Planning for the
Harvest 338
In the Spotlight: Letting Go Is Never Easy 338
The Importance of the Harvest 339
Methods of Harvesting a Business 339
Selling the Firm 340
Releasing the Firm’s Cash Flows 343
Living the Dream Sellers Offer Financing to Buyers 344
Living the Dream Sale Gives PR Firm the Bene?ts
of Becoming Employee-Owned 345
Initial Public Offering (IPO) 346
Private Placement 348
Living the Dream Off-the-Grid IPOs 349
Firm Valuation and the Harvest 350
The Harvest Value 350
The Method of Payment 351
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ix Contents
Developing an E?ective Harvest Plan 352
Anticipate the Harvest 352
Expect Con?ict—Emotional and Cultural 353
Get Good Advice 353
Living the Dream I’ll Be Over Here
If Anyone Needs Me 354
Understand What Motivates You 355
What’s Next? 356
Part 4
Focusing on the Customer:
Marketing Growth Strategies 361
Chapter 14 Building Customer
Relationships 362
In the Video Spotlight: Rodgers Chevrolet 362
What Is Customer Relationship Management? 363
The Importance of CRM to the Small Firm 364
Essential Materials for a CRM Program 365
Creating Positive Transactional Relationships
through Extraordinary Service 366
Managing Customer Satisfaction 366
Evaluating a Firm’s Customer Service Health 369
Living the Dream Pampering Customers by
Telling Them to Go Away! 370
Using Technology to Support Customer
Relationship Management 373
Building Customer Pro?les for a CRM Program 376
Living the Dream When You Care Enough to
Ignore Your Customers 377
Customers as Decision Makers 378
Problem Recognition 378
Information Search and Evaluation 379
Purchase Decision 379
Post-Purchase Evaluation 379
Understanding Psychological In?uences
on Customers 381
Needs 381
Perceptions 381
Motivations 382
Attitudes 382
Understanding Sociological In?uences
on Customers 382
Culture 382
Social Class 383
Reference Groups 383
Opinion Leaders 384
Chapter 15 Product
and Supply Chain Management 389
In the Video Spotlight: Horse.com 389
To Grow or Not to Grow 390
Innovation: A Path to Growth 391
Competitive Advantage and Innovation 391
Living the Dream Reinventing the Wheel—Entirely! 393
Sustainability and Innovation 394
The Product Life Cycle and New
Product Development 396
The Product Life Cycle 396
The New Product Development Process 397
Building the Total Product 398
Branding 398
Living the Dream Rapid Prototyping
and Blinding Speed 400
Packaging 402
Labeling 403
Warranties 403
Product Strategy 404
Product Marketing versus Service Marketing 404
Product Strategy Options 406
The Legal Environment 406
Consumer Protection 406
Protection of Marketing Assets 407
Supply Chain Management 409
Intermediaries 410
Channels of Distribution 410
The Scope of Physical Distribution 412
Pulling the Pieces Together 413
Chapter 16 Pricing
and Credit Decisions 418
In the Video Spotlight: Nicole Miller 418
Setting a Price 419
Cost Determination for Pricing 419
How Customer Demand Affects Pricing 420
Living the Dream To Cut or Not to Cut 421
Applying a Pricing System 423
Break-Even Analysis 423
Markup Pricing 425
Selecting a Pricing Strategy 426
Penetration Pricing 426
Skimming Pricing 427
Follow-the-Leader Pricing 427
Variable Pricing 428
Price Lining 428
Pricing at What the Market Will Bear 428
Some Final Notes on Pricing Strategies 428
Living the Dream e-Business Pricing 429
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x Contents
O?ering Credit 429
Bene?ts of Credit 429
Factors That Affect Selling on Credit 430
Types of Credit 431
Trade Credit 432
Managing the Credit Process 432
Evaluation of Credit Applicants 433
Sources of Credit Information 434
Aging of Accounts Receivable 434
Billing and Collection Procedures 435
Credit Regulation 436
Chapter 17 Promotional
Planning 440
In the Spotlight: Foley’s NY Pub & Restaurant 440
The Communication Process in Promotion 441
Determining the Promotional Budget 443
Allocating a Percentage of Sales 443
Deciding How Much Can Be Spared 443
Spending as Much as the Competition Does 443
Determining How Much Is Needed
for Speci?c Results 444
Personal Selling in the Small Firm 444
The Importance of Product Knowledge 444
The Sales Presentation 445
Living the Dream The Making of a Great
Salesperson 446
Customer Goodwill and Relationship Selling 447
Cost Control in Personal Selling 448
The Compensation Program for Salespeople 448
Advertising Practices for Small Firms 449
Advertising Objectives 449
Types of Advertising 450
Obtaining Assistance with Advertising 450
Frequency of Advertising 451
Where to Advertise 451
Web Advertising 452
Sales Promotional Tools 457
Specialties 457
Trade Show Exhibits 458
Publicity 458
Living the Dream Experiential Marketing 459
When to Use Sales Promotion 460
Chapter 18 Global Opportunities
for Small Business 464
In the Spotlight: New York Chocolatier
Finds a Sweet Spot Far from Home 464
Small Businesses as Global Enterprises 466
The Forces Driving Global Businesses 468
Expanding the Market 468
Living the Dream Surf ’s Up, but Sales Are Down 469
Gaining Access to Resources 472
Cutting Costs 473
Capitalizing on Special Features of Location 474
Strategy Options for Global Firms 476
Exporting 476
Importing 478
Living the Dream Importing Products
Can Get Downright Dirty 479
Foreign Licensing 480
International Franchising 481
International Strategic Alliances 481
Locating Facilities Abroad 481
Challenges to Global Businesses 483
Political Risk 483
Economic Risk 484
Managerial Limitations 484
Assistance for Global Enterprises 485
Analyzing Markets and Planning Strategy 485
Connecting with International Customers 486
Financing 486
Part 5
Managing Growth in the
Small Business 493
Chapter 19 Professional
Management in the
Entrepreneurial Firm 494
In the Video Spotlight: Goshow Architects 494
Entrepreneurial Leadership 495
What Is Leadership? 495
Leadership Qualities of Founders 495
What Makes a Leader Effective? 496
Leadership Styles 496
Leaders Shape the Culture of the Organization 498
Living the Dream Nice Guys Finish Last . . . or
So the Saying Goes 499
Distinctive Characteristics of Small Firm
Management 500
Professional-Level Management 500
Limitations of Founders as Managers 500
Managerial Weakness in Small Firms 501
Constraints That Hamper Management 501
Firm Growth and Managerial Practices 502
Managerial Responsibilities of Entrepreneurs 504
Planning Activities 504
Creating an Organizational Structure 505
Understanding Informal Groups 506
Delegating Authority 506
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xi Contents
Controlling Operations 507
Communicating 508
Living the Dream Dude, Where’s My Ability
to Communicate? 509
Negotiating 510
Personal Time Management 512
The Problem of Time Pressure 512
Time Savers for Busy Managers 512
Outside Management Assistance 513
The Need for Outside Assistance 513
Sources of Management Assistance 514
Chapter 20 Managing Human
Resources 521
In the Spotlight: Some People Ask Too Many
(Bad) Questions 521
Recruiting Personnel 522
The Need for Quality Employees 522
The Lure of Entrepreneurial Firms 523
Sources of Employees 524
Living the Dream All A-Twitter about Recruiting 526
Diversity in the Workforce 527
Job Descriptions 528
Evaluating Prospects and Selecting Employees 529
Step 1: Using Application Forms 529
Step 2: Interviewing the Applicant 529
Step 3: Checking References and Other
Background Information 531
Step 4: Testing the Applicant 532
Step 5: Requiring Physical Examinations 533
Training and Developing Employees 533
Basic Components of Training and Development 533
Orientation for New Personnel 534
Training to Improve Quality 534
Training of Nonmanagerial Employees 535
From Training to Implementation 535
Development of Managerial
and Professional Employees 537
Compensation and Incentives for Employees 538
Wage and Salary Levels 538
Financial Incentives 538
Stock Incentives 539
Employee Bene?ts 539
Special Issues in Human Resource Management 540
Co-Employment Agreements 540
Legal Protection of Employees 541
Labor Unions 542
Formalizing Employer–Employee Relationships 542
The Need for a Human Resource Manager 542
Chapter 21 Managing Operations 547
In the Video Spotlight: Modern Postcard 547
Competing with Operations 548
The Operations Process 549
Managing Operations in a Service Business 549
Living the Dream Making the Most of Motown 550
Types of Manufacturing Operations 551
Capacity Considerations 552
Planning and Scheduling 552
Inventory Management and Operations 553
Objectives of Inventory Management 554
Inventory Cost Control 554
Inventory Record-Keeping Systems 556
Operations Management and Quality 557
Quality as a Competitive Tool 557
The Customer Focus of Quality Management 558
“The Basic Seven” Quality Tools 560
Quality Assurance Using Inspection versus Poka-Yoke 560
Statistical Methods of Quality Control 561
International Certi?cation for Quality Management 561
Quality Management in Service Businesses 562
Purchasing Policies and Practices 562
The Importance of Purchasing 562
Living the Dream Under Armour Finds Outsourcing
Is “No Sweat” 564
Measuring Supplier Performance 566
Building Good Relationships with Suppliers 566
Forming Strategic Alliances 567
Forecasting Supply Needs 567
Using Information Systes 568
Lean Production and Synchronous Management 568
Lean Production 568
Synchronous Management 569
Chapter 22 Managing
the Firm’s Assets 575
In the Spotlight: Paci?c Writing Instruments 575
The Working-Capital Cycle 576
The Timing and Size of Working-
Capital Investments 577
Examples of Working-Capital Management 578
Managing Cash Flows 583
Managing Accounts Receivable 584
How Accounts Receivable Affect Cash 584
The Life Cycle of Accounts Receivable 584
Living the Dream Kindness Can Collect 585
Accounts Receivable Financing 587
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xii Contents
Managing Inventory 587
Reducing Inventory to Free Cash 588
Monitoring Inventory 588
Controlling Stockpiles 589
Managing Accounts Payable 589
Negotiation 589
Timing 589
Cash Conversion Period Revisited 591
Capital Budgeting 591
Capital Budgeting Techniques 592
Capital Budgeting Analysis in Small Firms 595
Chapter 23 Managing Risk
in the Small Business 601
In the Spotlight: Leidenheimer Baking Company 601
What Is Business Risk? 603
Basic Types of Pure Risk 603
Property Risks 603
Liability Risks 605
Personnel Risks 608
Risk Management 609
The Process of Risk Management 609
Risk Management and the Small Business 610
Living the Dream Crisis Averted 612
Basic Principles of a Sound Insurance Program 613
Common Types of Business Insurance 615
Property and Casualty Insurance 615
Life and Health Insurance 617
Living the Dream Providing Health Care for Your
Employees Can Be Frustrating—and Costly 618
Cases 623
1 Nau 623
2 Joseph’s Lite Cookies 626
3 Firewire Surfboards 628
4 Mo’s Chowder 630
5 W.S. Darley & Co. 632
6 Benjapon’s 634
7 eHarmony 636
8 D’Artagnan 638
9 Le Travel Store 641
10A Understanding Financial Statements, Part 1 643
10B Understanding Financial Statements, Part 2 645
11 Missouri Solvents 646
12 My Own Money 649
13 CitiStorage 652
14 Rodgers Chevrolet 654
15 Country Supply 656
16 Nicole Miller Inc. 658
17 Glidden Point Oyster Company, A.G.A.
Correa & Son, Hardy Boat Cruises,
Maine Gold 660
18 Smarter.com 662
19 Diamond Wipes International, Inc. 664
20 Salary Envy 666
21 Modern Postcard 667
22 Pearson Air Conditioning & Service 669
23 Protecting Intellectual Property 672
Appendix A 675
Appendix B 696
Endnotes 701
Glossary 719
Index 729
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xiii
W
elcome to the 15th edition of Small Business Management: Launching and Growing
Entrepreneurial Ventures by Longenecker, et.al! Textbooks rarely survive in the
marketplace for more than ?ve or six editions—much less 15—but Small Business
Management has proven to be one of those outliers. This edition of the book represents more
than four decades of writing about small business. Furthermore, it is a book that students fre-
quently choose to hold onto rather than selling it back to a bookstore at the end of a semester.
As one student explained, “It is one of the few books from my college days that I have kept for
future reference.”
Why has Longenecker’s Small Business Management not only survived, but been a market-
leader for so long? We believe there are two reasons: passion and commitment—which are
key success factors for any entrepreneurial venture. Our teaching, research, and consulting
as related to small businesses are not something we do as an afterthought. Neither is it merely
an academic exercise. It is our passion! We believe what we are doing makes a difference in
others’ lives. As a consequence, we have always been committed to giving you our very best.
Over all these years, there has been one absolute constant—we have measured our success by
the effectiveness of our presentation to you, the reader. And though you may not have selected
this textbook yourself, we consider you to be our customer nonetheless. We make every effort
to be sensitive to our readers’ learning needs. In fact, we have taken your point of view into
consideration when writing each chapter and have gone to great lengths to make the material
informative, as well as easy to understand and interesting to read.
In writing Small Business Management, we celebrate the initiative of small business own-
ers everywhere. They are our heroes! And among them is the Graeter’s family, whose business
is featured on the cover of the book. Graeter’s Ice Cream is a family-owned and managed busi-
ness now into the fourth generation. The ?rm has an outstanding reputation, which has led to
its huge market share in super premium ice creams in the Ohio region.
Headquartered in Cincinnati, Ohio, Louis Graeter founded Graeter’s Ice Cream in 1870.
But the family credits his wife, Regina, for laying the foundation for what the company is today.
She ran the company until her death in 1955 when her two sons (Wilmer and Paul) took charge.
Wilmer bought out his brother and eventually passed the business on to his three sons. The
fourth generation became owners in 2003—with Rich Graeter as CEO.
Rich and his cousins, Bob and Chip, have found it necessary to implement more profes-
sional management practices than their forebears. But they want all employees, family and
otherwise, to feel “part of the tribe.” The goal of the Graeter family is for their business to retain
its historical culture of being “the little company that people adore.” We can’t think of a more
?tting purpose for such an enterprise.
Small Business Management is a tribute to all the Graeter’s of the world and to the entrepre-
neurs who want to build something of meaning. But, our being a small part of these individuals’
dreams and endeavors, either directly or indirectly, has added so much to our lives. Writing
Small Business Management continues to be a blessing for us. We hope reading it helps move
you toward your entrepreneurial aspirations.
preface
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
xiv
Follow Your Dreams
Entrepreneurs need to dream BIG dreams—to see opportunities where others only see chaos.
Did you know that Benjamin Franklin was admonished to stop experimenting with electricity?
It’s true! Trying to improve on the reliable and perfectly functional oil lamp was considered an
absurd waste of time! And even Thomas Edison, a shrewd entrepreneur in his own right, tried
to discourage his friend Henry Ford from working on his daring idea of building a motorcar.
Convinced the idea was worthless, Edison advised Ford to give up this wild fancy and work for
him instead. Ford, however, remained steadfast and tirelessly pursued his dream. Progress was
slow. Although his ?rst attempt produced a vehicle without a reverse gear, Ford knew he could
make it happen—and, of course, he did. People like Franklin and Ford dreamed big dreams
and dared to do great things, and now we all bene?t from their achievements. Can you imagine
a world without electric lights and automobiles? The contributions of these two entrepreneurs
have been immeasurable!
This book lays out, in a step-by-step fashion, the knowledge and insights needed to lead
and manage a small business. At the same time, it focuses on a much broader concern—the
pursuit of entrepreneurial dreams. Entrepreneurs build businesses to ful?ll dreams—for them-
selves, for their families, for their employees, and for their communities. When we write about
small companies, therefore, we are writing about individuals whose business lives have had an
impact on a wide range of people.
The aim of the 15th edition of Small Business Management is to provide instruction and
guidance that will greatly improve your odds for success as you take your own entrepreneurial
journey. It is our hope that what we present in this book—and in the tools and ancillaries that ac-
company it—will support the varied goals of those seeking independent business careers, either
directly or indirectly, through the wise counsel of the instructor who has selected this book.
There has never been a more exciting time to be an entrepreneur—even though we are in
a recession at the time we are revising the book. The truth is that many vibrant, high-potential
new ventures are launched during recessions, and there is no reason that yours cannot be one
of them! We are seeing tremendous change these days, to be sure, but change opens the door
to opportunity for those with the courage to pursue it. If you are committed strongly enough to
your dream, in one creative way or another you will overcome all of the obstacles that lie ahead.
New ventures can create tremendous personal value both for entrepreneurs and the investors
who back them with time and money. New ventures can also protect and improve quality of life
by creating jobs and providing new products and services to those who value them. On all of
these fronts, you can make a difference.
Our best wishes to you for a challenging and successful learning experience!
What’s New?
A central purpose of this revision of Small Business Management is to present current, relevant
content in unique and interesting ways. When we started writing, we found many innovative
ideas, trends, companies, and people to write about.
With an abundance of real-world examples to keep both ?rst-time readers and readers
of earlier editions totally engaged, this edition of Small Business Management offers plenty
that’s new, beginning with the area where many potential entrepreneurs struggle the most—
accounting and ?nance.
Understanding and using ?nancial information is often challenging for small business
owners and students alike. Some of our readers are uncomfortable with the topic or
even feel intimidated by it. However, given its importance in managing a business, the
topic would be ignored only at your own peril. Accordingly, we have always tried to
pay particularly close attention to the matter, striving to make it very understandable,
even intuitive. In previous editions, we carefully presented what we believe an entrepre-
neur should know about the ?nancial position of a business. But in this latest edition,
we have truly gone “back to the basics.”
Preface
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
xv
In presenting ?nancial statements, we begin with the assumption
that the reader has little, if any, background knowledge related to
?nancial statements. To accomplish this objective, we have split
what had been one chapter on ?nancials into two chapters, mak-
ing it more of a building-block process. In the ?rst (Chapter 10),
we begin with a short story about three young sisters who start
and run a very simple business—a lemonade stand. Many of
the key concepts are illustrated through this story, avoiding the
complexities of the “real world” that tend to confuse readers.
We then build on the lemonade stand story to bring more realism
into the presentation. But we continue to present this material
piece-by-piece. Then, in the second (Chapter 11), we shift from
understanding historical ?nancial statements to learning the
basics on how to forecast a company’s ?nancial statements. To make certain that the mate-
rial is reader friendly, we classroom tested the materials with students in a small business
management course, and it was extremely well received.
If we have accomplished our goal, this new material should help create a level playing
?eld for the “non-accounting” student. In fact, Bill Petty, the co-author who wrote these
chapters, is prepared to make you an offer. If you carefully study these two chapters
and conclude that they fail to live up to his claims, he will send you $10. There is only
one catch: You have to provide him with a reference to instructional materials where
you believe it is done better. Just call him directly (254-710-2260) or e-mail him
([email protected]).
In our work over the years, we have come to know many
entrepreneurs, whom we believe represent the best of
what small business is about. We wanted you to have the
bene?t of their life experiences, so we formed a group
consisting of entrepreneurs who are the kind of individu-
als you would want to go to when you need advice and
counsel. We call them our “Go-To Team.” We will draw
on their experience to complement what we present in
the chapters. Their comments will appear in the
“HOW I SEE IT” boxes throughout the book.
There are numerous updated “Living the Dream”
features in each chapter that capture entrepreneurs in
action as they face the challenges of small business
and entrepreneurship. To add depth to these features
and ensure accuracy, the authors had personal conversations or
correspondence with a number of the entrepreneurs pro?led.
In addition, eleven new text cases update the case selection at the end of the text. Cases
include Nau, W. S. Darley and Co, Firewire Surfboards, CitiStorage, and many others.
These up-to-date cases provide opportunities for students to apply chapter concepts to
realistic entrepreneurial situations.
Cases that have appeared in the text in the fourteenth edition, but were replaced in
this edition, are now available on the Longenecker book website (www.cengage.com/
management/longenecker). This new feature is provided so that if an instructor has a
“favorite” case that he or she would like to continue to use, it is easily accessible.
Student exercises for the Small Business and Entrepreneurship Resource Center
(SBERC) are included at the end of each chapter. These exercises direct students to
articles and company information on various entrepreneurial ventures, and ask them
to discuss how the chapter topics apply to each situation. Companies covered include
Dyson, Bear Naked Granola, Blue Nile, iSoldIt, LLC, and many others.
The Fit of the Income Statement and Balance Sheet
E
X
H
I
B
I
T
10-5
Income statement reports the profits from
January 1, 2009 through December 31, 2009
Balance Sheet on
December 31, 2009
January 1 December 31
Balance Sheet on
December 31, 2008
Reports a firm's financial position
at beginning of 2009
(end of 2008)
Reports a firm's financial position
at end of 2009
We wanted a name for our company that was catchy, easy
to remember. We went through an exercise with an agency.
We started brainstorming, maybe 300 names. Some names
were absolutely crazy, some literal, some imaginative. We
did searches on a short list of names y were already
trademarked. The moment an agency person mentioned
“Spira,” I knew that was it. reminded me of spiral, aspire,
inspiration. All those things came through. And it’s Latin for
coil. Our spring is WaveSpring technology, not a coil, but it’s
coil-shaped. There were so many things you could do with
that name. We used an existing font, but stylized it, creating
our own. We got as detailed as the dot on the“i,” compressed
down a little bit to show the movement of the spring.
We startedwitha marketingplan. It’s critical whentalking
withpotential investors. The website is a huge focus of my mar-
ketingplan. It has evolvedto be the most important component.
We have always hadthe website. We learnedit is the easiest way
to reachthose customers who come lookingfor your product.
Youreally needto have a dynamic website. The focus for 2008–
2009 was my website. I redidthe whole thing. I think it was a ve
important move, to keepupwithsellingdirect to the customer,
andwiththe customer beingable to?ndus. The ?rst thingmost
people do whenthey want to knowabout a product is look it up
onthe website. They look upa keyword. We’ve workedhardon
our keywords so that people will knowwho we are and ?ndus
easily. It’s beenaninterestingjourney, learningall this.
How I see it: Holly Fields on
Choosing a Name and
Designing a Website
Preface
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
xvi Preface
A business plan for Atayne, LLC is provided in its entirety to illustrate what one “win-
ning plan” at the Babson College Business Plan Competition contains. Of course, there
is no one right plan, but it does let us visualize what a good plan looks like.
Beginning in fall 2009, we will host two Web-based seminars (Webinars) each semes-
ter for instructors to offer instructional insights and share ideas. We are excited that
technology has progressed to the point that we can easily communicate with each other
with nothing more than a phone line and Internet access. Watch for an announcement
about the webinars on the Longenecker website in the fall of 2009.
We will be developing a link on the Longenecker Web site where we can share course
syllabi. It is always good to draw on each other’s work. Excellent ideas deserve such
a forum.
Go Venture is an exciting business simulation allowing you to experience virtually the
challenges and satisfactions of small business management. As you take on the role of
an entrepreneur, you are faced with a myriad of decisions that must be made—from
what type of business you will launch, to what your measures of success will be, to
how to keep control of inventory. Learn more at www.goventure.net, or ask your sales
representative about packaging options with this text.
Achieving Your Best
Small Business Management is organized to help stu-
dents and future entrepreneurs achieve success in what-
ever ?eld they choose. The wide spectrum of content,
applications, cases, graphics, stories, and other details
offered in Small Business Management has assisted many
small business entrepreneurs in making their dreams
come true. With a focus on learning, our features
emphasize hands-on activities that capture student
interest and guarantee practical knowledge, including
the following:
Unique Spotlight Features. The chapter-opening “In the Spot-
light” features pro?le an amazing collection of business owners,
whose unique insights into how to start, run, and grow a business
will help readers identify and explore the full range of issues fac-
ing today’s business owners. More than half of the spotlights are
video-enriched, because nothing helps students master the lessons of
small business and entrepreneurship as much as seeing them put into
practice.
Unique Support for Building a Business Plan. The material in
Part 3, “Developing the New Venture Business Plan,” is integral
to learning how to develop workable plans. Closely aligned with
the approaches to planning that we present in the textbook, addi-
tional business plan templates can be found in Small Business
Management Online (www.cengage.com/login) by registering the
access code that accompanies this text.
Integrated Learning System. Our integrated learning system uses
each chapter’s learning objectives to give structure and coherence to
the text content, study aids, and instructor’s ancillaries, all of which
are keyed to these objectives. The numbered objectives are
introduced in the “Looking Ahead” section, and each is concisely addressed in the
“Looking Back” section at the end of each chapter.
The Location Plan
T
roy Ylitalo and his wife, Sarah Schaller Linn,
realized that work responsibilities were
crowding something far more important out of
their schedules—time with one another. As they
began to explore their options, they realized
that starting an eBay business could lead to
more ?exible job commitments and allow them
Period Papers, an online venture that
specializes in the sale of “vintage advertising
art, authentic antique prints, and collectible
paper ephemera [like greeting cards, posters,
and other printed items that were not really
created to be saved].” In the years since then,
business has really taken off. The company
chapter
T
ran
scen
d
en
tal G
rap
h
ics/H
u
lto
n
A
rch
iv
e/G
etty
Im
ag
es
In the SPOTLIGHT
Vintage Advertising in the
21st Century
www.eperiodpaper.com
LOOKING AHEAD
1. Understand the challenges associated with the
growth of a small business.
2. Explain the role of innovation in a company’s
growth.
3. Identify stages in the product life cycle and the new
product development process.
4. Describe the building of a frm’s total product.
5. Discuss product strategy and the alternatives
available to small businesses.
6. Describe the legal environment affecting product
decisions.
7. Explain the importance of supply chain
management.
8. Specify the major considerations in structuring a
distribution channel.
AFTER STUDYING THIS CHAPTER,
YOU SHOULD BE ABLE TO...
LOOKING BACK
1. Understand the challenges associated with the
growth of a small business.
• Simply maintaining the status quo is a goal of some entre-
preneurs.
• Growing a business too quickly can be stressful for a small
frmand its personnel.
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
xvii Preface
The integrated learning system also simpli?es lecture and test preparation. The lec-
ture notes in the Instructor’s Manual are grouped by learning objective and identify the
PowerPoint slides that relate to each objective. Questions in the Test Bank are grouped
by objective as well. A correlation table at the beginning of each
Test Bank chapter permits selection of questions that cover all
objectives or that emphasize objectives considered most important.
You Make the Call. “You Make the Call” incidents at the end
of each chapter are very popular with both students and instruc-
tors because they present realistic business situations that require
examining key operating decisions. By having students take on the
role of a small business owner, these exercises give them a leg up
in addressing the concerns of small businesses.
Living the Dream. Practical examples from the world of small
business and entrepreneurship carry both instructional and
inspirational value. “Living the Dream” boxes appear at critical
junctures throughout the chapters, refueling and refreshing
chapter concepts with documented experiences of practicing
entrepreneurs.
Video Cases. The video-enriched cases available with the 14th
edition of Small Business Management are once again avail-
able with this edition. The cases draw on the resources of the
popular PBS television series “Small Business School,” and
bring together high-interest video segments and in-text case
material. Case instruction augmented by video filmed on loca-
tion in diverse businesses such as Mo’s Chowder, Joseph’s Lite
Cookies, and other entrepreneurial businesses makes studying
effective small business management all the more interesting.
Updated and Enhanced Supplements
All resources and ancillaries that accompany Small Business Management, 15th edition, have
been created to support a variety of teaching methods, learning styles, and classroom situations.
Instructor’s Manual. Lecture notes in the Instructor’s Manual are grouped by
learning objective and tied to PowerPoint slides that relate to each objective. The
manual also contains sources of audio/video and other instructional materials,
answers to the “Discussion Questions,” comments on “You Make the Call” situa-
tions, and teaching notes for the cases. This edition’s Instructor’s Manual has been
revised by Janice Gates of Western Illinois University. It is available on the text Web
site athttp://www.cengage.com/management/longenecker and on the Instructor’s
IRCD.
Test Bank. The test bank has also been revised by J. David Allen, of Baylor University.
Questions in the Test Bank are grouped by learning objectives and includes true/false,
multiple-choice, and discussion questions. A correlation table at the beginning of each
Test Bank chapter helps instructors select questions that cover all objectives or that
emphasize objectives most important to the instructor’s speci?c course. The test bank
in Word is available on the text Web site athttp://www.cengage.com/management/
Longenecker and on the Instructor’s IRCD.
ExamView
®
Testing Software. ExamView contains all of the questions in the printed
test bank. This program is an easy-to-use test creation software compatible with
Microsoft Windows. Instructors can add or edit questions, instructions, and answers.
Questions may be selected by previewing them on screen, selecting them randomly, or
Rapid Prototyping and Blinding Speed
Klock Werks Kustom Cycles is in the business of building
one-of-a-kind motorcycles, including choppers and bag-
gers (motorcycles that can carry luggage). The owner,
Brian Klock, makes bikes that might better be classifed as
works of art. His products run with the speed of greased
lightning, but Klock can build them fast too, thanks to an
advanced technology called fused deposition modeling
(FDM). This new rapid prototyping process, developed
by a company called Stratasys, Inc., can use 3-Dcomputer
drawings to produce real thermoplastic end-use parts
that “can be sanded, painted, drilled, coated, sealed, and
bolted.”
Klock’s company, based in Mitchell, South Dakota, was
recently selected to compete in the popular “Biker
Build-Of” challenge, which is featured on the Discovery
Channel. His team had 10 days to build a bike, from the
ground up, that was then driven to the annual motor-
cycle rally in Sturgis, South Dakota (an enormous gath-
ering of cyclists), where visitors voted it best of show.
Construction of the two-wheeled creation required the
team to combine many of-the-shelf parts with several
that were created from scratch using rapid prototyping
equipment. “Normally, these parts would be produced
from injection-molded plastic or machined aluminum,”
says Jesse Hanssen, the company’s mechanical engineer.
“But it takes three to four weeks to build parts using
either of these methods because they require tooling.
Klock Werks had to fabricate all of the components dur-
ing a fve-day flming segment.” He also points out that
the rapid prototyping process, using durable polycar-
bonate, shaved the cost of the project by about $15,000.
The equipment manufactures parts by building up ma-
terial layer upon layer, much as a printer would lay down
ink, and to very precise specifcations. However, the fn-
ished components are extremely functional. After win-
ning the competition at Sturgis, the Klock Werk’s team
raced the bike at the Bonneville Salt Flats in Utah, where
they set a land speed record for baggers at 147 miles per
hour. How’s that for durability? It’s the power of polycar-
bonate parts.
Sources: “FDM Case Study—Klock Werks Kustom Cycles,”http://www
.stratasys.com/stratasys.aspx?id=591, accessed February 12, 2009;
“Fused Desposition Modeling Technology,”http://www.stratasys.com/
fused_deposition_modeling_technology.aspx, accessed February
12, 2009; “Biker Build-Of,”http://www.pddnet.com/Scripts/ShowPR
.asp?RID=21841&CommonCount=0, accessed February 12, 2009; and
“Welcome to Klock Werks Kustom Cycles,”http://www.kustomcycles
.com/about, accessed February 12, 2009.http://www.kustomcycles.com
Build-Of” challenge, which is featured on the Discovery
the ra
bonat
The eq
terial l
ink, an
ished
ning t
raced
they s
hour.
bona
Source
.strata
“Fused
fused_
12, 2
.asp?R
“Welc
.com/
http:/
Living the Dream:
using technology
Courtesy of Klock Werks Kustom Cycles
video
case
2
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
xviii Preface
selecting them by number. Instructors can also create quizzes online whether over the
Internet, a local area network (LAN), or a wide area network (WAN).
PowerPoint
®
for Instructors. A complete PowerPoint package is available to aid in
lecture presentation. Computer-driven projection makes it easy to use these colorful
images to add emphasis and interest to lectures. The PowerPoint slides, prepared by
Charlie Cook of the University of West Alabama, are available on both the Instructor’s
Resource CD-ROM and on the password protected Instructor’s Web site.
Instructor’s Resource CD-ROM. Instructors can get quick access to all of these ancil-
laries from the easy-to-use Instructor’s Resource CD-ROM that lets the user electroni-
cally review, edit, and copy what’s needed. The CD contains the Instructor’s Manual,
Test Bank in Microsoft Word and in ExamView, PowerPoint slides, and business
plan templates.
“Small Business School” Videos. Available in DVD
format, selections from this popular television series on
PBS stations let you in on some very big ideas at work in a
variety of innovative small businesses. Some of the small
businesses covered include Joseph’s Lite Cookies, Rodgers
Chevrolet, Nicole Miller, e-Harmony, and Modern Postcard, among many others. Use
these videos to bring the real world into your classroom and let your students learn
from the experts.
Small Business and Entrepreneurship Resource Center
The Small Business and Entrepreneurship Resource Center
(SBERC) from Gale, a part of Cengage Learning and a leader in
e-research for libraries and schools, is an optional package that
gives your students access to 900,000 published full text articles
directly related to small business management that are easily
searchable by business topic, business type, and commonly
asked how-to questions. This powerful resource also includes
access to hundreds of sample business plans and legal forms
necessary to start a new venture in every state. Powered by
InfoTrac, the how-to section provides direct access to the most
popular topics and questions students have about starting and
running a small business.
Small Business Management Online (www.cengage
.com/login). SBM Online provides your students with
a robust array of learning tools to enrich their course
experience. Access to this pincode protected student Web site
is packaged free with every new text and includes access to
the Small Business School videos, Business Plan Templates,
exercises to accompany the optional Small Business and
Entrepreneurship Resource Center, and helpful Interactive
Quizzes and e-lectures.
WebTutor™ on Blackboard or WebCT This dynamic
technology tool complements Small Business Management
by providing interactive reinforcement that helps you fully grasp
key concepts. WebTutor’s online teaching and learning
environment brings together content management, assessment, communication, and
collaboration capabilities quizzes, tutorials, and other opportunities for interactive
instruction that makes the world of small business come alive.
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
xix Preface
Optional Course Add-Ons
BizPlan Builder
®
Express: A Guide to Creating a Business Plan with BizPlan Builder
By JIAN and KAPRON
Now you can learn how to use the award-winning, best-selling professional software
BizPlan Builder 8.1 to create your business plan.
This workbook/CD-ROM package provides all the essentials for creating winning business
plans, from the latest BizPlanBuilder software to step-by-step instructions for preparing each
section of a plan. Ready-to-customize samples, advice, a detailed marketing analysis with links
to demographic and marketing tools, and helpful ?nancial tools make it easy to create a solid
plan. Hands-on exercises and activities throughout the workbook ensure you fully understand
how to maximize BizPlanBuilder’s dynamic tools.
Bundle your text with BizPlanBuilder
®
Express for a package that places you well ahead
on your path to business success.
Contact your South-Western Cengage representative or visithttp://www.cengage.com/
management/JIAN for more information.
Special Thanks and Acknowledgments
There are numerous individuals to whom we owe a debt of gratitude for their assistance in mak-
ing this project a reality. In particular, we thank our friends at South-Western Cengage; we really
do count on them! We are especially indebted to Michele Rhoades, Susan Smart, Jacquelyn K
Featherly, and word master Jeanne Yost. Without them, this book would only exist in our heads!
They are masters of coordination and motivation, keeping us on track and moving forward—
which is no easy task and their sending six pints of Graeter’s Ice Cream to one of the co-authors
who had been in the hospital got him back to work quicker, not to mention their thoughtfulness.
We thank, too, many others who worked on various aspects of the package: our designer,
Tippy McIntosh, our marketing group consisting of Nate Anderson, Jim Overly, and Clint
Kernen, and technology manager, Rob Ellington. We also offer our thanks to Elizabeth Vaughn
and Peggy Davies, whose excellent word-processing skills made our burden much easier to
bear, and to Mary Abrahams for reading chapters and catching our many errant keystrokes.
We owe a great debt of gratitude to Frank Hoy who helped us revise and improve
four of the chapters in the text and made countless great suggestions on all of the other
chapters—all while moving from his position at the University of Texas at El Paso to his new
academic home at Worcester Polytechnic Institute in Massachusetts. Working with him was
like having a valuable co-author, bringing expert and extraordinary insight to our work on
the book. We cannot express adequately how much we value his participation and appreciate
his friendship.
We also want to offer words of appreciation and acknowledgement to Wes Bailey who
was a contributing author for the risk management chapter. Mr. Bailey is president of Bailey
Insurance and Risk Management, Inc. (Waco, TX) and is well recognized as a leader in the
industry. His serving as the author for this chapter insures readers that they are receiving
timely and relevant information for managing risk in a small business. And we thank Bradley
Norris, a colleague and lecturer for us here at Baylor, for his suggestions regarding the opera-
tions chapter.
A talented team of writers contributed an outstanding set of ancillary materials. Special
thanks go to J. David Allen of Baylor University for his preparation of the Test Bank, and
to Janice Gates of Western Illinois University for her revision of the Instructor’s Manual. We
offer our thanks as well to Charlie Cook, of the University of West Alabama, who created the
PowerPoint images. And ?nally we offer a special word of appreciation for the understanding
and patient support of our wives—Donna and Dianna—during this process.
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
xx Preface
Dr. Jeffrey Alstete
Iona College
David Ambrosini
Cabrillo College
Chandler Atkins
Adirondack Community College
Lee Baldwin
University of Mary Hardin-Baylor
Francis B. Ballard
Florida Community College
Hilton Barrett
Elizabeth City State University
Bill Bauer
Carroll College—Waukesha
Wisconsin
Verona K. Beguin
Black Hills State University
Narendra C. Bhandari
Pace University, New York
Greg Bier
Stephens College
Karen Bishop
University of Louisville
Ross Blankenship
State Fair Community College
John Boos
Ohio Wesleyan University
Marvin Borgelt
University of Mary Hardin-Baylor
Steven Bradley
Austin Community College
Don B. Bradley III
University of Central Arkansas
Margaret Britt
Eastern Nazarene College
Mark Brosthoff
Indiana University
Penelope Stohn Brouwer
Mount Ida College
Rochelle R. Brunson
Alvin Community College
Kevin Chen
County College of Morris
Felipe Chia
Harrisburg Area Community
College
Mike Cicero
Highline Community College
Edward G. Cole
St. Mary’s University
Michael D. Cook
Hocking College
Roy A. Cook
Fort Lewis College
George R. Corbett
St. Thomas Aquinas College
Karen Cranford
Catawba College
George W. Crawford
Clayton College & State University
Bruce Davis
Weber State University
Terri Davis
Howard College
Bill Demory
Central Arizona College
Michael Deneen
Baker College
Sharon Dexler
Southeast Community College
Warren Dorau
Nicolet College
Max E. Douglas
Indiana State University
Bonnie Ann Dowd
Palomar College
Michael Drafke
College of Dupage
Franklin J. Elliot
Dine College
Franceen Fallett
Ventura College
R. Brian Fink
Danville Area Community College
Dennette Foy
Edison College
David W. Frantz
Purdue University
Janice S. Gates
Western Illinois University
Armand Gilinsky, Jr.
Sonoma State University
Darryl Goodman
Trident Technical College
William Grace
Missouri Valley College
William W. Graff
Maharishi University
of Management
Mark Hagenbuch
University of North Carolina,
Greensboro
James R. Hindman
Northeastern University
Betty Hoge
Limestone College
Eddie Hufft
Alcorn St University
Sherrie Human
Xavier University
Ralph Jagodka
Mt. San Antonio College
Larry K. Johansen
Park University
Michael Judge
Hudson Valley Community College
Mary Beth Klinger
College of Southern Maryland
Charles W. Kulmann
Columbia College of Missouri
Rosemary Lafragola
University of Texas at El Paso
William Laing
Anderson College
For their helpful suggestions and thoughtful comments, which helped to shape this edition,
we are grateful to the following reviewers and to many others who, for reasons of privacy, chose
to remain anonymous:
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xxi Preface
Ann Langlois
Palm Beach Atlantic University
Rob K. Larson
Mayville State University
David E. Laurel
South Texas Community College
Les Ledger
Central Texas College
Michael G. Levas
Carroll College
Richard M. Lewis
Lansing Community College
Thomas W. Lloyd
Westmoreland County Community
College
Elaine Madden
Anne Arundel Community College
Kristina Mazurak
Albertson College
James J. Mazza
Middlesex Community College
Lisa McConnell
Oklahoma State University
Angela Mitchell
Wilmington College
Frank Mitchell
Limestone College
Douglas Moesel
University of Missouri-Columbia
Michael K. Mulford
Des Moines Area Community College
Bernice M. Murphy
University of Maine at Machias
Eugene Muscat
University of San Francisco
John J. Nader
Grand Valley State University
Charles “Randy” Nichols
Sullivan University
Robert D. Nixon
University of Louisville
Marcella M. Norwood
University of Houston
Donalus A. Okhomina, Sr.
Jackson State University
Rosa L. Okpara
Albany State University
Timothy O’Leary
Mount Wachusett Community
College
Pamela Onedeck
University of Pittsburgh at
Greensburg
Claire Phillips
North Harris College
Dean Pielstick
Northern Arizona University
Mark S. Poulos
St. Edward’s University
Julia Truitt Poynter
Transylvania University
Fred Pragasam
University of North Florida
Mary Ellen Rosetti
Hudson Valley Community College
Jaclyn Rundle
Central College
John K. Sands
Western Washington University
Craig Sarine
Lee University
Duane Schecter
Muskegon Community College
Matthew Semadeni
Texas A&M University
Marjorie Shaprio
Myers University
Sherry L. Shuler
American River College
Cindy Simerly
Lakeland Community College
James Sisk
Gaston College
Victoria L. Sitter
Milligan College
Bernard Skown
Stevens Institute of Technology
Kristin L.H. Slyter
Valley City State University
William E. Smith
Ferris State University
Bill Snider
Cuesta College
Roger Stanford
Chippewa Valley Technical
College
Phil Stetz
Stephen F Austin State University
Peter L. Stone
Spartanburg Technical College
James Swenson
Minnesota State University Moorhead
Ruth Tarver
West Hills Community College
Darrell Thompson
Mountain View College
Melodie M. Toby
Kean University
Charles N. Toftoy
George Washington University
Charles Torti
Schreiner University
Gerald R. Turner
Limestone College
Barry L. Van Hook
Arizona State University
Brian Wahl
North Shore Community
College
Mike Wake?eld
University of Southern California
Charles F. Warren
Salem State College
Janet Wayne
Baker College
Nat B. White, Jr.
South Piedmont Community College
Jim Whitlock
Brenau University
Ira Wilsker
Lamar Institute of Technology
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xxii Preface
To the Instructor
As a ?nal word of appreciation, we express our sincere thanks to the many instructors who use
our text in both academic and professional settings. Based on years of teaching and listening
to other teachers and students, Small Business Management has been designed to meet the
needs of its readers. And we continue to listen and make changes in the text. Please write or
call us to offer suggestions to help us make the book even better for future readers. Our contact
information is Bill Petty (254-710-2260, [email protected]) or Les Palich (254-710-6194,
[email protected]). We would love to hear from you.
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Licensed to: iChapters User
xxiii
JUSTIN G. LONGENECKER Justin G. Longenecker’s authorship of Small Business Man-
agement began with the ?rst edition of this book. He authored a number of books and numerous
articles in such journals as Journal of Small Business Management, Academy of Management
Review, Business Horizons, and Journal of Business Ethics. He was active in several profes-
sional organizations and served as president of the International Council for Small Business.
Dr. Longenecker grew up in a family business. After attending Central Christian College of
Kansas for two years, he went on to earn his B.A. in political science from Seattle Paci?c Uni-
versity, his M.B.A. from Ohio State University, and his Ph.D. from the University of Washing-
ton. He taught at Baylor University, where he was Emeritus Chavanne Professor of Christian
Ethics in Business until his death in 2005.
J. WILLIAM PETTY J. William Petty is Professor of Finance and the W. W. Caruth
Chairholder in Entrepreneurship at Baylor University and the Executive Director of the Baylor
Angel Network. He holds a Ph.D. and an M.B.A. from The University of Texas at Austin and
a B.S. from Abilene Christian University. He has taught at Virginia Tech University and Texas
Tech University and served as dean of the business school at Abilene Christian University.
He taught entrepreneurship and small business courses in China, the Ukraine, Kazakhstan,
Indonesia, Thailand, and Russia. He has been designated a Master Teacher at Baylor and was
named the National Entrepreneurship Teacher of the Year in 2008 by the Acton Foundation for
Excellence in Entrepreneurship. His research interests include acquisitions of privately held
companies, shareholder value-based management, the ?nancing of small and entrepreneurial
?rms, angel ?nancing, and exit strategies for privately held ?rms. He has served as co-editor
for the Journal of Financial Research and as editor of the Journal of Entrepreneurial and
Small Business Finance. He has published articles in a number of ?nance journals and is the
co-author of two leading corporate ?nance textbooks—Financial Management and Founda-
tions of Finance. He is a co-author of Value-Based Management in an Era of Corporate Social
Responsibility (Oxford University Press, 2010). Dr. Petty has worked as a consultant for oil and
gas ?rms and consumer product companies. He also served as a subject matter expert on a best-
practices study by the American Productivity and Quality Center on the topic of shareholder
value-based management. He was a member of a research team sponsored by the Australian
Department of Industry to study the feasibility of establishing a public equity market for small
and medium-sized enterprises in Australia. Finally, he serves as the audit chair for a publicly
traded energy ?rm.
about the authors
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xxiv About the Authors
LESLIE E. PALICH Leslie E. Palich is Associate Professor of Management and Entrepre-
neurship and the Ben H. Williams Professor of Entrepreneurship at Baylor University, where
he teaches courses in small business management, international entrepreneurship, strategic
management, and international management to undergraduate and graduate students in the
Hankamer School of Business. He is also Associate Director of the Entrepreneurship Studies
program at Baylor. He holds a Ph.D. and an M.B.A. from Arizona State University and a B.A.
from Manhattan Christian College. His research has been published in the Academy of Man-
agement Review, Strategic Management Journal, Entrepreneurship Theory & Practice, Jour-
nal of Business Venturing, Journal of International Business Studies, Journal of Management,
Journal of Organizational Behavior, Journal of Small Business Management, and several other
periodicals. He has taught entrepreneurship and strategic management in a number of overseas
settings, including Cuba, France, the Netherlands, the United Kingdom, and the Dominican
Republic. His interest in entrepreneurial opportunity and small business management dates
back to his grade school years, when he set up a produce sales business to experiment with
small business ownership. That early experience became a springboard for a number of other
enterprises. Since that time, he has owned and operated domestic ventures in agribusiness,
automobile sales, real estate development, and educational services, as well as an international
import business.
CARLOS W. MOORE Carlos W. Moore was the Edwin W. Streetman Professor of Mar-
keting at Baylor University, where he was an instructor for more than 35 years. He was
honored as a Distinguished Professor by the Hankamer School of Business, where he
taught both graduate and undergraduate courses in Marketing Research and Consumer
Behavior. Dr. Moore authored articles in such journals as Journal of Small Business Man-
agement, Journal of Business Ethics, Organizational Dynamics, Accounting Horizons,
and Journal of Accountancy. His authorship of this textbook began with its sixth edition.
Dr. Moore received an associate arts degree from Navarro Junior College in Corsicana, Texas,
where he was later named Ex-Student of the Year. He earned a B.B.A. degree from The Uni-
versity of Texas at Austin with a major in accounting, an M.B.A. from Baylor University, and
a Ph.D. from Texas A&M University. Besides ful?lling his academic commitments, Dr. Moore
served as co-owner of a small ranch and a partner in a small business consulting ?rm until his
death in 2007.
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675 675
Atayne leverages innovative technologies
to create high performing athletic gear
that is safe for people and the planet.
appendix
A
Atayne, LLC
Membership Prospectus
January 2009
Primary Contact
Jeremy Litch?eld
+1.207.232.9536
[email protected]
Con?dential Property of
Atayne, LLC PERFORMANCE WITH A POINT OF VIEW
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Appendix A 676
Business and Company Overview
Atayne is a newly launched company established in
May 2007 to ?ll a void in the sporting goods market:
performance and lifestyle apparel, footwear, accesso-
ries, and equipment that are sensitive on the environ-
ment and safe for the people that make and use them.
Atayne employs a fundamentally different approach
than the traditional industry model in developing its
line of products: guided by Cradle-to-Cradle™ design
philosophy, Atayne uses “trash” (worn garments, fac-
tory scraps, plastic bottles, etc.) as the primary input
materials for its products.
The Product Line
Atayne will ful?ll the needs of the eco-active commu-
nity as they pursue their athletic and life goals. Atayne’s
initial product offerings, performance and lifestyle
apparel, are being developed from cutting edge recycled
textiles and materials. Current materials include recy-
cled polyester, Cocona (activated carbon derived from
coconut shells), and Chitosan (derived from snow crab
shells). Atayne will continually evolve its fabric and
material composition with advancements in the sustain-
able textile industry.
The primary bene?ts of the line are technical per-
formance, environmental sensitivity, and human safety.
From a performance standpoint, recycled polyester pro-
vides the moisture management properties of virgin
polyester, while the embedded, activated carbon par-
ticles from Cocona enhance moisture transfer, provide
odor control, and offer SPF 50 UV protection.
On the environmental side, Atayne’s products have
a dramatically lower environmental impact than the in-
dustry norm. By using recycled polyester, production
energy savings are estimated at over 75% as well as reductions in CO
2
emissions of over 70%
when compared to virgin polyester manufacturing processes. Additionally, in its ?rst six years,
Atayne will avert the use of over 270,000 gallons of petroleum, the equivalent of removing
650? cars from the road, and prevent nearly 540,000 pounds of waste from entering land?lls—
doing its part to help address climate change and pollution.
Executive Summary
Atayne, LLC has a simple vision: inspire positive environmental and social change
through the power of sports and active lifestyles.
We deliver a powerful message for fellow members of the eco-active community:
you do not have to sacri?ce your environmental and social values for performance.
Management Team
Jeremy Litch?eld
Chief Pacesetter/President
Rebecca Darr
VP/International Development
Lara Dittoe
VP/Product Development
Michael Hall
VP/Community Development
Parker Karnan
VP/Strategy & Development
Kathleen Lendvay
VP/Operations
Board of Advisors
Charlie Jones
President and Founder
Brand Intersection Group
Brad Nierenberg
President/CEO
RedPeg Marketing
James F. Kene?ck
Chairman and Co-founder
Better World Telecom
Ray and Cathy Pugsley
Brendan and Margie Shapiro
Potomac River Running Stores
Legal Representation
Gordon Kushner & Dennis Lambert
Financing Plan
Round I - $350k (Dec 2008, $135k
raised to date)
Round II - $650k (June 2009)
Round III - $2MM (Jan 2010)
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Appendix A 677
From a human safety standpoint, Atayne is designing products following a strict restricted
substance list that will prevent the use of commonly used yet harmful materials and chemicals
such as PVC, phthalates, heavy metals, antimony, and Azo dyes. Many of these are known car-
cinogens and contaminate ground water during production and laundering. Additionally, there
are concerns about the absorption of these chemicals into the body of wearers, especially when
their pores are wide open during exercise.
Atayne launched sales in late August 2008, with a product line that included a men’s and
a women’s performance top. In 2009, Atayne will introduce an expanded line that includes
performance and active lifestyle tops, bottoms, layering pieces, and outer wear, establishing
the groundwork for a full line of apparel, footwear, accessories, and equipment. All products
will be priced on par with or at a premium to other high-quality performance brands like Under
Armour, Nike, Adidas, Brooks, and New Balance.
THE MARKET
The opportunity for a sustainable performance sporting goods brand is readily apparent due to
the convergence of two signi?cant market-driving trends: the green movement and the increas-
ing number of people aspiring to live more active lifestyles. Driving the convergence of these
trends is a group of consumers who are ambitious and achievement-oriented, and strive for high
performance in everything they do—from their career and athletic pursuits to their commit-
ment to environmental and social causes.
This group of consumers, which Atayne calls the Game Changers, demand high quality
products that are aligned with their values—compromises are rarely tolerated. However, the cur-
rent market offerings of performance and lifestyle apparel, footwear, and accessories are forc-
ing them to compromise, choosing between their environmental and social values and product
performance. This market gap represents a highly pro?table business opportunity. Based upon
average Game Changer spending of US$90.13 per year on active apparel and the current base of
13.7MM
1
Game Changers, the estimated US market potential is over US$1.2bn. Conservatively,
growth of the market over the next 5 years is expected to follow a similar pattern as traditional
performance products, outperforming that of the sports apparel industry by a factor of two, if
not more.
REVENUE MODEL
Initially, sales will come through four primary channels: direct web sales, direct event sales,
wholesale through specialty retailers, and custom performance tops sales. Revenues will grow
from over US$30k in 2008 to over
US$11.1MM by 2013. In the ?rst year
of operation it is expected that 99% of
sales will be direct to consumer (web-
site and events). Wholesale revenues
will start to gain traction in 2010 grow-
ing to approximately 30% of total sales
by 2013, with the remaining 70% of
sales to come from events, web, and
custom sales. Gross margins will level
off around 65% by 2013, a ?gure that is
higher than the industry average due to
Atayne’s primarily direct sales model.
1
The 13.7MM Game Changer ?gure was obtained from Simmons Market Research Bureau’s National Consumer Survey
Table 1: Six-Year Financial Summary
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Appendix A 678
Table of Contents
EXECUTIVE SUMMARY 676
PRODUCT DESCRIPTION AND DEVELOPMENT 679
MARKET ANALYSIS AND POTENTIAL 682
BUSINESS & REVENUE STRATEGY 684
COMPETITION AND COMPETITIVE STRATEGY 685
GROWTH STRATEGY 687
FINANCIAL PLAN 689
RISK ASSESSMENT AND CONTINGENCY STRATEGIES 690
MANAGEMENT TEAM AND ADVISORS 692
APPENDICES 695
APPENDIX 1: PRO-FORMA INCOME STATEMENT 695
APPENDIX 2: PRO-FORMA STATEMENT OF CASH FLOW 695
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Appendix A 679
Product Description
and Development
Atayne’s initial product development strategy focuses on performance and lifestyle apparel for
eco-active consumers in North America. Products will be made from environmentally sensitive
and people-safe materials and technologies using
the most socially and environmentally responsible
manufacturing processes.
Atayne launched sales in late August 2008,
with its men’s and women’s short sleeve (SS) perfor-
mance tops at a retail price of US$38. The company
has completed design and development of its Spring
2009 line, set to launch in April 2009. The line will
include two men’s and women’s bottoms, two men’s
and women’s tops, and a men’s and women’s top for
customization programs (races, non-pro?ts, fund-
raising, etc.).
All products will be priced on par with or at a
premium to other high quality performance brands
like Under Armour, Nike, Adidas, Brooks, and
New Balance.
Throughout the remainder of 2009, Atayne will develop and launch an additional 7 items
for the line. These items will include:
Women’s Jog Bra (Summer ’09)
Men’s & Women’s LS Top (Fall ’09)
Men’s & Women’s Pants (Fall ’09)
Men’s & Women’s Jacket (Fall ’09)
Atayne differentiates its line from the sea of sameness in the performance and lifestyle apparel
category in four ways:
Quality and Performance: While staying true to environmental and human safety
values, Atayne will not compromise the quality or the performance of its products. Only
the highest quality materials will be used and the best manufacturing partners selected
to make Atayne products. As the unsolicited consumer feedback reveals in Figure 3
at the end of this section, the ?rst product offering is already exceeding consumer
expectations.
Environmental Sensitivity and Product Safety: Atayne will use strict guidelines to
ensure its products and the production of them is safe for people and the planet. Atayne
will adopt the highly respected bluesign international standard for product safety. The
goal is to have all products meet the bluesign standard by the end of 2010.
Design Point of View
Atayne’s products will be designed to ful?ll its vision of inspiring positive change.
Pieces in the line (as shown with the tops above) will be emblazoned with Point of
View (POV) statements that express the values of the brand and the people who
wear it.
Products will be designed for multi-functionality across the many activities
(running, biking, hiking, yoga, Pilates, fast packing, etc.) of the eco-active lifestyle.
Figure 1: Atayne’s POV (Point of View) Performance Tops
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Appendix A 680
Figure 2: Atayne’s Spring 2009 Collection
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Appendix A 681
Product enhancements will be integrated to
encourage consumer behavior change in
regard to usage and care. For example, “dry
loops” will encourage customers to rinse
their apparel after use and hang to dry. This
will help to reduce unnecessary laundering,
decreasing energy and water usage by Atayne
customers.
Localized Manufacturing: Atayne is dedicated
to developing a localized production model—
manufacture products where they are going to
be primarily sold. The purpose of this is not
only to support the local economy, but also
avoid unnecessary emissions and energy use by
moving materials across the globe. Since most
of Atayne’s current sales are in North America, the company has established its initial
production here. As the company grows and volume warrants, Atayne will establish
manufacturing partners in international markets for sales in those markets.
Atayne is ?nalizing the selection of its production partners for its Spring 2009 line and
beyond. As previously mentioned, the goal is to develop a supply chain that is consolidated
in the region were the bulk of sales occur. Atayne will likely source its woven fabrics in Asia
in the short term but aims to source fabric in North America as soon as Atayne can meet the
minimum quantities required of North American textile vendors. Below is the current short list
of potential fabric and manufacturing partners.
Fabric
United Knitting (Cleveland, TN)—United Knitting is a world leader in the production
of performance stretch fabrics. Since their inception in 1984, they have focused their
vertical resources in developing technologically innovative fabric systems. Today,
United Knitting continues to produce high performance technical fabrics for leading
brands in high pro?le markets including the Outdoor, Fitness, Team Sports, Military,
Workwear and Protective Markets. United Knitting is a member of the Green Steps
Program. Green Steps is a voluntary program that highlights changes that companies
in the outdoor and sporting industry can take to reduce their negative impact on the
environment. United Knitting is the preferred partner for knit fabrics for use in tops and
linings in bottoms.
Everest Textile (Taiwan)—Until an appropriate domestic partner is identi?ed, Everest
Textile is the preferred supplier of woven fabrics for use in shorts and active skirts.
Founded in 1988, Everest manufactures ?lament and staple textiles combining high
technology with fashion. Everest develops various products including multi-functional
membranes, fabrics for whole markets (sports & outdoor, city & casual), multi-
functional synthetic leather, high performance industrial fabric, home textile, and green
fabrics complying with Everest Sustainability Model including PLA, Organic Cotton,
and Recycled Polyester. Everest is a major textile supplier to companies such as Nike,
Adidas, Puma, Patagonia, The North Face, and Columbia. Everest recently became a
partner of bluesign
®
.
Manufacturing
Atayne is evaluating two manufacturing partners with production capabilities in North America
that meet the company’s environmental and social requirements. Selection of a partner will
Table 2: Spring 2009 Product Line and Pricing Summary
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Appendix A 682
be ?nalized in December 2008. The two ?nal candidates are AN’K Apparel Source Inc.
( Vancouver, BC Canada) and AJ Wear Inc. (Scarborough, ON Canada).
Market Analysis and Potential
The opportunity for a sustainable performance sports brand becomes readily apparent when
one examines the convergence of two signi?cant market-driving trends: the green movement
and the increasing number of people aspiring to live more active lifestyles.
The green movement is one of the most signi?cant trends in the US marketplace today.
In 2007, Americans witnessed the movement transform from environmental dialogue into en-
vironmental action. One of the biggest indicator s of this action was a change in consumer
spending as millions began actively seeking more environmentally friendly products and ser-
vices. A 2007 survey by Information Resources, Inc (IRI) showed that approximately 50% of
US consumers consider at least one sustainability factor when selecting a consumer good.
2

Another survey by global consulting ?rm Accenture showed that consumers are willing to pay
more for these products and services, on average 11% more.
3
Figure 3: Unsolicited Consumer Comments
WOW! What a great shirt! From the way it feels, stays dry through the 8th repeat, the great ?t, and looks
sweet. You guys have put a great shirt out there.
Mike V. Easton, MD
I would love to have an additional Atayne shirt! I bought my ?rst one at the Rock N’ Roll Half Marathon Expo
in VA Beach and I LOVE it! Cheers to people who do a good job and love the earth!
Kara C., Virginia Beach, VA
Got our shirts today!! Awesome. I have just hired myself as the Nor Cal / Tahoe regional sales rep. Really sweet
dude, nicely done. The chick’s shirt looks really good - I would almost say sexy.
Eric Z. Reno, NV
I am the teacher to whom you sold the shirt... I wore it last Friday at school for our “Green Day” and it was
a big hit!
Elisabeth C., Virginia Beach, VA
I picked up a couple of your Run Hard Tread Lightly shirts at the Virginia Beach Half Marathon a couple
weeks ago. I’m loving them and wonder when you will be coming out with a long sleeved version. Fall’s
on its way!
Steve C., Salem, VA
I get the feeling I will be buying some shirts for Xmas gifts.
Andrew L., Washington, DC
I wore that shirt at my race Sunday. It was very nice (green one with the footprint on it). Cool stu? guys!
Richard S., Washington DC
I don’t know if it was the shirt, but I wore it for a jog today and went further and easier then usual. I have a
bunch of cotton t-shirts and have run in them. Only recently have I been getting some “technical shirts” at
races and have come to really like them. Some are real good at wicking and others look good but the Atayne
is both. It was nicely warm at ?rst and as I warmed up it got rid of the perspiration nicely. When I really
heated up it didn’t get clammy. It does it all and I went further than usual and with less e?ort.
Todd S., Kennebunkport, ME
2
“Consumers Consider Sustainability when Picking CPG Brand,” Marketing Vox. 11 January 2008.http://www
.marketingvox.com/archives/2008/01/11/consumers-consider-sustainability-when-picking-cpgbrands/?camp=
newsletter&src=mv&type=textlink.
3
“Two-Thirds of People Will Pay Premium For Green Products,” Environmental Leader. 9 January 2008.http://www
.environmentalleader.com/2007/10/18/two-thirds-of-people-will-pay-premium-for-green-products/.
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
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Appendix A 683
The movement does not appear to
be waning anytime soon. Publications
from Vanity Fair to Runners World have
permanently integrated green issues
into their calendar. Other media com-
panies such as Discovery Communica-
tions (Planet Green) have established
permanent franchises dedicated to en-
vironmental issues. More importantly,
consumers are pledging their commit-
ment. Even in an economic downturn,
70% of consumers say they will stay
loyal to a brand if it supports important
causes.
4
One industry that has more re-
cently started to respond to the green movement is fashion. The presence of sustainable apparel
and fabrics has seen considerable growth over the past several years, and this trend is expected
to intensify. Global sales of organic cotton alone are expected to reach US$6.8 billion in 2010
up from $245MM in 2001.
5
The main driver of this explosive growth is consumer demand. 18%
of US consumers reported an interest in sustainable fashion products in 2006, up from just 6%
in 2004. This increase precedes the upsurge of mainstream interest in all things green that oc-
curred in 2007.
6
As conscientious consumers demand more environmentally friendly products and apparel
options, the obesity epidemic has people aspiring to live more active and healthy lifestyles. One
of the biggest indicators of this trend is people getting off their couch and tying on a pair of run-
ning shoes. Running is one of the fastest growing ?tness activities in the US, seeing a 9.5% in-
crease in participation from 2005 to 2006.
7
Additionally, the top 100 US running events in 2006
saw nearly 2MM people compete, a participation number that has nearly doubled since 1996.
8

As people are trying to become more active, they are also trying to dress the part. Consumers
are grabbing performance sportswear off the shelves, resulting in the category far outpacing the
growth of overall apparel and sportswear sales.
9
In recent years, a consumer group that Atayne calls the Game Changers, has started to
drive the convergence of these trends.
10
A subset of the Cultural Creatives, the segment driv-
ing the growth of Lifestyles of Health and Sustainability (LOHAS), the Game Changers are
an ambitious and achievement oriented group who strive for high performance in everything
they do from their career and athletic pursuits to their commitment to environmental and social
causes. The Game Changers demand high quality products that are aligned with their values—
compromises are rarely tolerated. However, the current market offerings of performance and
lifestyle apparel are forcing the Game Changers to compromise, choosing between their envi-
ronmental and social values and performance. Existing alternatives include:
A product thought to be more environmentally friendly that athletes avoid due to poor
performance during athletic pursuits (organic cotton from various brands)
4
“The Second Annual Edelman Good Purpose Study.” Good Purpose. 1 December 2008.http://www.goodpurpose
community.com/study.html.
5
Marquardt, Sandra. “Global Organic Cotton Apparel and Home Products Market Tops $1 Billion in 2006.” Press Release
News Wire. 21 Oct 2007.
6
“Green Sleeves: Eco-Friendly Incentive Clothing.” Economic Times. 14 May 2007: 4.
7
Lampa, Ryan. “Road Running Information Center Trends and Demographic,” Running USA. 19 October 2007. http://
www.runningusa.org/cgi/trends.pl.
8
Ibid.
9
Albergotti, Reed. “Smells Like Team Spirit,” 2007. The Wall Street Journal. Accessed 13 January 2008 at.http://online.wsj
.com/article/SB119888106821856441.html.
10
The Game Changers are a custom consumer segment developed and modeled by Jeremy Litch?eld and Charlie Jones
through a series of ethnographic and quantitative consumer studies through their work for numerous clients of RedPeg
Marketing Inc.
Figure 4: The Growth of Organic Cotton
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Appendix A 684
A product designed for performance but using environmentally harmful and
unsustainable materials in planet and people-harmful processes (e.g., Nike and
Under Armour)
A product designed for the outdoor lifestyle, performance, and planet, but not for
highly athletic pursuits (Patagonia and GoLite)
This market gap represents a lucrative business opportunity. Based on
average Game Changer spending of $90.13
11
per year on athletic apparel and
the current base of 13.7MM Game Changers, the estimated US market po-
tential is over US$1.2bn. Conservatively, growth of the market over the next
5 years is expected to follow a similar pattern as traditional performance
apparel growth, outperforming that of the sports apparel industry by a fac-
tor of two or more.
12
The initial launch of Atayne tops indicates the target market has been
eagerly awaiting a product to ?ll this void. In less than 15 weeks, Atayne
has sold over 550 tops and distributed another 180? to in?uential athletes
and media in the running community. In addition to the highly favorable
feedback previously shared, consumers are paying a premium price for
Atayne tops ($38 for 1, $70 for 2) at expos in the face of heavily discounted products by leading
brands such as Nike, Brooks, Adidas, and New Balance. Consumers are making this purchase
from a relatively unknown brand during this time of economic uncertainty.
Additionally, Atayne has started to receive highly favorable recognition from magazines,
newspapers, and bloggers in the running community. In the December 2008 issue of Trail Run-
ner magazine, Atayne’s POV top was featured as one of ?ve items in the Green Gear Review.
This is on top of coverage in The Times Record, The Portland Press Herald, and several promi-
nent blogs such as I Run Far, Eco-Runner, Trail Monster Running, and Run to Win.
Business & Revenue Strategy
From an operational standpoint, Atayne’s goal is to transform the current business approach in
the product manufacturing industry from cradle-to-grave to cradle-to-cradle. The current model
is energy and water intensive and is reliant upon virgin, non-renewable materials that enter
through the production process (“cradle”), move across the supply chain to the end consumer,
and ultimately ?nd a home in a “grave,” a land?ll or incinerator. This approach creates a trans-
actional revenue model that promotes conspicuous consumption in order to be successful.
Atayne will design and operate under a more intelligent and sustainable (both environ-
mentally and economically) model than what currently exists. Atayne’s goal is to transform
the traditional, linear model of the industry into a closed loop system, thereby reducing the
amount of energy, water, nonrenewable, and non-recycled materials used in production as well
as diminishing post industrial and consumer waste and providing incentives for responsible
consumption.
The Atayne Model will operate on two levels: the traditional, forward supply chain and a
progressive, reverse supply chain.
FORWARD SUPPLY CHAIN At a high-level, Atayne’s forward supply chain will work much as
it does in the traditional manufacturing industry. However, the materials that enter the produc-
tion phase will be recycled or renewable and will not contain harmful chemicals or materials.
11
Simmons Market Research Bureau, National Consumer Survey, Spring 2007 Adult Full Year.
12
“Taking the Lead in Performance Apparel,” 2006. Just-Style. Accessed 16 January 2008 athttp://www.just-style.com/
article.aspx?ID=95066.
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Appendix A 685
REVERSE SUPPLY CHAIN The reverse supply chain of the model is something that is rela-
tively nonexistent in the product manufacturing industry but an emerging trend. Partnering
with retailers and TerraCycle
13
, Atayne will establish the infrastructure to take back unwanted
products to be recycled into new ones. To encourage the return of products, Atayne will give
consumers a credit in exchange for used materials that can be recycled. Additionally, Atayne
will work with race directors to collect plastic bottles from events to recycle into polyester.
The infrastructure for this program is currently being developed and will roll out in phases over
the course of 2009 and 2010.
Based upon this model, revenues will be generated through four channels:
Direct sales through the Atayne website
Direct sales through events (race expos and lifestyle events)
Wholesale through specialty retailers (running, cycling, multisport, outdoor, lifestyle)
Direct sales through a custom shirt program (races, fundraisers, co-branded apparel)
Under this distribution strategy, revenues will grow from over US$30,000 in 2008
(4 months of sales) to over US$11.1MM by 2013. In the ?rst year of operation, it is expected that
99% of sales will be direct to consumer (website and events). Wholesale revenues will start to
gain traction in 2010 growing to approximately 30% of total sales by 2013, with the remain-
ing 70% of sales coming from events, the web, and custom top sales. It is estimated that gross
margins will level off around 65% by 2013, a ?gure that is higher than the industry average due
to Atayne’s primarily direct sales model.
Competition and Competitive
Strategy
The Competitive Landscape
Competition in the performance apparel category is best segmented using two variables:
product function and product sustainability. On the product function side, sports apparel is
13
Terracycle is a company that is dedicated to eliminating waste. The company recently launched take-back programs with
Clif Bar and Target.
Figure 5: Atayne Revenues by Channel
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Appendix A 686
most often designed for athletic or outdoor
performance. Apparel for athletic perfor-
mance is created for speci?c sports such as
running, cycling, soccer, football, and bas-
ketball. Apparel for outdoor performance
is designed for activities such as hiking,
rock climbing, skiing, and ?shing. Product
sustainability deals with an organization’s
commitment to designing and develop-
ing products in a way that minimizes its
negative impact on people and the environ-
ment.
Combining these variables creates a
landscape with four competitive quad-
rants. On the lower end of the sustainability
scale there are many well-known and es-
tablished companies offering performance
apparel for both outdoor and athletic pur-
suits. Moving up the sustainability scale
reveals there are also several companies
offering outdoor performance products using more environmentally sensitive and people safe
materials and processes. However, no one has fully addressed the intersection of athletic perfor-
mance and sustainability. As initial consumer response to Atayne has shown, the market is ready
and waiting.
The athletic performance ? highly sustainable quadrant is unlikely to remain wide open
for much longer. Entrants are likely to come from three sources:
1. Traditional athletic performance companies such as Nike, Brooks, and New Balance are
starting to experiment with some of the sustainable product technologies, and they are
likely to enter the space once these technologies become more commercialized. Nike
has already set a goal of having their entire apparel line meet certain environmental
criteria by 2012.
2. Outdoor performance companies already using sustainable product technologies are
poised to enter the space using their knowledge. The companies most likely to make this
move are Patagonia and Golite.
3. The opportunity is attracting new entrants in addition to Atayne. Two organizations to
watch in particular are Nulethics and Greenlayer, both of which are marketing a line of
environmentally sensitive sportswear.
Atayne will likely face the biggest competitive threats from Nike, Patagonia, and Green-
layer. However, the management team at Atayne believes they have the right mix of authenticity,
focus, and go-to-market strategy to become the leader in this space.
Nike presents a formidable threat. Despite the strength of their brand and their seemingly
limitless resources, Nike lacks an important tool in capturing the leadership position: authenticity.
While Nike has become synonymous with getting out there and playing hard (Just Do It), they
will be hard pressed to de?ne “Just Do It with Meaning.” Nike will successfully sell products in
the athletic performance/sustainable category; however, they will never own the category.
While Patagonia does have the necessary authenticity, they lack the required focus. His-
torically, Patagonia has had a limited line of trail running apparel; however, recently they have
started to retreat from the sport. Instead, the company is placing its focus on water sports such as
sur?ng. Patagonia estimates that in the next ?ve years over 50% of its sales will come from wa-
ter sports, shifting considerably from the mountain sports that have come to de?ne their brand.
Finally, while Greenlayer may have authenticity and focus, they lack the appropriate go-
to-market strategy to capture Atayne’s target consumers, the Game Changers. The Game
Figure 6: Performance Apparel Competitive Landscape Map
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Appendix A 687
Changers require that brands engage them on a personal level. Greenlayer has opted for the
traditional wholesale model, putting at least two layers between them and their end users. This
will make it exceedingly dif?cult for them to develop the deep relationship that the Game
Changers seek.
Competitive Advantages
Atayne has four primary competitive advantages that will help to position it as the leader in this
emerging space.
First, Atayne will enter the market with a clean slate. This will enable Atayne to de-
velop the authenticity to capture and de?ne this new space. Industry giants will be able to
develop products or sub lines in this segment; however, it is unlikely they will ever be able
to de?ne it. Under Armour proved how powerful this advantage can be when they took the
performance apparel industry by storm starting in the mid 90s. Even today, despite the fact
their sales are dwarfed by companies like Nike and Adidas, Under Armour clearly de?nes
the category.
Second, Atayne is ?nalizing relationships with well-established, complementary brands
that will give Atayne credibility with its core consumer. Atayne is developing relationships
with TerraCycle for the development of its product take-back program and with Clif Bar for
its 2009 event schedule. Not only will Atayne’s association with these companies lend a tre-
mendous amount of credibility in the socially responsible brand space, it opens up signi?cant
opportunities with non-traditional lifestyle retailers such as Whole Foods.
Third, Atayne has built a management team with the skills and backgrounds to achieve
success. Parker Karnan is one of the most respected running industry leaders and brings well-
established relationships with specialty retailers across the country. Additionally, the product
development team (Lara Dittoe and Libby Vance) brings a tremendous amount of experience
from leading companies such as Brooks, Lululemon, Prana, Sugoi, and Nordstrom. The remain-
ing team complements their industry experience with strong backgrounds in consumer goods,
marketing, sales, operations, socially responsible business, retail, international business, and
entrepreneurship.
Finally, Atayne’s operational structure provides the company two major bene?ts. First, by
implementing a reverse supply chain with the take-back program, the company’s core opera-
tions will be based on a model that enhances the Game Changers’ preference for Atayne. The
model shows consumers true dedication to sustainability, moving beyond the all too frequent
green washing
14
in the marketplace. The “all talk, no walk” mentality of greenwashing has
destroyed many companies’ hopes of leveraging the green movement. The model also builds
Atayne’s operations around the future of the textile and apparel industry, enabling the com-
pany to operate seamlessly as others are forced to change. Textile and apparel industry events
across the world are abuzz with sustainability and the impending government regulations. A
recent event in New York City on greening the sports industry had considerable discussion of
regulations that will require companies to take more responsibility for their products after their
usable life. Many experts expect required take back and recycling programs similar to what the
electronics industry is starting to face.
Growth Strategy
To achieve the aggressive growth that Atayne is targeting over the next ?ve years, the company
will focus on ?ve primary areas:
Apparel Line Expansion
Atayne.com Sales Growth
14
A.k.a. stretching of the truth of a company’s environmental friendliness
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Appendix A 688
Wholesale Distribution Expansion
Event Sales Growth
International Expansion
Apparel Line Expansion
In late August 2008, Atayne launched sales
of its shortsleeve top. This will be followed
by the launch of its long-sleeve top in
December. Over the next ?ve years, Atayne
will continue to add items offering consum-
ers a full line of performance and lifestyle
apparel.
In the Spring of 2009, Atayne will expand
its line to include two men’s and women’s
tops and two men’s and women’s bottoms. In
the Fall, Atayne will introduce cold weather
gear including pants, jackets, and a re-designed long-sleeve top. Additionally in 2009, the company
will launch its custom top program speci?cally targeting green races and non-pro?t organizations.
(A pilot program is already underway with a school in Virginia Beach, VA.)
Over the next ?ve years, Atayne will continue to add more styles, as well as items designed
for speci?c activities such as cycling and triathlon. Once its apparel business is well established
around 2012, Atayne will pursue opportunities to extend the brand to include other athletic gear
such as equipment and footwear.
Atayne.com Sales Growth
As Atayne grows and expands distribution channels, the company will focus on retaining 50 to
60% of total sales direct-to-consumer through the company website. To facilitate these sales,
Atayne will support aggressive PR and online marketing programs, such as loyalty and referral
programs and digital communities (e.g., Facebook).
Wholesale Distribution Expansion
In 2009, Atayne will start to pursue distribution with key retailers in priority geographic mar-
kets. Atayne will focus on specialty retail (running, cycling, multi-sport, and outdoor), lifestyle
retail (Whole Foods and sustainable living retailers), and Internet/Catalog (Athleta, Title IX,
Backcountry.com). The goal for 2009 is to be in 15 retail locations. Atayne has already secured
distribution in 5 of these locations.
Event Sales Growth
From late August-early December 2008, Atayne will have sold product at 8 events (Health
& Fitness Expos and Green Lifestyle Events) primarily on the East Coast of the US. The
company will continue to expand its direct sales through events over the next five years.
To create a more scalable event model, Atayne is finalizing an agreement with Clif Bar on
a partnership for 15 to 20 events in 2009. This will not only provide the benefit of reduc-
ing overall event costs, but also associate Atayne will a highly respected and complemen-
tary company.
International Expansion
Starting in 2011, Atayne will look to pursue sales in key international markets with the goal
of establishing sales in ?ve international markets by 2013. International efforts will focus on
Table 3: Growth Strategy Summary
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Appendix A 689
developed countries with cities that have a high concentration of Game Changers. Examples of
these markets include London, Tokyo, and Sydney.
Key Milestones
In the short term, there are several milestones that Atayne must hit to stay on track and lay the
foundation for the above growth plan. Figure 7 shows the major milestones through the second
quarter of 2009.
Financial Plan
The initial ?nancial goal of Atayne is to
manage rapid growth while bringing the
company to pro?tability in its 4th year
of sales. Atayne estimates it will gener-
ate sales of US$11.12MM by 2013 leading
to pre-tax pro?ts of US$3.68MM. As de-
scribed in the previous section, the orga-
nization will achieve this growth through
apparel line expansion, Atayne.com sales
growth, wholesale distribution expansion, event sales growth, and
international expansion. In the ?rst 15 weeks of sales, the company
is approaching $20,000 in revenues. Revenues (from 4 months of
sales) in 2008 should exceed $30k.
Anticipated start-up cash needs (first 30 months) are
approximately $2.0MM. The primary usage of funds includes
Working Capital, Employee Compensation, Sales & Marketing,
and Product Manufacturing. To meet these cash needs and facil-
itate future growth, Atayne will raise funds in three rounds.
In Rounds I and II, Atayne will raise a total of $1.0MM from
friends/family and angel investors using convertible bridge
financing. The money will initially be issued to Atayne as debt
and will convert to equity at a 20% discount once the company
has raised a minimum of $2.0MM in Round III.
Round I funds ($350k) must be raised by the end of December
2008. To date, Atayne has secured $135k and is currently working to
close the remaining $215k through individual investments ranging
Table 4: Six-Year Financial Summary
Table 5: Estimated Start-Up Cash Needs
Figure 7: Key Milestones through Q2 2009
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Appendix A 690
from $10k to $50k. If the amount is not secured by this time, the prin-
cipal owner will continue to run the organization by self- funding. How-
ever, without a cash infusion, Atayne will need to delay the launch of the
Spring 2009 line until that funding is secured.
An additional $650k and $2MM will be sought in Rounds II and III.
These funds must be raised by June 2009 and January 2010 respectively.
The primary usage of these funds will be for product line and distribu-
tion expansion. Both angel and institutional investors will be targeted
for this round. To date, the principal owner has invested over $160,000
($25,000 in cash and $135,000 in deferred wages) in the development of Atayne.
After ?ve full years of operation, Atayne will create a liquidity event enabling its early stage
investors to cash out and realize a healthy return. Atayne will look to follow the paths of com-
panies such as Stony?eld Farms, Tom’s of Maine, and Honest Tea
15
by securing a strategic
investment from a larger company that will not only provide funds for growth, but also existing
supply chain and distribution infrastructure to help support the company’s growth. With this
deal, Atayne will strive to retain a majority of the voting rights for the core ownership group.
Based upon the growth projections and the investment terms, the ?ve-year return on
Round I and II investments is estimated to be between 600 and 690%.
Risk Assessment
and Contingency Strategies
As with any new start-up, Atayne faces several strategic, operational, and ?nancial risks that
will challenge the organization during its launch and growth. Below is an assessment of some
of these risks and the steps the company will take to minimize them.
Strategic Risks
The primary strategic risks that Atayne faces are from entrenched competitors and consumer
inertia. As the green movement becomes more ingrained in mainstream brands, the current
leaders in the performance apparel category will likely move into the emerging sustainable
space. As detailed in the Competition and Competitive Strategy section, competition is likely to
enter from three primary areas: existing individual performance brands, outdoor performance
brands with green processes in place, and new entrants. In evaluating this landscape, Atayne
believes the companies that present the biggest risk are Nike and Patagonia.
Nike is the most powerful force in the sports apparel and footwear industry and has the
ability to de?ne the entire industry because they control over 60% of the market.
16
At the same
time, Nike has become one of the leaders in efforts to design and produce more sustainable
products. Nike is the second largest purchaser of organic cotton in the world
17
, has a line of
environmentally sensitive products—Nike Considered, and is a leading player in the Outdoor
Industry Association Eco Working Group. Patagonia has been the long time leader in designing
and producing environmentally sensitive performance apparel. Their focus has always been on
outdoor apparel but they do a small trail running apparel line.
15
For background on this deal, see Fast Company’s July 25, 2008 blog:http://www.fastcompany.com/blog/
saabira-chaudhuri/itinerantmind/coca-cola-and-honest-tea-plot-thickens.
16
Information obtained via SportScanInfo. 2008.
17
“Global Organic Cotton Market Tops US$1 Billion,” 2007. Ecotextile News. Accessed 7 February 2008 at http://
www.ecotextile.com/archive_news_details.php?id=691.
Table 6: Three Round Investment Schedule
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Appendix A 691
Both Nike and Patagonia are well positioned to turn their focus on producing sustainable
apparel for individual performance sports and be a major competitive threat to Atayne. To ad-
dress this risk, Atayne has focused on building a model that is not just about selling “greener”
performance apparel. Atayne has a vision of transforming the entire textile and apparel indus-
try with eco-effective design and production, as well as responsible consumption. Atayne has
created a unique value proposition that will enable it to de?ne the emerging sustainable space
in the market for performance and lifestyle sports apparel—ecoconscious athletes no longer
have to compromise their environmental and social values for performance. This is a similar
strategy that Under Armour leveraged in their ascent to become the $600MM company they
are today.
The other primary strategic risk that Atayne faces is consumer inertia. The Atayne model
requires consumers to make two major shifts. First, they must believe that a more sustainable
option performs equally well as traditional options, and they must make the move away from
the brands to which they are already loyal.
To reduce the risk of consumer inertia, Atayne will focus its efforts on a niche
target market that is most likely to adopt Atayne. Initial marketing efforts will focus on
engaging the Game Changers, a group of consumers segmented around values, behaviors,
and attitudes (the most signi?cant indicators of brand and product selection). The Game
Changers possess the characteristics that make them highly likely to adopt Atayne. This
makes the company’s way of doing business an easy sell and a comfortable adjustment for
the Game Changers.
Operational Risks
Atayne is designing a business model very different than the industry norm combining a forward
supply chain using environmentally sensitive and people safe manufacturing processes and ma-
terials and a reverse supply chain that brings used products back into the production process.
The main operational risk facing Atayne is its ability to seamlessly implement and inte-
grate all elements of its model. To develop this model, the organization will not only need to
?nd partners across the supply chain with the right capabilities, but also get the individual
partners to work together for the collective good—advancing industry norms.
There are two primary ways Atayne will address this risk. First, the company will select part-
ners with a similar vision and passion for changing the current linear model of the industry. The
current and potential partners are listed in the Product Description and Development section.
Second, Atayne will create a more substantial relationship with its partners. One way
the company will look to do this is through vendor equity. By combining a partner’s vision
to create change, with a ?nancial interest beyond payment for services, Atayne will develop
a collection of partners who are fully dedicated to the success of developing a new model for
the industry.
Another operational risk that Atayne faces is supply of input materials. Atayne’s product
line is based on materials that are not conventional in the apparel industry. Materials such as
recycled polyester are not fully commercialized and this could lead to materials acquisition
issues, especially if suppliers give priority to more established organizations. By developing the
company’s business model around more substantial relationships, Atayne will put itself in the
position to reduce the possibility of this problem.
Finally, Atayne faces the more general organizational and management risks that
accompany a new startup, including recruiting and retaining key staff while managing
aggressive growth. To minimize this risk, Atayne will develop an organizational struc-
ture and culture that is designed to empower individuals. Atayne will empower employees
through decentralized decision making and by providing an equity interest in the organiza-
tion. This will help to align all individuals to the best interests of the company and provide
all employees the opportunity to have a true impact on Atayne’s success as well as reap the
?nancial rewards.
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Appendix A 692
Financial Risks
The primary ?nancial risks that Atayne faces are the recession in the US and exposure to
foreign exchange ?uctuations.
The US economy has of?cially fallen into a recession, and this could have a negative
impact on the organization in two ways.
First, it could make it more dif?cult to acquire the funds necessary to grow the company.
It is likely investors will be much more conservative with their funds and may be less willing
to take a risk on a start-up in the uncertain economic environment. To address this risk, Atayne
is currently developing some non-traditional investment options. One of these includes the
opportunity to spread an investment out over monthly payments. This may attract investors
who are nervous about parting with a large sum of cash but capable of making an investment
from their personal monthly cash ?ow.
Second, consumers are also likely to tighten their wallets. If consumers stall their spend-
ing, it will be much more dif?cult for a start-up to handle than an established company with
relatively better access to commercial ?nancing. This is a tough risk to address because there
are many factors at play that Atayne does not have control over. However, Atayne does not
think a recession would affect it as much as it may other companies. The primary reason for this
is that the core target has a considerable amount of disposable income, and they are unlikely
to need to drastically change their spending patterns. Additionally, history has shown that in
times of hard economic times people move away from lavish consumerism and toward quality,
“feel good” brands and products. Atayne offers consumers something they can be proud of in
these tough economic times.
The other ?nancial risk facing Atayne comes from its exposure to foreign exchange ?uc-
tuations. Atayne will be manufacturing in Canada and if the Canadian dollar rises in value
against the US dollar (as it did this past summer), cost of goods will rise, leading to lower gross
margins and lower pro?ts/higher losses. To hedge against this risk, Atayne will be seeking
quotes from Canadian based companies in US dollars (with payment made in US dollars).
Management Team and Advisors
At this time, Atayne has one full-time staff member, President and Founder Jeremy Litch?eld,
who has been dedicated full-time to the building of Atayne since August 2007. In addition to
Jeremy, Atayne has developed a core team who conduct work on various initiatives to support
the building of the company. Many of these people will be joining the company on a full time
basis, once funding warrants.
JEREMY LITCHFIELD • CHIEF PACESETTER/PRESIDENT, ATAYNE, LLC Jeremy is a life
long environmentalist and athlete, playing basketball in college and running 5 marathons in the
past two years, including a recent Boston qualifying time at the Maine Marathon. His profes-
sional experience has centered on the consumer experience and growing brands through non-
traditional channels. From 2004–2007 Jeremy served as the Director of Brand Strategy and
Consumer Insights at RedPeg Marketing. Prior to RedPeg, Jeremy was Operations Manager
at Pierce Promotions. His brand strategy experience cuts across a variety of categories and
includes large and small brands such as Gillette Venus, Dove, Pepperidge Farm, Diet Pepsi,
Drambuie, Zyrtec, and The I Do Foundation. Jeremy received a BA in Biology from Bowdoin
College and an MBA from American University.
REBECCA DARR • VICE PRESIDENT/INTERNATIONAL DEVELOPMENT, ATAYNE, LLC As
an independent management consultant, Rebecca helps clients in North America and Asia with
sustainability strategy development, operations effectiveness, and change management. Clients
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Appendix A 693
come from multiple industries and have included a global apparel manufacturer. Rebecca
was part of the ?rst global corporate responsibility team at Deloitte Touche Tohmatsu from
2004–2006 and was a management consultant with Deloitte from 1996–2004. Rebecca has a
BA from Rice University, an MBA from the University of Michigan, and a post-graduate cer-
ti?cate in cross-sector partnerships from Cambridge University, England. Rebecca has lived,
worked in or visited 34 countries on 6 continents and speaks a smattering of Mandarin, Canton-
ese, Japanese, French, Spanish, Hindi, and Tamil.
LARA DITTOE • VICE PRESIDENT/PRODUCT DEVELOPMENT, ATAYNE, LLC Lara has 20?
years in the sports apparel arena. She has a keen eye for market trends and is able to trans-
form that vision into leading product. Lara was a founding member and V.P. of Merchandising
for Athleta, a women’s sports lifestyle company, which was recently purchased by Gap Inc.
for US$150MM. Additionally, she was a Product Line Manager for 3 years at Brooks Sports.
Working on both the women’s and men’s lines, she consistently produced 20 to 40% yearly
growth. Her experience also includes retail management, sales representation, and retail buying.
Lara has a BA from the University of Washington and currently lives in the Seattle area with her
husband and two children.
MICHAEL HALL • VICE PRESIDENT/MARKETING AND COMMUNITY BUILDING, ATAYNE,
LLC Michael was a three-sport athlete in college, playing hockey, baseball, and football. Pro-
fessionally, Mike has spent 9 years in the Consumer Packaged Goods (CPG) industry with roles
spanning sales strategy and execution, trade promotion management, national account sales,
customer development, and sales ?nance. He has worked for large CPG ?rms including M&M/
Mars and Church & Dwight and more recently the smaller, entrepreneurial company Dr. Fresh,
Inc. Mike received his BA from Bowdoin College and an MBA from Northeastern University.
PARKER KARNAN • VICE PRESIDENT/STRATEGY AND DEVELOPMENT Parker is a 15?
year veteran of the sporting goods industry having spent most of his career at Brooks Sports,
Inc. Parker was the Vice President of Apparel Sales where he led US sales efforts for 4 divi-
sions of the $150MM company. Prior to heading up Apparel Sales, Parker directed the apparel
brand’s reposition from parity to premium over a 3 year period, increasing the annual margin
by 1300 basis points, thereby establishing the business as a pro?table unit of Brooks. After
leaving Brooks, Parker founded Karnan Associates, a consultancy that works closely with pres-
idents and owners of businesses to help them achieve their business vision and goals. Parker
holds an undergraduate degree from Dartmouth and a graduate degree from the University of
San Francisco.
KATHLEEN LENDVAY • VICE PRESIDENT/OPERATIONS, ATAYNE, LLC Kathleen brings
drive, clarity, and relentless focus on execution to help achieve Atayne’s vision. Kathleen has
12 years of consulting and product management experience working with start-ups and Fortune
100 companies in a variety of industries. She has provided interim leadership to execute strate-
gic initiatives such as product launches, alliance development, vendor management, and process
design. To ?nd her, follow the sound of the the voice asking “how, why, when, who, and how
much?” Kathleen has a BA from Rice University and currently lives with her husband, son, and
golden retriever in Seattle.
LIBBY VANCE • PRODUCT DEVELOPMENT CONSULTANT, ATAYNE, LLC Libby is a product
expert with a passion for organic and sustainable apparel. In senior apparel positions at Brooks
Sports, Sugoi, and Lululemon Athletica, Libby has helped lead positive changes in the apparel
industry toward a more sustainable future. Her current work as an independent consultant is
focused on private brand development and creation of the women’s athletic brand Zella for Nor-
dstrom. Libby lives in Vancouver, BC (home of the 2010 Winter Olympics), with her husband
Mark and their dog Rusty.
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Appendix A 694
WAYNE HENNINGER • PR CONSULTANT Independent publicist Wayne Henninger has over
16 years of public relations, marketing, and feature writing experience. As co-founder of WAVE
PR and Sports, Wayne was responsible for overseeing, promoting, and generating business for
the entire ?rm. He coordinated publicity campaigns for athletes and sports entities including
the Senior Olympics, Major League Lacrosse, the Baltimore Marathon, Sports & Entertainment
Direct, the Hail Redskins book, and BikeDC. Earlier in his career, Wayne was a member of the
Detroit Pistons public relations department and a freelance writer for ESPN—The Magazine.
In addition to the current team, Atayne has formed a Board of Advisors with a wealth
of experience in the management of new, growing, and mature businesses across a variety of
industries. The current Board of Advisors includes:
CHARLIE JONES • PRESIDENT AND FOUNDER, BRAND INTERSECTION GROUP, LLC Charlie’s
20-year career includes brand work in the advertising, direct marketing, public relations, inter-
active, sports marketing, grassroots promotions, social marketing, cause related marketing, and
entertainment ?elds. He has worked on brands such as Pepperidge Farm, Jockey, GEICO, Mc-
Donald’s, Spalding, Major League Baseball, The Virginia Lottery, and Sprint. Charlie recently
launched the branding consultancy Brand Intersection Group. Charlie was formerly CMO of
RedPeg Marketing, CMO of Arnold Worldwide, and President of Earle Palmer Brown. Charlie
is a current marketing faculty member at Georgetown’s McDonough School of Business.
JAMES F. KENEFICK • CHAIRMAN, BETTERWORLD TELECOM, LLC • MANAGING DIRECTOR,
WEX PARTNERS Jim is a seasoned entrepreneur with 20? years of experience as a CEO/
operator in the high tech, nutrition, and telecommunications industries. As CEO/Co-founder of
3 companies he led growth from zero to US$15MM, $30MM, and $70MM, all within 10 years.
He founded an executive coaching and strategic management consulting ?rm called Working
Excellence in 2006 to support CEOs, corporate boards, and executive management teams. In
2007, he co-founded Working Excellence Capital Partners to advise on corporate development
and to provide capital, networking, strategic, and legal advisory services.
BRAD NIERENBERG • PRESIDENT/CEO, REDPEG MARKETING, INC. In just over a decade,
Brad Nierenberg has built RedPeg Marketing into a 50-person marketing powerhouse with cli-
ents such as Anheuser-Busch, the National Guard, GEICO, Bacardi and the State of Texas.
Brad’s leadership skills and marketing insight has positioned RedPeg as a highly-respected,
award winning agency with accolades including a yearly Top 25 ranking in Promo Magazine’s
Promo 100, a consistent position in Inc. Magazine’s Inc. 500, multiple Ex Awards from Event
Marketer magazine and a Best Place to Work honor from Washingtonian magazine. In 2004,
Fortune Small Business and Winning Workplaces named Brad as a Best Boss, one of 15 recipi-
ents chosen from a pool of US executives.
POTOMAC RIVER RUNNING OWNERSHIP GROUP Ray and Cathy Pugsley and Brendan and
Margie Shapiro are the owners of Potomac River Running, a group of ?ve specialty-running
stores in the Washington, DC metropolitan area. The Running Network consistently ranks Poto-
mac River Running in the top 50 running stores in the US. In addition to their stores, the group
runs a popular running club that successfully melds the functions of organizing, scheduling,
coaching, and selling in one seamless process. All four owners competed in track and ?eld in
high school and college. Margie now competes on the international Triathlon Union professional
circuit, and she is a USA Triathlon National Team Member.
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Appendix A 695
Appendix 1: Pro-Forma Income Statement
Appendix 2: Pro-Forma Statement of Cash Flow
Appendices
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Licensed to: iChapters User
696 696
appendix
B
appendix
Valuing a Business
At certain times, an entrepreneur may need to determine the value of her or his business.
Despite the subjective nature of assigning value to a privately held company—that is, a ?rm
whose stock is not traded publicly—and especially a small privately owned ?rm, there are
times when the value must be estimated.
The Need to Compute Firm Value
A variety of speci?c situations may call for a ?rm valuation, including the following:
1. An entrepreneur decides to buy a business, rather than starting one from scratch. He or
she needs to know the answers to two questions, which may seem the same but are not:
“How much is the business worth to me?” and “What should I pay for it?”
2. An owner has decided to make an employee stock ownership plan (ESOP) part of
the ?rm’s retirement program (see Chapter 12). The stock has to be valued each
year so that the appropriate number of shares can be contributed to the employees’
retirement plan.
3. A ?rm is raising money from outside investors. The ?rm’s value must be determined to
establish the percentage of ownership the new investors will receive in the company
(see Chapter 11).
4. One partner wants to buy out another partner or the interest of a deceased partner. The
value of the business must be set so that a price can be agreed on.
5. An owner wants to exit (harvest) the business. Knowing the value of the company
is essential if the business is to be sold or transferred to family members
(see Chapter 12).
These are the most common reasons for valuing a business. Note that they are, for the most part,
driven by external in?uences and exceptional circumstances. But it is a good idea to value a
business on an ongoing basis—at least once a year. As a ?rm grows and becomes more pro?t-
able, the owner needs to know if the business is also increasing in value. In some situations, a
pro?table business may lose value over time. Therefore, being aware of its value is important in
the management of a business. Knowing your ?rm’s value provides critical insight into how the
?rm is performing, what options it has, and how it can improve long-term.
Valuation Methods
In valuing ?rms, it is important to distinguish between ?rm value and owner value. Firm
value, or enterprise value, is the value of the entire business, regardless of how it is
?nanced. It re?ects the value of the underlying assets of the business. Equity value, or
owner’s value, on the other hand, is the total value of the ?rm less the amount of debt owed
by the ?rm. That is,
Firm value ? Outstanding debt ? Equity value
Some approaches to determining ?rm value focus on the ?rst quantity on the left side of the
equation—estimating the value of the ?rm as an entity. The question is “Given the ?rm’s assets
firm value
(enterprise
value)
The value of the entire
business, regardless of
how it is ?nanced.
equity value
(owner’s value)
The value of the ?rm less
the debt owed by the
?rm.
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Licensed to: iChapters User
Appendix B 697
and its ability to produce pro?ts from these assets, what is the ?rm worth?” The equity value is
then found by subtracting the outstanding debt from the total ?rm value.
Other approaches involve determining the value of the outstanding debt and the equity
value separately. In those cases, ?rm value is found by summing the amount of outstanding
debt and the equity value. While both processes produce similar results, we recommend ?nd-
ing the ?rm value and then subtracting the outstanding debt in order to determine the equity,
or owner’s, value.
There are three basic methods for valuing a business: (1) asset-based valuation,
(2) valuation based on comparables, and (3) cash flow-based valuation. Each of these
methods can be used as a stand-alone measure of firm value, but more often they are used
in combination.
ASSET-BASED VALUATION
An asset-based valuation assumes that the value of a ?rm can be determined by examin-
ing the value of the underlying assets of the business (the left-hand side of the balance sheet).
Three variations of this approach use (1) the modi?ed book value of assets, (2) the replacement
value of assets, and (3) the liquidation value of assets.
The modified book value method starts with the numbers shown on a company’s bal-
ance sheet. These amounts are adjusted to re?ect any obvious differences between the histori-
cal cost of each asset (as given on the balance sheet) and its current market value. For instance,
the market value of a ?rm’s plant and equipment may be totally different from its depreciated
historical cost or book value. The same may be true for real estate. The replacement value
method entails estimating the cost to replace each of the ?rm’s assets. And the liquidation
value method involves estimating the amount of money that would be received if the ?rm
ended its operations and liquidated its assets.
Asset-based valuation is of limited worth in valuing a business. The historical costs
shown on the balance sheet may be very different from the current value of the assets. The
three variations to some extent adjust for this weakness, but their estimate of value has a
weak foundation, as all asset-based techniques fail to recognize the ?rm as an ongoing
business. However, the liquidation value method yields an estimate of the value that could
be realized if the assets of the business were all sold separately, which is sometimes helpful
information.
VALUATION BASED ON COMPARABLES
A valuation based on comparables looks at the actual market prices of recently sold
?rms similar to the one being valued—either publicly traded ?rms (market comparables) or
private ?rms that have been sold (transaction comparables). “Similar” means that the two ?rms
are in the same industry and are alike in such characteristics as growth potential, risk, pro?t
margins, assets-to-sales relationships, and levels of debt ?nancing.
For instance, you might start by ?nding several recently sold companies with growth pros-
pects and levels of risk comparable to those of the ?rm being valued. For each of these ?rms,
you calculate the earnings multiple, or value-to-earnings ratio,
1
Earnings multiple ?
Value

________

Earnings

Earnings may be one of the following:
1. Earnings before interest, taxes, depreciation, and amortization,
frequently referred to as EBITDA
2. Earnings before interest and taxes (EBIT), which is also a ?rm’s operating income
3. Net income
Of these three options, earnings before interest, taxes, depreciation, and amortization is the
most popular.
asset-based
valuation
Determination of the
value of a business by
estimating the value
of its assets.
modified book
value method
Determination of the
value of a business by
adjusting book value
to re?ect obvious
di?erences between the
historical cost and the
current market value of
the assets.
replacement
value method
Determination of the
value of a business by
estimating the cost of
replacing the ?rm’s assets.
liquidation
value method
Determination of the
value of a business by
estimating the money
that would be available if
the ?rm were to liquidate
its assets.
valuation based
on comparables
Determination of the
value of a business by
considering the actual
market prices of ?rms
that are similar to the
?rm being valued.
earnings
multiple
A ratio determined by
dividing a ?rm’s value by its
annual earnings; also called
value-to-earnings ratio.
earnings before
interest, taxes,
depreciation,
and amortization
(EBITDA)
A ?rm’s pro?ts after
subtracting cost of goods
sold and cash operating
expenses, but before
subtracting depreciation
and amortization, interest
expense, and taxes.
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Appendix B 698
Then, assuming that the company being valued should have an earnings multiple compa-
rable to those of similar ?rms, you apply the calculated ratio to estimate the company’s value.
That is, you apply the multiple in the following equation:
Value ? Earnings of company being valued ? Earnings multiple of comparable ?rms
Potential buyers of one novelty manufacturer and importer in Missouri offered 4.9 times
the ?rm’s annual EBITDA of $45,000. That is, the buyer was willing to pay $220,500 for the
?rm (EBITDA of $45,000 ? 4.9 ? $220,500).
2
The market-comparable valuation method is not as easy to use as it might seem. First, ?nd-
ing other ?rms that are comparable in every way to the ?rm being valued is often dif?cult. It
is not enough simply to ?nd a ?rm in the same industry, although that might provide a rough
approximation. As already noted, the ideal comparable ?rm is one that is in the same industry,
is a similar type of business, and has a similar growth rate, ?nancial structure, asset turnover
ratio (sales ? total assets), and pro?t margin (pro?ts ? sales). Fortunately, considerable infor-
mation is published about ?rm sales. For instance, a publication called Mergerstat reports the
prices of all such sales announced in the public media. Also, some accounting ?rms can provide
information about the selling prices of comparable businesses.
Second, ideally normalized earnings should be used in this computation. Normaliz-
ing earnings involves adjusting for any unusual items, such as a one-time loss on the sale of real
estate or as the consequence of a ?re. In addition, normalizing earnings involves adding back
any “leakages” that are occurring in the ?rm’s income. For instance, if the owners have been
paying themselves a salary above what it would take to ?nd a similarly quali?ed manager, the
excess should be deducted in ascertaining the ?rm’s normalized earnings.
A variation on valuation based on comparables is simply to assign an appropriate earnings
multiple. There are two fundamental drivers of a ?rm’s earnings multiple—risk and growth.
The two are related as follows:
1. The more (less) risky the business, the lower (higher) the appropriate earnings multiple
and, as a consequence, the lower (higher) the ?rm’s value.
2. The higher (lower) the projected growth rate in future earnings, the higher (lower) the
appropriate earnings multiple and, therefore, the higher (lower) the ?rm’s value.
These relationships are presented graphically in Exhibit B-1.
As already noted, earnings multiples vary with the nature of the ?rm. (In practice, of
course, earnings multiples are also affected by conventional wisdom and the perspective and
normalized
earnings
Earnings that have been
adjusted for unusual
items, such as ?re
damage, and leakages,
such as an excessive
salary for the owner.
Appendix B 69 6988
E
X
H
I
B
I
T
B-1
High Low earnings multiple
Firm risk
Low firm value
Low High earnings multiple High firm value
High High earnings multiple
Firm growth
High firm value
Low Low earnings multiple Low firm value
Risk and Growth: Key Factors A?ecting the Earnings Multiple
and Firm Value
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Licensed to: iChapters User
Appendix B 699
experience of the person performing the valuation.) Following are some examples of multiples
based on the type of ?rm:
Type of Firm Earnings Multiple
Small, well-established ?rm, vulnerable to recession 7
Small ?rm requiring average executive ability but 4
operating in a highly competitive environment
Firm that depends on the special, often unusual, 2
skill of one individual or a small group of managers
Earnings multiples also vary by industry, as shown by the following average multiples in
different industries:
3
Industry Earnings Multiple
Manufacturing 5.5 to 8.5
High-tech 6.0 to 12.0
Health-care services 5.0 to 9.0
Retail 4.5 to 7.5
Public relations, advertising, media 3.0 to 6.5
Restaurant 4.0 to 8.0
Consider a real-life example. When Robert Hall, former owner of Visador Corporation, was
considering selling his ?rm, he received an offer based on a multiple of ?ve times the ?rm’s operat-
ing income plus depreciation expense.
4
The offer was presented to Hall in the following format:
5
Company’s operating income plus depreciation expense
Earnings multiple
Firm value
To determine what Hall would receive for his ownership of the business, we subtract the
$750,000 of debt owed by the ?rm, to get $15,750,000.
Hall rejected the offer of $15.75 million but made a counter-offer of $20 million for his
ownership. Hall’s counter-offer was accepted, which suggests that the buyer wanted the ?rm
more than he let on initially.
The appropriateness of using earnings to value a ?rm is the subject of ongoing debate.
Some contend that markets value a ?rm based on future cash ?ows, not reported earnings.
Moreover, they argue, there are simply too many ways (within generally accepted accounting
principles) to in?uence a ?rm’s reported earnings, leading to material differences in valuation
estimates when there is no difference in the intrinsic value of the ?rm. For these individuals, a
?rm’s value is the present value of the ?rm’s projected future cash ?ows.
CASH FLOW-BASED VALUATION
Although not popular among smaller companies, cash flow-based valuation, in which
a company is valued based on the amount and timing of its future cash ?ows, makes a lot of
sense. Valuations based on earnings, although used more often, present a conceptual problem.
From an investor’s or owner’s perspective, the value of a ?rm should be based on future cash
?ows, not reported earnings—especially not reported earnings for just a single year.
Measuring the value of a ?rm’s future cash ?ows for a cash ?ow-based valuation is a three-
step process:
Step 1. Project the ?rm’s expected future cash ?ows.
Step 2. Estimate the investors’ and owners’ required rate of return on their investment in
the business.
Step 3. Using the required rate of return as the discount rate, calculate the present value of
the ?rm’s expected future cash ?ows, which equals the value of the ?rm.
cash flow-based
valuation
Determination of the
value of a business by
estimating the amount
and timing of its future
cash ?ows.
$ 3,300,000
? 5
$16,500,000
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Licensed to: iChapters User
Appendix B 700
The cash ?ow-based approach is the most complicated of the three valuation methods dis-
cussed here; an in-depth explanation is well beyond the scope of this book. But it has one dis-
tinct advantage: A cash ?ow-based evaluation requires that explicit assumptions be made about
the ?rm’s future growth rates, its pro?t margins (pro?ts to sales), how ef?ciently it is managing
its assets (sales relative to the amount of the assets), and the appropriate discount rate (required
rate of return). In contrast, a valuation based on comparables only implicitly considers the re-
lationship between the multiple being used and the factors that should determine the multiple.
Thus, using cash ?ow-based valuation requires the estimator to examine more carefully why
the ?rm has value.
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Licensed to: iChapters User
701
CHAPTER 1
1. Global Entrepreneurship Monitor.
2. Reynolds and Curtin, op. cit.
3. For an extensive report of the role of small
businesses in the U.S. economy, see “The
Small Business Economy: A Report to the
President,” United States Government Print-
ing O? ce, Washington, D.C., 2009,http://www.sba.gov/advo/research/sb_
econ2008.pdf, accessed February 28, 2009.
4. Mark Hendricks, “Oh Hire Ground,”
Entrepreneur Magazine, February 2008,
p. 19
5. Simona Covel, “Slump Batters Small
Business, Threatening Owners’ Dreams,”
WSJ Online,http://online.wsj.com/article/
SB123025114273834377.html?mod?
djemSB, accessed September 30, 2008.
6. John J. Fernandes, “Management and
Entrepreneurship Education: Looking over
the Horizon,” speech given at the 2006
United States Association of Small Business
and Entrepreneurship/Small Business
Institute Conference, Tucson, Arizona,
January 15, 2006.
7. Patricia B. Gray, “Business Class,”
Fortune, April 17, 2006,http://money
.cnn.com/magazines/fortune/fortune_
archive/2006/04/17/8374351/ index.htm,
accessed Octoer 6, 2008.
8. The description of Table Occasions is based
on an interview with Chia Stewart, one of
the ?rm’s founders, in September 2008.
9. This description of Bert and John Jacobs,
the founders of Life Is Good, is based on an
interview by Leigh Buchman in “Life Lessons,”
Inc. Magazine, October 2006, p. 86.
10. Sara Wilson, “A Business Comes into Frui-
tion,” Entrepreneur Magazine,http://www
.entrepreneur.com/worklife/successstories/
youngmillionaires/article196572.html,
accessed September 15, 2008.
11. Lena Basha, “The Entrepreneurial Gene,”
MyBusiness, December/January 2007, p. 15.
12. For a discussion on “making meaning,”
see Guy Kawasaki, The Art of the Start (The
Woodlands, TX: Portfolio, 2004), pp. 4–6.
13. Avivia Yael, “The Get Ahead Guide: Erin
McKenna Makes the Best Cupcakes in New
York City,” Inc. Magazine, July 2008, p. 89.
14. Thomas J. Stanley and William D. Danko,
The Millionaire Next Door (New York: Simon
& Schuster, 1996), p. 227.
15. Gangaram Singh and Alex De-Noble,
“Early Retirees as the Next Generation of
Entrepreneurs,” Entrepreneurship Theory
and Practice, Vol. 27, No. 3 (Spring 2003),
pp. 218–220.
16. Ram Charan, “Stop Whining, Start Thinking,”
Business Week, August 24, 2008, p. 58.
17. Michelle Conlin, editor, “How to Get a Life
and Do Your Job,” Business Week, August 14,
2008, pp. 37–38.
18. Personal conversation with Rick Davis,
October 15, 2008.
19. William J. Dennis, Jr., “Success, Satisfaction
and Growth,” NFIB National Small Business
Poll (Washington: National Federation of
Independent Business, 2001), p. 1.
20. A 2004 NFIB Research Foundation.
21. Lena Basha, “Like a Good Neighbor,”
MyBusiness, December/January 2008, p. 28.
22. Ibid.
23. Norman R. Smith, The Entrepreneur and
His Firm: The Relationship between Type of
Man and Type of Company (East Lansing:
Bureau of Business and Economic Research,
Michigan State University, 1967). See
also Norman R. Smith and John B. Miner,
“Type of Entrepreneur, Type of Firm, and
Managerial Motivation: Implications
for Organizational Life Cycle Theory,”
Strategic Management Journal, Vol. 4, No. 4
(October–December 1983), pp. 325–340;
Carolyn Y. Woo, Arnold C. Cooper, and
William C. Dunkelberg, “The Development
and Interpretation of Entrepreneurial
Typologies,” Journal of Business Venturing,
Vol. 6, No. 2 (March 1991), pp. 93–114.
24. Sara Wilson, “Leading Ladies,” Entrepreneur
Magazine, November 2008, p. 66.
25. It was with great sadness that we learned
of the death of Je? Timmons in 2008. He
truly made a di?erence in this world. There
is simply no way to measure the contribu-
tion he made to entrepreneurship educa-
tion and in helping his students and others
start and operate successful businesses.
His passion for what he taught was truly
contagious. Even more important, he was
good to other people. You were always
encouraged when you spent time with
him. He will be missed by many.
26. Je?ry A. Timmons and Stephen Spinelli,
New Venture Creation: Entrepreneurship for
the 21st Century (New York: McGraw-Hill/
Irwin, 2009), p. 367.
27. Thomas L. Friedman, The World Is Flat
(Waterville, ME: Thorndike Press, 2005).
28. Chris Pentilla, “All Shook Up,” Entrepreneur,
December 2005, pp. 112–113.
29. Amar Bhide, The Venturesome Economy (Princ-
eton, NJ: Princeton University Press, 2008).
30. Chris Penttila, “Keeping Fresh,” Entrepreneur,
Vol. 33, No. 4 (April 2005), p. 86.
31. Pete Engardio, with Michael Arndt and
Dean Foust, “The Future of O?shoring,”
Business Week, January 30, 2006, p. 46.
32. Sarah Wilson, “Learning from the Best,”
Entrepreneur, March 2006, p. 62.
33. Cited in Gary M. Stern, “Young Entrepre-
neurs Make Their Mark,” Nation’s Business,
Vol. 84, No. 8 (August 1996), pp. 49–51.
34. Personal conversation with Tyler Self, October
29, 2008. Also, for a great reference on the
importance of experience in being successful,
see Malcom Gladwell, Outliers: The Story of
Success (New York: Little, Brown, 2009).
35. Tamera Erikson, “Don’t Treat Them Like
Baby Boomers,” Business Week, August 14,
2008, p. 64.
36. This description of the Millennials comes from
Donna Fenn, “Cool, Determined & Under 30,”
Inc. Magazine, October 2008, p. 97.
37. Ibid.
38.http://www.womenhomebusiness, com/
success/glen?ddich.htm, accessed
February 8, 2006.
39. J. B. Rotter, “Generalized Expectancies
for Internal versus External Control of
Reinforcement,” Psychological Monographs,
1966. A more recent review is given in
Robert H. Brockhaus, Sr., and Pamela S.
Horwitz, “The Psychology of the Entrepre-
neur,” in Donald L. Sexton and Raymond W.
Smilor (eds.), The Art and Science of Entrepre-
neurship (Cambridge, MA:
Ballinger, 1986), pp. 25–48.
40. Timmons and Spinelli, op. cit., pp. 46–54.
41. This quote comes from an interview of
Scott Cook by John Koten, as reported in
“Everything Will Change,” Inc. Magazine,
September 2007,http://www.inc.com/
magazine/20070901/everything-will-
change.html, accessed September 2008.
CHAPTER 2
1. “In the Game of Business, Playing Fair
Can Actually Lead to Greater Pro?ts,”
end notes
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702 End Notes 702
Knowledge at Wharton, March 13, 2008,http://knowledge.wharton.upenn.edu/
article.cfm;jsessionid?9a30d49231903b65
3224?articleid?1916, accessed
September 4, 2008.
2. Karl Eller, Integrity Is All You’ve Got: And
Seven Other Lessons of an Entrepreneurial
Life (New York: McGraw-Hill, 2005), p. 89.
3. Leslie E. Palich, Justin G. Longenecker,
Carlos W. Moore, and J. William Petty,
“Integrity and Small Business: A Framework
and Empirical Analysis,” Proceedings of the
49th World Conference of the International
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South Africa, June 2004.
4. Laura L. Nash, Good Intentions Aside:
A Manager’s Guide to Resolving Ethical
Problems (Boston: Harvard Business
School Press, 1993), p. 61.
5. Milton Friedman, Capitalism and Freedom
(Chicago: University of Chicago Press,
1963), p. 133.
6. Jana Matthews and Je? Dennis, Lessons
from the Edge: Survival Skills for Starting
and Growing a Company (Oxford: Oxford
University Press, 2003), pp. 119–123.
7. Hattie Bryant, Producer of Small Business
School, the series on PBS Stations,
Worldnet, and the Web at http://
smallbusinessschool.org.
8. Jodie Carter, “Rolling in Dough,” Entrepre-
neur, Vol. 31, No. 6 (June 2003), p. 106; and
personal conversation with Mike Jacobs,
October 6, 2006.
9. David Dorsey, “Happiness Pays,” Inc.
Magazine Vol. 26, No. 2 (February 2004), pp.
88–94.
10. Palich et al., op. cit.
11. Nathan Bennett, “Munchausen at Work,”
Harvard Business Review, Vol. 85, No. 11
(November 2007), pp. 24–27.
12. “Employee Theft: Legal Aspects—Estimates
of Cost,”http://law.jrank.org/pages/1084/
Employee-Theft-Legal-Aspects-Estimates-
cost.html, accessed September 4, 2008.
13. “Employee Theft,”http://www.criminal-law-
lawyer-source.com/terms/employee-theft
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14. “Executive Team,”http://www.salesforce
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accessed September 21, 2008.
15. Chris Penttila, “Got Skills?” Entrepreneur,
Vol. 34, No. 9 (September 2006),
pp. 100–101; and personal conversation
with David Shapiro, February 13, 2007.
16. Raymund Flandez, “Small Companies Put
Charity into Their Business Plan,” The Wall
Street Journal (November 20, 2007), p. B3.
17. The popular business press provides
numerous examples to support this posi-
tion, but we recognize that the evidence
from academic studies on the subject
is mixed. For an excellent review of this
research, see Michael L. Barnett, “Stake-
holder In?uence Capacity and the Variabil-
ity of Financial Returns to Corporate Social
Responsibility,” Academy of Management
Review, Vol. 32, No. 3 (July 2007),
pp. 794–816.
18. “2004 Cone Corporate Citizenship Study
Results,”http://www.causemarketingforum
.com/page.asp?ID?330, accessed
November 12, 2008.
19. William J. Dennis, Jr., “Contributions to
Community,” National Federation of
Independent Business, quarterly research
report, Vol 4, No. 6 (2004).
20. Eric Knopf, “One Step at a Time,” in Michael
McMyne and Nicole Amare (eds.), Beyond
the Lemonade Stand: 14 Undergraduate
Entrepreneurs Tell Their Stories of Ethics in
Business (St. Louis, MO: St. Louis University,
2004), pp. 47–48.
21. Martin Vaughn, “IRS Too Easy on Payroll
Taxes, Study Finds,” The Wall Street Journal
(July 29, 2008), p. A8.
22. Paulette Thomas, “Virtual Business Plans
Require Human Touch,” The Wall Street
Journal (August 2, 2005), p. B2.
23. Nadine Heintz, “For Rolling up Her Sleeves,”
Inc. Magazine (April 2004), pp. 128–129.
24. Justin G. Longenecker, Joseph A. McKin-
ney, and Carlos W. Moore, “Egoism and
Independence: Entrepreneurial Ethics,”
Organizational Dynamics, Vol. 16, No. 3
(Winter 1988), pp. 64–72.
25. These di?erences were signi?cant at the
.05 level.
26. Karl Eller, op. cit., p. 90.
27. As cited in Je?rey L. Siglin, “Do It Right,”
MBA Jungle (November 2001), p. 69.
28. David H. Freedman, “Worried That Employees
Are Wasting Time on the Web? Here’s Why
You Shouldn’t Crack Down,”Inc. Magazine,
Vol. 28, No. 8 (August 2006), pp. 77–78.
29. American Management Association, “2005
Electronic Monitoring & Surveillance Survey:
Many Companies Monitoring, Recording,
Video-taping—and Firing—Employees”
(May 18, 2005),http://www.amanet.org/
press/amanews/ems05.htm, accessed
November 12, 2008.
30. “Handbagged,” Economist (June 19, 2008),http://www.economist.com/business/
Printer/Friendly.cfm?story_id?11580287,
accessed July 10, 2008.
31. Brad Stone, “Court Clears eBay in Suit over
Sale of Counterfeit Goods,” The New York
Times (July 15, 2008),http://www.nytimes
.com/2008/07/15/technology/15ebay
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gin, accessed September 10, 2008.
32. “Fake Gucci, Vuitton Bags Seized in Italy,”
CNNMoney.com (September 25, 2006),http://money.cnn. com/2006/09/25/news/
international/ counterfeit_bags.reut/index
.htm? postversion?2006092518, accessed
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33. A study by Justin G. Longenecker, Joseph A.
McKinney, and Carlos W. Moore (“Religious
Intensity, Evangelical Christianity, and
Business Ethics: An Empirical Study,”
Journal of Business Ethics, Vol. 55, No. 2
[2004], pp. 373–386) provides evidence
to support this position. The authors
examined data from 1,234 business lead-
ers responding to a national survey. They
asked study participants to evaluate the
ethical quality of responses described in a
series of vignettes (from “never acceptable”
to “always acceptable”) and also to identify
which of the following ?ve broad catego-
ries best described their religious faith:
Catholic, Protestant, Jewish, other
religions, no religion. Study results found
no di?erence between these general
groups. However, respondents who in-
dicated that religious interests were of
high or moderate importance to them
demonstrated a higher level of ethical
judgment than did others in the study,
as did those who considered their beliefs
to be consistent with the basic tenets of
Evangelical Christianity. These ?ndings
suggest that religious values play a part in
ethical decision making, though general
religious categorizations do not seem to
have this same impact.
34. Kent Jennings Brockwell, “10 Questions: Je?
Ukrop,”Richmond.com (August 27, 2007),http://www.richmond.com/local-life/120,
accessed September 12, 2008; “Ukrop’s,”
NationMaster.com,http://www.nationmaster
.com/encyclopedia/Ukrop’s-Super-Market,
accessed September 12, 2008.
35. Nicholas G. Moore, “Ethics: The Way to Do
Business,”http://www.bentley.edu/cbe/
events/lecture_sears_moore.cfm, accessed
September 12, 2008.
36. Excerpt from an interview with J. C. Huizenga
in “Virtuous Business and Educational
Practice,”Religion & Liberty (a publication of
the Acton Institute for the Study of Religion
and Liberty), Vol. 12, No. 2 (September–
October 2002), p. 1.
37. Kenneth H. Blanchard and Norman Vincent
Peale, The Power of Ethical Management
(New York: Harper-Collins, 1989).
38. J. Michael Alford, “Finding Competitive
Advantage in Managing Workplace Ethics,”
paper presented at the 2005 meeting of
the United States Association for Small
Business and Entrepreneurship, Indian
Wells, California, January 13–16, 2005.
39. More speci?c insights and guidance for
writing a code of conduct can be found at
the following website:http://www.ethics
.org/resources/common-code-provisions
.asp, accessed September 21, 2008.
40. “Resource Toolkit: The PLUS Decision
Making Model,” Ethics Resource Center,http://www.ethics.org/resources/
decision-making-process.asp, accessed
September 12, 2008.
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
End Notes 703
41. “Guiding Principles,”http://www.rotary.org/
en/AboutUs/RotaryInternational/
GuidingPrinciples/Pages/ridefault.aspx,
accessed September 21, 2008.
42. Brian K. Burton and Michael Goldsby
(“The Golden Rule and Business Ethics:
An Examination,” Journal of Business Ethics,
Vol. 56, No. 3 [2005], pp. 371–383) o?er
an extended discussion of the history,
meaning, and problems of the Golden Rule.
They document the appearance of this
general principle in the writings of several
major world religions and philosophers
and provide examples of companies that
have used the Golden Rule explicitly as a
guide for decision making (e.g., JCPenney
and Lincoln Electric Co.). The in?uence of
the Golden Rule is so pervasive that Burton
and Goldsby conclude that it “seems to be
one of the few candidates for a universally
acceptable moral principle.”
43. Kant actually o?ered a critique of the
Golden Rule, but only as a footnote to his
discussion of the categorical imperative. In
his opinion, the categorical imperative is a
superior concept for a number of reasons,
all of which are related to his expanded
view of the imperative (see Immanuel Kant,
Grounding for the Metaphysics of Morals,
with a Supposed Right to Lie Because of
Philanthropic Concerns, 3rd ed., trans.
J. W. Ellington [Indianapolis: Hackett
Publishing, 1993]).
44. This de?nition is o?ered in James Austin,
Howard Stevenson, and Jane Wei-Skillern,
“Social and Commercial Entrepreneurship:
Same, Di?erent, or Both?” Entrepreneur-
ship Theory & Practice, Vol. 30, No. 1 (2006),
pp. 1–22. However, the authors recognize
that de?nitions of the term vary from
an emphasis on nonpro?t enterprises to
corporate philanthropy and many other
activities. Indeed, in their article, Austin,
Stevenson, and Wei-Skillern identify key
di?erences between social and commer-
cial entrepreneurship. Using Sahlman’s
analytical framework (W. A. Sahlman,
“Some Thoughts on Business Plans,” in
W. A. Sahlman, H. Stevenson, M. J. Roberts,
and A. V. Bhide (eds.), The Entrepreneurial
Venture [Boston: Harvard Business School
Press, 1996], pp. 138–176), the authors
compare the two forms of entrepreneur-
ship across four factors: the people, the
context, the deal, and the opportunity. They
highlight substantial di?erences across
all four factors. For example, commercial
entrepreneurs tend to focus on break-
through opportunities where new needs
are emerging, whereas social entrepreneurs
are concerned with opportunities centered
on basic, longstanding needs that can be
served more e?ectively with innovative ap-
proaches. However, they also conclude there
are notable similarities. Taken together, the
authors’ observations suggest that the con-
cept of social entrepreneurship, though
becoming less ambiguous, is still not
de?ned to the satisfaction of many
entrepreneurship researchers.
45. Paul Sloan, “Doughing the Right Thing,”
Business 2.0, Vol. 7, No. 7 (August 2006),
p. 82.
46. Elaine Pofeldt, “Beyond the Bottom Line,”
Fortune, Vol. 150, No. 13 (December 27,
2004), p. 170[H].
47. “Tanzania—Hero Rats,”http://www.pbs
.org/frontlineworld/stories/tanzania605/
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2008.
48. “Greening Your Business: A Primer for
Smaller Companies,”http://www.greenbiz
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49.http://www.epa.gov/epaoswer/hazwaste/
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50. See David Worrell, “Keen on Green,” Entre-
preneur, Vol. 34, No. 9 (September 2006),
pp. 67–71, for a helpful summary of trends
related to “green” technologies and the
investments they have attracted.
51.http://www.bigbellysolar.com, accessed
September 15, 2008.
52. Marc Gunter, “Tree Huggers, Soy Lovers,
and Pro?ts,” Fortune, Vol. 147, No. 12
(June 23, 2003), pp. 99–104.
CHAPTER 3
1. Clay Shirky, “The (Baysian) Advantage
of Youth,”http://many.corante.com/
archives/2007/05/19/the_bayesian_
advantage_of_youth.php, accessed
January 13, 2009.
2. To read more about an interesting frame-
work that integrates three forms of the
search process (deliberate search, industry
insight guided search, and alertness to
opportunities), see Robert A. Baron,
“Opportunity Recognition as Pattern
Recognition: How Entrepreneurs ‘Con-
nect the Dots’ to Identify New Business
Opportunities,” Academy of Management
Perspectives, Vol. 20, No. 1 (February 2006),
pp. 104–119.
3. Israel M. Kirzner, Competition and Entrepre-
neurship (Chicago: University of Chicago
Press, 1973), p. 74.
4. Andrew C. Corbett and Je?ery S. McMullen
built upon Kirzner’s concept of entre-
preneurial alertness by introducing the
practice of “mindfulness” to the opportu-
nity recognition discussion. They describe
the di?erences between the two perspec-
tives as follows: “Unlike entrepreneurial
alertness, mindfulness can be developed.
This potential for development allows en-
trepreneurial alertness to be transformed
from a trait that someone either does or
does not have to a skill that can be learned.”
For more on the concept and practice of
mindfulness, see Andrew C. Corbett and
Je?ery S. McMullen, “Perceiving and Shap-
ing New Venture Opportunities Through
Mindful Practice,” in Andrew Zacharakis and
Stephen Spinelli, Jr. (eds.), Entrepreneurship:
The Engine of Growth (Westport, CT: Praeger
Perspectives, 2007), pp. 43–64.
5. For an in-depth discussion of the concept
and the essence of the mind-set of the
entrepreneur, see Je?ery S. McMullen
and Dean A. Shepherd, “Entrepreneurial
Action and the Role of Uncertainty in the
Theory of the Entrepreneur,” Academy of
Management Review, Vol. 31, No. 1 (2006),
pp. 132–152.
6. We should point out that the process of
opportunity recognition is not entirely
cognitive (driven by thoughts); in fact,
a?ect (feelings and emotions) can also
play a very important role. For an interest-
ing analysis of the interplay of a?ect and
cognitive processes, see Robert A. Baron,
“The Role of A?ect in the Entrepreneurial
Process,” Academy of Management Review,
Vol. 33, No. 2 (2008), pp. 328–340.
7. Quoted in April Y. Pennington, “Copy That:
In Business, Imitation Is More Than a Form
of Flattery,” Entrepreneur, Vol. 34, No. 3
(March 2006), p. 22.
8. Lee Gimpel, “Idea Mining,” Entrepreneur,
Vol. 34, No. 12 (December 2006), p. 70.
9. Sara Wilson, “A Step Ahead,” Entrepreneur,
Vol. 36, No. 11 (November 2008), p. 41.
10. Jada Cash, “Cure Couture,” Entrepreneur,
Vol. 34, No. 12 (December 2006), p. 128.
11. Gerry E. Hills and R. P. Singh, “Opportunity
Recognition,” in W. B. Gartner, K. G. Shaver,
and P. D. Reynolds (eds.), Handbook of
Entrepreneurial Dynamics: The Process of
Business Creation (Thousand Oaks, CA: Sage
Publications, 2004), Table 24.4, p. 268.
12. ”About Cabana Life,”http://www.cabanalife
.com/about.php, accessed January 13,
2009; Nichole L. Torres, “Transform a
Negative Experience into a Positive Busi-
ness Idea,” Entrepreneur, Vol. 35, No. 12
(December 2007), pp. 108–109.
13.http://www.bestkiteboarding.com/
09-Company, accessed January 13, 2009;
Lindsay Holloway, “To the Extreme,”
Entrepreneur, Vol. 36, No. 3 (March 2008), p. 21.
14.http://www.totelemonde.com/aboutus
.html, accessed November 13, 2008.
15. For an expanded discussion of this frame-
work, see Peter F. Drucker, Innovation and
Entrepreneurship: Practice and Principles
(New York: HarperCollins, 2006), pp. 30–129.
16. Ibid., p. 30.
17. To learn more about the application
of creativity to the process of business
idea generation, see Dimo Dimov, “Idea
Generation from a Creativity Perspective,”
in Andrew Zacharakis and Stephen Spinelli,
Jr. (eds.), Entrepreneurship: The Engine of
Growth (Westport, CT: Praeger Perspectives,
2007), pp. 19–41.
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
704 End Notes 704
18. ”A Revolutionary Concept,”http://www
.aimiesdinnerandmovie.com/about.asp,
accessed January 13, 2009.
19. Lauren Etter, “The Joys of Juggling,” Wall
Street Journal, January 30, 2006, p. R9.
20. ”About Us,”http://www.leasetrader.com/
car/lease/info/agreement/about_us.aspx,
accessed January 13, 2009; James Park,
“New Lease on Life,” Entrepreneur, Vol. 35,
No. 5 (May 2007), p. 116.
21. Chris Pentila, “Hit or Miss,” Entrepreneur,
Vol. 32, No. 6 (June 2004), pp.108–113.
22. Ibid.
23. Nichole L. Torres, “New and Improved,”
Entrepreneur, Vol. 33, No. 5 (May 2005),
p. 96.
24. ”Adventure Bachelor Party,” http://
adventurebachelorparty.com, accessed
January 13, 2009; Amanda Pennington,
“Creature Comforts,” Entrepreneur, Vol. 34,
No. 7 (July 2006), pp. 120–122.
25. ”Overview,”http://www.obecure.com/
apage/9748.php, accessed January 13,
2009; Loolwa Khazzoom, “Beating Obesity
with an Old Drug,” Business 2.0, Vol. 8, No. 7
(August 2007), p. 28.
26. Kristin Ohlson, “Save Water, Save Money,”
Entrepreneur, Vol. 36, No. 10 (October 2008),
p. 20.
27. “RFID Is a Winner in the Sports Arena,”
RFID Journal,http://www.r?djournal.com/
article/articleview/4028/5/474, accessed
January 13, 2009; Siri Schubert, “A Du?er’s
Dream,” Business 2.0, Vol. 7, No. 10
(November 2006), p. 56.
28. Tony Manning, Making Sense of Strategy
(New York: American Management
Association, 2002), p. 17.
29. As something of a parallel to the outside-in
and inside-out options, Dimo Dimov (”From
Opportunity Insight to Opportunity Inten-
tion: The Importance of Person-Situation
Learning Match,” Entrepreneurship Theory
and Practice, Vol. 31, No. 4 [July 2007],
p. 566) mentions two very di?erent op-
portunity insight–inducing situations. In
demand-driven situations, the entrepreneur
is aware of customer needs but does not
know of any products that could meet
those needs. Dimov uses the example of
Phil Knight and Bill Bowerman, co-founders
of Nike, who came up with the ?rst long-
distance running shoe. They had known for
some time that runners needed shoes that
were lighter, promoted lateral stability, and
could better cushion impact, but it wasn’t
until later that they discovered they could
create a new sole by pouring latex onto a
household wa? e iron. Supply-driven situa-
tions are just the opposite. Here, aware-
ness of an emerging product exists, but
the entrepreneur is not aware of customer
needs that could be satis?ed by it. This is
closer to the experience of Roy Jacuzzi, who
used his inventive knowledge of pump
systems to come up with the ?rst whirlpool
bath. Only later did he discover a market for
his product.
30. Much of the research on this subject is
based on ?rms of all sizes, not just small
businesses; however, there is no reason to
rule out entirely the applicability of this
research to entrepreneurial companies.
Some studies present strong evidence that
context is important (Suresh Kotha and
Anil Nair, “Strategy and Environment as
Determinants of Performance: Evidence
from the Japanese Machine Tool Industry,”
Strategic Management Journal, Vol. 16,
No. 7 [1995], pp. 497–518; A. M. McGahan
and Michael E. Porter, “How Much Does
Industry Matter, Really?” Strategic Manage-
ment Journal, Vol. 18, Summer Special Issue
[1997], pp. 15–30; R. Schmalensee, “Do
Markets Di?er Much?” American Economic
Review, Vol. 75, No. 3 [1985], pp. 341–351),
whereas others show that context is
important but not as great a driver of ?rm
performance as such internal factors as a
company’s resources (Gabriel Hawawini,
Venkat Subramanian, and Paul Verdin,
“Is Performance Driven by Industry- or
Firm-Speci?c Factors? A New Look at the
Evidence,” Strategic Management Journal,
Vol. 24, No. 1 [2003], pp. 1–16; Mona
Makhija, “Comparing the Resource-Based
and Market-Based Views of the Firm: Em-
pirical Evidence from Czech Privatization,”
Strategic Management Journal, Vol. 24, No.
3 [2003], pp. 433–451). Thomas J. Douglas
and Joel A. Ryman (”Understanding Com-
petitive Advantage in the General Hospital
Industry: Evaluating Strategic Competen-
cies,” Strategic Management Journal, Vol. 24,
No. 2 [2003], pp. 333–347) interpret the
results of their study to suggest that both
external context and internal factors are
important to the formation of competitive
advantage, a conclusion that is consistent
with evidence from studies of small and
medium-sized enterprises, such as those
conducted by Bo Eriksen and Thorbjorn
Knudsen (”Industry and Firm Level Interac-
tion: Implications for Pro?tability,” Journal
of Business Research, Vol. 56, No. 3 [2003],
pp. 191–199), Stewart Thornhill (”Knowl-
edge, Innovation and Firm Performance
in High- and Low-Technology Regimes,”
Journal of Business Venturing, Vol. 21, No.
5 [2006], pp. 687–703), and Clement K.
Wang and Bee Lian Ang (”Determinants of
Venture Performance in Singapore,” Journal
of Small Business Management, Vol. 42,
No. 4 [2004], pp. 347–363).
31. Kevin J. Delaney, “Searching for Clients from
Above,” Wall Street Journal, July 31, 2007,
p. B1; Logan Kugler, 69 “Targeting the Eye
in the Sky,” Business 2.0, Vol. 7, No. 3
(April 2006), p. 26.
32. Rich Karlgard, “Schumpeter on Speed,”Forbes,
Vol. 178, No. 3 (August 14, 2006), p. 35.
33. Delaney, op. cit.
34. Krysten Crawford, “The Big Opportunity,”
Business 2.0, Vol. 7, No. 5 (June 2006),
pp. 95–99.
35. Michael Porter, Competitive Advantage
(New York: Free Press, 1985), pp. 7–29.
36. William A. Sahlman, “How to Write a Great
Business Plan,”Harvard Business Review,
Vol. 75, No. 4 (July–August 1997), pp. 103–104.
37. Robert Levine, “The Kopy Kat Kids,”
CNNMoney.com ,October 2, 2007, http://
money.cnn.com/2007/10/02/technology/
kopy_kat_kids.biz2/index.htm, accessed
January 13, 2009.
38. Gary Hamel, “Strategy as Revolution,”
Harvard Business Review, Vol. 74, No. 4
(July–August 1996), p. 80.
39. For an interesting discussion of this case
and others where relaxing assumptions
that guide business behavior has made a
signi?cant di?erence in entrepreneurial
e?orts of businesses around the world, see
C. K. Prahalad, The Fortune at the Bottom of
the Pyramid: Eradicating Poverty Through
Pro?ts (Upper Saddle River, NJ: Wharton
School Publishing, 2005).
40.http://www.starbucks.com, accessed
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41. ”Heartwood Studios,”http://www.hwd3d
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Torres, “Biz U: Industrial Evolution,” Entrepre-
neur, Vol. 35, No. 11 (November 2007),
pp. 142–143.
42. It should be pointed out that a recent
study of small businesses conducted by the
National Federation of Independent Busi-
ness found that 34.4 percent of all small
businesses surveyed said that competing
on price is a very signi?cant feature of
their strategy, which is consistent with an
emphasis on controlling costs (speci?cally,
51 percent said that keeping overhead to
a minimum is a very signi?cant feature of
their strategy). However, it is also important
to note that providing better service and
o?ering the highest quality possible were
signi?cantly important to even more ?rms
(83.4 percent and 86.3 percent, respec-
tively), which indicates that di?erentiation
strategies are even more important to small
businesses. See William J. Dennis, Jr. (ed.),
“Competition,” National Small Business Poll,
Vol. 3, No. 8 (2003).
43. ”Spirit Airlines – About Us,”http://www
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44. Scott McCartney, “The Next Airline Fee:
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45. ”Radio Tag: We Put You All over the Radio,”http://www.getradiotag.com, accessed
January 13, 2009; Sara Wilson, “Maximizing
Air Time,”Entrepreneur, Vol. 36, No. 11
(November 2008), p. 71.
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
End Notes 705
46. Philip Kotler, Marketing Insights from
A to Z (New York: John Wiley & Sons, 2003),
p. 65.
47. “Welcome!”http://www.personalized
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48. Brian O’Reilly, “A Small Firm That Sells
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Online Sales,” Fortune Small Business, Vol. 17,
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49. “Spin—Portfolio,”http://www.spin-la.com/
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50. Laura Ti?any, “Road to Success,” Entrepre-
neur, Vol. 36, No. 11 (November 2008),
pp. 88–97.
51. Ibid.
52. “COBB Tuning—History,”http://www
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53. Ti?any, op. cit.
54. Marc J. Dollinger, Entrepreneurship: Strate-
gies and Resources (Lombard, IL: Marsh
Publications, 2008), p. 144.
55. Porter, op. cit., p. 5.
56. Quoted in Mark Henricks, “What Not to Do,”
Entrepreneur, Vol. 32, No. 2 (February 2004),
pp. 84–90.
57. John W. Mullins, The New Business Road
Test (London: Financial Times Prentice Hall,
2006), pp. 3–4.
58. Ibid., p. 10.
CHAPTER 4
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8.http://www.subway.com/subwayroot/
legalDisclaimer, accessed January 17, 2009.
9.http://www.franchise.org/Veteran-
Franchise, accessed January 19, 2009.
10. Dennis L. Monroe, “Teamwork,” Franchise
Times, Vol. 14, No. 9 (October, 2008), p. 90.
11.http://www.franchiseregistry.com/
partnership.asp, accessed March 3, 2009.
12. ”Legal Briefs,” Franchise Time, Vol. 14, No. 7
(August, 2008), p. 51.
13. Ibid.
14. Inc. Magazine Sta?, “How to Buy a Business,”
www.inc.com/magazine, accessed March 5,
2009.
15.http://www.astutediligence.com,
January 12, 2007.
16. Ibid.
CHAPTER 5
1. Frank Hoy and Pramodita Sharma, The
Entrepreneurial Family Business (Upper Saddle
River, NJ: Pearson Prentice Hall, 2010).
2. James Olan Hutcheson, “In with the Old;
Out with the Older,” Family Business, http://
www.familybusinessmagazine.com/
worldsoldest.html, accessed
September 27, 2008.
3. “The World’s 250 Largest Family Businesses,”
Family Business, www.familybusiness
magazine.com/topglobal.html, accessed
September 27, 2008.
4.http://www.amserv.com/familystatistics
.html, accessed September 28, 2008.
5. J. H. Chua, J. J. Chrisman, & P. Sharma,
“De?ning the Family Business by Behavior,”
Entrepreneurship Theory & Practice, Vol. 23,
No. 4, pp. 19–39.
6. Alternatively, the European Group of
Owner-Managed and Family Enterprises
classi?es a ?rm, of any size, as a family
enterprise, if (1) the majority of votes is in
possession of the natural person(s) who
established the ?rm, or in possession of the
natural person(s) who has/have acquired
the share capital of the ?rm, or in the pos-
session of their spouses, parents, child, or
children’s direct heirs; (2) at least one repre-
sentative of the family or kin is involved in
the management or administration of the
?rm; or (3) the person(s) who established
or acquired the ?rm or their families or de-
scendents possess 25 percent of the right
to vote mandated by their share capital.
7. Lowell J. Spirer, The Human Factor in Start-
ing Your Own Business (Blue Bell, PA: Lowell
J. Spirer, n.d.), e-book.
8. Daniel L. McConaughy, “Family CEOs vs.
Non-Family CEOs in the Family-Controlled
Firm: An Examination of the Level and
Sensitivity of Pay to Performance,” Family
Business Review, Vol. 13, No. 2 (June 2000),
pp. 121–131; and Simon Bartholomeusz
and George A. Tanewski, “The Relation-
ship Between Family Firms and Corporate
Governance,” Journal of Small Business
Management, Vol. 44, No. 2 (April 2006),
pp. 245–267.
9.http://www.scjohnson.com/family/,
accessed September 28, 2008.
10. David G. Sirmon and Michael A. Hitt,
“Managing Resources: Linking Unique
Resources, Management, and Wealth
Creation in Family Firms,” Entrepreneurship
Theory and Practice, Vol. 27, No. 4 (Summer
2003), pp. 341–344. These ?ndings are
consistent with the results of other recent
research—see, for example, Ronald C.
Anderson and David M. Reeb, “Founding-
Family Ownership and Firm Performance:
Evidence from the S&P 500,” Journal of
Finance, Vol. 58, No. 3 (June 2003),
pp. 1301–1328.
11. John L. Ward, “New Research on Family
Business Culture,” proceedings of the Fifth
Annual Kellogg Family Business Invitational
Conference, Evanston, IL, May 16–17, 2006,
pp. 51–65.
12. W. Gibb Dyer and David A. Whetten, “Family
Firms and Social Responsibility: Preliminary
Evidence from the S&P 500,” Entrepreneur-
ship Theory and Practice, Vol. 30, No. 6
(November 2006), pp. 785–802.
13. Patricia Olsen, “At the Helm,” Family Busi-
ness, Vol. 18, No. 4 (Autumn 2007), p. 12.
14. A description of these bases of commit-
ment and an extensive discussion of the
theory and analysis that back up these
conclusions can be found in Pramodita
Sharma and P. Gregory Irving, “Four Bases
of Family Business Successor Commitment:
Antecedents and Consequences,” Entrepre-
neurship Theory and Practice, Vol. 29, No. 1
(January 2005), pp. 13–33. Our discussion
of these commitment bases and the quotes
we use are sourced from this article.
15. Ibid., pp. 25–26.
16. Bill Glavin, Joe Astrachan, and Judy Green,
2007 American Family Business Survey
(Spring?eld, MA: Massachusetts Mutual Life
Insurance Company, 2007).
17. Quoted in Je? D. Opdyke, “Readers’
Views on Family, Feuds and Quality of
Life,” CareerJournal.com, April 26, 2005,http://www.careerjournal.com/myc/
workfamily/20050426-opdyke.html,
accessed December 13, 2006.
18. Pia Chatterjee, “Making Beautiful Startups
Together,” Business 2.0, September 2007,
pp. 42–44.
19. Krissah Williams, “We Do: Copreneurs
Simultaneously Build Happy Marriages
and Thriving Enterprises,” Black Enterprise,
February 2008.
20. “Ask Inc.,” Inc. Magazine, March 2007,
pp. 81–82.
21. Sue Birley, “Attitudes of Owner-Managers’
Children Toward Family and Business Issues,”
Entrepreneurship Theory and Practice, Vol. 26,
No. 3 (Summer 2002), pp. 5–19.
22. Stephanie Cli?ord, “Splitting Heirs,” Inc.
Magazine, August 2007, pp. 103–110.
23. Family Business, “Ask the Experts: A Sibling
Rivalry Festers After a Chairman’s Death,”
Vol. 18, No. 4 (Autumn 2007), pp. 8, 10, 14.
24. John L. Ward, “Family Humor,” proceedings
of the Fifth Annual Kellogg Family Business
Invitational Conference, Evanston, IL,
May 16–17, 2006, p. 45.
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
706 End Notes 706
25. Ibid.
26. Darren Dahl, “Was Firing Him Too Drastic?”
Inc. Magazine, Vol. 28, No. 10 (October 2006),
pp. 51–54.
27. John L. Ward, quoted in Margaret Steen,
“The Decision Tree of Family Business,”
Stanford Business, August 2006,http://www
.gsb.stanford.edu/news/bmag/ sbsm0608/
feature_familybiz.html, accessed
December 22, 2006.
28. Joe Astrachan, Andrew Keyt, Suzanne
Lane, and Dan Yarmalouk, “Non-Family
CEO’s in the Family Business: Connecting
Family Values to Business Success,”
proceedings of the Family Business
Network World Conference, Helsinki,
Finland, 2002.
29. Steven White, quoted in Kenneth Meeks,
“Family Business,” Black Enterprise, Vol. 34,
No. 1 (August 2003), p. 91.
30. Matthew Fogel, “A More Perfect Business,”
Inc. Magazine, Vol. 25, No. 8 (August 2003),
p. 44.
31. Daniela Montemerlo, “Regulating Rela-
tions Between Family, Ownership and
Company: The Role and Variety of Formal
Agreements—Some Italian Experiences,”
proceedings of the Family Business
Network Academic Research Forum,
London, 2000.
32. Ibid.
33. John L. Ward, “Family Humor,” proceedings
of the Fifth Annual Kellogg Family Business
Invitational Conference, Evanston, IL,
May 16–17, 2006, p. 46.
34. Ibid., p. 47.
35. Adam Bluestein, “The Success Gene,” Inc.
Magazine, April 2008, pp. 83–94.
36. For an extended discussion of various as-
pects of mentoring in the family ?rm, see
Barbara Spector (ed.), The Family Business
Mentoring Handbook (Philadelphia: Family
Business Publishing Co., 2004). Only one
of many resources on mentoring, this
edited volume provides articles outlining
a number of proven mentoring strategies,
as well as case examples of family compa-
nies that have used these approaches to
achieve e?ective succession transitions.
The book addresses processes and strate-
gies as they apply speci?cally to family
businesses.
37. This topic is explored in depth in Johan
Lambrecht, “Multigenerational Transition
in Family Businesses: A New Explanatory
Model,” Family Business Review, Vol. 18, No. 4
(2005), pp. 267–282. We base our model of
succession in this chapter primarily on the
work of Lambrecht.
38. Austin Ramirez, quoted in Margaret Steen,
“The Decision Tree of Family Business,”
Stanford Business, August 2006,http://www
.gsb.stanford.edu/news/bmag/sbsm0608/
feature_familybiz.html, accessed
December 22, 2006.
CHAPTER 6
1. The MIT Enterprise Forum (http://web.mit
.edu/entforum) sponsors sessions across
the United States in which aspiring entre-
preneurs present business plans to panels
of venture capitalists, bankers, marketing
specialists, and other experts.
2. David E. Gumpert, How to Really Create a
Successful Business Plan, 4th ed. (Needham,
MA: Lauson Publishing Co., 2003), p. 10.
3. Several of these studies include Stephen C.
Perry, “The Relationship Between Written
Business Plans and the Failure of Small
Business in the U.S.,” Journal of Small Busi-
ness Management, Vol. 39, No. 2 (2001),
pp. 201–208; Frederic Delmar and Scott
Shane, “Does Business Planning Facilitate the
Development of New Ventures?”Strategic
Management Journal, December 2003,
pp. 1165–1185; Scott Shane and Frederick
Delmar, “Planning for the Market: Business
Planning Before Marketing and the Continua-
tion of Organizing E?orts,”Journal of Business
Venturing, Vol. 19 (2004), pp. 767–785; Tomas
Karlsson and Benson Honig, “Business
Planning Practices in New Ventures: An Insti-
tutional Perspective,”presented at the Babson
Entrepreneurship Research Conference, April
2007; and Julian E. Lange et al., “Pre-Startup
Formal Business Plans and Post-Startup
Performance: A Study of 116 New Ventures,”
forthcoming in Venture Capital Journal.
4. Thomas Stemberg, “What You Need to
Succeed,” Inc. Magazine, Vol. 29, No. 1
(January 2007), pp. 75–77.
5. Kelly Spors, “Do Start-Ups Really Need
Formal Business Plans?” Wall Street Journal,
January 9, 2007, p. B9.
6. Amar Bhide, The Origin and Evolution of New
Businesses (New York: Oxford University
Press, 2000), p. 53.
7. Stephen Lawrence and Frank Moyes,
“Writing a Successful Business Plan,” http://
leeds-faculty.colorado.edu/ moyes/html/
resources.htm, accessed December 15,
2008.
8. Bhide, op. cit., p. 70.
9. “Conversations with Ewing Marion Kau?-
man,” Ewing Marion Kau?man Foundation,
March 2004.
10. Peter Drucker, quoted in Brian Tracy, “7
Secrets to Success,” Entrepreneur, Vol. 35,
No. 2 (February 2007), pp. 96–103.
11. Gumpert, op. cit., pp. 30–34.
12. An alternative framework for a feasibility
analysis to what is presented in Chapter 3
is provided by Frank Moyes, a professor at
the University of Colorado, at his websitehttp://leeds-faculty.colorado.edu/moyes/
html/documents/FeasibilityPlan2007,
accessed December 15, 2008.
13. Portions of the content in this section draw
on Je?ry A. Timmons, Andrew Zacharakis,
and Stephen Spinelli, Business Plans That
Work (New York: McGraw-Hill, 2004).
14. Rhonda M. Abrams, The Successful Business
Plan: Secrets and Strategies, 2nd ed. (Grants
Pass, OR: Oasis Press, 2003).
15.http://www.inc.com/articles/1999/
10/14877.html, accessed January 17, 2009.
16. Personal conversation with Rudy Garza,
November 18, 2008.
17.http://www.powerhomebiz.com/vol3/
badbplan.htm, accessed November 9, 2006;http://www.bpiplans.com/Articles.htm,
accessed December 9, 2008; and Robert A.
Baron and Scott A. Shane, Entrepreneurship:
A Process Perspective, 2nd ed. (Cincinnati:
Thomson South-Western, 2008), p. 220.
18. Mark Stevens, “Seven Steps to a Well-
Prepared Business Plan,” Executive Female,
Vol. 18, No. 2 (March 1995), p. 30.
19. Je?rey Bussgang “Think Like a VC, Act like
an Entrepreneur, BusinessWeek, http://
www.businessweek.com/magazine/
content/08_34/b4097042749532.htm?
chan=magazine+channel_special+report,
accessed September 2, 2008.
20. Kenneth Blanchard, Don Hotson, and
Ethan Willis, The One-Minute Entrepreneur
(New York: Doubleday, 2008).
21. Personal conversation with Tim Smith,
September 2008.
22. For additional information on business
plans, visithttp://www.cengage.com/
management/ longenecker.
23. Jill Andresky Fraser, “Who Can Help Out
with a Business Plan?” Inc. Magazine, Vol. 21,
No. 8 (June 1999), pp. 115–117.
24.http://www.entrepreneur.com/startinga
business/businessplans/article38314.html,
CHAPTER 7
1.http://www.lakepowell.com, accessed
February 21, 2009;http://knowledge.wpcarey
.asu.edu, accessed February 21, 2009.
2. From the business plan of Calico Com-
puter Consulting,http://www.bplans.com,
accessed February 22, 2009.
3. From the business plan of Borrow My Tools,http://www.bplans.com, accessed
February 22, 2009.
4. Personal conversation with Todd Stoner of
Disciplined Investors, December 2006.
5. From the Private Placement Memorandum
for Spira Footwear, Inc. Magazine, June
2007.
6. Carl McDaniel and Roger Gates, Marketing
Research, 8th ed. ( New York: John Wiley &
Sons, 2009 ).
7.http://blog.dirtbag.com, accessed
March 13, 2009.
8. McDaniel and Gates, op. cit., pp. 94–95.
9. Isabella Trebond, “On Target,” Entrepreneur,
August 2004.
10. Michael Porter, Competitive Advantage
(New York: Free Press, 1985), p. 5.
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
End Notes 707
CHAPTER 8
1. Michael Fitzgerald, “Turning Vendors into
Partners,”Inc. Magazine, Vol. 27, No. 8
(August 2005), p. 95.
2. The exact percentage of solo startups is
hard to pin down. Recent analyses of start-
ups based on data from the Panel Study of
Entrepreneurial Dynamics have determined
that nearly one-half of all new ventures
are launched by individuals [see “Teaming
with Entrepreneurs: A Look at the Research
of Howard Aldrich,” in Understanding
Entrepreneurship: A Research Policy Report
(Kansas City, MO: Ewing Marion Kau?man
Foundation, 2005), p. 40; and Paul D. Rey-
nolds, Nancy M. Carter, William B. Gartner,
Patricia G. Greene, and Larry W. Cox, The
Entrepreneur Next Door: Characteristics of
Individuals Starting Companies in America
(Kansas City, MO: Ewing Marion Kau?man
Foundation, 2002), p. 5]. A study of small
businesses conducted by the National Fed-
eration of Independent Business found that
more than 58 percent of the companies in
the study sample were owned by a single
individual [see “Business Structure,” in
William J. Dennis (ed.), National Small
Business Poll, Vol. 4, No. 7 (Washington,
DC: National Federation of Small Business,
2004), p. 10]. One recent review of studies
on the topic puts the number of solo start-
ups closer to one-third of new ventures [see
Gaylen N. Chandler, “New Venture Teams,”
in Andrew Zacharakis and Stephen Spinelli,
Jr. (eds.), Entrepreneurship: The Engine of
Growth (Westport, CT: Praeger Perspectives,
2007), pp. 75–76]. Regardless of the per-
centage accepted, it is clear that many ?rms
are started by individual entrepreneurs.
3. Chandler, op. cit. It also bears noting that,
in many cases, one or more members of
high-performing entrepreneurial teams
have had prior experience with business
startups. This pattern is evident in studies
by Michael D. Ensley, Allison W. Pearson,
and Allen C. Amason, “Understanding the
Dynamics of New Venture Top Manage-
ment Teams: Cohesion, Con?ict, and New
Venture Performance,” Journal of Business
Venturing, Vol. 17, No. 4 (July 2002),
pp. 365–366; and Elizabeth J. Teal and
Charles W. Hofer, “Key Attributes of the
Founding Entrepreneurial Team of Rapidly
Growing New Ventures,” Journal of Private
Equity, Vol. 4, No. 2 (Spring 2001), pp. 19–31.
4. This point is emphasized in Daniel P. Forbes,
Patricia S. Borchert, Mary E. Zelmer-Bruhn,
and Harry J. Sapienza, “Entrepreneurial Team
Formation: An Exploration of New Member
Addition,”Entrepreneurship Theory and Prac-
tice, Vol. 30, No. 2 (March 2006), p. 226.
5. The ?eld has evolved toward a view that
sees management team members as those
with ?nancial ownership and signi?cant
decision-making responsibilities in the
venture (see Chandler, op. cit.). Other de?ni-
tions are more restrictive and emphasize
factors such as being a part of the founding
of the venture [see Iris Vanaelst, Bart
Clarysse, Mike Wright, Andy Lockett,
Nathalie Moray, and Rosette S’Jegers,
“Entrepreneurial Team Development in
Academic Spinouts: An Examination of
Team Heterogeneity,” Entrepreneurial Theory
and Practice, Vol. 30, No. 2 (March 2006),
p. 251]. At the other end of the spectrum,
some entrepreneurs consider all employ-
ees and advisors to be a part of the team.
Because our discussion is focused on those
who hold important leadership positions
in the small business but may not share
ownership in the ?rm, we use the broader
term management team rather than
entrepreneurial team to re?ect this more
general view.
6. For an interesting study of the addition of
members to the management team, see
Daniel P. Forbes, Patricia S. Borchert, Mary E.
Zellmer-Bruhn, and Harry J. Sapienza,
“Entrepreneurial Team Formation: An
Exploration of New Member Addition,”
Entrepreneurship Theory and Practice,
Vol. 30, No. 2 (March 2006), pp. 225–248.
7. This may explain why research using Panel
Study of Entrepreneurial Dynamics data
found that around three-fourths of solo
entrepreneurs were starting service ?rms
(49 percent) or retail businesses
(26 percent). These types of startups tend
to be less complicated than technology-
based ?rms or manufacturing businesses,
so a single founder is more likely to have
the knowledge and experience neces-
sary to get the business going. A more
complex startup may well require the
combined expertise and insight of a team
of entrepreneurs. For a closer look at the
data, see Expected Costs of Startup Ventures,
a consulting report prepared for the SBA’s
O? ce of Advocacy by Blade Consulting
Corporation, Vienna, VA, November 2003.
8. It should be noted that research has not
always supported the view that func-
tional balance leads to improved venture
performance. Some studies have found
that functional heterogeneity is correlated
with small ?rm growth, while others o?er
no evidence to indicate a relationship with
team performance (see Chandler, op. cit.).
9. Andy Lockett, Deniz Ucbasaran, and John
Butler, “Opening Up the Investor-Investee
Dyad: Syndicates, Teams, and Networks,”
Entrepreneurship Theory and Practice,
Vol. 30, No. 2 (March 2006), p. 119.
10. Chandler, op. cit., p. 71.
11. Howard E. Aldrich and Nancy M. Carter,
“Social Networks,” in William B. Gartner,
Kelly G. Shaver, Nancy M. Carter, and Paul D.
Reynolds (eds.), Handbook of Entrepreneurial
Dynamics: The Process of Business Creation
(Thousand Oaks, CA: Sage, 2004), p. 331.
12. Lauren Tara LaCapra, “Social Network-
ing Can Be a Friend Indeed,” July 28,
2008,http://www.thestreet.com/
story/10430499/3/social-networking-
can-be-a-friend-indeed.html, accessed
January 13, 2009.
13. Robert B. Cialdini, In?uence: Science and
Practice (Needham Heights: MA: Allyn &
Bacon, 2009).
14. This percentage from the Internal Revenue
Service includes enterprises organized as
limited liability companies (an organiza-
tional form that is introduced later in the
chapter), but you should note that other
sources indicate the number of startups
formed as LLCs is quite small.
15. The ?gures o?ered here are based on Inter-
nal Revenue Service projections of returns
for the 2009 tax year. These numbers di?er
from those reported elsewhere, however,
and this deserves some explanation. For
example, some may choose to use PSED
data, but Paul D. Reynolds, [”Nature of Busi-
ness Start-ups,” in William B. Gartner, Kelly
G. Shaver, Nancy M. Carter and Paul D.
Reynolds (eds.), Handbook of Entrepreneurial
Dynamics: The Process of Business Creation
(Thousand Oaks, CA: Sage, 2004), p. 250]
points out that 52.7 percent of nascent
entrepreneurs intend to operate as sole
proprietorships, whereas actual tax ?lings
put the ?gure at 71.9 percent. While we
cannot rule out the possibility that this is a
result of the PSED sampling frame, it would
be reasonable to conclude that many
entrepreneurial hopefuls fully anticipate
incorporating or forming a partnership,
but they end up moving toward the least
complicated form, the sole proprietorship,
when the more pressing challenges of
starting and running a business take prior-
ity. On the other hand, a recent survey of
small businesses from the NFIB reveals
that only 20.9 percent are organized as sole
proprietorships, which is far more at variance
with IRS data [see “Business Structure,”in
William J. Dennis, Jr. (ed.), NFIB National Small
Business Poll, Vol. 4, No. 7 (Washington, DC:
NFIB Research Foundation, 2004), p. 8]. The
sampling frame was drawn from the ?les of
the Dun & Bradstreet Corporation, which
may represent more mature businesses,
many of which started as proprietorships but
changed to more sophisticated organiza-
tional forms as a shield against liability or for
other reasons. We use IRS ?gures here be-
cause they are based on the population of all
companies submitting returns and represent
the most recent data available.
16. Liability insurance and other forms of pro-
tection are discussed further in Chapter 23.
However, there are many forms of liability
protection, and a full discussion of these
goes beyond the scope of this text. Experts
and speci?c sources of information should
be consulted when making these decisions.
17. Fred S. Steingold, Legal Guide for Starting
and Running a Small Business (Berkeley, CA:
Nolo Press, 2008).
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
708 End Notes 708
18. Karen Cheney, “Meet Your Match,” http://
www.quicken.com/cms/viewers/article/
small_business/ 55318, accessed
January 29, 2007.
19. Karen Cheney, “The Perfect Partnership
Plan,”http://www. quicken.com/cms/
viewers/article/small_business/55340,
accessed January 29, 2007.
20. Steingold, op. cit.
21. Ira Nottonson, Forming a Partnership: And
Making It Work (Irvine, CA: Entrepreneur
Press, 2007), pp. 6–7.
22. Nichole L. Torres, “Left in the Lurch?”
Entrepreneur, Vol. 34, No. 5 (May 2006),
p. 108.
23. John Seely Brown, quoted by Stephen J.
Dubner, “How Can We Measure Innovation?
A Freakonomics Quorum,” April 25, 2008,http://freakonomics.blogs.nytimes
.com/2008/04/25/how-can-we-measure-
innovation-a-freakonomics-quorum/,
accessed January 13, 2009.
24. Internal Revenue Service, “Table 1A.
Calendar Year Projections of Individual
Returns by Major Processing Categories
for the United States,”http://www.irs.
gov/pub/irs-soi/d6187.pdf (data for sole
proprietorships), accessed January 13,
2009; Internal Revenue Service, “Table 1.
Fiscal Year Projections of the Number of
Returns to be ?led with the IRS,” http://
www.irs.gov/pub/irs-soi/d6292.pdf (data
for partnerships, regular corporations,
and S corporations); accessed January 13,
2009.
25. Chris Harrison, “Form Is Everything,” http://
www.welcomebiz.com/Guest/index.php?
deptID=4&articleID=49, accessed
December 5, 2008.
26. ”Piercing the Corporate Veil,”http://www.residual-rewards.com/
piercingthecorporateveil.html,
accessed March 6, 2009.
27. Rieva Lesonsky, Start Your Own Business: The
Only Start-Up Book You’ll Ever Need (Irvine,
CA: Entrepreneur Press, 2007).
28. For tax years beginning after 2004, the
law increased the maximum number of
shareholders permitted in an S corporation
from 75 to 100. (Note that husband and
wife count as one stockholder.)
29. The rules have been modi?ed in recent
years to allow more types of trusts to hold
Subchapter S stock.
30. As stated, S corporations can own other
business entities but cannot be owned
by C corporations, other S corporations,
many trusts, limited liability companies,
or partnerships. For more information on
the subject, see “Small Business Answer
Handbook,” Entrepreneur, Vol. 34, No. 10
(October 2006), pp. 41–46.
31. Kelly Spors, “Small Talk,” Wall Street Journal,
September 9, 2006, p. B8.
32. For a description of the tax advantages of
the limited liability company, see Steingold,
op. cit.
33. Nichole L. Torres, “Lofty Ideals,” Entrepreneur,
Vol. 34, No. 6 (June 2006), pp. 150–151.
34. ”Strategic Alliances,” in William J. Dennis, Jr.
(ed.), National Small Business Poll,.Vol. 4,
No. 4 (Washington, DC: NFIB Research
Foundation, 2004), pp. 1–8.
35. Ibid., p. 4.
36. Chris Penttila, “Dream Teams,” Entrepreneur,
Vol. 36, No. 6 (June 2008), p. 76.
37. ”Strategic Alliances,” op. cit., pp. 9–14.
38. Michael Fitzgerald, “Turning Vendors into
Partners,” Inc. Magazine, Vol. 27, No. 8 (Au-
gust 2005), pp. 95–100.
39. Chris Penttila, “All Together Now,” Entrepre-
neur, Vol. 35, No. 8 (August 2007),
pp. 92–93; “Company History,”http://www
.topics-ent.com/company_history.php,
accessed January 13, 2009.
40. Ibid.
41. Mark Hendricks, “License to Thrive: How
You Can Pro?t from Big Companies’ Tech
Ideas,” Entrepreneur, Vol. 33, No. 10
(October 2005), p. 22.
42. “Strategic Alliances,” op. cit., p. 7.
43. Je?rey Shuman, Janice Twombly, and
David Rottenberg, Everyone Is a Customer:
A Proven Method for Measuring the Value of
Every Relationship in the Era of Collaborative
Business (Chicago: Dearborn Trade
Publishing, 2002).
44. National Association of Corporate Direc-
tors, E?ective Entrepreneurial Boards:
Findings from the 2001–2002 Entrepre-
neurial Boards Survey (Washington, DC:
National Association of Corporate
Directors, 2002), p. 3.
45. National Association of Corporate Directors,
op. cit., p. 17.
46. ”Boards for Beginners,” Inc. Magazine, Vol.
27, No. 2 (February 2005), p. 44.
CHAPTER 9
1. Eric Schlosser, Fast Food Nation: The Dark
Side of the All-American Meal (New York:
Harper Perennial, 2002), p. 66.
2. Del Jones, “California Proves Too Costly for
Departing Businesses,” USAToday, October
2, 2003, p. 1B.
3. Jacquelyn Lynn, “Location Is Key,” Entrepre-
neur, Vol. 36, No. 11 (November 2008), p. 26.
4. Adapted from J. D. Ryan and Gail P. Hiduke,
Small Business—An Entrepreneur’s Business
Plan, 8th ed. (Cincinnati: South–Western
Cengage, 2009), pp. 148–150.
5.http://www.lids.com, accessed December
17, 2008.
6. Ryan Chittum, “A New Mantra: Location,
Location, Technology,” Startup Journal, WSJ
.com, accessed July 21, 2005.
7. “COBBTuning—History,”http://www
.cobbtuning.com/info/?id=2953, accessed
January 13, 2009.
8. According to the 2009 State Business
Tax Climate Index, published by the Tax
Foundation (http://www.taxfoundation.org/
?les/bp58.pdf, accessed January 13, 2009),
Wyoming tops the rankings of best state
business tax climates, followed by South
Dakota, Nevada, Alaska, Florida, Montana,
Texas, New Hampshire, Oregon, and
Delaware, ordered here by their respective
rankings.
9. “Wyoming Department of Revenue,” http://
revenue.state.wy.us, accessed January 13,
2009.
10. Jacquelyn Lynn, “Tax Relief,” Entrepreneur,
Vol. 36, No. 7 (July 2008), p. 24.
11. Jacquelyn Lynn, “What’s It Worth,” Entrepre-
neur, Vol. 36, No. 3 (March 2008), p. 32.
12. “Oregon Business—Enterprise Zones,”http://
www.oregon4biz.com/enterthezones,
accessed December 18, 2008.
13. Rieva Lesonsky, Start Your Own Business: The
Only Start-Up Book You’ll Ever Need (Irvine,
CA: Entrepreneur Press, 2007).
14. Lynn, op. cit. Research shows that this
is certainly true for small businesses that
are in high-technology manufacturing.
According to a recent study, the
availability of technical labor was the
most important factor in the location
decisions of this group of ?rms. [See
Craig S. Galbraith, Carlos L. Rodriguez,
and Alex F. DeNoble, “SME Competi-
tive Strategy and Location Behavior: An
Exploratory Study of High-Technology
Manufacturing,” Journal of Small Business
Management, Vol. 46, No. 2 (April 2008),
pp. 183–202.]
15. National Federation of Independent
Businesses, “411 Small Business Facts,”http://www.411sbfacts.com/sbpoll-
tables-res.php?POLLID=0048&QID=0000
0001378&KT_back=1, accessed January
13, 2009.
16. “The Dyson Story,”http://www.dyson.com/
about/story, accessed January 13, 2009;
Zareer Masani, “Not So Doomed,” New
Statesman, March 5, 2007,http://www
.newstatesman.com/writers/zareer_
masani, accessed December 22, 2008;
Joshua Levine, “Carpet Diem,” Forbes.com,
October 14, 2002,http://www.forbes.com/
forbes/2002/1014/206.html, accessed
January 13, 2009; “Dyson Plant Shuts Up
Shop,”http://news.bbc.co.uk/2/hi/uk_
news/england/2282809.stm, accessed
January 13, 2009.
17. Cecilia Goodnow, “New Designs and
Technology Take Treehouses to a Higher
Level for Adults,” Seattle Post-Intelligencer,
August 23, 2007,http://seattlepi.nwsource
.com/lifestyle/328618_treehouse23.html,
accessed January 13, 2009.
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
End Notes 709
18. “2005 Outstanding Incubator Graduate
Award Winners,”http://www.nbia.org/
awards_showcase/2005/graduate.php,
accessed January 13, 2009.
19. Gwendolyn Bounds, “My O? ce Is Your
O? ce: Small Firms Share Space,” Wall Street
Journal, March 18, 2008, p. B4.
20. Jacquelyn Lynn, “Room to Grow,”Entrepreneur,
Vol. 36, No. 6 (June 2008), p. 26; Jacquelyn
Lynn, “And the Winners Are . . . ,”Entrepreneur,
Vol. 35, No. 12 (December 2007), p. 28.
21. National Federation of Independent Busi-
nesses, “411 Small Business Facts,” http://
smallbusiness.?ndlaw.com/business-
operations/commercial-real-estate/
commercial-real-estate-lease-purchase
.html, accessed December 22, 2008.
22. Richard Breeden, “Small Businesses Favor
Buying over Leasing,” Wall Street Journal,
February 24, 2004, p. B11.
23. Emily Maltby, “Dressing Up a Sub,” Fortune
Small Business, Vol. 17, No. 9 (November
2007), p. 62.
24. Ibid.
25. See Candida G. Brush, Linda F. Edleman,
and Tatiana S. Manolova, “The E?ects of
Initial Location, Aspirations, and Resources
on Likelihood of First Sale in Nascent Firms,”
Journal of Small Business Management,
Vol. 46, No. 2 (April 2008), pp. 159–182. The
researchers note that this may be the result
of freed-up resources that can be focused
on the product/service or the capabilities
of the business, or it may result from home-
based businesses being able to organize
their schedules more quickly. It should also
be pointed out, however, that the study
found that home-based businesses do
not always enjoy advantages related to
aspirations and resource formation.
26. Nichole L. Torres and April Y. Pennington,
“Home Court Advantage,” Entrepreneur’s
Start-Ups, May 2005.
27. Broderick Perkins, “Realize the Dream of a
Home-Based Business,”http://www
.startupjournal.com, accessed April 9, 2004.
28. Susan Smith Hendrickson, “Balancing
Work and Family,”http://www.allbusiness
.com/specialty-businesses/home-based-
business-work-life-balance/1170-1.html,
accessed January 13, 2009.
29. Torres and Pennington, op. cit.
30. Michael J. McDermott, “Avoid Zoning
Pitfalls When Working from Home,” http://
www.busop1.com/pitfall.html, accessed
January 13, 2009.
31. For the details of supporting research, see
David A. Johnson, Michael Wade, and Ron
McClean, “Does eBusiness Matter to SMEs?
A Comparison of the Financial Impacts of
Internet Business Solutions on European
and North American SMEs,” Journal of
Small Business Management, Vol. 45, No. 3
(July 2007), pp. 354–361. The ?ndings were
based on a study of nearly 1,700 small and
medium-size companies in ?ve nations in
North America and Europe, which revealed
that the performance bene?ts from
Internet business solutions were greater
for American and Canadian companies
than for their European counterparts.
The researchers also concluded that the
bene?ts from customer-facing applica-
tions (like e-commerce) were greater than
supplier-facing alternatives (such as sales
force automation and supply chain
management).
32. Sara Wilson, “Global Scents,” Entrepreneur,
Vol. 35, No. 12 (December 2007), p. 164.
33. See Prashanth Nagendra Bharadway and
Ramesh G. Soni, “E-Commerce Usage and
Perceptions of E-Commerce Issues Among
Small Firms: Results and Implications
from an Empirical Study,” Journal of Small
Business Management, Vol. 45, No. 4
(October 2007), pp. 501–521.
34.http://www.witiger.com/ecommerce/
bene?ts-limitations.htm, accessed
January 13, 2009.
35. Raymund Flandez, “Help Wanted—and
Found,”Wall Street Journal, October 13, 2008,http://online.wsj.com/article/
SB122347721312915407.html?mod=
googlenews_wsj, accessed January 5, 2009.
36.http://www.odesk.com, accessed
January 5, 2009.
37. Flandez, op. cit.
38. “About Us,”http://www.kosher.com/help/
about-us.html, accessed January 13, 2009;
Melissa Campanelli, “Taking O?,”
Entrepreneur, Vol. 34, No. 5 (May 2006),
pp. 42–43.
39. Shelly Banjo, “Wholesalers Set Up Shop
Online to Tap Customers,” Wall Street
Journal,,September 18, 2008, p. B9.
40. “eBay Marketplace Fast Facts,”http://pages
.ebay.in/community/aboutebay/news/
infastfacts.html, accessed January 5, 2009.
41.http://www.premium.hoovers.com, ac-
cessed December 20, 2006.
42. “Goodbye and Thanks from eBay Express,”http://pages.ebay.com/express, accessed
January 5, 2009.
43. “eBay Stores FAQ,”http://pages.ebay.com/
storefronts/faq.html#what, accessed
January 6, 2009.
44. Kelly K. Spors, “New Services Help Bloggers
Bring in Ad Revenue,” Wall Street Journal,
January 15, 2008, p. B6.
45. Personal communication with Adam
Weinroth, August 6, 2007;http://www
.easyjournal.com/about.html, accessed
January 6, 2009.
46. “Our Products,”http://www.q3i.com/
products.php, accessed January 6, 2009.
47. Nichole L. Torres, “Weekenders,” Entrepre-
neur, Vol. 33, No. 8 (August 2005), p. 80; per-
sonal conversation with Chad Ronnebaum,
February 7, 2007.
48. “Q3 Innovations LLC,”http://www.q3i.com/
aboutus.php, accessed January 6, 2009.
CHAPTER 10
1. Norm Brodsky, “Secrets of a $110 Million
Man,” Inc. Magazine, October 2008, p. 77.
2. Philip Campbell, “Are You Really Focused on
Pro?ts?”http://www. inc.com/resources/
?nance/ articles/20080601/campbell.html,
accessed February 26, 2007. Inc. Magazine,
June 2008. Copyright 2008 by Mansueto
Ventures LLC. Reproduced with permission
of Mansueto Ventures LLC in the Format
Textbook via Copyright Clearance Center.
3. Jan Norman, “You’re Making Sales, but
Are You Making Money?”http://www
.entrepreneur.com/ article/0,4621,228680,
00.html, March 2004, accessed
October 14, 2006.
CHAPTER 11
1. Paul A. Broni, “Persuasive Projections,” Inc.
Magazine, Vol. 22, No. 4 (April 2000), p. 38.
2. Rhonda Abrams, “How Can I Make Financial
Projections in My Business Plan When
I Have No Solid Numbers?” Inc.com,
September 2000,http://www.inc.com/
articles/2000/09/20226.html, accessed
February 15, 2009.
3. David Worrell, “A Penchant for Pro?ts,”
Entrepreneur, Vol. 33, No. 8 (August 2005),
pp. 53–57.
4. This example is based on an actual situ-
ation; however, the name of the founder
has been changed, as have some of the
numbers.
5. Investors also look to ?nancial projections
to determine the sales level necessary for
the ?rm to break even. A ?rm’s break-even
point, while important from a ?nancial
perspective, is also important for pricing
its products or services. The issue of pricing
is discussed in Chapter 16.
6. Personal communication with Cecilia
Levine, November 28, 2008.
7. Scott Bernard Nelson, “Fee Agents,”
Entrepreneur, January 2003, p. 63.
8. This percentage can be found by dividing
the number of days of credit the supplier
is o?ering (30 days, in this case) by the
365 days in a year (30/365 ? 8.2%).
9. If you need to review the process for creat-
ing a statement of cash ?ows, return to the
discussion of cash ?ows in Chapter 10.
10. Note that the changes in the balance sheet
for year 1 are actually the year-end bal-
ances, since the business did not exist
in the prior year.
11. Suzanne McGee, “Breaking Free from
Budgets,” Inc. Magazine, October 2003,
p. 73.
12. Information in this section was taken from
Linda Elkins, “Real Numbers Don’t Deceive,”
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
710 End Notes 710
Nation’s Business, Vol. 85, No. 3 (March 1997),
pp. 51–52; Broni, op. cit., pp. 183–184.
13. Broni, op. cit.
CHAPTER 12
1. Mike Hofman, “The Big Picture,” Inc. Maga-
zine, Vol. 25, No. 12 (October 2003), p. 87.
2. Ilan Mochari, “The Numbers Game,” Inc.
Magazine, Vol. 24, No. 12 (October 2002),
pp. 65–66.
3. Ibid., p. 64.
4. Personal conversation with Jack Griggs,
Fall 2006.
5. To compute the $730 monthly payment, we
can use a ?nancial calculator or a computer
spreadsheet.
PV (present value) ? 50,000 (current
loan)
N (number ? 84 (7 years ?
of payments) 12 months ? 84)
I/yr (interest ? 0.5% (6% interest
rate/month) rate per year ÷
12 months ?
0.005 ? 0.5%)
FV (future value) ? 0 (in 7 years)
Then solve for PMT ? $730.43
(payment)
6. As discussed in Chapters 10 and 11, the
ratio of current assets to current liabilities
is called the current ratio; the ratio of total
debt to total assets is called the debt ratio.
7. Mochari, op. cit, p. 64.
8. Personal interview with Bill Bailey, former
owner of Cherokee Communications,
Spring 2005.
9. C. J. Prince, “New Money,” Entrepreneur,
March 2008,http://www.entrepreneur
.com/ magazine/entrepreneur/2008/
march/190066.html, accessed
October 2, 2008.
10. For an excellent source on business
angels, see Frances M. Amatucci and
Je?rey E. Sohl, “Business Angels: Investment
Processes, Outcomes, and Current Trends,”
in Andrew Zacharakis and Stephen Spinelli,
Jr. (eds.), Entrepreneurship: The Engine of
Growth (Westport, CT: Praeger, 2007),
pp. 87–107.
11. Je?ry Sohl, “The Angel Investor Market In
2008: A Down Year in Investment Dollars
but Not in Deals,” Center for Venture
Research, March 30, 2009.
12. Julian Lange, Benoit Leleux, and Bernard
Surlemont, “Angel Network for the 21st
Century,” Journal of Private Equity, Spring
2003, p. 18.
13. William H. Payne, “Joining Angel
Organizations—A Win-Win Opportunity,”
unpublished notes.
14. For a description of how angel networks
function, see Aja Carmichael, “The Money
Game: In Search of an Angel,” Wall Street
Journal, January 30, 2006, p. R4.
15.http://www.centexangels.org, accessed
January 10, 2007.
16. Guy Kawasaki, “Garnering Angels,”
Entrepreneur, January 2008,http://www
.entrepreneur.com/magazine/entrepreneur/
2008/january/187614.html, accessed
October 2, 2008, p. 38.
17. C. J. Prince, “Alternate Financing Routes,”
Entrepreneur, March 2007, pp. 66–68.
18. Jim Hopkins, “Corporate Giants Bankroll
Start-Ups,” USA Today, March 29, 2001,
p. 1B.
CHAPTER 13
1. Personal interview with Robert Hall, former
CEO of Visador Corporation, August 18, 2007.
2. Personal conversation with Bob Browder,
former CEO, BFW Construction Company,
February 1, 2009.
3. Simona Covel, “How to Get Workers to
Think and Act Like Owners,” Wall Street
Journal, February 7, 2008, p. B-1.
4. Carol Tice, “Is It Time to Sell?, Entrepreneur,
January 2009,http://www.entrepreneur
.com/magazine/entrepreneur/2009/
january/199016.html, accessed February
5, 2009.
5. Brad Feld, “What’s Your Exit Strategy?”
Entrepreneur, May 2009, p. 30.
6. S. T. Certo, “In?uencing Initial Public O?er-
ing Investors with Prestige: Signaling with
Board Structure,” Academy of Management
Review, Vol. 28, No. 3 (2003), pp. 432–447.
7. Woojin Kim and Michael S. Wiesbach, “Do
Firms Go Public to Raise Capital?” presented
at the annual Financial Management
Association Meeting, October 14, 2005.
8. The source for this example is Heritage
Partners, a Boston venture capital ?rm,
which obtained a registered trademark for
a process it calls the Private IPO®.
9. Richard D. Dorf and Thomas H. Byers,
Technology Ventures: From Idea to Enterprise
(New York: McGraw-Hill, 2005), p. 120.
10. The unattributed quotes in this part of the
chapter are taken from personal interviews
conducted as part of a research study on
harvesting, sponsored by the Financial
Executive Research Foundation and cited
in J. William Petty, John D. Martin, and John
Kensinger, Harvesting the Value of a Privately
Held Company (Morristown, NJ: Financial
Executive Research Foundation, 1999).
To acquire a copy of the book, write the
Financial Executive Research Foundation,
Inc., P.O. Box 1938, Morristown, NJ 07962-
1938, or call 973-898-4600.
11. Je? Bailey, “Selling the Firm—and Letting
Go of the Dream,” Wall Street Journal,
December 10, 2002, p. B6.
12. Jennifer Wang, “Confessions of Serial
Entrepreneurs,” Entrepreneur, January 8,
2009,http://www.entrepreneur.com/
startingabusiness/successstories/
article199436.html, accessed
April 18, 2009.
CHAPTER 14
1. “Getting More from Existing Custom-
ers,”http://www.startupnation.com/
articles/1387/1/grow-business-existing-
customers.asp, accessed January 14, 2009.
2. [email protected], “The Neglected
Moneymaker: Customer Retention,” April 25,
2007,http://knowledge.wpcarey.asu.edu/
article.cfm?articleid=1408#, accessed
January 14, 2009.
3. Frederick Reichheld, The Loyalty E?ect: The
Hidden Force Behind Growth, Pro?ts, and
Lasting Value (Boston: Harvard Business
School Press, 2008).
4. Guy Kawasaki, “At Their Service,” Entrepre-
neur, Vol. 35, No. 8 (August 2007), p. 24.
5. Dan J. Sanders, Built to Serve: How to Drive
the Bottom Line with People-First Practices
(New York: McGraw-Hill, 2008),
p. 163–164.
6. Ibid., pp. 164–165.
7. A recent study indicates that increased
levels of customer satisfaction leads the
employees who serve them to feel better
about their employers (see Xueming Luo
and Christian Homburg, “Neglected Out-
comes of Customer Satisfaction,” Journal
of Marketing, Vol. 71, No. 2 [April 2007],
pp. 133–149). Satis?ed employees tend to
produce increased customer satisfaction,
especially when they have direct contact
with customers. Furthermore, this research
shows that higher levels of customer
satisfaction are linked to a ?rm being able
to hire better employee and managerial tal-
ent. Reasoning from evidence in this study
and others shows that customer satisfac-
tion is bene?cial to ?rm performance for a
number of reasons, some of them a result
of direct in?uences and others of indirect
bene?ts that often are not even taken into
consideration.
8. Charles W. Lamb, Joseph F. Hair, and Carl
McDaniel, Marketing, 10th ed. (Cincinnati:
South-Western Cengage Learning, 2010),
p. 632.
9. Interestingly enough, research has shown
that the entrepreneur–customer relation-
ship is actually a reciprocal one (see Dirk
De Clercq and Deva Rangarajan, “The
Role of Perceived Relational Support in
Entrepreneur-Customer Dyads,” Entre-
preneurship Theory & Practice, Vol. 32, No.
4 [2008], pp. 659–683). In other words,
most customers recognize that the way an
entrepreneurial company treats them has
an impact on their level of satisfaction with
and commitment to the venture; but De
Clercq and Rangarajan also found that the
customer’s reputation and the reliability of
their exchanges with the company in?u-
ence the entrepreneur’s satisfaction with
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
End Notes 711
and commitment to that customer. In other
words, one builds upon the other.
10. Marjorie J. Cooper, Nancy Upton, and
Samuel Seaman, “Customer Relationship
Management: A Comparative Analysis of
Family and Nonfamily Business Practices,”
Journal of Small Business Management,
Vol. 43, No. 3 (July 2005), pp. 242–256.
11. Brian Vellmure, “Let’s Start with Customer
Retention,”http://www.initiumtech.com/
newsletter_120602.htm, September 4,
2004.
12. Amy Barrett, “True Believers,” http://
www.businessweek.com/magazine/
content/06_52/b4015401.htm?chan=
smallbiz_smallbiz+index+page_sales+
and+marketing, accessed January 15,
2009.
13. “CRM: You (Should) Love Your Customers,
Now Work to Keep Them,”http://www
.startupnation.com/articles/1533/1/
crm-software-strategy.asp, accessed
January 16, 2009.
14. Lindsay Holloway, “Marx Acosta-Rubio,”
Entrepreneur, Vol. 36, No. 9 (September
2008), pp. 66–67.
15. [email protected], op. cit.
16. Personal conversation with Keith Jezek,
January 16, 2009.
17. Some of these suggestions were adapted
from the following article: Lesley Spencer
Pyle, “Keep Your Customers from Straying,”
June 12, 2008,http://www.entrepreneur
.com/article/printthis/194784.html,
accessed January 16, 2009.
18. Personal communication with Denny Fulk,
May 7, 2007.
19. Uncle Saul, “Personal Pitch,”http://www
.infochachkie.com/personal-pitch, accessed
January 16, 2009.
20. Bill Hudgins, “Hold Please,” MyBusiness,
April/May 2005, p. 50;http://www
.onholdguy.com, accessed August 3, 2009.
21. Bruce Horovitz, “Whatever Happened
to Customer Service?” USAToday,
September 26, 2003, pp. 1A–2A.
22. Pattie Simone, “A Marketing Tool That’s
Obvious, Overlooked and Cheap,” Entrepre-
neur.com, October 27, 2008,http://www
.entrepreneur.com/article/printthis/198194.
html, accessed January 14, 2009.
23. Personal communication with John Stites,
October 23, 2007.
24. Heather Larson, “Co?ee Talk,”MyBusiness,
October–November 2006, p. 12; “Our
Locations,”http://www.hamptonco?ee
company.com/Hampton_Co?ee_
Company_Our_Locations.html, accessed
February 2, 2009.
25. Dionne Searcey, “For Better or Worse,” Wall
Street Journal, October 30, 2006, p. R5.
26. “SAS
®
Helps 1-800FLOWERS.COM Grow
Deep Roots with Customers,”http://www
.sas.com/success/1800?owers.html,
accessed January 23, 2009.
27. Ibid.
28. Darren Dahl, “What Seems to Be the
Problem? Self Service Gets a Tune-Up,” Inc.
Magazine, Vol. 30, No. 2 (February 2008),
pp. 43–44.
29. Salvatore Parise, Patricia J. Guinan, and
Bruce D. Weinberg, “The Secrets of Market-
ing in a Web 2.0 World,” Wall Street Journal,
December 15, 2008, p. R4.
30. Ibid.
31. “Taco Talk,” No. 162,http://www.california
tortilla.com, accessed January 23, 2009.
32. Sharon Fling, “California Tortilla Customers Love
Taco Talk,”http://www.geolocal.com/public/79
.cfm?sd=45, accessed January 23, 2009.
33. Russell S. Wimer, “Customer Relationship
Management: A Framework, Research
Directions, and the Future,”http://groups
.haas.berkeley.edu/fcsuit/PDF-papers/
CRM%20paper.pdf, accessed January 23,
2009.
34. “Get to Know Your Customers with a
Customer Pro?le,”http://www.edwardlowe
.org/index.elf?page=sserc&storyid=0035&
function=story, accessed January 26, 2009.
35. Ibid.
36. See, for example, Del I. Hawkings, David L.
Mothersbaugh, and Roger J. Best, Consumer
Behavior: Building Marketing Strategy, 10th
ed. (New York: McGraw-Hill Irwin, 2007),
Chapter 17.
37. Laurie Zuckerman, “Picture Perfect,” MyBusi-
ness, April–May 2005, p. 12;http://www
.angusbarn.com, accessed January 26, 2009.
38. Jeremy, Mullman, “Nike: What Slowdown?
Swoosh Rides Games to New High,” Adver-
tising Age, October 17, 2008,http://adage
.com/print?article_id=131755, accessed
January 27, 2009.
CHAPTER 15
1. Robert Kiyosaki, “Even Steven,” Entrepre-
neur, Vol. 36, No. 8 (August 2008), p. 36.
2. Debra Kahn Scho?eld, “Grow Your Business
Slowly: A Cautionary Tale,”http://www
.gmarketing.com/articles/read/76/Grow_
Your_Business_Slowly:_A_Cautionary_Tale
.html, accessed February 4, 2009.
3. “BareBabies,”http://www.carstock.com
.ua/Dictionary/BareBabies, accessed
February 4, 2009.
4. “Karen McMasters—BareBabies.com,”http://
br.video.yahoo.com/watch/1581802/
5350194, accessed February 4, 2009.
5. Julie Fields, “Caught in a Candy Crunch,”http://www.businessweek.com/smallbiz/
content/oct2000/sb20001027_096.htm,
accessed February 5, 2009.
6. Je?ry A. Timmons and Stephen Spinelli,
New Venture Creation: Entrepreneurship for
the 21st Century (Boston: McGraw-Hill/Irwin,
2009), p. 18.
7. Reported in an interview with Martha E.
Mangelsdorf, “Hard Times Can Drive
Innovation,” Wall Street Journal,
December 15, 2008, p. R2.
8. Neale Martin, “How Habits Undermine Mar-
keting,” Financial Times, July 1, 2008, http://
www.ftpress.com/articles/article
.aspx?p=1223844, accessed February 5,
2009.
9. “About Potomac Swim School,”http://www
.potomacswimschool.com/New%20
Gallery/New%20Gallery.htm, accessed
February 9, 2009; Kara Clark, “Loudoun’s
Entrepreneurs: With Risk Comes Reward,”
Leesburg Today, January 13, 2009; Donna
Boone, “Entrepreneurial Growth: Think
Regional, Act Local,”http://www.entrepre
neurship.org/Resources/Detail/Default.
aspx?id=11334, accessed February 9, 2009.
10.http://www.180s.com, accessed February 9,
2009; “180s L.L.C.,”http://www.fundinguni
verse.com/company-histories/180s-LLC-
Company-History.html2, accessed
February 9, 2009.
11. “Science and Research,”http://www
.scienti?cintake.com, accessed February 10,
2009; “Scienti?c Intake,”http://www
.onemedplace.com/database/list/
cid/11013, accessed February 10, 2009.
12. “About Premier,”http://www.premier.com/
View.aspx?page=about/premier, accessed
February 10, 2009; “Innovators,” August 3,
2005,http://www.richmond.com/print.
aspx?articleId=4018, accessed February 10,
2009.
13. Dennis Romero, “Master Minds,” Entrepre-
neur, Vol. 37, No. 3 (March 2009), pp. 20–25.
14. “VC Cash Crunch May Impact Innovation,”http://www.us-tech.com/RelId/702033/
ISvars/default/VC_Cash_Crunch_May_I
.htm, accessed February 11, 2009.
15. Anne Field, “Creating a Sustainable Competi-
tive Advantage for Your Small Business,”http://
devsun.startupnation.com/articles/1522/1/
competitive-advantage-small-business.asp,
accessed February 20, 2009.
16. “Dylan’s Candy Bar,”http://www.dylanscan
dybar.com/custserv/customerservicemain
.jsp?cid=1, accessed February 11, 2009.
17. Daniel Maurer, “Scream for Free Ice Cream,”
New York Magazine, November 12, 2008,http://nymag.com/daily/food/2008/11/
scream_for_free_ice_cream.html, accessed
February 11, 2009.
18. Brian Tracy, “Test Marketing Your New Prod-
uct or Service,”http://www.1000ventures
.com/business_guide/marketing_test_
bybt.html, accessed February 11, 2009.
19. “Beacon Street Girls Overview,”http://www
.tradevibes.com/company/pro?le/
beacon-street-girls, accessed February 13,
2009; Nadine Heintz, “Hands On Case
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
712 End Notes 712
Study,’’ Inc. Magazine, Vol. 27, No. 3 (March
2005), pp. 44–46.
20. “The Parking Spot,”http://www.thepark
ingspot.com, accessed February 12, 2009;
Elizabeth J. Goodgold, “Dot Your Eyes,”
Entrepreneur, February 2002, http://
?ndarticles.com/p/articles/mi_m0DTI/
is_2_30/ai_83663520, accessed February 23,
2009.
21. “The Parking Spot—Location Directory,”http://www.theparkingspot.com/Facilities/
LocationDirectory.aspx, accessed
February 12, 2009.
22. “Logo Design, op. cit.
23. Ibid.
24. Adapted from Gwen Moran, “Best and
Worst Marketing Ideas. . . Ever,” Entrepre-
neur, Vol. 37, No. 1 (January 2009), p. 48 and
“Logo Design – Not Just a Pretty Typeface,”http://www.logomojo.com/logotype.html,
accessed February 13, 2009.
25. Nichole L. Torres, “Package Deal,” Entrepre-
neur, Vol. 35, No. 10 (October 2007), p. 114.
26. Ibid.
27. Laura Ti?any, “What Whole Package,”
Entrepreneur, Vol. 36, No. 2 (February 2008),
p. 24.
28. Rieva Lesonsky, “In the Know,” Entrepreneur,
Vol. 35, No. 6 (June 2007), pp. 96–101.
29. Kelly Spors, “Small Talk,” Wall Street Journal,
July 15, 2008, p. B6.
30. “All About Trademarks,”http://www.uspto
.gov/smallbusiness/trademarks/faq.html,
accessed February 18, 2009.
31. “Trade Dress,”http://www.nolo.com/
de?nition.cfm/Term/B8808518-8553-483
A-932DD2E4BC63E155/alpha/T/, accessed
February 18, 2009.
32. Fare Scanners and ‘Compare Fare’ Sites,”http://www.airkiosk.com/ttt_item_2
.php?item=2, accessed February 25, 2009.
33. Sarah E. Needleman, “In a Sole Revival, the
Recession Gives Beleaguered Cobblers New
Traction,” Wall Street Journal, February 2,
2009, pp. A1, A13.
34. “How Tomorrow Moves—Radio Ad: One
Gallon,”http://www.csx.com/?fuseaction=
about.tomorrow_moves, accessed
February 19, 2009.
35. “FedEx Service Enhancements Pay O?,”
Shippers Today,http://info.hktdc.com/
shippers/vol26_3/vol26_3_aircargo05.htm,
accessed February 25, 2009; “UPS—3PL,”http://www.ups-scs.com/support/3pl.html,
accessed February 25, 2009.
36. “Toolbox for IT,”http://supplychain
.ittoolbox.com/documents/what-is-4pl-
17878, accessed February 25, 2009.
37. Kurt C. Ho?man, “Just What Is a 4PL Any-
way?”http://www.supplychainbrain.com/
archives/8.00.4pl.htm?adcode75, accessed
February 25, 2009.
CHAPTER 16
1. Nadine Heintz, “Flexing Your Pricing
Muscles,” Inc. Magazine, Vol. 26, No. 2
(February 2004), pp. 25–26.
2. Geo? Williams, “Name Your Price,” Entrepre-
neur, September 2005, pp. 108–112.
3. To measure a company’s break-even point,
we can use an equation that is an adapta-
tion of the income statement. We know that
operating pro?ts are measured as follows:
Total dollar sales ? cost of goods sold ?
operating expenses ? operating pro?ts
Using the above equation, we simply want
to ?nd the number of units sold and the
corresponding dollar sales where operating
pro?ts are equal to 0. In other words, we
want to calculate the sales level where
Total dollars sales ? cost of goods sold ?
operating expenses ? 0
If we reclassify the costs and expenses into
?xed and variables costs and expenses,
we have
Total dollar sales ? total variable costs
and expenses ? total ?xed costs
and expenses ? 0
Also, since a ?rm’s total dollar sales equals
selling price per unit ? number of units
sold, and variable costs and expenses equal
variable costs and expenses per unit ?
number of units sold, then the break-even
equation may be restated as
(selling price ? units sold) ? (unit variable
costs and expenses ? units sold) ? total
?xed costs and expenses ? 0
Solving for the numbers of units sold that
produce an operating pro?t of 0, we have
break-even units sold ? total ?xed costs
and expenses/selling price ? unit variable
costs and expenses
4. For an excellent discussion of price setting,
see Charles W. Lamb, Jr., Joseph H. Hair,
Jr., and Carl McDaniel, Marketing, 9th ed.
(Cincinnati: South-Western, 2008),
Chapter 18.
5.http://www.technewsworld.com/
story/31271.html, accessed March 16, 2007.
6. John A. Boyd, “Market-Driven Pricing
Strategies,” Iowa Small Business Develop-
ment Centers,http://www. iabusnet.org,
accessed March 15, 2009.
7. For more details, see Sarah Goldstein, “Who
Gets to Say When the Price Is Right?”Inc.
Magazine, March 2007, p. 24; Leegin Creative
Leather Products, Inc., v. PSKS, Inc. Magazine,
DBA Kay’s Kloset, on writ certiorari to the
United States Court of Appeals, No. 06–480,
June 28, 2007.
8. “Online Payment Processing,” Inc. Magazine,
June 2006, p. 86.
9. Jonathan A. Scott, William C. Dunkelberg,
and William J. Dennis, Jr., Credit, Banks
and Small Business—The New Century
(Washington, DC: NFIB Research
Foundation, 2003).
10. For a detailed look at a Equifax credit
report, seehttps://www.econsumer
.equifax. com/consumer/sitepage
.ehtml?forward?cs_cpo.
CHAPTER 17
1. Rachel Metz, “Social Network Faces Trans-
parency Questions,” The Associated Press,http://www.google.com/hostednews/ap/
article, accessed March 22, 2009.
2. Barton A. Weitz, Stephen B. Castleberry, and
John F. Tanner, Jr., Selling: Building Partner-
ships (New York: McGraw-Hill/Irwin, 2007),
Chapter 11; Rieva Lesonsky, “Wind in Your
Sales,” Entrepreneur, June 2007,
pp. 102–105; Barry Farber, “Good Connec-
tions,” Entrepreneur, January 2009, p. 60.
3. Gwen Moran, “Better Business: Get Ready,”
Entrepreneur, October 2007, p. 24;http://www
.babyganics.com, accessed, March 29, 2009.
4. Romanus Wolter, “Success Coach: Sales on
Your Side,” Entrepreneur, October 2008,
pp. 138–139.
5. Gwen Moran, “Take Your Tag Line from Drab
to Fab,” Entrepreneur, March 2009, p. 26;http://www.marketingprofs.com, accessed
March 28, 2009.
6. Gary Slack, “How to Hire an Ad Agency,”
Entrepreneur, June 2007, p. 71;http://www
.slackbarshinger.com, accessed March 28,
2009.
7. Robert Kiyosaki, “Rich Returns: Go Big or
Go Home,” Entrepreneur, November 2008,
p. 34.
8. Chris Morrison, “Interactive Ads Save
Newspapers,” Business 2.0, Vol. 8, No. 8
(September 2007), p. 26.
9. Jacques Bughin, Christoph Erbenich,
and Amy Shenkan, “How Companies
Are Marketing Online,”http://www
.mckinseyquarterly.com/Marketing,
accessed March 31, 2009.
10. Gwen Moran, “Clicks: Natural Born Clickers,”
Entrepreneur, September 2008, p. 79.
11. Susanna Hamner, “Cyberstalking Your
Customers,” Business 2.0, September 2007,
pp. 24–25;http://www.fetchback.com,
accessed March 31, 2009.
12. Leigh Buchanan, Max Chafkin, and
Ryan McCarthy, “On Messages,” Inc.
Magazine, February 2008, p. 78; Steve
Strauss, “Ask an Expert: Don’t Overlook the
Value of E-mail Marketing,”http://www
.usatoday.com/money/smallbusiness/
columnist/strauss/2009-3-30-email.
marketing_N.htm?loc=interstitialskip,
accessed April 1, 2009.
13.http://www.mckinseyquarterly.com,
accessed March 29, 2009.
14.http://www.ftc.gov/spam, accessed
March 27, 2009.
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
End Notes 713
15.http://blog2print/sharedbook.com,
accessed April 14, 2009;http://money.cnn
.com/magazine/business2/, accessed
April 14, 2009.
16.http://www.securecomputing.com,
accessed April 11, 2009.
17. For more details regarding domain name
rules, seehttp://www.register.com/
domain-rules.cgi.
18.http://www.dnjournal.com/ytd.-sales-
charts.htmi, accessed March 31, 2009.
19. Carol Tice, “What’s in a Name?” Entrepreneur,
August 2007, p. 21.
20. Lindsay Holloway, “Webcams Gone
Creative,” Entrepreneur, April 2009, p. 32.
21. Chris Kivelhan, “Improve Your Website’s
Performance,” Entrepreneur, May 3, 2006,http://www.entrepreneur.com/ebusiness/
operations/article159400.html, accessed
July 30, 2007.
22. Corey Rudl, “4 Fatal Website Design
Mistakes,”http://www.entrepreneur.com,
accessed January 29, 2007.
23. Leigh Buchanan, Max Chafkin, and Ryan
McCarthy, “How to Jazz up Your Site,” Inc.
Magazine, February 2008, p. 76.
24. Heather Clancy, “Web Sight: Social Market-
ing,” Entrepreneur, November 2008, p. 44;http://www.white?ash.com, accessed
March 29, 2009.
25. Amanda C. Kooser, “Make Your New Site
Social,” Entrepreneur, February 2009, p. 120.
26. Heather Clancy, “Web Sight: Do You See
What I See?” Entrepreneur, October 2007,
p. 58.
27. Gwendolyn Bounds, “Cracking the YouTube
Market Even If Your Product Is Boring,” Wall
Street Journal, October 30, 2007, p. B9.
28. Catherine Seda, “How to SEO like a Pro,”
Entrepreneur, June 2007, p. 69; http://
wwwsedacommunication.com, accessed
March 31, 2009.
29. Amanda C. Kooser, “Net Pro?ts: Start a
Search Engine,” Entrepreneur, October 2008,
pp. 132–133.
30.http://www.merriam-webster.com/diction
ary/blog, accessed April 14, 2009.
31. Gwen Moran, “Get Noticed,” Entrepreneur,
October 2008, p. 58.
32. Gwen Moran, “Keep Them Posted,” Entrepre-
neur, October 2007, p. 39.
33. Janelle Elms, “In the Fast Lane,” Entrepre-
neur, June 2007, pp. 122–123; http://
fastbackstack.com, accessed March 29,
2009.
34. Kim T. Gordon, “Marketing: Reaching Multi-
taskers,” Entrepreneur, October 2008, p. 86.
35. Moran, “Get Noticed,” op. cit..
36. Adapted from Janet Attard, “Trade Show
Dos and Don’ts,”http://www.businessknow
how.com/tips/tradesho.htm, accessed
April 11, 2009.
37. Gail Dutton, “Global: Mass Appeal,” Entrepre-
neur, November 2008, p. 78.
38. Laura Ti?any, “Generate Buzz About Your
Business,”Entrepreneur, February 2009, p. 26.
39. Don Debelak, “Make Your Mark,” Entrepre-
neur, May 2004, p. 146;http://www
.maryellenproducts.com, accessed
February 5, 2007.
CHAPTER 18
1. See Leora Klapper, Raphael Amit, Mauro F.
Guillen, and Juan Manuel Quesada,
“Entrepreneurship and Firm Formation Across
Countries,”http://knowledge.wharton.upenn
.edu/papers/1345.pdf, accessed March 2, 2009.
2. Statistics have already answered this ques-
tion. Data published by the International
Trade Administration indicate that small
and medium-sized enterprises (SMEs)
account for 97 percent of all U.S. exporters
and that these ?rms represent 29 percent
of all U.S. goods exported. These ?nd-
ings show that SMEs are already actively
involved in international trade. The data
re?ect only export activity, so the numbers
would be even more striking if other forms
of globalization were included in the
report. For an extensive analysis of the ITA
study, see Leslie E. Palich and D. Ray Bagby,
“Trade Trends in Transatlantica: A Pro?le of
SMEs in the United States and Europe,” in
Lester Lloyd-Reason and LeighSears (eds.),
Trading Places—SMEs in the Global Economy:
A Critical Research Handbook (Cheltenham,
UK: Edward Elgar Publishing, 2007).
3. Michael V. Copeland [”The Mighty Micro-
Multinational,” Business 2.0, Vol. 7, No. 6
(July 2006), pp. 107–114] points out just
how fast the number of startups with
global ambitions is growing. He cites UN
data to indicate that the number of start-
ups that are global from day one doubled
between 1990 and 2006, from 30,000 to
60,000. Many of these are technology-
focused companies, but the phenomenon
certainly extends to non-tech companies
as well. But, in many cases, the emphasis
is not on starting a business in the United
States and selling product abroad; rather,
it is on establishing operations wherever in
the world it makes sense to do so. In other
words, it could be a way to draw on the
talents of highly trained employees or to
locate near abundant resources or low-cost
labor to enhance the value proposition of
the new venture.
4. Terms other than born global are some-
times used to refer to this category of ?rms
and others that are similar to them; other
labels include born international ?rms,
global startups, international new ventures,
and instant exporters. See Pat H. Dickson,
“Going Global,” in Andrew Zacharakis and
Stephen Spinelli, Jr. (eds.), Entrepreneurship:
The Engine of Growth (Westport, CT: Praeger
Perspectives, 2007), pp. 155–161; Gary A.
Knight and S. Tamar Cavusgil, “Innova-
tion, Organizational Capabilities, and the
Born-Global Firm,” Journal of International
Business Studies, Vol. 35, No. 2 (March 2004),
pp. 124–141; Svante Andersson, “Inter-
nationalization in Di?erent Industrial
Contexts,” Journal of Business Venturing,
Vol. 19, No. 6 (2004), p. 856; and Erkko
Autio, Harry J. Sapienza, and James G.
Almeida, “E?ects of Age at Entry, Knowl-
edge Intensity, and Imitability on Interna-
tional Growth,” Academy of Management
Journal, Vol. 43, No. 5 (October 2000),
pp. 909–924.
5. Leigh Buchanan, “The Thinking Man’s
Outsourcing,” Inc. Magazine, Vol. 28, No. 5
(May 2006), pp. 31–33.
6. For an important theoretical analysis on
this, see John A. Matthews and Ivo Zander,
“The International Entrepreneurial Dynam-
ics of Accelerated Internationalisation,”
Journal of International Business Studies,
Vol. 38, No. 3 (May 2007), pp. 387–403.
7. Buchanan, op. cit.
8. The Sloan Brothers, “Taking Your Startup to
a Foreign Market,”http://www
.startupnation.com/articles/1471/1/
startupforeign-market.asp, accessed
March 2, 2009; “Eco-Fridge Revolutionizes
Food Transport,”http://www.ebrd.com/
new/stories/2006/060911.htm, accessed
March 2, 2009.
9. Ibid.
10. “Tradewind Strategies—Contact,” http://
www.tradewindstrategies.com/tradewind_
contact.html, accessed March 2, 2009.
11. Shelby Scarborough, “A Whole New World,”
Entrepreneur, Vol. 36, No. 6 (June 2008),
p. 21.
12. Leigh Buchanan, “Gone Global,” Inc. Maga-
zine, Vol. 29, No. 4 (April 2007), pp. 88–91.
13. This point is made in Stephanie A. Fern-
haber, Patricia P. McDougall, and Benjamin
M. Oviatt, “Exploring the Role of Industry
Structure in New Venture Internationaliza-
tion,” Entrepreneurship Theory and Practice,
Vol. 31, No. 4 (July 2007), pp. 517–542.
However, these authors provide an analysis
that shows how major ?elds of research (in-
cluding industrial economics, international
business, and entrepreneurship) can shed
light on the role that industry structure
plays in new ventures’ inclination to inter-
nationalize. For example, they conclude
that variables such as industry growth,
knowledge intensity, local industry inter-
nationalization, an industry’s general level
of global integration, and venture capital
involvement will encourage the interna-
tionalization of new ventures. Factors such
as the general level of industry maturity
are believed to moderate the relationships
predicted.
14. Svante Andersson, “Internationalization
in Di?erent Industrial Contexts,” Journal
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
714 End Notes 714
of Business Venturing, Vol. 19, No. 6 (2004),
pp. 851–875; “Don’t Laugh at Gilded
Butter?ies,” Economist, Vol. 371, No. 8372
(April 22, 2004), pp. 71–73; Oliver Burgel,
Andreas Fier, Georg Licht, and Gordon C.
Murray, “The E?ect of Internationalization
on Rate of Growth of High-Tech Start-
Ups—Evidence for UK and Germany,” in
Paul D. Reynolds et al. (eds.), Frontiers for
Entrepreneurship Research, proceedings of
the 20th Annual Entrepreneurship Research
Conference, Babson College, June 2002.
15. This study focused on the expansion of U.S.
?rms into Europe. It is possible that the pri-
mary motivation for involvement in other
parts of the world is di?erent. For example,
it could very well be that most U.S. small
companies doing business in Asia are seek-
ing to access low-cost component sources
or to relocate business processes via out-
sourcing. For an extended discussion of the
particular study cited, see Edmund Prater
and Soumen Ghosh, “Current Operational
Practices of U.S. Small and Medium-Sized
Enterprises in Europe,” Journal of Small
Business Management, Vol. 43, No. 2
(April 2005), pp. 155–169.
16. Dominic Wilson and Roopa Purushotha-
man, “Dreaming with BRICs: The Path to
2050,” GS Global Economics paper, http://
www2.goldmansachs.com/ideas/brics/
book/99-dreaming.pdf, accessed March 4,
2009; Economist.com, “Another BRIC in the
Wall,” April 21, 2008,http://www.economist
.com/?nance/displaystory.cfm?story_
id=11075147, accessed March 4, 2009.
17. ”Tradewind Strategies,” op. cit.
18. Raymond Vernon, “International Invest-
ment and International Trade in the Prod-
uct Cycle,” Quarterly Journal of Economics,
Vol. 80, No. 2 (May 1966), pp. 190–207.
19. Gordon B. Baty and Michael S. Blake, Entre-
preneurship: Back to Basics (Washington, DC:
Beard Books, 2003), p. 166.
20. Palich and Bagby, op. cit., pp. 64–65.
21. ”Company Background,”http://www.itretail
.com/about/company.php, accessed
March 4, 2009.
22. Ibid.; “IT RETAIL Announces Integrated
Support for BlackHawk Gift Cards and the
Integration of MTXEPS’ ServerEPS Electronic
Payment Engine,”http://www.itretail.com/
news/PressRelease.php?id=59, accessed
March 4, 2009.
23. This is not to suggest that small businesses
no longer follow the pattern of establish-
ing themselves ?rst in the domestic market
before stepping out into international op-
portunities. Pat H. Dickson (op. cit.) refers to
?rms in this category as gradual globals and
mentions that this pattern of expansion
is consistent with the well-developed and
still in?uential Uppsala Internationaliza-
tion Model. The Uppsala school suggests
that ?rms internationalize slowly and
incrementally, perhaps taking years to
gain the knowledge, skills, and resources
necessary to expand into international
markets. Stepping out is likely to begin
with low-commitment strategies ?rst (such
as sourcing abroad or exporting) and then
move into more resource-intensive options
(such as forming a joint venture with an
overseas partner and then moving in time
to establish a wholly owned international
subsidiary). The logic extends to selec-
tion of markets as well, suggesting that
companies ?rst seek to enter countries that
are similar and easy to penetrate. They will
expand into markets that are more and
more dissimilar as they develop the capa-
bilities to move in that direction and ?nd
that they have tapped out the potential of
the markets they are currently in. Though
we now have evidence that many startups
internationalize early on (the born-global
phenomenon), many other entrepreneurs
choose the gradual-global option instead.
24. Palich and Bagby, op. cit., p. 66.
25. In the United States, this problem has been
exacerbated by problems related to the
War on Terror. In an attempt to prevent
dangerous individuals from entering the
country, the U.S. government has tightened
visa and work permit restrictions, which
has made it more di? cult for companies
to bring in the foreign talent they need. To
make the situation worse, many interna-
tional students from countries like China
and India train in the best universities in
the United States and then return home,
hoping to use their skills to get in on the
ground ?oor of opportunities that are
emerging in their rapidly developing
home countries.
26. The Boston Consulting Group/Knowledge@
Wharton, “China and the New Rules for
Global Business,”http://knowledge.wharton
.upenn.edu/papers/download/BCG-KW
specialreport-?nal.pdf, accessed March 11,
2009.
27. Francine Russo, “Doc in a Box,” Business 2.0,
Vol. 8, No. 5 (June 2007).
28. ”Kirkham Motorsports History,” http://
www.kirkhammotorsports.com/about/
index.html, accessed March 8, 2009.
29. ”Salvador’s Co?ee House,”http://www
.salvadors.cn, accessed March 8, 2009;
Christopher J. Horton, “Ex-Coloradans See
Hope in Sister City,” Denver Post, http://
www.salvadors.cn/Denver%20Post%
20article.htm, accessed April 24, 2009;
Paul Sloan “East Meets—and Eats—West,”
Business 2.0, Vol. 6, No. 7 (August 2006),
p. 76.
30. ”Salvador’s Investment and Business
Opportunities,”http://www.salvadors.cn/
investmentopp.htm, accessed March 8,
2009.
31. Prater and Ghosh, op. cit., p. 161.
32. Jan Stojaspal, “Back in the Driver’s Seat,”http://www.time.com/time/europe/
specials/?/trip6/hungarybuses.html,
accessed March 8, 2009; Palich and Bagby,
op. cit.
33. SBA O? ce of Advocacy, “Small Business
Frequently Asked Questions,”http://www
.sba.gov/advo/stats/sbfaq.pdf, accessed
March 8, 2009.
34. SBA, “Small Business Guide to Exporting:
Making the Export Decision,”http://www
.sba.gov/idc/groups/public/documents/
sba_program_o? ce/oit_bitg4th_chpt1
.pdf, accessed March 8, 2009.
35. ”About Entertainment Earth,”http://www
.entertainmentearth.com/help/aboutee
.asp, accessed March 11, 2009.
36. ”EntertainmentEarth.com,”http://www
.secretstotheirsuccess.com/industry-
categories/7-giftsmemorabilia/149-
entertainment-earth.html, accessed
March 11, 2009.
37. Janelle Elms, “Go Global,”Entrepreneur, Vol. 34,
No. 9 (September 2006), pp. 130–131.
38. For an informative discussion of this issue
as it applies speci?cally to export approval
for shipments to China, see Ted C. Fishman,
“America’s Most Innovative Industries Are
Being Robbed Every Day on the Floors of
Chinese Factories,” Inc. Magazine, Vol. 28,
No. 6 (June 2006), pp. 98–102.
39. Ian Mount, “Right Back at You,” Fortune
Small Business, Vol. 16, No. 2 (March 2006),
p. 18.
40. ”Compass Trading Co.—About Us,”http://www.compasstradingco.com/
pages/about_us.html, accessed March 11,
2009; Personal conversation with store
management, February 8, 2008.
41. Joshua Kurlantzick, “On Foreign Soil,”
Entrepreneur, Vol. 33, No. 6 (June 2005),
pp. 88–92.
42. Ibid.
43. A study of small and medium-sized
enterprises (SMEs) in the European Union
revealed that international sourcing is
used far more than exporting strategies.
While 16 percent of ?rms in the study
used exporting alone, 49 percent engaged
in foreign sourcing alone. Twenty-seven
percent had both foreign suppliers and
exports. These ?ndings may not general-
ize beyond European ?rms, given their
unique setting within the region, but
they certainly highlight the importance
of these two international strategies
for SMEs. For more details, see the 2003
Observatory of European SMEs: 2003/4
Internationalization of SMEs, which can
be accessed athttp://ec.europa.eu/enter-
prise/enterprise_policy/analysis/observa-
tory_en.htm.
44. Michael A. Hitt, R. Duane Ireland, and
Robert E. Hoskisson, Strategic Manage-
ment: Competitiveness and Globalization
(Cincinnati, OH: Thomson South-Western,
2007), p. 246.
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
End Notes 715
45. ”Company Background,”http://www.itretail
.com/about/company.php, accessed
March 11, 2009.
46. U.S. Small Business Administration, Breaking
into the Trade Game: A Small Business Guide
to Exporting,http://www.sba.gov/aboutsba/
sbaprograms/internationaltrade/exportli-
brary/sbge/OIT_SB_GUIDE_EXPORT_INDEX.
html, accessed March 11, 2009.
47.http://www.bluenote.net/ franchise/index
.shtml, accessed March 11, 2009.
48. Space is limited here, but there is much
more to know about strategic alliances and
small business. For example, Dickson (op.
cit., pp. 162–163) reviews research showing
that features of national culture can shape
the formation of alliances and the use of
equity ties. This source will lead interested
readers to other important studies on the
topic.
49. Elizabeth Wasserman, “Happy Birthday,
WTO?” Inc. Magazine, Vol. 27, No. 1 (January
2005), pp. 21–23.
50. Karen E. Klein, “An American in South
America’s Paris,” BusinessWeek, June 15,
2006,http://www.businessweek.com/
smallbiz/content/jun2006/
sb20060615_849958.htm?chan=smallbiz_
spr_bestplaces, accessed March 11, 2009;
Nichole L. Torres, “Change of Scenery,”
Entrepreneur, Vol. 34, No. 8 (August 2006),
p. 90.
51. Kevin Kelly, “Mexican Stando?,” Fortune
Small Business, Vol. 16, No. 2 (March 2006),
p. 29.
52. Some forms of risk are not within the con-
trol of a country’s government, but these
may have very serious e?ects on business
performance and thus should be factored
into business startup and expansion deci-
sions. One emerging example involves
what some researchers are calling environ-
mental risk, which suggests that climate
change risks vary across global regions and
should be a recognized decision-making
factor [see Peter Romilly, “Business and
Climate Change Risk: A Regional Time
Series Analysis,” Journal of International
Business Studies, Vol. 38, No. 3 (May 2007),
pp. 474–480]. However, the state and qual-
ity of climate change science is still hotly
debated, so its predictive value in business
decision making is still open to question.
53.http://www.mooneyfarms.com/about_
us.htm, accessed June 7, 2004.
54. ”Chapter 3—Foreign Market Entry,” http://
www.foreign-trade.com/reference/trad8
.htm, accessed March 11, 2009.
CHAPTER 19
1. William Shakespeare, The Tempest, Act 2,
Scene 1.
2. Julie H. Case, “The Art of Leadership,” U.W.
[University of Washington] Business, Spring
2003, p. 17.
3. Deepa D. Singh, “Entrepreneur—Crashing
Fear/Cashing Fortitude,”http://www.indian
mba.com/Faculty_Column/FC362/fc362
.html, accessed March 17, 2009.
4. As quoted in Brent Bowers, The 8 Patterns
of Highly E?ective Entrepreneurs (New York:
Currency Doubleday, 2006), p. 61.
5. Daniel Goleman, Richard E. Boyatzis, and
Annie McKee, Primal Leadership: Learning
to Lead with Emotional Intelligence
(Cambridge, MA: Harvard Business School
Press).
6. Danny Meyer, “The Saltshaker Theory,”
Inc. Magazine, Vol. 28, No. 10 (October
2006), pp. 69–70;http://www.union-
squarecafe.com/aboutusc.html, accessed
April 16, 2009;http://www.cbsnews.com/
stories/2003/03/03/sunday/main542606.
shtml, accessed April 6, 2009.
7. Glenn Ross, “Employee Empowerment
Contributes to the Customer Service
Experience,”http://www.allbusiness.com/
sales/customer-service/3876268-1.html,
accessed April 6, 2009.
8. For more on this topic, see Nichole Torres,
“Thinking Bigger,” Entrepreneur, Vol. 34,
No. 8 (August 2006), p. 53.
9. Nichole Torres, “Setting the Mood,” Entrepre-
neur, Vol. 34, No. 8 (August 2006), p. 52.
10. Ibid.
11. Sara Wilson, “Build a Billion Dollar Business,”
Entrepreneur, Vol. 37, No. 3 (March 2009),
pp. 45–47.
12. Adam Hanft, “Save the Founder,” Inc. Maga-
zine, Vol. 27, No. 10 (October 2005), p. 156.
13. Personal communication with Sara Blakely,
May 3, 2007.
14. Gwen Edwards, “Going from Fortune 500
to Startup,” March 5, 2007,http://www
.businessweek.com/print/smallbiz/content/
mar2007/sb20070305_965709.htm,
accessed April 6, 2009.
15. The model we o?er in this chapter could
be viewed as a relatively smooth curve
with no disruptions or downward trends.
Our focus is mostly on the managerial
challenges that go along with each of
these stages of growth, and it would
seem to be implicit that these are always
manageable. However, we recognize that
very few entrepreneurial ?rms develop
along such a straightforward path, and
the smooth sailing will often be upset
by moments of crisis along the way, and
perhaps even failure. Edward P. Marram,
entrepreneur and professor at Babson
College, o?ers more creative stage names
and notes more speci?cally the perils
that companies face at di?erent points in
their growth and development. His model
includes the following ?ve stages: Wonder,
Blunder, Thunder, Plunder, and Asunder.
As reported by Je?ry A. Timmons and
Stephen Spinelli (New Venture Creation:
Entrepreneurship for the 21st Century
[Boston: McGraw-Hill Irwin, 2009], p. 556),
“Wonder is the period that is ?lled with
uncertainty about survival. Blunder is a
growth stage when many ?rms stumble
and fail. The Thunder stage occurs when
growth is robust and the entrepreneur has
built a solid management team. Cash ?ow
is robust during Plunder, but in Asunder
the ?rm needs to renew or will decline.”
This model obviously runs relatively paral-
lel to what we present in this section of
the chapter, but the emphasized dynamics
are clearly somewhat di?erent.
16. Chris Penttila, “Can You Manage?”
Entrepreneur, Vol. 31, No. 7 (July 2003),
pp. 74–75.
17. Ibid.
18. Demetria Lucas, “Twin Tailors,” Black Enter-
prise, Vol. 33, No. 9 (April 2003), p. 47.
19. Conversation with Ryan Gibson, Waco,
Texas, April 13, 2009.
20. Startup Journal, “The Long-Term Perils of
Being a Control Freak,”http://www
.managementsite.com/currentevents/167/
The-Long-Term-Perils-of-Being-a-Control-
Freak.aspx, accessed March 26, 2009.
21. Brent Bowers, The 8 Patterns of Highly
E?ective Entrepreneurs (New York: Currency
Doubleday, 2006), p. 67.
22. Rodes Fishburne, “More Survival Advice:
Communicate,”http://www.forbes.com/
asap/2000/0403/120.html, accessed
March 27, 2009.
23. The use of blogs for the expression of per-
sonal opinions online has been increasing
rapidly, but applications to the business
setting are expanding even faster. For ex-
ample, blogs can be employed as a public
relations tool or a channel to address cus-
tomer complaints or to pass along product
or service insights.
24. Numerous resources provide excellent
background on the principles and skills of
negotiation. One popular book on the sub-
ject, a national bestseller, is by Roger Fisher,
William Ury, and Bruce Patton: Getting to
Yes: Negotiating Agreement Without Giving
In (New York: Random House, 2003). This
book emphasizes several very important
concepts, including bargaining for mutual
gains, separating people from the problem
and positions from interests, and agreeing
on objective criteria for evaluating out-
comes. With its readable style and practical
orientation, this book—and others like it—
would be very useful reading for any small
business owner.
25. Barry Farber, “Putting Ideas into Action,”
Entrepreneur, Vol. 37, No. 2 (February 2009),
p. 62.
26. Erika Kotite, “Focus, People!” Entrepreneur,
Vol. 34, No. 9 (September 2006), p. 34.
27. As reported in Mark Henricks, “Just ‘To-Do’
It,” Entrepreneur, Vol. 32, No. 8 (August
2004), p. 71.
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
716 End Notes 716
28. Suggestions were adapted from the follow-
ing articles: Inc. Magazine, “Ask Inc.,” Vol. 30,
No. 1 (January 2008), p. 60; Emma Johnson,
“A Stress-Free Guide to Time Management,”
MyBusiness, October–November 2005,
pp. 29–33; Lisa Kanarek, “Clean Sweep,”
Entrepreneur, Vol. 34, No. 6 (June 2006),
pp. 43–44; Chris Penttila, “Rush Hour,” Entre-
preneur, Vol. 36, No. 8 (August 2008),
p. 74; Chris Penttila, “Time Out,” Entrepre-
neur, Vol. 35, No. 4 (April 2007), pp. 71–73;
Je?rey Pfe?er, “Why Deadlines Matter,”
Business 2.0, Vol. 8, No. 5 (June 2007), p. 54;
Nichole L. Torres, “In Good Time,” Entre-
preneur, Vol. 33, No. 12 ( December 2005),
p. 38; Romanus Wolter, “A Clean Sweep,”
Entrepreneur, Vol. 32, No. 7 (July 2004),
pp. 108–109; Romanus Wolter, “Easy Does
It,” Entrepreneur, Vol. 33, No. 10 (October
2005), pp. 122–123.
29. Visit the Entrepreneurs’ Organization web-
site athttp://www.eonetwork.org and the
Young Presidents’ Organization at http://
www.ypo.org for more information.
30. “Business Incubation FAQ,”http://www
.nbia.org/resource_center/bus_inc_facts/
index.php, accessed March 20, 2009.
31. Ibid.
32. Darren Dahl, “Percolating Pro?ts,” Inc. Maga-
zine, Vol. 27, No. 2 (February 2005),
pp. 38–40.
33. “FastTrac,”http://www.fasttrac.org,
accessed March 31, 2009.
34. Interested in signing up? Visit the organiza-
tion’s website athttp://www.fasttrac.org to
learn more about the program.
35. For more information about SCORE, visit
the organization’s website athttp://www
.score.org.
36. “The Baker’s Peel,”http://www.score.org/
success_bakers_peel.html, accessed
March 30, 2009.
37. “Bozmedia,”http://www.bozmedia.com/
about.html, accessed March 31, 2009;
Nichole L. Torres, “Family Ties,” Entrepreneur,
Vol. 34, No. 10 (September 2006),
pp. 132–133; personal communication
with Ryan Bonifacino, May 2, 2007.
CHAPTER 20
1. For an extended discussion of small
business and HRM practices, especially
as applied to family ?rms, see Jan M. P. de
Kok, Lorraine M. Uhlaner, and A. Roy Thurik,
“Professional HRM Practices in Family
Owned-Managed Enterprises,” Journal of
Small Business Management, Vol. 44, No. 3
(May 2006), pp. 441–460.
2. Joel Spolsky, “There’s a Better Way to Find
and Hire the Very Best Employees,” Inc.
Magazine, Vol. 29, No. 5 (May 2007),
pp. 81–82.
3. Chris Penttila, “Talent Scout,” entrepreneur
.com, July 2008,http://www. entrepreneur
.com/magazine/entrepreneur/2008/
july/194508.html, accessed June 30, 2009.
4. Chris Resto, Ian Ybarra, and Ramit Sethi,
Recruit or Die: How Any Business Can Beat
the Big Guys in the War for Young Talent
(New York: Penguin Group, 2008).
5. For ?ndings of an informative study of the
relationship between employee bene?ts
and turnover in large versus small business-
es, see John B. Hope and Patrick C. Mackin
(SBA O? ce of Advocacy), “The Relationship
Between Employee Turnover and Employee
Compensation in Small Business,” Small
Business Research Summary, Report No.
308, July 2007,http://www.sba.gov/advo/
research/rs308.pdf, accessed May 15, 2009.
6. Sarah E. Needleman, “Small Firms O?er
More Responsibility, Credit,” Wall Street
Journal, March 4, 2008, p. B6.
7. ”Our Goal,”http://www.kayconstruction.com,
accessed April 23, 2009; Mark Henricks,
“Search Party,”Entrepreneur, Vol. 35, No. 2
(February 2007), p. 83.
8. To get an idea of the kinds of services that
public employment o? ces can provide,
visit the website of Workforce Solutions of
El Paso, Texas, which operates under the
oversight of the Upper Rio Grande Work-
force Development Board. Its programs
are outlined athttp://www.urgjobs.com/
index.php?option=com_frontpage&
Itemid=1, accessed on May 15, 2009.
9. Henricks, op. cit.
10. ”Imperatives,”http://www.imperativesllc
.com, accessed April 23, 2009; Mark
Henricks, “You Know Who?” Entrepreneur,
Vol. 35, No. 5 (May 2007), pp. 89–90.
11. ”Tomorrow’s Jobs,”http://stats.bls.gov/oco/
oco2003.htm, accessed April 27, 2009.
12. Mark Henricks, “In the Mix,” Entrepreneur,
Vol. 35, No. 10 (October 2007), p. 109.
13. Bruce D. Phillips, “The Future Small Business
Workforce,” paper presented at the national
meeting of the United States Association
for Small Business and Entrepreneurship,
Indian Wells, CA, January 2005.
14. See “Foreign Labor Certi?cation,” http://
www.foreignlaborcert.doleta.gov, accessed
May 13, 2009.
15. As reported in Dee Gill, “Dealing with
Diversity,” Inc. Magazine, Vol. 27, No. 11
(November 2005), p. 38.
16. Chris Kelleher, “Writing Great Job Descrip-
tions,”http://www.entrepreneur.com/
humanresources/hiring/article70642.html,
accessed May 6, 2009.
17. For more detail on overtime regulations as
they may apply to small businesses, visit the
U.S. Department of Labor’s website at http://
www.dol.gov/esa/regs/compliance/whd/
fairpay/main.htm, accessed April 23, 2009.
18. For more on this and other features of
the hiring process, see Stephanie Cli?ord,
“The Science of Hiring,” Inc. Magazine, Vol.
28, No. 8 (August 2006), pp. 90–98. The
article reports that the correlation between
interview-based assessments and actual
performance is a mere 0.20, which is not
very encouraging. However, the author
o?ers many insights that could be used to
improve the hiring process.
19. Je?rey Pfe?er, “Why Resumes Are Just One
Piece of the Puzzle,” Business 2.0, Vol. 6,
No. 11 (December 2005), p. 106.
20. For more behavioral interview questions
that could be adapted to a speci?c com-
pany’s needs, see “Sample Behavioral Inter-
view Questions,”http://www.quintcareers
.com/sample_behavioral.html, accessed
April 23, 2009.
21. Recent studies indicate that around 25 per-
cent of small businesses ?nd it necessary
to ?re employees each year (”First, Fire Your
Assistant. Then, Ax All the Sales Guys,” Inc.
Magazine, Vol. 29, No. 7, (July 2007),
p. 26; William J. Dennis, Jr., “Unemployment
Compensation,” National Federation of
Independent Business, quarterly research
report, Vol. 7, No. 1, (2007). When a small
business has to ?re an employee, it always
runs the risk of being sued for wrongful
termination. However, released employees
are much less likely to ?le a lawsuit if they
conclude that their employer has been fair
throughout the process and has provided
ample opportunity for them to improve
their work performance before termination.
22. Beth Gaudio, “Tell Me About Yourself,”
MyBusiness, October–November 2006, p. 14.
23. Mark Henricks, “Check That Temp,” Entrepre-
neur, Vol. 34, No. 4 (April 2006), pp. 91–92.
24. Susanna Hamner, “Give People a Second
Chance,” Business 2.0, Vol. 8, No. 4
(May 2007), p. 67.
25. Paulette Thomas, “Case Study: Not Sure of
a New Hire? Put Her to a Road Test,” Wall
Street Journal, January 7, 2003, p. B-7.
26. As with many governmental regulations
that a?ect small businesses, this applies
only to those companies that have at least
15 employees. In this case, crossing the
15-employee threshold means that the
company is subject to federal laws against
disability discrimination.
27. William J. Dennis, Jr. (ed.), “Alcohol, Drugs,
Violence and Obesity in the Workplace,”
NFIB National Small Business Poll, Vol. 4,
No. 3 (2004), pp. 7–8.
28. Communication with Rick Davis,
August 21, 2007.
29. Ibid.
30. For a substantive study of reported training
practices of small businesses, see William J.
Dennis Jr. (ed.), “Training Employees,” NFIB
National Small Business Poll, Vol. 5, No. 1
(2005), pp. 1–39.
31. Gaylen N. Chandler and Glenn M. McEvoy,
“Human Resource Management, TQM,
and Firm Performance in 62 Small and
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
End Notes 717
Medium-Size Enterprises,” Entrepreneur-
ship Theory and Practice, Vol. 25, No. 1 (Fall
2000), pp. 43–57.
32. Emily Barker, “Hi-Test Education,” http://
www.inc.com/magazine/20010701/22888
.html, accessed April 27, 2009.
33. ”Welcome to Bookpros,”http://www
.bookpros.com, accessed May 6, 2009;
“NFIB—Small Business Toolbox,” http://
74.125.47.132/search?q=cache:
9ZD8hbPZrY0J:www.n?b.com/object/
2991858.html+phenix+and+phenix+ %22l
earning+situation%22&cd=1&hl=en&ct=clnk
&gl=us, accessed May 6, 2009.
34. Harry J. Martin, “The Key to E?ective Train-
ing Isn’t Necessarily What Happens in the
Classroom. It’s What You Do Afterward,”
Wall Street Journal, December 15, 2008,
p. R-11.
35. Ibid.
36. These recommendations were adapted
from suggestions presented in Martin,
op. cit.
37. Mike Faith, “A Systems Approach to Hiring
the Right People,”http://www.entrepre
neurship.org/Resources/Detail/Default
.aspx?id=10574, accessed April 27, 2009;http://www.headsets.com, accessed
April 27, 2009.
38. Faith, op. cit.
39. “In-N-Out Burger—Great Bene?ts,” http://
www.in-n-out.com/employment_
restaurant.asp, accessed May 1, 2009.
40. Get more information about ESOPs from
the website of the National Center for
Employee Ownership athttp://www
.nceo.org.
41. For more information on guidelines for
cafeteria plans for businesses, see the
relevant IRS website athttp://www.irs.gov/
publications/p15b/ar02.html#en_US_
publink1000101745, accessed April 30, 2009.
42. Karen E. Spaeder, “All Well and Good,” Entre-
preneur, Vol. 36, No. 11 (November 2008).
p. 24.
43. For more detailed information on laws
protecting employees, see the website of
the U.S. Department of Labor,http://www
.dol.gov/opa/aboutdol/lawsprog.htm,
accessed May 6, 2009.
44. Beth Gaudio, “Stay Out of Court,” MyBusi-
ness, October–November 2005, p. 46.
45. In 2008, the 12-week leave was expanded
to 26 weeks in a 12-month period for any
individual who needs time to care for a
member of the U.S. military who has a
serious injury or illness.
46. For more information on the provisions of
the Family and Medical Leave Act, consult
the following website:http://www.dol.gov/
esa/whd/regs/compliance/whdfs28.pdf,
accessed May 4, 2009.
47. For more insights on e?ective performance
review processes, see “How to Conduct
Annual Employee Reviews,” Inc. Guidebook,
Vol. 1, No. 9 (December 2008), Special
supplement.
CHAPTER 21
1. Found by browsing the following website:http://www.amazon.com, accessed
May 15, 2009.
2. “The Flash Pass,”http://www.six?ags.com/
overTexas/tickets/?ashpass.aspx, accessed
May 15, 2009.
3. Knowledge at Wharton, “Delving into the
Mystery of Customer Satisfaction: A Toyota
for the Retail Market?” August 10, 2005,http://knowledge.wharton.upenn.edu/
article.cfm?articleid?1255, accessed
May 15, 2009.
4. The economic order quantity is the low-
est point on the total costs curve, which
coincides with the intersection of the
carrying costs and ordering costs curves for
a ?rm. In cases in which su? cient informa-
tion on costs is available, this point can
be calculated with some precision. Even
when the economic order quantity cannot
be calculated precisely, however, a ?rm’s
goal must be to minimize both ordering
costs and carrying costs. Most operations
management textbooks o?er formulas and
calculations for determining the economic
order quantity. One exceptionally good
resource for this and many other opera-
tions management computations is Wal-
lace J. Hopp and Mark L. Spearman, Factory
Physics, 3rd ed. (Boston: Irwin McGraw-Hill,
2007), pp. 49–53.
5. “McAlister’s Corporation,”http://www
.answers.com/topic/mcalister-s-corporation,
accessed May 15, 2009; “McAlister’s Deli,”http://www.mcalistersdeli.com/, accessed
May 15, 2009.
6. Je? Bailey, “A Restaurant’s Turnaround Is
All in the Details,” Wall Street Journal, May
20, 2003, p. B-3;http://www.leye.com/
company/history.htm, accessed April 20,
2007.
7.http://money.cnn.com/magazines/fortune/
fortune_archive/2005/10/03/8356743/
index.htm, accessed June 1, 2009; http://
www.nytimes.com/2004/11/14/business/
yourmoney/14wal.html, accessed June 1,
2009.
8.http://src.alionscience.com/pdf/Quality
Tools.pdf, accessed June 2, 2009; http://
www.asq.org/learn-about-quality/seven-
basic-quality-tools/overview/overview
.html, accessed June 2, 2009.
9. “Customer Spending Growth Likely to
Remain Strong as Customer Satisfac-
tion Hits an All-Time High,” ASCI News,
February 20, 2007,http://www.theasci.org/
index?option?com_content&task?view
&id?165&Itemid?161, accessed April 24,
2007.
10.http://www.scpiteam.com/SCOR Met
rics.htm, accessed May 25, 2009; http://
www.scelimited.com/sitebuildercontent/
sitebuilder?les/howdoesscormeasureup
.pdf, accessed May 25, 2009.
11. Nadine Heintz, “Ross O. Youngs: The Fix It
Man,” Inc. Magazine, 500 Special, Vol. 25, No.
12 (Fall 2004), pp. 28, 30.
12. Ibid.;http://www.univenture.com/
company/ history.html, accessed April 22,
2007.
13. Laurel Delaney, “Howdy Partner,” Entrepre-
neur, Vol. 35, No. 4 (April 2007), p. 87.
14. Janelle Elms, “Automatic Transition,”
Entrepreneur, Vol. 35, No. 2 (February 2007),
p. 118;http://www.gotham-cycles.com,
accessed April 20, 2007.
15. Ibid.
16.http://www.google.com/?nance; Duncan
Jones, “Best Practices: Invoice-To-Pay
Process Automation,” November 19, 2008,
Forrester Research.
17.http://www.microsoft.com/dynamics/
default.mspx, accessed May 20, 2009.
18. “Connecting the Dots: Aligning Lean
Operational and Financial Metrics,” http://
www.sme.org/cgi-bin/get-newsletter.pl?
LEAN&20070810&4&, accessed June 26,
2009
19. Henry Ford ?rst discussed these ideas in
his seminal book from 1926, Today and
Tomorrow more recently published in 1988
by Productivity Press.
CHAPTER 22
1. Accruals are not considered in terms of
managing working capital. Accrued ex-
penses, although shown on ?nancial state-
ments as a short-term liability, primarily
result from the accountant’s e?ort to match
revenues and expenses. There is little that
can be done to “manage” accruals.
2. Keith Lowe, “Managing Your Cash
Flow,” Entrepreneur, December 3,
2001,http://www.entrepreneur. com/
article/0,4621,295043,00.html, accessed.
3. Simona Covel and Kelly K. Spors, “To Help
Collect the Bills, Firms Try the Soft Touch,
Wall Street Journal, January 27, 2009, p. B1.
4. Paulette Thomas, “Why Debt Collection
Is So Essential for Startups,” Wall Street
Journal Online, September 25, 2005, http://
www.startupjournal.com/runbusiness/
billcollect/20050920-thomas.html,
accessed August 21, 2007.
5. Lana Basha, “Handle the Headaches,”
MyBusiness, June–July 2007, pp. 26–29,http://www.mybusinessmag.com/fullstory.
php3?sid?1589, accessed April 30, 2009.
6. Ibid.
7. Covel and Spors, op. cit., p. B6.
8. To be more accurate, the equation should
use the amount of purchases a company
has made from suppliers; however, we use
cost of goods sold as an approximation
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
718 End Notes 718
because it is available in the income
statement and purchases are not.
9. William J. Dennis, Jr. (ed.), The National
Small Business Poll: Reinvesting in the
Business, Vol. 3, No. 3 (2003), NFIB
Research Foundation, p. 13.
10. Ibid., p. 11.
CHAPTER 23
1. Translated by Arthur W. H. Adkins from
the Greek text of Solon’s poem “Prosperity,
Justice and the Hazards of Life,”in M. L. West
(ed.), Iambi et Elegi Gracci ante Alexandrum
Canttati, Vol. 2 (Oxford: Clarendon Press,
1972).
2. “Risk,”http://www.thefreedictionary.com/
risk, accessed March 26, 2007.
3. Daniel Tynan, “In Case of Emergency,” Entre-
preneur, Vol. 3, No. 4 (April 2003), p. 60.
4. Social Security Administration, as cited
in Randy Myers, “The Fine Art of Self-
Protection,” CFO, July 1, 2006,http://www
.cfo.com, accessed July 27, 2007.
APPENDIX B
1. Other multiples, besides value to earnings,
that are used in valuing a ?rm include value
to sales, value to equity book value, and
value to cash ?ows, just to mention
a few.
2.http://www.buysellbiz.com/Mid
west%20fsbos.htm, February 4, 2004.
3. Justin Martin, “What’s Your Busi-
ness Worth—Really?” http://
money.cnn.com/magazines/fsb/fsb_
archive/2006/09/01/8384898/index.htm,
accessed August 28, 2007.
4. Depreciation expense was added back
to operating income, since it is a non-
cash expense. The resulting number is
equal to the firm’s cash flow from
operations.
5. The numbers in this example have been
changed, but they still represent the
valuation process.
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
719 719
A
24/7 e-tailing Electronic retailing provid-
ing round-the-clock access to products and
services.
7(a) Loan Guaranty Program Loan pro-
gram that helps small companies obtain ?nanc-
ing through a guaranty provided by the SBA.
7(m) Microloan Program SBA loan pro-
gram that provides short-term loans of up to
$35,000 to small businesses and not-for-pro?t
child-care centers.
ABC method A system of classifying items
in inventory by relative value.
Acceptance sampling The use of a
random, representative portion of products to
determine the acceptability of an entire lot.
Accounting return on investment
technique A capital budgeting technique
that evaluates a capital expenditure based
on the expected average annual after-tax
pro?ts relative to the average book value of an
investment.
Accounts payable (trade credit)
Financing provided by a supplier of inventory
to a given company.
Accounts receivable The amount of
credit extended to customers that is currently
outstanding.
Accrual-basis accounting An account-
ing method of recording pro?ts when they
are earned, whether or not the pro?ts have
been received in cash; additional expenses
are recorded when they are incurred, even if
payment has not been made.
Accrued expenses Short-term liabilities
that have been incurred but not paid.
Accumulated depreciation Total depre-
ciation expense taken over the asset’s life.
Actual cash value (ACV) An insurance
term that refers to the depreciated value of a
property.
Actual product/service The basic
physical product/service that delivers those
bene?ts.
Advertising The impersonal presentation
of a business idea through mass media.
Advisory council A group that functions
like a board of directors but acts only in an
advisory capacity.
Agents/brokers Intermediaries that do not
take ownership of the goods they distribute.
Aggregate stop loss limit A compre-
hensive limit on annual expenses should a
number of employees reach the speci?c stop
loss limit.
Aging schedule A categorization of
accounts receivable based on the length of
time they have been outstanding.
All-risk approach Stating, in an insurance
policy, that all direct damages to property are
covered except those caused by perils speci?-
cally excluded.
Area developers Individuals or ?rms that
obtain the legal right to open several fran-
chised outlets in a given area.
Artisan entrepreneur A person with
primarily technical skills and little business
knowledge who starts a business.
Asset-based loan A line of credit secured
by working-capital assets.
Associative forecasting Forecasting that
considers a variety of variables to determine
expected sales.
Attitude An enduring opinion based on
knowledge, feeling, and behavioral tendency.
Attractive small ?rm A small ?rm that
provides substantial pro?ts to its owner.
Attributes Product or service parameters
that can be counted as being present or
absent.
Auction sites Web-based businesses o?er-
ing participants the ability to list products for
consumer bidding.
Augmented product/service The basic
product/service plus any extra or unsolicited
bene?ts to the consumer that may prompt a
purchase.
Automobile insurance Coverage de-
signed to protect against liability and physical
damage to a vehicle resulting from insured
perils such as collision, theft, vandalism, hail,
and ?ood.
Average pricing An approach in which
total cost for a given period is divided by
quantity sold in that period to set a price.
B
Bad-debt ratio The ratio of bad debts to
credit sales.
Balance sheet A ?nancial report showing a
?rm’s assets, liabilities, and ownership equity
at a speci?c point in time.
Balloon payment A very large payment
that the borrower may be required to make at
a speci?ed point about halfway through the
term over which the payments were calcu-
lated, repaying the rest of the loan in full.
Banner ads Advertisements that appear
across a Web page, most often as moving
rectangular strips.
Behavioral interview An interview
approach that assesses the suitability of job
candidates based on how they would respond
to hypothetical situations.
Bene?t variables Speci?c characteristics
that distinguish market segments according
to the bene?ts sought by customers.
Bill of lading A document indicating that a
product has been shipped and the title to that
product has been transferred.
Blog An interactive website in which an indi-
vidual can maintain a personal online journal,
post comments and re?ections, and provide
hyperlink.
Board of directors The governing body of
a corporation, elected by the stockholders.
Bootstrapping Doing more with less in
terms of resources invested in a business,
and where possible controlling the resources
without owning them.
Born-global ?rms Small companies
launched with cross-border business activities
in mind.
Bottleneck Any point in the operations
process where limited capacity reduces the
production capability of an entire chain of
activities.
Brand A verbal and/or symbolic means of
identifying a product.
Brand image People’s overall perception of
a brand.
Brand mark A brand that cannot be
spoken.
Brand name A brand that can be spoken.
Breakdown process (chain-ratio
method) A forecasting method that begins
with a larger-scope variable and works down
to the sales forecast.
Break-even point Sales volume at which
total sales revenue equals total costs and
expenses.
Brick-and-mortar store The traditional
physical store from which businesses have
historically operated.
glossary
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720 Glossary Glossary
Budget A document that expresses future
plans in monetary terms.
Build-up LBO A leveraged buyout involv-
ing the purchase of a group of similar compa-
nies with the intent of making the ?rms into
one larger company.
Buildup process A forecasting method in
which all potential buyers in the various sub-
markets are identi?ed and then the estimated
demand is added up.
Business angels Private individuals who
invest in others’ entrepreneurial ventures.
Business format franchising A fran-
chise arrangement whereby the franchisee
obtains an entire marketing and management
system geared to entrepreneurs.
Business incubator A facility that
provides shared space, services, and manage-
ment assistance to new businesses.
Business interruption insurance Cov-
erage that reimburses a business for the loss
of anticipated income following the interrup-
tion of business operations.
Business model A group of shared char-
acteristics, behaviors, and goals that a ?rm
follows in a particular business situation.
Business owners policy (BOP) A
business version of a homeowner’s policy,
designed to meet the property and general
liability insurance needs of some small busi-
ness owners.
Business plan A document that presents
the basic idea for the venture and includes
descriptions of where you are now, where you
want to go, and how you intend to get there.
Business risk The possibility of losses asso-
ciated with the assets and earnings potential
of a ?rm.
Business-to-business (B2B) model A
business model based on selling to business
customers electronically.
Business-to-consumer (B2C) model
A business model based on selling to ?nal
customers electronically.
Bust-up LBO A leveraged buyout involving
the purchase of a company with the intent of
selling o? its assets.
C
C corporation An ordinary corporation,
taxed by the federal government as a separate
legal entity.
Capabilities The integration of various
organizational resources that are deployed
together to the ?rm’s advantage.
Capital budgeting analysis An analyti-
cal method that helps managers make deci-
sions about long-term investments.
Cash budget A listing of cash receipts and
cash disbursements usually for a relative short
time period, such as weekly or monthly.
Cash conversion period The time
required to convert paid-for inventory and
accounts receivable into cash.
Cash ?ow statement A ?nancial report
showing a ?rm’s sources of cash as well as its
uses of cash.
Cash-basis accounting An accounting
method of recording pro?ts when cash is
received and recording expenses when they
are paid.
Certi?ed Development Company
(CDC) 504 Loan Program SBA loan
program that provides long-term ?nancing
for small businesses to acquire real estate or
machinery and equipment.
Chain of command The o? cial, vertical
channel of communication in an organization.
Channel of distribution The system of
relationships established to guide the move-
ment of a product.
Chattel mortgage A loan for which items
of inventory or other movable property serve
as collateral.
Churning Actions by franchisors to void
the contracts of franchisees in order to sell
the franchise to someone else and collect an
additional fee.
Civil Rights Act Legislation prohibiting
discrimination based on race, color, religion,
sex, or national origin.
Co-branding Bringing two franchise
brands together under one roof.
Code of ethics O? cial standards of em-
ployee behavior formulated by a ?rm.
Co-employment Outsourcing part of
the burden of managing personnel to an
organization that handles paperwork and
administers bene?ts for those employees.
Cognitive dissonance The anxiety that
occurs when a customer has second thoughts
immediately following a purchase.
Coinsurance clause A clause found within
the property insurance policy that requires
the business owner to have insurance that
will cover a certain percentage (usually 80
percent) of what it would cost to rebuild the
building or replace the personal property.
Commercial general liability (CGL)
insurance Coverage for general liability
loss exposure, including premises liability,
operations liability, product liability, and com-
pleted operations liability.
Common carriers Transportation interme-
diaries available for hire to the general public.
Community-based ?nancial
institution A lender that uses funds from
federal, state, and private sources to provide
?nancing to small businesses in low-income
communities.
Compensatory damages Economic or
noneconomic damages intended to make the
claimant whole, by indemnifying the claimant
for any injuries or damage arising from the
negligent action.
Competitive advantage A bene?t that
exists when a ?rm has a product or service
that is seen by its target market as better than
those of competitors.
Competitive environment The environ-
ment that focuses on the strength, position,
and likely moves and countermoves of com-
petitors in an industry.
Comprehensive plan A full business
plan that provides an in-depth analysis of the
critical factors that will determine a ?rm’s suc-
cess or failure, along with all the underlying
assumptions.
Constraint The most restrictive of bottlenecks,
determining the capacity of the entire system.
Consumer credit Financing granted by
retailers to individuals who purchase for per-
sonal or family use.
Content-based model A business model
in which the website provides access but not
the ability to buy or sell products and services.
Continuous manufacturing A form of
repetitive manufacturing with output that
more closely resembles a stream of product
than individual goods.
Contract carriers Transportation interme-
diaries that contract with individual shippers.
Contribution margin The di?erence
between the unit selling price and the unit
variable costs and expenses.
Cooperative purchasing organiza-
tion (coop) An arrangement whereby small
businesses combine demand for products or
services in order to negotiate as a group with
suppliers.
Co-preneurs Husband and wife teams who
own and manage businesses.
Copyright The exclusive right of a creator to
reproduce, publish, perform, display, or sell his
or her own works.
Core competencies Those capabilities
that provide a ?rm with a competitive edge
and re?ect its personality.
Core product/service The fundamental
bene?t or solution sought by customers.
Corporate charter A document that
establishes a corporation’s existence.
Corporation A business organization that
exists as a legal entity and provides limited
liability to its owners.
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Glossary 721
Cost of goods sold The cost of producing
or acquiring goods or services to be sold by
a ?rm.
Cost-based commitment Commitment
based on the belief that the opportunity for
gain from joining a business is too great to
pass up.
Cost-based strategy A plan of action
that requires a ?rm to be the lowest-cost
producer within its market.
Counterfeit activity The unauthorized
use of intellectual property.
Credit An agreement between a buyer and
a seller that provides for delayed payment for
a product or service.
Credit bureaus Privately owned
organizations that summarize a number
of ?rms’ credit experiences with particular
individuals.
Crime insurance Coverage against
employee dishonesty.
Critical risks A section of the business plan
that identi?es the potential risks that may be
encountered by an investor.
Cross-border acquisition The purchase
by a business in one country of a company
located in another country.
Culture Behavioral patterns and values that
characterize a group of consumers in a target
market.
Current assets Assets that can be
converted into cash within a company’s
operating cycle.
Current debt (short-term liabilities)
Borrowed money that must be repaid within
12 months.
Current ratio A measure of a company’s
relative liquidity, determined by dividing
current assets by current liabilities.
Customer experience management
(CEM) An approach that recognizes that
with every interaction, customers learn
something about a company that will
a?ect their desire to do business there
in the future.
Customer pro?le A collection of informa-
tion about a customer, including demo-
graphic data, attitudes, preferences, and
other behavioral characteristics, as de?ned by
CRM goals.
Customer relationship management
(CRM) A company-wide business
strategy designed to optimize pro?tability,
revenue, and customer satisfaction by
focusing on highly de?ned and precise
customer groups.
Cycle counting A system of counting dif-
ferent segments of the physical inventory at
di?erent times during the year.
D
Days in inventory The number of days,
on average, that a company is holding
inventory.
Days in payables The number of days,
on average, that a business takes to pay its
accounts payable.
Days sales outstanding (average
collection period) The number of days,
on average, that a ?rm is extending credit to
its customers.
Debt Business ?nancing provided by
creditors.
Debt ratio A measure of what percent-
age of a ?rm’s assets are ?nanced by debt,
determined by dividing total debt by total
assets.
Delegation of authority Granting
to subordinates the right to act or make
decisions.
Demand management strategies
Strategies used to stimulate customer
demand when it is normally low.
Demographic variables Speci?c char-
acteristics that describe customers and their
purchasing power.
Depreciable assets Assets whose value
declines, or depreciates, over time.
Depreciation expense The cost of a
?rm’s building and equipment, allocated over
their useful life.
Design defect A defect resulting from a
dangerous design, even though the product
was made according to speci?cations.
Design patent Registered protection for
the appearance of a product and its insepa-
rable parts.
Desire-based commitment Commit-
ment based on a belief in the purpose of a
business and a desire to contribute to it.
Di?erentiation-based strategy A plan
of action designed to provide a product or
service with unique attributes that are valued
by consumers.
Direct channel A distribution system
without intermediaries.
Direct forecasting A forecasting method
in which sales is the estimated variable.
Direct loss A loss in which physical damage
to property reduces its value to the property
owner.
Disability insurance Coverage that
provides bene?ts upon the disability of a
?rm’s partner or other key employee.
Disclosure document A detailed state-
ment provided to a prospective franchi-
see, containing such information as the
franchisor’s ?nances, experience, size, and
involvement in litigation.
Discounted cash ?ow (DCF)
techniques Capital budgeting techniques
that compare the present value of future cash
?ows with the cost of the initial investment.
Disintermediation A situation where
a wholesaler in a B2B operation chooses to
bypass the “middleman” and sell its product
or service directly to the ?nal consumer.
Distribution Physically moving products
and establishing intermediary relationships
to support such movement.
Double taxation Taxation of income that
occurs twice, ?rst as corporate earnings and
then as stockholder dividends.
Dual distribution A distribution system
that involves more than one channel.
Due diligence The exercise of
reasonable care in the evaluation of a
business opportunity.
Dynamic (personalized) pricing
strategy Charging more than the standard
price when the customer’s pro?le suggests
that the higher price will be accepted.
E
E-commerce The paperless exchange of
business information via the Internet.
Economic damages Compensatory
damages that relate to economic loss, such as
medical expense, loss of income, or the cost
of property replacement/restoration.
Economic order quantity The quantity
to purchase in order to minimize total inven-
tory costs.
Economic risk The probability that a
government will mismanage its economy in
ways that hinder the performance of ?rms
operating there.
Economies of scale E? ciencies that
result from expansion of production.
Elastic demand Demand that changes
signi?cantly when there is a change in the
price of the product.
Elasticity of demand The degree to
which a change in price a?ects the quantity
demanded.
Electronic Customer Relationship
Marketing (eCRM) An electronically
based system that emphasizes customer
relationships.
E-mail promotion Advertising delivered
by means of electronic mail.
Employee bene?ts Supplements to
compensation, such as health care insurance
and life insurance programs, designed to be
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722 Glossary
attractive and bene?cial to employees and to
maintain their commitment to the ?rm.
Employee stock ownership plan
(ESOP) A method by which a ?rm is sold
either in part or in total to its employees.
Employee training Planned e?orts to help
workers master the knowledge, skills, and
behaviors they need to perform their duties.
Empowerment Giving employees
authority to make decisions or take actions
on their own.
Encroachment The franchisor’s selling of
another franchise location within the market
area of an existing franchisee.
Enterprise zones State-designated areas
that are established to bring jobs to economi-
cally deprived regions through regulatory and
tax incentives.
Entrepreneur A person who is relentlessly
focused on an opportunity, either in a new or
existing business, to create value both for the
customer and the owner. The entrepreneur
assumes both the risk and reward for his or
her e?ort.
Entrepreneurial alertness Readiness
to act on existing, but unnoticed, business
opportunities.
Entrepreneurial legacy Material assets
and intangible qualities passed on to both
heirs and society.
Entrepreneurial opportunity An eco-
nomically attractive and timely opportunity
that creates value for interested buyers or end
users.
Entrepreneurial team Two or more
people who work together as entrepreneurs
on one endeavor.
Environmentalism The e?ort to protect
and preserve the environment.
Equipment loan An installment loan from
a seller of machinery used by a business.
Ethical imperialism The belief that the
ethical standards of one’s own country can be
applied universally.
Ethical issues Questions of right and
wrong.
Ethical relativism The belief that ethical
standards are subject to local interpretation.
Evaluative criteria The features or charac-
teristics of a product or service that customers
use to compare brands.
Evoked set A group of brands that a con-
sumer is both aware of and willing to consider
as a solution to a purchase problem.
Exchange rate The value of one country’s
currency relative to that of another country.
Executive summary A section of the
business plan that conveys a clear and concise
overall picture of the proposed venture.
Experience curve e? ciencies Per-unit
savings gained from the repeated production
of the same good.
Exporting Selling products produced in
the home country to customers in another
country.
External locus of control A belief that
one’s life is controlled more by luck or fate
than by one’s own e?orts.
F
Factoring Obtaining cash by selling accounts
receivable to another ?rm.
Fair Labor Standards Act (FLSA)
Federal law that establishes a minimum
wage and provides for overtime pay.
Family and Medical Leave Act Legisla-
tion that assures employees of unpaid leave
for childbirth or other family needs.
Family A group of people bound by a shared
history and a commitment to share a future
together, while supporting the development
and well-being of individual members.
Family business An organization in which
either the individuals who established or
acquired the ?rm, or their descendants, sig-
ni?cantly in?uence the strategic decisions and
life course of the ?rm.
Family business constitution A state-
ment of principles intended to guide a family
?rm through times of crisis and change.
Family council An organized group of
family members who gather periodically to
discuss family-related business issues.
Family protocol An extension of the con-
stitution incorporating additional agreements.
Family retreat A gathering of family mem-
bers, usually at a remote location, to discuss
family business matters.
Fatal ?aw A circumstance or develop-
ment that alone could render a new business
unsuccessful [SPSI].
Feasibility analysis A preliminary assess-
ment of a business idea that gauges whether
or not the venture envisioned is likely to
succeed.
Financial plan A section of the business
plan that projects the company’s ?nancial
position based on well-substantiated assump-
tions and explains how the ?gures have been
determined.
Financial statements (accounting
statements) Reports of a ?rm’s ?nancial
performance and resources, including an
income statement, a balance sheet, and a cash
?ow statement.
Fixed assets Relatively permanent assets
intended for use in the business, such as plant
and equipment.
Fixed costs Costs that remain constant as
the quantity produced or sold varies.
Flexible manufacturing systems
Operations that usually involve computer-
controlled equipment that can turn out prod-
ucts in smaller or more ?exible quantities.
Focus strategy A plan of action that
isolates an enterprise from competitors and
other market forces by targeting a restricted
market segment.
Follow-the-leader pricing strategy
Using a particular competitor as a model in
setting prices.
Foreign licensing Allowing a company
in another country to purchase the rights to
manufacture and sell a company’s products in
international markets.
Formal venture capitalists Individu-
als who form limited partnerships for the
purpose of raising venture capital from large
institutional investors.
Founder An entrepreneur who brings a new
?rm into existence.
Fourth-party logistics ?rm (4PL) A
company that coordinates every aspect of a
manufacturer’s or distributor’s supply chain
and acts as the sole point of contact between
that company and all of its logistics and infor-
mation service providers.
Franchise The privileges conveyed in a
franchise contract.
Franchise contract The legal agreement
between franchisor and franchisee.
Franchise Disclosure Document
(FDD) A document that provides the ac-
cepted format for satisfying the franchise
disclosure requirements of the FTC.
Franchise Rule A rule that prescribes that
the franchisor must disclose certain informa-
tion to prospective franchisees.
Franchisee An entrepreneur whose power
is limited by a contractual relationship with a
franchising organization.
Franchising A marketing system involving
a legal agreement, whereby the franchisee
conducts business according to terms speci-
?ed by the franchisor.
Franchisor The party in a franchise contract
that speci?es the methods to be followed and
the terms to be met by the other party.
G
General environment The broad environ-
ment, encompassing factors that in?uence
most businesses in a society.
General partner A partner in a limited
partnership who has unlimited personal
liability.
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Glossary 723
General-purpose equipment Machines
that serve many functions in the production
process.
Globalization The expansion of interna-
tional business, encouraged by converging
market preferences, falling trade barriers, and
the integration of national economies.
Green?eld venture A wholly owned
subsidiary formed from scratch in another
country.
Gross ?xed assets Original cost of depre-
ciable assets before any depreciation expense
has been taken.
Gross pro?t Sales less the cost of goods
sold.
H
Harvesting (exiting) The process used by
entrepreneurs and investors to reap the value
of a business when they leave it.
Headhunter A search ?rm that locates
quali?ed candidates for executive positions.
Health insurance Coverage for medical
care at hospitals, doctors’ o? ces and rehabili-
tation facilities that usually includes outpa-
tient services and prescription drugs.
Health maintenance organization
(HMO) A managed-care network that
provides health insurance that is generally
less expensive than that of a PPO but limits
employees’ choices of medical care providers
more than a PPO does.
High-potential venture (gazelle) A
small ?rm that has great prospects for growth.
Home-based business A business that
maintains its primary facility in the residence
of its owner.
I
Importing Selling goods produced in
another country to buyers in the home
country.
Income statement (pro?t and loss
statement) A ?nancial report showing the
pro?t or loss from a ?rm’s operations over a
given period of time.
Indemni?cation clause A contractual
clause that requires one party to assume the
?nancial consequences of another party’s
legal liabilities.
Indirect channel A distribution system
with one or more intermediaries.
Indirect forecasting A forecasting
method in which variables related to sales are
used to project future sales.
Indirect loss A loss arising from inability
to carry on normal operations due to a direct
loss of property.
Industry environment The combined
forces that directly impact a given ?rm and its
competitors.
Inelastic demand Demand that does not
change signi?cantly when there is a change in
the price of the product.
Informal venture capital Funds pro-
vided by wealthy private individuals (business
angels) to high-risk ventures.
Information-based model A business
model in which the website provides informa-
tion about a business, its products, and other
related matters but doesn’t charge for its use.
Initial public o?ering (IPO) The issuance
of stock that is to be traded in public ?nancial
markets.
Inspection The examination of a part or a
product to determine whether it meets qual-
ity standards.
Installment account A line of credit that
requires a down payment, with the balance
paid over a speci?ed period of time.
Institutional advertising The presenta-
tion of information about a particular ?rm,
designed to enhance the ?rm’s image.
Intangible resources Those organiza-
tional resources that are invisible and di? cult
to assess.
Integrity An uncompromising adherence to
the lofty values, beliefs, and principles that an
individual claims to hold.
Intellectual property Original intellec-
tual creations, including inventions, literary
creations, and works of art, that are protected
by patents or copyrights.
Interest expense The cost of borrowed
money.
Internal locus of control A belief that
one’s success depends on one’s own e?orts.
Internal rate of return (IRR) The rate
of return a ?rm expects to earn on a project.
International franchising Selling a
standard package of products, systems,
and management services to a company in
another country.
International outsourcing A strategy
that involves accessing foreign labor through
contracts with independent providers.
International strategic alliance A
combination of e?orts and/or assets of com-
panies in di?erent countries for the sake of
pooling resources and sharing the risks of an
enterprise.
Inventory A ?rm’s raw materials and prod-
ucts held in anticipation of eventual sale.
ISO 9000 The standards governing interna-
tional certi?cation of a ?rm’s quality manage-
ment procedures.
J
Job description An outline, or summary,
of the work to be performed for a particular
position.
Job Instruction Training A systematic
step-by-step method for on-the-job training
of nonmanagerial employees.
Job shop A manufacturing operation in
which short production runs are used to pro-
duce small quantities of unique items.
Job speci?cation A list of skills and abili-
ties needed to perform a speci?c job.
Joint and several liability The liabil-
ity of each partner resulting from any one
partner’s ability to legally bind the other
partners.
just-in-time inventory system A
method of reducing inventory levels to an
absolute minimum.
K
Key-person life insurance Coverage that
provides bene?ts to a ?rm upon the death of
the ?rm’s key personnel.
L
Lean production An approach that
emphasizes e? ciency through elimination
of waste.
Learning e?ects Insights, gained from
experience, that lead to improved work
performance.
Legal entity A business organization that
is recognized by the law as having a separate
legal existence.
Letter of credit An agreement issued
by a bank to honor a draft or other demand
for payment when speci?ed conditions
are met.
Leveraged buyout (LBO) A purchase
heavily ?nanced with debt, where the
future cash ?ow of the target company
is expected to be su? cient to meet debt
repayments.
Leveraged ESOP An employee stock own-
ership plan that is ?nanced with borrowed
money.
LIBOR (London InterBank O?ered
Rate) The interest rate charged by London
banks on loans to other London banks.
Licensee The company buying licensing
rights.
Licensor The company selling licensing
rights.
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Licensed to: iChapters User
724 Glossary
Lifestyle business A microbusiness that
permits the owner to follow a desired pattern
of living.
Limited liability The restriction of an
owner’s legal ?nancial responsibilities to the
amount invested in the business.
Limited liability company A form of
organization in which owners have limited
liability but pay personal income taxes on
business pro?ts.
Limited partner A partner in a limited
partnership who is not active in its
management and has limited personal liability.
Limited partnership A partnership with
at least one general partner and one or more
limited partners.
Line of credit An informal agreement
between a borrower and a bank as to the
maximum amount of funds the bank will
provide at any one time.
Line organization A simple organizational
structure in which each person reports to one
supervisor.
Line-and-sta? organization An organi-
zational structure that includes sta? specialists
who assist management.
Linkage A type of advertising agreement
in which one ?rm pays another to include a
click-on link on its site.
Liquidity The degree to which a ?rm has
working capital available to meet maturing
debt obligations.
Loan covenants Bank-imposed restrictions
on a borrower that enhance the chances of
timely repayment.
Lock box A post o? ce box for receiving
remittances from customers.
Long-range plan (strategic plan) A
?rm’s overall plan for the future.
Long-term debt Loans from banks or
other sources with repayment terms of more
than 12 months.
Loss avoidance Avoiding loss by choosing
not to engage in hazardous activities.
Loss prevention Keeping a loss from
happening.
Loss reduction Lessening the frequency,
severity, or unpredictability of losses.
M
Make or buy decisions A choice small
manufacturing companies must make when
they have the option of making or buying
component parts for products they produce.
Management buyout (MBO) A lever-
aged buyout in which the ?rm’s top manag-
ers become signi?cant shareholders in the
acquired ?rm.
Management development Preparation
of employees for career advancement through
education, job experiences, network develop-
ment, and performance assessment.
Management team A section of the
business plan that describes a new ?rm’s
organizational structure and the backgrounds
of its key players.
Management team Managers and other
key persons who give a company its general
direction.
Manufacturing defect A defect result-
ing from a problem that occurs during the
manufacturing process causing the product
to subsequently not be made according to
speci?cations.
Market A group of customers or potential
customers who have purchasing power and
unsatis?ed needs.
Market analysis The process of locating
and describing potential customers.
Market risk The uncertainty associated with
an investment decision.
Market segmentation The division of
a market into several smaller groups with
similar needs.
Marketing defect A defect result-
ing from failure to convey to the user that
hazards are associated with a product or
to provide adequate instructions on safe
product use.
Marketing mix The combination of pro-
duct, pricing, promotion, and distribution
activities.
Marketing plan A section of the business
plan that describes the user bene?ts of the
product or service and the type of market that
exists.
Marketing research The gathering, pro-
cessing, interpreting, and reporting of market
information.
Markup pricing Applying a percentage to
a product’s cost to obtain its selling price.
Master licensee An independent ?rm or
individual acting as a sales agent with the re-
sponsibility of ?nding new franchisees within
a speci?ed territory.
Matchmakers Specialized brokers
that bring together buyers and sellers of
businesses.
Mentor A knowledgeable person who can
o?er guidance from their experience in a
given ?eld.
Merchant middlemen Intermediar-
ies that take ownership of the goods they
distribute.
Microbusiness A small ?rm that provides
minimal pro?ts to its owner.
Mini-plan A short form of a business plan
that presents only the most important issues
and projections for the business.
Mortgage A long-term loan from a creditor
for which real estate is pledged as collateral.
Motivations Forces that organize and give
direction to the tension caused by unsatis?ed
needs.
Multi-brand franchising The operation
of several franchise organizations within a
single corporate structure.
Multiple-unit ownership Ownership by
a single franchisee of more than one franchise
from the same company.
Multisegment strategy A strategy that
recognizes di?erent preferences of individual
market segments and develops a unique
marketing mix for each.
N
Named-peril approach Identifying, in an
insurance policy, the speci?c perils covered.
Need-based commitment Commitment
based on an individual’s self-doubt and belief
that he or she lacks career options outside the
current business.
Needs The starting point for all behavior.
Negotiation A two-way communication
process used to resolve di?erences in
interests, desires, or demands.
Net ?xed assets Gross ?xed assets less
accumulated depreciation.
Net present value (NPV) The present
value of expected future cash ?ows less the
initial investment outlay.
Net pro?ts Income that may be distributed
to the owners or reinvested in the company.
Net working capital Current assets less
current liabilities.
Networking The process of developing and
engaging in mutually bene?cial relationships.
Niche market A market segment identi?ed
by an identi?able but narrow range of product
or service interests.
Noneconomic damages Compensatory
damages for such losses as pain and su?ering,
mental anguish, and loss of physical abilities.
Nonpro?t corporation A form of cor-
poration for enterprises established to serve
civic, educational, charitable, or religious
purposes but not for generation of pro?ts.
O
Obligation-based commitment
Commitment that results from a sense of
duty or expectation.
Occupational Safety and Health Act
Legislation that regulates the safety of work-
places and work practices.
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Glossary 725
O?ering A section of the business plan that
indicates to an investor how much money is
needed and when, and how the money will
be used.
O?shoring A strategy that involves relocat-
ing operations abroad.
Open charge account A line of credit that
allows the customer to obtain a product at
the time of purchase, with payment due when
billed.
Operating expenses Costs related to
marketing and selling a ?rm’s product or
service, general and administrative expenses,
and depreciation.
Operating pro?t margin A measure
of how well a ?rm is controlling its costs of
goods sold and operating expenses relative
to sales, determined by dividing operating
pro?ts by sales.
Operating pro?ts Earnings or pro?ts after
operating expenses but before interest and
taxes are paid.
Operations The processes used to create
and deliver a good or service.
Operations and development
plan A section of the business plan that
o?ers information on how a product
will be produced or a service provided,
including descriptions of the new ?rm’s
facilities, labor, raw materials, and processing
requirements.
Operations management The plan-
ning and control of a conversion process that
includes turning inputs into outputs that
customers desire.
Opinion leader A group member who
plays a key communications role.
Opportunistic entrepreneur A person
with both sophisticated managerial skills and
technical knowledge who starts a business.
Opportunity cost of funds The rate of
return that could be earned on another invest-
ment of similar risk.
Opportunity recognition Identi?cation
of potential new products or services that may
lead to promising businesses.
Organizational culture Patterns of
behaviors and beliefs that characterize a
particular ?rm.
Organizational test Veri?cation of
whether a nonpro?t organization is staying
true to its stated purpose.
Other assets Assets other than current
assets and ?xed assets, such as patents, copy-
rights, and goodwill.
Outsourcing Purchasing products or
services that are outside the ?rm’s area of
specialization.
Ownership equity Owners’ investments
in a company plus pro?ts retained in
the ?rm.
P
Package policy A policy for small busi-
nesses that do not qualify for a BOP that
combines property insurance and commercial
general liability insurance.
Partially self-funded program
Designating part of a ?rm’s earnings to fund a
portion of employee medical coverage.
Partnership A legal entity formed by two
or more co-owners to carry on a business for
pro?t.
Partnership agreement A document
that states explicitly the rights and duties of
partners.
Patent The registered, exclusive right of an
inventor to make, use, or sell an invention.
Payback period technique A capital
budgeting technique that measures the
amount of time it will take to recover the cash
outlay of an investment.
Penetration pricing strategy Setting
lower than normal prices to hasten market ac-
ceptance of a product or service or to increase
market share.
Percentage-of-sales technique A
method of forecasting asset investments and
?nancing requirements.
Perception The individual processes that
give meaning to the stimuli confronting
consumers.
Perceptual categorization The process
of grouping similar things so as to manage
huge quantities of incoming stimuli.
Peril A cause of loss, either through natural
events or through the actions of people.
Perpetual inventory system A method
for keeping a running record of inventory.
Personal property Any property other
than real property, including machinery,
equipment, furniture, ?xtures, stock, and
vehicles.
Personal selling A sales presentation
delivered in a one-on-one manner.
Personnel risks Risks that directly a?ect in-
dividual employees but may have an indirect
impact on a business as well.
Physical distribution (logistics) The
activities of distribution involved in the physi-
cal relocation of products.
Physical inventory system A method
that provides for periodic counting of items in
inventory.
Piecework Financial incentive based on
pay according to number of units
produced.
Piercing the corporate veil A situation
in which the courts conclude that incorpora-
tion has been used to perpetuate a fraud,
skirt a law, or commit some wrongful act, and
thus remove liability protections from the
corporate entity.
Piggyback franchising The operation of
a retail franchise within the physical facilities
of a host store.
Plant patent Registered protection for any
distinct, new variety of living plant.
Pledged accounts receivable Accounts
receivable used as collateral for a loan.
Poka-Yoke A proactive approach to quality
management that seeks to mistake-proof a
?rm’s operations, thus avoiding problems and
waste before they can occur.
Political risk The potential for political
forces in a country to negatively a?ect the
performance of businesses operating within
its borders.
Pop-up ads Advertisements that burst
open on computer screens.
Pre-emptive right The right of stockhold-
ers to buy new shares of stock before they are
o?ered to the public.
Preferred provider organization
(PPO) A managed-care network that pro-
vides health insurance that is generally more
expensive than an HMO but o?ers a broader
choice of medical providers.
Prestige pricing Setting a high price
to convey an image of high quality or
uniqueness.
Price A speci?cation of what a seller requires
in exchange for transferring ownership or use
of a product or service.
Price lining strategy Setting a range of
several distinct merchandise price levels.
Primary data New market information
that is gathered by the ?rm conducting the
research.
Prime rate The interest rate charged by
commercial banks on loans to their most
creditworthy customers.
Private carriers Lines of transport owned
by the shippers.
Private placement The sale of a ?rm’s
capital stock to selected individuals.
Pro forma ?nancial statements State-
ments that project a ?rm’s ?nancial perfor-
mance and condition.
Pro forma statements Projections of a
company’s ?nancial statements for up to ?ve
years, including balance sheets, income state-
ments, and statements of cash ?ows, as well
as cash budgets.
Product A total bundle of satisfaction—
including a service, a good, or both—o?ered
to consumers in an exchange transaction.
Product advertising The presentation of
a business idea designed to make potential
customers aware of a speci?c product or
service and create a desire for it.
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726 Glossary
Product and trade name franchising
A franchise agreement granting the right to
use a widely recognized product or name.
Product item The lowest common
denominator in the product mix—the indi-
vidual item.
Product life cycle A detailed picture of
what happens to a speci?c product’s sales and
pro?ts over time.
Product line The sum of related individual
product items.
Product mix The collection of a ?rm’s total
product lines.
Product mix consistency The similarity
of product lines in a product mix.
Product strategy The way the product
component of the marketing mix is used to
achieve a ?rm’s objectives.
Product/service plan A section of the busi-
ness plan that describes the product and/or
service to be provided and explains its merits.
Professional corporation A form of cor-
poration that shields owners from liability and
is set up for individuals in certain professional
practices.
Professional employer organiza-
tion (PEO) A company that sets up co-
employment agreements, assisting businesses
with the administrative demands of keeping
employees on their payrolls.
Professional manager A manager
who uses systematic, analytical methods
of management.
Pro?ts before taxes (taxable pro?ts)
Earnings after operating expenses and inter-
est expenses but before taxes.
Project manufacturing Operations used
to create unique but similar products.
Promotion Marketing communications that
inform and persuade consumers.
Promotional mix A blend of nonpersonal,
personal, and special forms of communication
aimed at a target market.
Prospecting A systematic process of con-
tinually looking for new customers.
Prospectus (o?ering memorandum)
A document that contains all the information
necessary to satisfy federal and state require-
ments for warning potential investors about
the possible risks of the investment.
Proximate cause A negligent act that is
the clear cause of damages sustained.
Publicity Information about a ?rm and its
products or services that appears as a news
item, usually free of charge.
Punitive damages A form of punishment
that goes beyond compensatory damages,
intending to punish wrongdoers for gross
negligence or a callous disregard for the inter-
ests of others and to have a deterrent e?ect.
Purchase-order ?nancing Lender
advances the amount of the borrower’s cost of
goods sold for a speci?c customer order.
Pure risk The uncertainty associated with
a situation where only loss or no loss can
occur.
Q
Quality The features of a product or service
that enable it to satisfy customers’ needs.
R
Real estate mortgage A long-term loan
with real property held as collateral.
Real property Land and anything physi-
cally attached to the land, such as buildings.
Reasonable (prudent person) stan-
dard The typical standard of care, based on
what a reasonable or prudent person would
have done under similar circumstances.
Reciprocation A powerful social rule
based on an obligation to repay in kind what
another has done for or provided to us.
Reference groups Groups that an indi-
vidual allows to in?uence his or her behavior.
Refugee A person who becomes an entre-
preneur to escape an undesirable situation.
Reliability The consistency of a test in mea-
suring job performance ability.
Reluctant entrepreneur A person who
becomes an entrepreneur as a result of some
severe hardship.
Repetitive manufacturing Operations
designed for long production runs of high-
volume products.
Replacement value of property The
cost of replacing personal property and
rebuilding real property at today’s prices.
Resources The basic inputs that a ?rm uses
to conduct its business.
Retained earnings Pro?ts less withdraw-
als (dividends) over the life of a business.
Return on assets A measure of a ?rm’s
pro?tability relative to the amount of assets
invested in the company, determined by
dividing operating pro?ts by total assets.
Revolving charge account A line
of credit on which the customer may
charge purchases at any time, up to a prees-
tablished limit.
Revolving credit agreement A legal
commitment by a bank to lend up to a
maximum amount.
Risk control Minimizing potential losses by
preventing, avoiding, or reducing risk.
Risk ?nancing Making funds available to
cover losses that could not be eliminated by
risk control.
Risk management Ways of coping with
risk that are designed to preserve the assets
and earning power of a ?rm.
Risk retention Financing loss intentionally,
through a ?rm’s cash ?ows.
Risk transfer Buying insurance or making
contractual arrangements with others in order
to transfer risk.
Royalties Fees paid by the licensee to the
licensor for each unit produced under a licens-
ing contract.
S
S corporation (Subchapter S corpo-
ration) A type of corporation that o?ers
limited liability to its owners but is taxed by
the federal government as a partnership.
Sales forecast A prediction of how
much of a product or service will be pur-
chased within a market during a speci?ed
time period.
Sales promotion An inclusive term for any
promotional techniques other than personal
selling and advertising that stimulate the
purchase of a particular good or service.
Secondary data Market information that
has been previously compiled.
Segmentation variables The parameters
used to distinguish one form of market behav-
ior from another.
Self-insurance Designating part of a ?rm’s
earnings as a cushion against possible future
losses.
Seller ?nancing Financing in which the
seller accepts a note from a buyer in lieu of
cash in partial payment for a business.
Serendipity A gift for making desirable
discoveries by accident.
Service Corps of Retired Executives
(SCORE) An SBA-sponsored group of retired
executives who give free advice to small
businesses.
Service mark A brand that a company
has the exclusive right to use to identify a
service.
Short-range plan A plan that governs a
?rm’s operations for one year or less.
Short-term notes Cash amounts
borrowed from a bank or other lending
sources that must be repaid within a short
period of time.
Single-segment strategy A strategy that
recognizes the existence of several distinct
market segments but focuses on only the
most pro?table segment.
Skimming price strategy Setting very
high prices for a limited period before reduc-
ing them to more competitive levels.
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Glossary 727
Small business A business that is small
compared to large companies in an industry,
is geographically localized, is ?nanced by only
a few individuals, and has a small manage-
ment team.
Small business development centers
(SBDCs) University-a? liated centers o?ering
consulting, education, and other support to
small businesses.
Small Business Innovative Research
(SBIR) program A government program
that helps to ?nance companies that plan to
transform laboratory research into marketable
products.
Small business investment compa-
nies (SBICs) Privately owned banks, regu-
lated by the Small Business Administration,
that provide long-term loans and/or equity
capital to small businesses.
Small business marketing Business
activities that direct the creation, develop-
ment, and delivery of a bundle of satisfaction
from the creator to the targeted user and that
satisfy the targeted user.
Social capital The advantage created by
an individual’s connections in a social net-
work.
Social classes Divisions within a society
having di?erent levels of social prestige.
Social entrepreneurship Entrepreneur-
ial activity whose goal is to ?nd innovative
solutions to social needs, problems, and
opportunities.
Social network An interconnected system
comprising relationships with other people.
Social responsibilities A company’s
ethical obligations to the community.
Sole proprietorship A business owned by
one person, who bears unlimited liability for
the enterprise.
Span of control The number of subordi-
nates supervised by one manager.
Special-purpose equipment Machines
designed to serve specialized functions in the
production process.
Speci?c stop loss limit A ?rm’s per-
employee limit on self-funding for medical
claims.
Spontaneous debt ?nancing Short-term
debts, such as accounts payable, that automati-
cally increase in proportion to a ?rm’s sales.
Stages in succession Phases in the
process of transferring leadership of family
business from parent to child.
Stakeholders Individuals who either can
a?ect or are a?ected by the performance of
the company.
Startups New business ventures started
“from scratch.”
Statistical inventory control A method
that uses a targeted service level, allowing
statistical determination of the appropriate
amount of inventory to carry.
Stock certi?cate A document specifying
the number of shares owned by a stockholder.
Strategic alliance An organizational rela-
tionship that links two or more independent
business entities in a common endeavor.
Strategic decision A decision regarding
the direction a ?rm will take in relating to its
customers and competitors.
Strategy A plan of action that coordinates
the resources and commitments of an organi-
zation to achieve superior performance.
Supply chain management A system of
management that integrates and coordinates
the means by which a ?rm creates or develops
a product or service, delivers it to customers,
and is paid for it.
Supply Chain Operations Reference
(SCOR) model A list of critical factors that
provides a helpful starting place when assess-
ing a supplier’s performance.
Sustainable competitive advantage
A value-creating position that is likely to
endure over time.
SWOT analysis A type of assessment that
provides a concise overview of a ?rm’s strate-
gic situation.
Synchronous management An ap-
proach that recognizes the interdependence
of assets and activities and manages them to
optimize the entire ?rm’s performance.
T
Tangible resources Those organiza-
tional resources that are visible and easy to
measure.
Term loan Money loaned for a 5- to 10-year
term, corresponding to the length of time the
investment will bring in pro?ts.
Third-party logistics ?rm (3PL) A
company that provides transportation and
distribution services to companies that prefer
to focus their e?orts on other facets of their
business.
Torts Wrongful acts or omissions for which
an injured party can take legal action against
the wrongdoer for monetary damages.
Total asset turnover A measure of how
e? ciently a ?rm is using its assets to gener-
ate sales, calculated by dividing sales by total
assets.
Total cost The sum of cost of goods sold,
selling expenses, and overhead costs.
Total quality management (TQM)
An all-encompassing management approach
to providing high-quality products and
services.
Trade credit Financing provided by a sup-
plier of inventory to a given company.
Trade dress Elements of a ?rm’s distinctive
image not protected by a trademark, patent,
or copyright.
Trade intermediary An agency that dis-
tributes a company’s products on a contract
basis to customers in another country.
Trade mission A trip organized to help
small business owners meet with potential
buyers abroad and learn about doing business
there.
Trade-credit agencies Privately owned
organizations that collect credit information
on businesses.
Trademark A legal term identifying a ?rm’s
exclusive right to use a brand.
Transactional relationship An association
between a business and a customer that begins
(or ends) with a purchase or a business deal.
Transaction-based model A busi-
ness model in which the website provides a
mechanism for buying or selling products or
services.
Transfer of ownership Passing ownership
of a family business to the next generation.
Two-bin inventory system A method
of inventory control based on use of two
containers for each item in inventory: one to
meet current demand and the other to meet
future demand.
Type A ideas Startup ideas centered
around providing customers with an existing
product not available in their market.
Type B ideas Startup ideas, involving new
technology, centered around providing cus-
tomers with a new product.
Type C ideas Startup ideas centered
around providing customers with an
improved product.
U
Underlying values Unarticulated ethical
beliefs that provide a foundation for ethical
behavior in a ?rm.
Unlimited liability Liability on the part of
an owner that extends beyond the owner’s
investment in the business.
Unsegmented strategy (mass
marketing) A strategy that de?nes the total
market as the target market.
Utility patent Registered protection for a
new process or a product’s function.
V
Validity The extent to which a test assesses
true job performance ability.
Variable costs Costs that vary with the
quantity produced or sold.
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728 Glossary
Variable pricing strategy Setting more
than one price for a good or service in order to
o?er price concessions to certain customers.
Variables Measured parameters that fall on
a continuum, such as weight or length.
W
Warranty A promise that a product will
perform at a certain level or meet certain
standards.
Web sponsorship A type of advertising
in which a ?rm pays another organization
for the right to be part of that organization’s
webpage.
Work teams Groups of employees with free-
dom to function without close supervision.
Workers’ compensation insurance
Coverage that provides bene?ts to employees
for medical expenses, loss of wages, and reha-
bilitation expenses, as well as death bene?ts
for employees’ families.
Workers’ compensation legislation
Laws that obligate the employer to pay
employees for injury or illness related to
employment, regardless of fault.
Workforce diversity Di?erences among
employees on such dimensions as gender,
age, ethnicity, and race.
Working capital Current assets, accounts
receivable, and inventory required in day-to-
day operations.
Working-capital cycle The daily ?ow of
resources through a ?rm’s working-capital
accounts.
Working-capital management The
management of current assets and current
liabilities.
Z
Zoning ordinances Local laws regulating
land use.
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729
index
A
AAMCO Transmissions, 99
A&W, 96
ABC method, 555
ABC Supply, 111–112
Abrams, Rhonda, 287–288
Acceptance sampling, 561
Accountants, 112, 517
Accounting return on investment technique,
592–593
Accounting statements, 260
Accounts payable
in asset management, 589–590
de?nition of, 269, 325
as ?nancing source, 649–651
sales and, 295
Accounts receivable
in asset management, 584–587
credit and aging of, 434–435
de?nition of, 268
?nancing of, 587
Accredited Registrar Directory (Commerce
Department), 454
Accrual-basis accounting
cash ?ows and, 275
de?nition of, 274
Accrued expenses
de?nition of, 268–269
sales and, 295
Accumulated depreciation, 268
Ace Hardware, 99, 102
Ackerman, Leslie, 333
Acorda Therapeutics, 524
Acosta-Rubio, Marx, 366
Actual cash value (ACV), 604
Actual product/service, 176
Adidas, 687
Aducci, Brian, 210
Adventure Bachelor Party, 68–69
Advertising, 449
Advertising Age
on advertising expenditures, 443
on Nike’s market share, 384
Advertising agencies, 450–451
Advertising practices, 449–457
frequency of, 451
media choices, 451–452
objectives, 449
types of, 450
use of advertising agencies, 450–451
web advertising, 452–457
A? liate programs, web advertising, 453
A? liative leaders, 496
A.G.A. Correa & Son, 660–661
Agents/brokers, 410
Aggregate stop loss limit, 612
Aging schedule, 434–435
Aimei’s Dinner and Movie, 67
Aire Serv, 96
AirStrip Technologies, 245
Alabama Information Technology
Association, 583
Alando.de, 74
Alden, Rick, 63
Aldrich, Howard, 204
Allen, David, 289–290, 294–303
Alliance of Angels (Seattle), 329
Alliances, strategic, 218–222
Allied Capital, 652–653
All-risk approach, 615
Alter, Hobie, 629
Altman, Benson, 248
Alves, John, 186
AlwaysOn Network, 112, 113
Amazon.com, 248, 551
American Cedar, Inc., 486
American Customer Satisfaction Index, 562
American Express, 432
American Heelers, 411
American Management Association, 46
American Online (AOL), 251
American Pop Corn Company, 126
American Society for Quality (ASQ), 557
Americans with Disabilities Act (1990), 529,
533, 541
Anaton, Jon, 369
Anderson, Bob, 333
Anderson, Eric, 81
Andrews, Donavan, 242
Andro?, Scott, 460
Angrick, William P., III, 459
The Angus Barn, 380
Ann LaWall and Company, 586
Anthony, Joe, 498
Anthony, Scott, 19
APL Logistics, 413
Apple Computer, 67, 311, 402, 501, 548
Application forms, 529
“Apprentice, The” (TV show), 32
ARAMARK, 176–177
Area developers, 96
Argentina, 482
Arndt, Michael, 19
Artful Framer Gallery, 376
Articles of incorporation, 210
Artisan entrepreneurs, 15
Art of the Start, The (Kawasaki), 328
Ash, Mary Kay, 501
Ashton-Royce Capital Corporation, 34, 36
Asia, 237, 458, 482, 564, 623
Asset-based loans, 326
Asset-based valuation, 697
Asset management, 575–596
accounts payable, 589–590
accounts receivable, 584–587
analyses of capital budgeting, 595–596
capital budgeting, 591–594
cash conversion period, 591
cash ?ows, 583–584
inventory management, 587–589
working-capital cycle, 576–582
Asset requirements, 291–298
asset-to-sales ?nancing
relationships, 294
determining asset
requirements, 294–295
determining ?nancing
requirements, 295–298
Association for Enterprise
Opportunity (AEO), 333
Association to Advance Collegiate Schools of
Business International, 3
Associative forecasting, 568
Atayne, LLC, 155–158, 675–695
business and revenue strategy, 684–685
competition and competitive
strategy, 685–687
?nancial plan, 689–690
growth strategy, 687–689
management team and advisors,
692–694
market analysis and potential, 682–684
product description and development,
679–682
pro-forma income statement, 695
risk assessment, 690–692
Atlanta Technology Angels, 329
Attitudes, 382
Attorneys. See Lawyers
Attractive small ?rms, 14
Attributes, statistical, 561
Auction site model, E-commerce, 249–250
Auction sites, 249. See also eBay
Augmented product/service, 176
Auto Consignment, 82
Automattic, 21
Automobile insurance, 616
Average collection period, 585–586
Average pricing, 420
Avidian Technologies, 288
B
Babson College, 18
Baby Boomers, 72, 509
BabyCakes NYC, 11
Background checks, 114, 531
Bad-debt ratio, 436
Baer, Max, 213
Baha’s Fajita Bar, 291
Bailey, Bill, 324–325, 356
Baker, Lynn, 352, 353, 355
Balance sheets
assets, 268
debt, 267, 268–269, 271
de?nition of, 267
equity, 267, 269
in ?nancial statements, 267–273
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Licensed to: iChapters User
Index 730
Balloon payments, 324
Bank credit cards, 432
Bankers, 321–323
Banks and banking
banker’s perspective, 321–323
during 2008 ?nancial crisis, 95
global businesses and, 487–488
lending programs for franchisees, 99
lending standards, 3, 214
letters of credit, 487–488
lines of credit, 320
loan collateral requirements, 116
loan negotiations, 322–325
mortgages, 321
new startups, 60–61
selecting a banker, 323
term loans, 321
Banner ads, 453
Barak, Nir, 69
BareBabies.com, 391
Barreto, Hector, 293
Barton, Richard, 495
Basic Guide to Exporting, A
(Commerce Department), 466–467
Basic Seven quality tools, 560
Basic Sports Apparel (BSA), 181
Baskin-Robbins, 102
Bates, Ashley, 260–263, 274
Bates, Cameron, 260–263, 274
Baty, Gordon, 352
Baumgartens, 576
Baylor University, 39
Beattie, Kim, 114
Beauty Encounter, 246
Behavioral interviews, 530
Behlen Mfg. Co., 481
Belkin, Jason, 373
Bene?ts, employees, 539–540
Bene?ts vs. features, 175
Bene?t variables, 190
Benio?, Marc, 39–40
Benjapon’s, 634–635
Bennett, Sharon, 392
Benususan, Danny, 481
Bernstein, Jerry, 658
Berra, Yogi, 86
Best Kiteboarding, 65
Betahistine, 69
Better Business Bureau (BBB), 49–50
BFW Construction Company, 342
Bhide, Amar, 19, 151
Bidwell, Chuck, 309
BigBelly Solar Compactor, 54
Billing and collection procedures, 435–436
Bill of lading, 488
Billybobteeth.com, 251
Biolos, Matt, 628–629
Biosite, Inc., 200
Birley, Sue, 131
BizBuySell, 343
Blakely, Sara, 30, 63, 500–501
Blanchard, Kenneth, 49, 164
Blickensta?, Kim, 200
Blockbuster, 249
Blog, 457
Blogger.com, 457
Blogging. See also Social networks
advertising income from, 251–252
customer relationsips, 455
de?nition of, 457
on eBay, 457
idea accumulation and, 397
personnel recruitment and, 526
sponsorships and linkages, 454, 456
Web 2.0 and, 374–375, 526
WordPress software, 21
as workplace communication tool, 510
BlogHer, 457
Blog2Print, 454
Blue Lake Publishing, 356
Blue Note, 481
Blue Sky laws, 346
Blumenfeld, Joseph, 466
Board of directors, 222–224
compensation of, 224
contributions of, 222–223
de?nition of, 222
legal liability of, 608
selection of, 223
Bolton, Ruth, 366
Bonifacino, Ryan, 516
Bonneau, Ed, 24–25, 353, 355
Bonneville Seabase, 235
Bonobos, 203
Boone, Donna, 392
Bootstrapping, 6, 291
Born-global ?rms, 466
Borrow My Tools, 180
Bottlenecks, 569–570
Bounce rates, websites, 455
Bozmedia, 516
Brand, 398
BrandEquity International, 401
Brand image, 398
Branding, 398–399, 401–402
Brand Intersection Group, LLC, 694
Brand marks, 399–400
Brand names, 399
Brazil, 469–470
Breakdown process, in sales forecasting, 195
Break-even analysis, 423–425
Break-even point, 423
Breaking into the Trade Game (SBA), 485
Brevda, Velvel, 479
Bribes, 47
Brick-and-mortar startup, 231–239
location decision, 232
location selection, 233–239
Brick-and-mortar stores, 232
BRIC markets, 469–470
Bridgecreek, 2
Brin, Sergey, 4
Brodsky, Norm, 23, 259–260, 354, 652–653
Broni, Paul A., 287, 303–304
Brooks, 686
Brossette, Stephen, 238
Browder, Bob, 342
Brown, Dennis, 292
Brown, Rob, 329
Brownlow, Mark, 453
B*tween Productions, 398–399
Buchanan, Leigh, 468
Budgets
cash budgets, 301–303
de?nition of, 504
promotional, 443–444
Buechler, Ken, 200
Buettell, Ben, 353
Build-up LBO, 342
Buildup process, in sales forecasting, 195
BuiltNY, 286
Burger King, 99
Burrow, Taj, 629
Busch, Richard, 21
Business angels, 327–328
Business Capital, 585
Business evaluation, 115–116, 696–700
Business format franchising, 95–96
Business image
home-based business and, 243
physical facilities and, 241
Business incubators, 237–238, 514–515
Business interruption insurance, 616
Business 2.0 (magazine), 454
Business model
de?nition of, 246
for E-commerce businesses, 246–252
scope of, 246–247
Business names, 182
Business One Software (SAP), 555
Business owners policy (BOP), 617
BusinessPartners.com, 208
Business plan, 148–174. See also speci?c
aspects
content and format of, 153–162
de?nition of, 149
outline, 154
overview, 149–152
presentation to investors, 163–165
resources for, 165–168, 170–172
Business Resumption Planning (Wrobel), 612
Business risk, 603
Business-to-business (B2B) models, 247–248
Business-to-consumer (B2C) models, 248–249
Bussgang, Je?rey, 163
Bust-up LBO, 341
Butera, Jay, 338
Butler, Rhett, 251–252
Buyers, 84–85
Buying a Franchise (FTC), 103
Buy-sell agreements, 639
Bylaws, 210
C
C. V. Martin & Co., Inc., 138
Cabana Life, 65
Calico Computer Consulting, 179
California Tortilla, 375
Calsaway Pool Services, 69
Campbell, Bruce, 349
Campbell, Glenn, 233
Campbell, Je?rey, 311
Campbell, Philip, 266
Canada, 481, 482, 692
Canning, Douglas, 186
Cano, Aaron, 374
Can-Spam Act (2003), 453
Capabilities, inside-out analysis, 74
Capacity, 552
Capital budgeting analysis, 591
Capital Southwest Corporation, 164
Capsule, 210
CarAlarmsEtc., 477
Cardinal Health, 238
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Index 731
CareerBuilders.com, 526
Carlyle, Thomas, 151
Caroline’s Desserts, 586–587
Carter, Nancy, 204
Carvel Ice Cream, 234
Cases
A.G.A. Correa & Son, 660–661
Benjapon’s, 634–635
CitiStorage, 652–653
Country Supply, 656–657
D’Artagnan, 638–640
Diamond Wipes International, Inc.,
664–665
eHarmony, 636–637
?nancial statements, 643–645
Firewire Surfboards, 628–629
Glidden Point Oyster Company, 660–661
Hardy Boat Cruises, 660–661
intellectual property, 672–673
Joseph’s Lite Cookies, 626–627
Le Travel Store, 641–642
Maine Gold, 660–661
Missouri Solvents, 646–648
Modern Postcard, 667–668
MOM (My Own Money), 649–651
Mo’s Chowder, 630–631
Nau, 623–625
Pearson Air Conditioning & Service,
669–671
Rodgers Chevrolet, 654–655
salary envy, 666
Smarter.com, 662–663
W.S. Darley & Co., 632–633
Case Western Reserve University, 9
Cash-basis accounting
cash ?ows and, 275
de?nition of, 274
Cash budgets
de?nition of, 301
forecasting of, 301–303
Cash conversion period, 578
Cash ?ow-based valuation, 699–700
Cash ?ows, forecasting of, 298–303
cash budgets, 301–303
pro forma statements, 300–301
Cash ?ow statements
de?nition of, 273
in ?nancial statements, 273–276
measuring cash ?ows, 274–276
pro?t vs. cash ?ows, 273–274
Cassidy, Dan, 291
Cathy, Bubba, 131
Cathy, Dan, 131
Cause-and-e?ect diagram, 560
CCI Triad, 352
C corporation
comparisons to, 214–215
corporate charters, 210, 212
de?nition of, 210
income taxes, 215–216
maintaining corporate status, 212
percentage of new businesses, 213
stockholders, 212
Census of Manufacturers report, 195
Centeno, Javier, 10
Centeno, Manuel, 10
Centeno, Mirna, 10
Centeno Home Improvement Solutions, 10
Center for International Business Education
and Research, 486
Center for Systems Management (CSM), 220
Centers for Disease Control and
Prevention, 639
Central Texas Angel Network (CTAN), 327–328
Certi?cate of incorporation, 210
Certi?ed Business Brokers, 112
Certi?ed Development Company (CDC)
504 Loan Program (SBA), 330
Certi?ed public accountant (CPA), 517
Chagrin Shoe Leather & Luggage Repair,
410–411
Chain of command, 505
Chain-ratio method, in sales forecasting, 195
Changes Therapeutic, 187–193, 195
Chanin, Natalie, 564–565
Channel Islands, 628
Channels of distribution, 410–413
costs and control of, 411–412
de?nition of, 410
physical distribution, 412–413
Charge.com, 430
Chase, Reed, 391
Chattel mortgages, 321
Cheney, Karen, 209
Cherney, Ed, 353, 356
Cherokee Communications, 324–325, 356
China, 465, 469–470, 472, 474–475, 478, 481,
662–663
Chocolate Bar, 464–465
Christensen, Clayton M., 392
Churning, 101
Cialdini, Robert, 205
CitiStorage, 354, 652–653
Citizenship, 39–40
Civil Rights Act (1964), 541
Clancy, Shaun, 440, 441
Clark, Gordon “Grubby,” 628
Clark Foam, 628, 629
Clif Bar, 687, 688
Cli?ord, Randall, 137
CNNMoney.com, 454
Coaching leaders, 496
Coast Converters, 231
Cobb, Trey, 80, 82, 234
COBB Tuning, 82, 234
Co-branding, 96
Coca-Cola Co., 182, 332, 377
Code of ethics, 49, 50
Code of values, 49, 50
Cody Kramer Imports, 391
Co-employment, 541
Co-employment agreements, 540–541
Cognitive dissonance, 380
Cohen, David, 21
Coinsurance clause, 615
Cold Stone Creamery, 130
Collection procedures, 435–436
Commanding leaders, 497
Commercial general liability (CGL)
insurance, 616
Commitment, in family business, 126–129
Common carriers, 412
Common stock, 332
Communication, managerial, 508, 510, 511
Communication process, in promotion,
441–443
Community-based ?nancial institutions, 331
Compassionate Capitalism (Benio?), 39–40
Compass Partners, 457
Compass Trading Co., 478
Compensation
of board of directors, 224
of employees, 538–540
salary envy, 666
of salespeople, 448–449
Compensatory damages, 607
Competing interests, in family
business, 123, 126
Competitive advantage
inside-out analysis of, 74
pricing and, 422–423
Competitive Advantage (Porter), 72, 82
Competitive environment
assessment of business ideas and, 73–74
de?nition of, 71
Complete O? ce, 292
Comprehensive plan, 152
Computer-aided business planning, 166–167
Computer Friends, Inc., 532
Computer security threats, 603–604
Cone, Carol, 41
Cone, Inc., 40–41
Cone, Judith, 496
Con?rming houses, 487
Constraints, 569–570
Consultants, 167–168, 184
Consumer behavior model, 378–380
Consumer credit, 431
Consumer Credit Protection Act (1968), 436
Consumer-oriented philosophy, 177, 178
Consumer Product Safety Act (1972), 406–407
Consumer protection, 406–409
Consumers. See Customers
Content-based model, E-commerce, 251
Continuous manufacturing, 552
Contract carriers, 412
Contracts, in franchising, 96, 110
Contractual liability, 606
Contribution margin, 424
Control process, stages of, 508
Cook, Scott, 22
Cooperative purchasing
organization (coop), 565
Co-preneurs, 130
Copyright Act (1976), 408–409
Copyrights, 408–409, 672–673
Copywriting.com, 450
Core competencies, inside-out analysis, 75
Core product/service, 176
Corporate bylaws, 210
Corporate charter
components of, 210, 212
de?nition of, 210
Corporate scandals, 332, 348
Corporations. See also speci?c corporations
bylaws for, 210
charters for, 210, 212
de?nition of, 210
as ?nancing source, 332
nonpro?t status, 217–218
website advertising by, 454–456
Correa, Andy, 660–661
Correa, Tony, 660–661
Corrective action, 508
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Index 732
Corsten, Daniel, 554
Cost-based commitment
de?nition of, 128
in family business, 127, 128–129
Cost-based strategy, 77–78
Cost of goods sold, 263
Counterfeit activity, 480
Countertrends, 68
Country Place Living, 93–94, 98,
102, 104–105
Country Supply, 656–657
CouponMountain.com, 662
Cousin consortium, 121
Couvillion, Karyn, 12–13
Covey, Stephen R., 24
Crack Team USA, 456
Crane, Patrick, 524
Credit. See also Trade credit
bene?ts of o?ering, 429–430
consumer, 431
credit cards, 431–432
de?nition of, 419
?ve C’s of, 321, 433
selling on credit, 430–431
Credit bureaus, 434
Credit cards, 320
Credit Management, 432–436
aging of accounts receivable, 434–435
billing and collection procedures,
435–436
credit regulation, 436
evaluation of credit applicants, 433
sources of information, 434
Credit regulation, 436
Crime insurance, 617
Crimson Consulting Group, 19
Critical risks
in business plan, 159–160
de?nition of, 160
CRMGuru.com, 366
Crocetti, Al, 660–661
Crocetti, Stacie, 660–661
Crosby, Philip, 560
Cross-border acquisition, 482
CSX Corporation, 412
Cu?e, Khary, 446
Cu?e, Selena, 446
Culture. See also Organizational culture
de?nition of, 382–383
in family business, 125–129
founders and, 126, 127
leadership and, 498, 500
Culture con?ict, 353
Current assets
in current ratio, 277–278
de?nition of, 268
Current debt, 268
Current liabilities, 277–278
Current ratio, 277–278, 295
Customer Care Measurement &
Consulting, 370
Customer experience
management (CEM), 369
Customer information management
systems, 374
Customer-initiated contacts, 445
Customer intimacy model, 366
Customer pro?le, 179, 376
Customer relationship Management (CRM),
362–384
customer pro?les, 376–378
customers as decision makers, 378–380
de?nition of, 364
psychological in?uences on customers,
381–382
scope of, 363–365
sociological in?uences on customers,
382–384
technology and, 373–375
transactional relationships and, 366–373
Customers
business models and, 247–252
demand by and pricing, 420–423
entrepreneurs and, 17
feedback from, 559
in marketing plans, 177
relationship selling to, 447–448
retail is detail and, 558–559
site selection and, 233–234
as stakeholders, 36–37
surveying of, 184–189
in target markets, 189–190
Customer satisfaction, 176–178, 366–369, 562
Customer service quotient, 369
Customers for Life (Sewell), 373
Cycle counting, 556
D
Daguin, Ariane, 638–640
Dain Rauscher Inc., 352
D’Andrea, Christian, 63
D’Andrea, Mark, 63
D’Andrea Brothers LLC, 63
D&R Products, Inc., 289–290, 294–303
Darley, Bill, 632–633
Darley, Paul, 632–633
Darr, Rebecca, 692–693
D’Artagnan, 638–640
Data mining, 559
DAVACO, Inc., 13, 23, 367, 533
Davidson, Carolyn, 401
Davis, Charles “Skip,” 23
Davis, Rick, 13, 23, 30, 367, 533
Days in inventory, 588
Days in payables, 589–590
Days sales outstanding, 585–586
Dealmed, Inc., 238
Deaton, Gary, 13
Debt, 268
Debt ratio, 280, 295
Dedmon, Bill, 354
Deeds, David, 318–319
DeGra?, Je?, 286
Delaney, Laurel, 567
Delaware Valley Reinvestment Fund, 331
Delegation of authority, 506–507
DeLello, Judy, 277
Delice, Ronald, 503–504
Delice, Rony, 503–504
Delivery terms, 412–413
Dell, 399, 567
Dell, Michael, 201
DeLuca, Fred, 501
Demand management strategies, 553
Democratic leaders, 497
Demographic trends, 72
Demographic variables, 190
Dennis, Je?, 34, 36
Depreciable assets, 268
Depreciation expense, 264
Desai, Deepak, 377
Design defect, 608
Design patent, 408
Desire-based commitment, 127, 128
Detkowski, Rick, 114
Detkowski, Rick, Jr., 114
Diamond Wipes International, Inc., 664–665
Di?erentiation-based strategy, 78
Diner’s Club, 432
Dior, 46
Direct channel
de?nition of, 410
illustration of, 411
Direct e-mail promotion, 453–454
Direct forecasting, 195
Direction setting, startups, 77
Direct loss, 604
Dirmon, David, 124
Dirtbag Clothing, 186
Disability insurance, 618–619
Disciplined Investors, 180
Disclosure document, 107
Discounted cash ?ow (DCF) techniques, 594
Disintermediation, 249
Distribution
channels of, 410–413
de?nition of, 410
physical, 412–413
Distribution section, of marketing plans,
182–183
Dittoe, Lara, 687, 693
Diversi?cation, 67
Diversity in workforce, 527–528
Doctor’s Associates Inc., 98
Doerr, John, 10
Dollar velocity, 555
Domain Name System (DNS), 454
Donnelly, Harriet, 220
Donnelly Corporation, 352
Dooley, Pete, 469
Dorman, Denise, 457
Double taxation, 345
Doyle, Charles, 585
Drinking Water Depot, 79
Drucker, Peter, 66, 152, 672
Dual distribution, 411
Due diligence
de?nition of, 112
documents for, 113
Dun & Bradstreet, 293, 434
Dunkin’ Donuts, 101
Dunn, Andy, 203
Dunn, Michelle, 586
The Dwyer Group, 50, 96
Dylan’s Candy Bar, 395
Dynamic pricing strategy, 428
Dyson, James, 237
E
EagleRider Motorcycle Rentals, 102
Earnings before interest, taxes, depreciation,
and amortization (EDITDA), 697–698
Earnings multiple, 697–698
EasyJet, 410
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Index 733
Easyjournal website, 252
eBay
a? liate programs, 453
blogs on, 457
clone of, 74
fraud by sellers, 46
global businesses and, 477
as largest auction site, 249–250
as sales outlet, 230, 248, 390–391, 567
Skype and, 466
venture capital ?rms and, 311
eBay University, 249
E-commerce, 244–252. See also Internet; Web
advertising
business models for, 246–252
de?nition of, 245
pricing and, 429
startups and, 246
eCommerce Exchange, 430
Economic damages, 607
Economic order quantity, 554
Economic risk, global business, 484
Economic trends, 71
Economies of scale, 472
Economist
on intellectual property, 46
Eddy, Brian, 252
Educational institutions, 515
eHarmony, 636–637
Einhorn, Michael, 238
Elance.com, 248
Elastic demand, 422
Elasticity of demand, 421
Electronic Customer Relationship Marketing
(eCRM), 246
Eli Lilly, 200
Eller, Karl, 32, 44
Email Marketing Reports, 453
e-mail promotion, 453–454
Emerald Packaging, Inc., 482
Emergency preparedness plans, 601–602
Emotional attachment (desire-based
commitment), 127, 128
Employee bene?ts, 539–540
Employees. See also Human resource
management (HRM)
compensation of, 538–540
diversity in workforce, 527–528
in family business, 135
labor unions, 542
legal protection of, 541
risk management and, 608–609
theft by, 39
valuing of, 37, 39
Employee stock ownership plan (ESOP)
as compensation, 539
de?nition of, 342
Employee training, 533–534
Empowerment, 497
Empyrean Management Group, 133
Encroachment, 101
Engardio, Pete, 19
Enron, 332
Entelligence, 324
Enterprise value, 696–697
Enterprise zones, 235–236
Entertainment credit cards, 432
Entertainment Earth, 477
Entrepreneur
on franchises, 103, 106, 108
on market analyses, 179–180
on sales forecasts, 194
startup ideas, 67
Entrepreneurial alertness, 61
Entrepreneurial legacy, 25–26
Entrepreneurial networks, 516
Entrepreneurial opportunities
age and, 20–21
area of integrated analyses, 76
change-based sources of, 66
de?nition of, 6
Entrepreneurial teams, 17
Entrepreneurs, 4–5. See also Management as
leadership
artisan, 15
characteristics of, 21–22
competitive advantages, 17–19
customer service, 18
de?nition of, 5
genetics and, 9–10
integrity and, 18, 32–33
legacy of, 24–26
lone-wolf, 201
opportunistic, 15
second-stage, 14
women as, 15–17
Entrepreneurship
as creative destruction, 391–392
as management discipline, 3
rewards of, 11–13
social, 52–54
varieties of, 14–17
Entrepreneurship Centre (London), 131
Entrepreneurs’ Organization, 513
Environmentalism, 53–54
Epoch 5, 611
ePolicy Institute, 46
Equal Credit Opportunity
Act (1974), 436
Equifax, 434
Equinox Corporation, 19
Equipment, 239–241, 325–326
Equipment loans, 325–326
Equity value, 696–697
Erikso, Tamer, 20
Espresso Connection, 535
ESRI, Inc., 234
Ethical imperialism, 47
Ethical issues. See also Integrity
in business plan, 162
in decision-making, 51–52
de?nition of, 34
examples of, 427
in seller-owner sales, 114–115
Ethical relativism, 47
Ethics Resource Center, 51–52
Eure, Van, 380
Euromoney (magazine)
on country risk ratings, 483
Europe, 466, 475, 481
European Union (EU), 473, 475
Evaluative criteria, customers, 379
Everest Textile, 681
Everyone Is a Customer (Shuman, Twombly
and Rottenberg), 222
Evoked set, consumers, 379
Ewing Marion Kau?man Foundation.
See Kau?man Foundation
Exchange rates
de?nition of, 484
in marketing plans, 183
Executive search ?rms, 527
Executive summary, business plan
de?nition of, 155
examples of, 157–158
outline, 155–156
Existing businesses
buying, 111–114
evaluating, 112–114, 696–700
negotiations, 116
valuing, 115–116
Exiting, 339
Expansion Plus, 457
Expedia, Inc., 410, 495
Experian, 434
Experience curve e? ciencies, 472
Export agents, 487
Exporting, 476–478
Export management company (EMC), 487
Export trading company (ETC), 487
External ?nancing, 310
External locus of control, 21
F
Facebook.com, 204, 445
Facilities. See Physical facilities
Factoring, 326, 649–651
Fads, 68
Fair Credit Billing Act (1986), 436
Fair Credit Reporting Act (1970), 436, 531
Fair Debt Collection Practices
Act (1978), 436
Fair Labor Standards Act (FLSA) (1938), 541
Faison, George, 638–640
Faith, Mike, 537–538
Falkow, Sally, 457
Family
de?nition of, 121
home-based business and, 242–243
Family and Medical Leave Act (1993), 541
Family business, 120–141
de?nition of, 122
family and, 121–125
leadership succession in, 137–141,
632–633
management issues in, 134–137
nonfamily employees, 135
organizational culture of, 125–129
roles and responsibilities, 129–134
Family Business
on family business structure, 131
on oldest family business, 121–122
Family business constitutions, 137
Family councils, 136–137
Family Firm Institute, 129
Family protocols, 137
Family retreats, 135
FAO Schwartz, 458
Farber, Barry, 512
Farkas, Alex, 165
FastbackStack, 457
FAST-FIX, 102
Fast Food Nation (Schlosser), 231
Fast-food outlets, 95
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Index 734
FastTrac Entrepreneurial Training
Program, 167
Fatal ?aws
in business plan, 162
de?nition of, 83
Feasibility analysis, startups, 83–86
de?nition of, 83
framework, 84
industry attractiveness, 85–86
market potential, 84–85
new venture leadership, 86
Federal Bureau of Investigation (FBI), 39
Federal Reserve Board, 3
Federal Reserve Bulletin, 194
Federal Trade Commission (FTC), 453
Federation of International Trade
Associations, 486
FedEx, 413, 567
Feld, Brad, 346
Felix, Pam, 375
Fernandes, John, 3
Fetchback, Inc., 453
Fields, Holly, 175, 181–183
Financial crisis (2008)
bank loans and, 95
credit card ?nancing and, 320
delayed payments, 586–587
impact on Atayne, LLC, 692
sales of businesses and, 343
small businesses and, 3, 60, 292–293
TARP program, 311
Financial forecasting, 286–304
of asset and ?nancing requirements,
291–298
of cash ?ows, 298–303
of pro?tability, 289–290
purpose of, 287–288
using good judgment in, 303–304
Financial performance, 276–280
Financial plan, 160
Financial statements, 258–280
balance sheet, 267–273
cash ?ow statements, 273–276
credit extension and, 434
de?nition of, 260
evaluating ?nancial performance,
276–280
examples of, 260–263
income statements, 263–266, 271–273
video case on, 643–645
Financial wealth, 11–12
Financing sources, 309–333
asset-based lenders, 326
from banks, 320–325
debt/equity comparison, 312–317
external, 310
?rm’s characteristics and, 310–312
for global businesses, 486–488
government, 330–331
new venture sources, 317–320
private equity, 327–330
secondary sources, 332
suppliers, 325–326
video case on, 649–651
Finding the Love of Your Life (Warren), 636
Finney, Tanya, 191–192
Firewire Surfboards, 628–629
Firm value, 696–698
Fishbone chart, 560
Five Cool Guys Principle, 384
Five C’s of credit, 321, 433
Five Four Clothing, 165
Fixed assets, 268
Fixed costs, 420
Fizzion, 332
Flexible manufacturing systems, 552
Flow chart, 560
Floyd’s 99 Barbershop, 95
Fluid, 40
Focus groups, 184
Fog Creek Software, 522
Foley, Arthur “Red,” 440
Foley’s NY Pub & Restaurant, 440
Follow-the-leader pricing strategy, 427
Food Allergy & Anaphylaxis Network, 10–11
FootZone, 8
Ford, Henry, 201, 568
Ford Motor Corporation, 475
Forecasting. See Financial forecasting
Foreign Corrupt Practices
Act (1977), 47, 485
Foreign licensing, 480–481
Forgatch, Greg, 636
Formal venture capitalists, 328
Forrester Research
on customer service, 369–370
on electronic invoicing, 568
on social-networking technology, 204
Fortune
on Ukrop’s Super Markets, 48
Founders
de?nition of, 14
family business culture and, 126, 127
leadership qualities of, 495–496
as managers, 500–501
parents as, 129–130, 140–141
Fourth-party logistics ?rms (4PLs), 413
Foust, Dean, 19
Fox, Dale, 80
Franchise, 95
Franchise contract, 95
Franchise disclosure document (FDD), 110
Franchisee
competitive issues and, 101
contracts, 96, 110
de?nition of, 14, 94
?nancial issues and, 100–101
management issues and, 101
as source of information, 107–108
suppliers, 565
Franchise Opportunities Guide (FTC), 103
Franchise Registry (SBA), 100
Franchise Rule, 109
Franchises, fastest-growing, 108
Franchising, 93–110
costs of, 102–103
de?nition of, 94
economic impact of, 96–97
evaluating opportunities in, 103–108
legal issues in, 110
options in, 95–96
pros and cons, 97–101
Franchisors
contracts, 96, 110
de?nition of, 94
?nancial assistance for, 99–100
requirements of, 108–110
as source of information, 106–107
Francorp, 106
Franklin, Benjamin, 94, 602
Freedman, David H., 377
Freelancers, 247–248
Friedman, Steven, 479
Friedman, Thomas, 18, 34
Friends/family, as ?nancing sources, 318–319
Friis, Janus, 466
The Fruitguys, 8–9
Fulk, Denny, 30, 368–369, 614
Fund, 329
FundingPost.com, 329
Furst, Jack, 354
G
Galbenski, David, 509
Galbraith, Mark, 623–625
Garage Technology Ventures, 328, 363
Garriott, Owen, 81
Garriott, Richard, 81
Gartman, Cynthia, 93–94, 98
Garza, Rudy, 160
Gates, Bill, 201
Gates, Perry, 660–661
Gazelles, 14
GE Healthcare, 245
General Electric, 669–671
General environment, outside-in analysis,
71–72
General partner, 216
General-purpose equipment, 239
Generation X, 20, 509
Generation Y, 509
Genetics, 9–10
Gibson, Ryan, 504
Gilbert, Krisy, 264–266
Gilbert & Associates Leasing, Inc., 264–266,
270–271, 274–280
Givray, Henry, 345
Glass Doctor, 96
GlassTileStore.com, 249
Glatstein, Scott, 527
Glen?ddich Farm Pottery, 21
Glidden Point Oyster Company, 660–661
Global business, 464–488
assistance for, 485–488
challenges to, 483–485
forces driving expansion of, 468–475
small business and, 466–467
strategies in, 475–482
GlobalEnglish, 377
Globalization. See also Global business
de?nition of, 465
innovation and, 18–19
Global trends, 71
GlobeSt.com, 459
Glossary, business plans, 164, 166
GNC, 99
Godefroy, Danielle, 248
Goldberg, Jason, 326
Golden Rule, 51, 364
Goldman Sachs, 469, 524
Goleman, Daniel, 496–497
Golite, 686
Gompers, Paul, 160
Good, Nancy, 13
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Index 735
Goodwin, Martin, 471
Google, 4, 249, 456
Google Earth, 72
Google Friend Connect, 455
Gordy, Berry, 550
Goshow, Eric, 494
Goshow, Nancy, 494
Goshow Architects, 494
Gotham Cycles, 567
Go-To Team (Davis), 23
GotVMail, 421
Government. See also States; speci?c agencies
concerns about franchising, 100
labeling regulations, 403
laws and regulations, 41–43, 109
as stakeholder, 36
Government Liquidation, 459
Gow, Gleen, 19
Graeter, Bob, 120, 121
Graeter, Chip, 120, 121
Graeter, Louis C., 120
Graeter, Regina Berger, 120
Graeter, Richard, II, 120, 121, 124
Graeter’s Ice Cream, 120, 121
Graphic Arts, 402
Grasshopper, 421
Greene, Kelli, 320
Green?eld venture, 482
Greening Your Business (book), 53
Greenlayer, 686–687
Green products and services, 69, 682–684
Greif, Mitchell, 231
Griggs, Jack, 321
Grobe, Jon, 69
Gross ?xed assets
in balance sheets, 294
de?nition of, 268
Gross pro?t, 263
Guanxi (personal connections), 474–475
Guardiola, Juan, 344
Guarino, Jennifer, 309–310
Guayaki Sustainable Rainforest
Products, Inc., 184
Gucci, 46
Gumpert, David, 149
Gunning, Marie, 277
Gupta, Vinay, 150–151
Guru.com, 248
Guthridge, Matthew, 523
Gutschick, Matthew, 218
H
Hackett, Jim, 38
Hagelstein, Rick, 635
Hall, Craig, 57–58
Hall, Jody, 20
Hall, Michael, 693
Hall, Robert, 341, 699
Hamburger University, 98
Hamel, Gary, 74
Hamilton, Booz Allen, 63
Hamlet, Luke, 629
Hampton Co?ee Company, 373
Handelsman, Michael, 343
H&R Block, 401
Hanft, Adam, 500
Hanft Unlimited Inc., 500
Hanover Community Bank, 60–61
Hanssen, Jesse, 400
Hardy Boat Cruises, 660–661
Harper, Keith, 72
Hart, Stuart L., 54
Harvard University, 18, 52
Harvesting, 339
Harvest plan, 338–356
development of, 352–356
?rm valuation and, 350–352
harvesting methods, 339–350
importance of, 339
initial public o?ering, 346–348
private placement, 348–350
releasing cash ?ows, 343–345
selling ?rm, 340–343
Hat?eld, Teague, 8
Hat World Corporation, 233
Hauser, David, 421
Hawk, Tony, 628
Headhunters, 527
Headsets.com, 537–538
Healionics Corp., 329
Health insurance, 539–540, 609, 611–613,
617–618
Health maintenance organization (HMO),
617–618
Heartwood Studios, 76
Heaviside, Katherine, 611
Helios ?shing rod, 70
Help-wanted advertising, 525
Hendricks, Ken, 111–112
Henninger, Wayne, 694
Heritage Academies, 48
Heritage Link Brands, 446
Heritage Partners, 352
Hermann, Peter, 352, 356
Herrin, Jessica, 148
Heskett, James, 44–45
Highland Capital Partners, 150
Highland Hiker, 8
High-potential ventures, 14
Hilsen, Bruce, 460
Hiring, 99, 448–449. See also Human resource
management (HRM)
His Place Hair Studio, 333
Histogram, 560
Hitt, Michael, 124
Hitz, Darren, 68–69
HM Capital, 354
Hobbies, startups and, 65, 66
Ho?man, Steven, 547, 667–668
Hogan, Mike, 258–259
The Hogan Group, 258–259
H2O2Go, 79
Holmes, Donna, 331
Holy Land Earth, 479
Home-based business, 241–244
challenges of, 243–244
de?nition of, 241
rationale for, 242–243
technology and, 244
Honest Tea, 690
Hooker, Lisa, 478
Hooker, Thad, 478
Hoorah! Bar, 63
Horny Toad, 624
Horse.com, 389
Hotson, Don, 164
How to Sell Internationally (Nipert), 477
How to Start a Successful Home Business
(Cheney), 209
Hsieh, Tony, 498
Huizenga, J. C., 48
Human resource management (HRM),
521–543
employee compensation and incentives,
538–540
evaluating and selecting employees,
529–533
personnel recruitment, 522–529
special issues, 540–543
training employees, 533–538
Human resource managers, 542–543
Hunt, Stacey, 7
Hurricane Katrina, 601–602
Hutcheson, James, 319
I
Iatria Day Spas and Health Center, 503
IdeaChain, 251
The Idea Village, 515
Impersonal referrals, 445
Importing, 478–480
Inc. (magazine)
on ?nancing sources, 317–318
on Heritage Academies, 48
Inc.com, 292, 644
on Internet use at work, 45–46
on sales forecasts, 194
startup ideas, 67
on strategic alliances, 220
website for, 644
Incentive plans, 538–539
Income statements
de?nition of, 263
in ?nancial statements, 263–266,
271–273
Income taxes, 215–217, 234–235
Indemni?cation clause, 606
India, 465, 469–470, 472–473
Indirect channel
de?nition of, 410
illustration of, 411
Indirect forecasting, 195
Indirect loss, 605
Inelastic demand, 422
Informal groups, 506
Informal venture capital, 327
Information-based model,
E-commerce, 251
Information Resources, Inc. (IRI), 682
Informed Systems, Inc., 277
Initial public o?ering (IPO)
de?nition of, 332, 346
as harvest strategy, 346–348
Initium Technology, 364
In-N-Out Burger, 538
Innovation
competitive advantage and, 391–395
Drucker on, 66
globalization and, 18–19
sustainability and, 394–395
Innovative thinking, startups, 67–70
Inside-out analysis, 74–77
Inspection, 560
Installment account, 431
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Index 736
Institute of Management
Consultants USA, 516
Institutional advertising, 450
Insurance. See also speci?c types
for home-based business, 244
in risk management, 613–619
self-insurance, 611–612
Intangible resources, inside-out analysis, 74
Integrity
in an expanding economy, 45–47
business operations and, 47–52
challenges and bene?ts of, 43–45
de?nition of, 32
entrepreneurs and, 18, 32–33
international issues of, 46–47
social entrepreneurship and, 52–54
stakeholders and, 33–43
Integrity Is All You’ve Got (Eller), 44
Intellectual property
de?nition of, 46, 182
foreign licensing and, 480–481
Internet and, 46
Microsoft Corp. and, 221
video case on, 672–673
Wolfe on, 401
Interactive Voice Response (IVR)
software, 370
Interest expense, 263, 264
Interest rates, 323
Intermediaries, 410
Internal locus of control, 21
Internal rate of return (IRR), 594
Internal Revenue Service (IRS), 41–42, 216,
217–218
International Business Machines
(IBM), 247, 408
International Franchise Association (IFA)
on code of ethics, 100
on economic impact of franchising,
96–97
on franchise system, 94
incentives for hiring minorities and
veterans, 99
VetFran Directory, 99
International franchising, 481
International Licensing Industry
Merchandisers’ Association, 659
International Organization for
Standardization (ISO), 561–562
International outsourcing, 472
International strategic alliances, 481
International Trade Administration
(Commerce Department), 485
Internet. See also E-commerce; Web
advertising; Websites
as business startup location, 244–253
exporting and, 477
home-based business and, 244
integrity and, 45–46
market research on, 185, 187
part-time startup advantage, 253–253
personnel recruitment on, 526–527
privacy issues on, 45–46
purchasing and, 565
self-service systems, 374
spam, 453–454
supply chain management and, 409
Web 2.0, 374–375, 526
Internet Corporation for Assigned Names and
Numbers (ICANN), 454
InternetSecure, Inc., 430
InterNIC, 454
Interviewing job applicants, 521–522,
529–531
Inuit, 22
Inventors, 14
Inventory, 268
Inventory management, 553–557
in asset management, 587–589
cost control, 554–556
objectives of, 554
record-keeping systems, 556–557
Investors
business angels, 327–329
business plan presentations to, 163–165
relations with, 200
venture capital ?rms, 328–330, 528
iPod, 68
Ireland, 482
IRM Corporation, 291
Ishikawa, Kaoru, 560
ISO 9000, 561–562
Israel, 479
Israel, Rick, 292
IT Retail, 471, 480
Izquieta, Andres, 165
J
Jack in the Box, 107
Jacobs, Bert, 7–8
Jacobs, John, 7–8
Jacobs, Mike, 37
Jacobs Gallery, 7–8
Jacovatos, James, 60
James, Greg, 220–221
J&S Construction, 18
Januz, Lauren, 243–244
Jao, Frank, 2
Japan, 473, 481, 555
JBCStyle, 292
Jezek, Keith, 366–367
Jivasantikarn, Benjapon, 634–635
J.M. Smucker Company, 181
Job applicants
application forms, 529
background and reference checks, 531
interviewing, 521–522, 529–531
physical examinations, 533
sources of, 524–527
testing of, 532
Job descriptions, 528–529
Job Instruction Training
de?nition of, 535
steps in, 536
Jobs, Steve, 67, 402, 501
Job shops, 552
Job speci?cation, 529
Johnson, Jimmie, 440
Johnson, Laurie, 64
Johnston, Judy, 356
Joint and several liability, 209
Jolly Time Pop Corn, 126
Jones, Catesby, 480
Jones, Charlie, 694
Jones, Tonya, 618
Joseph’s Lite Cookies, 31, 626–627
JR’s Sports Collectibles, 429
Just-in-time inventory systems, 555–556
J.W. Hulme Co., 309–310
K
Kaboodle, 460
Kalinsky, Michael, 133
Kant, Immanuel, 51
Kaplan Thaler Group (KTG), 499
Kar, Christian, 535
Karnan, Parker, 687, 693
Karr, David, 184
Kassim, Fizal, 309–310
Katz, Marc, 36
Katz Deli, 36
Kau?man, Ewing Marion, 152
Kau?man Foundation, 167, 327, 496, 515
Kawasaki, Guy, 328, 363, 369
Kay, Lorraine, 525
Kay Construction, 525
Kay’s Kloset, 428
Kazaa, 466
Kearney, Jack, 352
Kelleher, Kris, 639
Keller, Aaron, 210
Keller, Bill, 641–642
Keller, Joan, 641–642
Kellogg’s, 626
Kelly, Kevin, 482
Kelly Services, 525–526
Kene?ck, James F., 694
Kennesaw State University, 129
Kent, Katherine, 218–219
Kenworthy, Bruce, 133
Kenworthy, David, 133
Key-person life insurance, 618
KFC, 96, 182
Khayelitsha Cookie Co., 52
Kirkham Motorsports, 473
Kirzner, Israel, 61
Kiyosaki, Robert, 390, 451
Klock, Brian, 400
Klock Werks Kustom Cycles, 400
Knauer, Amanda, 482
Knight, Phil, 384
Knister, Jim, 352
Kongo Gumi Company, 122
Konheim, Bud, 418, 658
Kopeikina, Luda, 19
Kosher.com, 248
Kotler, Philip, 79
Kotter, John, 44–45
Koval, Robin, 499
Krafsur, Andy, 175, 183
Kroc, Ray, 231
Kuehne-Institute for Logistics
(Switzerland), 554
Kunming Salvador’s Food and
Beverage Co., Ltd., 474–475
Kuwait, 472
L
Labeling, 403, 407
Labor supply, 236
Labor unions, 542
Labowitz, Aaron, 477
Labowitz, Jason, 477
Landau, Brian, 78
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Index 737
Lanham Trademark Act (1946), 408
Lauren, Dylan, 395
LaWall, Ann, 586
Laws and regulations, 41–43
Lawyers
in business purchases, 112
leasing agreements, 238–239
in sales negotiations, 116
S corporation setup, 217
Leadership. See also Management
as leadership
culture and, 498, 500
of founders, 495–496
styles of, 496–497
succession in family businesses,
137–141, 632–633
Lean production, 568–569
Learning e?ects, 472
LeaseTrader.com, 68
Leasing agreements, 238–239
Leegin Creative Leather Products, 428
Legal entity, 210
Legal Guide for Starting and Running a Small
Business (Steingold), 209
Legal issues
board of directors and, 608
choosing legal form of organization,
205–216
employee protections, 541
in franchising, 110
for global businesses, 485
in home-based businesses, 243–244
legal entities, 210
organizational form and, 205–212
in product and supply chain
management, 406–409
for publicly held companies, 349
trademarks, 407–408
trends in, 71
LeGette, Brian, 392
Leidenheimer Baking Company, 601–602
Lemonade Girls, 260–263, 274, 275
LemonAid Crutches, 64
Lendvay, Kathleen, 693
Letter of credit, 487–488
Leveraged buyout (LBO)
de?nition of, 341
as harvest strategy, 348–350
Leveraged ESOP, 342
Levine, Cecilia, 18, 291, 293, 427, 474
Levine, Marc, 585
Levine Company, 313–315
Lewis, Linda, 507
Lewis, Russ, 507
Liability risks, 605–608
LIBOR (London InterBank O?ered Rate), 323
Licensee, 480
Licensor, 480
Life Is Good, 7–8
Lifestyle businesses, 14
Lifestyles of Health and Sustainability
(LOHAS), 683
Lightsey, Martin, 349
Li’l Guy Foods, 344
Limited liability, 324
Limited liability company, 217
Limited partner, 216
Limited partnership, 216
Line-and-sta? organization, 505–506
Line organization, 505
Lines of credit, 320
Lingolook Publishing, 248
Linkage, 454
LinkedIn Corp., 204, 445, 524
Linn, Sarah Schaller, 230–231
Liquidation value method, 697
Liquidity, 277, 295
Liquidity Services, Inc., 459
Litch?eld, Jeremy, 692
Little Saigon, 2
Litvack, Mark, 672–673
Loan covenants, 324–325
Loan maturity dates, 323
Loan negotiations
interest rates, 323
loan covenants, 324–325
loan maturity dates, 323
repayment schedule, 323–324
sample loan request, 322
Loans. See Banks and banking; Financing
sources
Location, of global businesses, 474–475
Location plan, 230–257
brick-and-mortar startup, 231–239
home-based business, 241–244
Internet startup, 244–253
physical facilities, 239–241
Lock box, 587
Logistics, 410
Logistics Dynamics, 292
Lone-wolf entrepreneurs, 201
Long Beach Surf Shop, 629
Longley, William, 392
Long-range plans, 504
Long-term debt, 269
Lopez, Shea, 629
Loranger Manufacturing Corporation, 475
Loss avoidance, 611
Loss prevention, 611
Loss reduction, 611
Lost Surfboards, 628
Louis Vuitton, 46
Lovering, Judson, 515
Lowe, Chris, 332
Lowe, Keith, 583
Lown, Aaron, 286
Lumen Legal, 509
M
Macdonald, Je?, 524
M.A.D. Collection Agency, 586
Magazines, as advertising media, 452
MagicMouth Theatre, 218
MailWasher Free software, 454
Maine Gold, 660–661
Make meaning, 10
Make-or-buy decisions, 563
Making Sense of Strategy (Manning), 71
Mama Fu’s, 634
Management. See also Human resource man-
agement (HRM)
in family business, 134–137
in franchising, 98–100
of global businesses, 467, 484–485
Management as leadership, 494–517
entrepreneurial, 495–500
managerial responsibilities, 504–511
outside management assistance,
513–517
personal time management, 512–513
in small businesses, 500–504
Management assistance, 513–517
Management buyout (MBO), 342
Management consultants, 516
Management control, 214–215
Management development, 533–534
Management teams
building, 201–205
de?nition of, 159, 201
Managerial responsibilities, 504–511
communication e?ectiveness, 508,
510, 511
control of operations, 507–508
creating organizational structure,
505–506
delegation of authority, 506–507
negotiation, 510–511
planning, 504–505
understanding informal groups, 506
Managing Your Hazardous Waste (EPA), 53
Mangrum, Erika, 503
Manning, Tony, 71
Manpower Inc., 526
Manufacturing business, 551–553
Manufacturing defect, 608
Manufacturing equipment, 239–240
MapInfo software, 234
Marion Labs, 152
Market, 189
Market analysis, 178
Market attractiveness, 73
Marketer-initiated contacts, 445
Marketing defect, 608
Marketing mix
de?nition of, 178
“4 P’s” of, 181
Marketing plan, 175–199
competition, 180
de?nition of, 159
estimating market potential, 193–196
formal plans, 179–183
market analyses, 179–180
marketing research, 183–189
small business marketing, 176–178
strategies in, 180–183
target markets, 189–193
MarketingProfs.com, 450
Marketing representatives, 448
Marketing research, 183–189
de?nition of, 184
steps in, 185–189
Market niche, 19, 79–82
Marketresearch.com, 634
Market risk, 603
Market segmentation, 190
Mark IV Enterprises, 618
Markup pricing, 425–426
Marsh, Inc., 606
Martin, Chris, 138
Martin, Harry J., 535–537
Martin, Hull, 635
Martin, Steve, 60
Mary Kay Cosmetics, 501
Massey, Knox, 329
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Index 738
Mass marketing, 190–191
MassMutual Financial Group, 129
MasterCard, 432
Master licensee, 96
Matchmakers, 112
Mateus-Tigue, Jaime, 459
Maui PlayCare, 102
May?eld Fund, 356
McAlister’s, 556
McCann, Chris, 374
McConnell, Mac, 376
McDonald’s Corp.
brand mark of, 399
Hamburger University, 98
international franchises, 481
piggyback franchising, 96
Quintillion software, 231
site selection, 231
speed of service, 548
McEntee, Cindy, 630–631
McKenna, Erin, 10–11
McKinney, Julian, 486
McKinsey & Company
on advertising expenditures, 452
on digital advertising, 453
human resources and, 523–524
McLoughlin, Don, 3
McMasters, Karen, 390–391
MD in a Box, 473
Me! Bath, 402–403
Mechlovitz, Eli, 249
Media, as advertising source, 451–452
Medical Methods Inc., 524
Medical Reimbursement Specialists (MRS),
242–243
Medley, Dean, 524
MedMined, Inc., 238
Meehan, Deborah, 660–661
Melman, Richard, 559
Men’s Warehouse, 531
Mentors, 22
Merchant Accounts Express, 430
Merchant middlemen, 410
Mergerstat report, 698
Metal O? ce Furniture Company, 38
Metro-Goldwyn-Mayer Studios v. Grokster, 672
Mexico, 473, 474, 482
Meyer, Danny, 497
MeziMedia, 662
MFI International, 18, 291, 293
Microbusinesses, 14–15
Micro-loans, 333
Microsoft Consulting, 471
Microsoft Corp., 221, 408, 523–524, 568
Microsoft Dynamics software, 555
Middle East, 464, 467
Millennials, 20
Miller, Nicole, 418, 658–659
Millionaire Next Door, The (Stanley
and Danko), 11
MindPrime, Inc., 251
Mini-plan, 152
Minnetonka, 82
The Minor Group, 635
Missouri Solvents, 646–648
Mr. Appliance Corp., 96
Mr. Electric, 96
Mr. Rooter, 96
MIT Enterprise Forum, 149
Mitsui & Co., Ltd., 567
Mittelstaedt, Chris, 8–9
Moberg, Markus, 394
Mochari, Ilan, 25
Modern Postcard, 547, 667–668
Modi?ed book value method, 697
Molander, Scott, 233
Monster.com, 526
Monthly Labor Review, 194
Mooney, Mary Ellen, 484
Mooney, Scott, 389, 656–657
Mooney Farms, 484
Moon Valley Rustic Furniture, 114
Moore, Trey, 245
Moot Corp Competition, 165
Morgan, David, 69
Mortgages, 269, 321
Mo’s Chowder, 630–631
Motivations, 382
Motown Records, 550
Moyes, Frank, 151
Mullenweg, Matt, 21
Mullins, John W., 83–86
Multi-brand franchising, 96
Multiple-unit ownership, 96
Multisegment strategy, 191–192
Munchausen at Work, 39
Murthy, Dee, 165
MyBusiness
on startup ideas, 67
My Own Money (MOM) self-funding, 649–651
MySpace.com, 204, 445
Mystery shoppers, 186
N
Named-peril approach, 615
Names, business, 182
NameSecure, 454
Narvaez, Claudia, 7
National Association of Corporate
Directors, 223
National Association of Professional Back-
ground Screeners, 531
National Association of Professional Employer
Organizations, 541
National Business Incubation Association, 514
National Federation of Independent Business
(NFIB)
on background checks, 533
on capital investments, 592, 595
on career satisfaction, 13
on credit use, 431
on social responsibility, 41
on sources for startups, 64
on strategic alliances, 218
National Restaurant Association, 630
National Trade and Professional Associations
of the United States (directory), 194
Natural Art, 469
Nau, 623–625
Need-based commitment, 127–128
Needs, 381
Negotiation, 510–511
Neimi, Mohaya, 630
Nelson, Allison, 464–465
Nelson, Linda, 235
Nepotism, 125
Net ?xed assets, 268
Net?ix, 249
Net present value (NPV), 594
Net pro?ts
de?nition of, 264
in income statements, 263–264
Networking, 516
Net working capital
de?nition of, 291
in determining ?nancing
requirements, 295
Networks, social, 204–205
Never Run Out of Cash (Campbell), 266
New & Improved, 498
New Balance, 686
New Business Road Test, The (Mullins), 83–84
Newcomb, Don, 556
New product development process, 397–398
Newspapers, as advertising media, 451–452
New York Magazine
on competitive advantage, 395
New York Times
on Toscanini’s ice cream, 42
Niche market
de?nition of, 19
focus strategies and, 79–82
Nichols, Marvis, 532
Nicole Miller Inc., 418, 658–659
Nierenberg, Brad, 694
Nike, 175
Nike, Inc., 384, 401, 402, 450, 686, 687,
690, 691
Nikolich, Mr., 345
Nimoy, Leonard, 532
Ning, 455
Nipert, Je?, 477
Nisano?, Benjamin, 402
Nisano?, Lisa, 402
Noncompete agreements, 111
Noneconomic damages, 607
Nonpro?t corporation, 217–218
Noonprasith, Zack, 635
Normalized earnings, 698
Norman, Jan, 273
North American Administrators Association
(NASAA), 110
North American Free Trade Agreement, 473
North American Industry Classi?cation
System (NAICS), 195
Norwood, Derek, 67
Nothing but Noodles, 634
Nulethics, 686
Nutrition Labeling and Education
Act (1990), 407
O
Obecure, 69
Obligation-based commitment, 127, 128
O’Brien, Bill, 95
O’Brien, Paul, 95
O’Brien, Rob, 95
Occupational Safety and Health Act (OSHA)
(1970), 541
O’Connor, Leslie, 16
oDesk.com, 248
O?ering, 160
O? ce Depot, 251, 567
O? ce equipment, 240–241
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Index 739
O?shoring
competitiveness and, 19
de?nition of, 472
Oil industry, 472
Omidyar, Peter, 249
O.N.E. World Enterprises, 165
1-800-FLOWERS.COM, 374
180s LLC, 392, 405
O’Neill, Talmadge, 662–663
1/1/1 Model, 39–40
Onestop, 366
On-Hold Guy, 369
Onsen, Houshi, 121–122
Open charge account, 431
Operating expenses, 263
Operating pro?t margin, 279
Operating pro?ts, 264
Operational control, 507–508
Operations, 548
Operations and development
plan, 159
Operations management, 547–570
capacity, 552
competition and, 548–549
de?nition of, 548
inventory management, 553–557
lean production, 568–569
in manufacturing, 551–552
planning and scheduling, 552–553
purchasing, 562–568
quality control, 557–562
in service business, 549–551
synchronous management, 569–570
Operations manuals, franchising, 98, 109
Opinion leaders, 384
Opportunistic entrepreneurs, 15
Opportunity cost of funds, 351
Opportunity recognition, 61
Organizational culture
de?nition of, 125
in family business, 125–129
integrity and, 48–49
Organizational plan, 200–229
board of directors, 222–224
criteria for choosing legal form
of organization, 213–216
legal forms of organization, 205–212
management teams, 201–205
specialized forms of organization,
216–218
strategic alliances, 218–222
Organizational structure, 505–506
chain of command, 505–506
span of control, 506
unplanned, 505
Organizational tests, 218
Ortiz, Susana, 586–587
Orvis, 70
Osher, John, 83
Other assets, 268
Outdoor Industry Association, 690
Outdoor media, as advertising media, 452
Out of the Cubicle and Into Business
(Strickland), 210
Outside-in analysis, 71–77
Outsourcing
as B2B trade, 247–248
de?nition of, 563
international, 472–473
of purchasing, 563–565
Overstock.com, 250
Ownership
transfer of, 141, 214, 215
voting control, 313, 316
Ownership equity, 270
Owner’s value, 696–697
P
Pacesetting leaders, 497
Paci?c Data Designs, 320
Paci?c Writing Instruments, 575–576
Package policy, 617
Packaging, 402–403
PAETEC, 37
Page, Larry, 4
Palmer, Jay, 95
Pampered Chef parties, 383
Panel Study of Entrepreneurial Dynamics
(PSED), 64–65
Papock, Melissa Marks, 65
Paragon, 624
Pareto chart, 560
Parker, Charlie, 8
Parking Spot, 401
Parsa, H. G., 630
Partially self-funded programs, 611–613
Partnership
comparisons to, 214–215
de?nition of, 207
failure of, 211
income taxes, 215
percentage of new businesses, 213
quali?cations for, 207–209
rights and duties in, 209–210
termination of, 210, 214
Partnership agreements, 209
Paso a Pasito Family Child Care, 10
Patagonia, 686, 690, 691
Patents
de?nition of, 408
on unique product features, 182
Payback period technique, 593–594
Payne, Bill, 327
Payne, Dusty, 628
PayPal, 250, 430
Peace Frogs, 480
Peale, Norman Vincent, 49
Pearson, Bob, 669–671
Pearson, Scott, 669–671
Pearson Air Conditioning & Service, 669–671
Pedolsky, Howard, 466
Pei Wei Asian Diner, 634
Penetration pricing strategy, 426–427
Pennington, Holly, 478
Percentage-of-sales technique, 294–295
Perception, 381
Perceptual categorization, 381
Perfect Courier, 653
Performance reviews, 122, 542
Perfume Bay, 246
Peril, 604
Period Papers, 230–231
Perpetual inventory system, 557
Personal experience, startups and, 65
Personalization, as focus strategy, 79–80
Personalized Bottled Water, 79–80
Personalized pricing strategy, 428
Personal property, 603
Personal referrals, 445
Personal savings, 318
Personal selling, 444–449
cost control, 448
de?nition of, 444
product knowledge and, 444–445
relationship selling, 447–448
salespeople compensation, 448–449
sales presentation, 445–447
Personal time management, 512–513
Personnel recruitment, 522–529. See also
Human resource management (HRM)
diversity in workforce, 527–528
job descriptions, 528–529
need for quality employees, 522–524
sources of employees, 524–527
Personnel risks, 608–609
Pezman, Steve, 628, 629
Pfe?er, Je?rey, 530
Phenix and Phenix, Inc., 535
Phifer, Sherwood T. “Woody,” 29
Phillips Seafood, 102
Physical distribution
aspects of, 412–413
de?nition of, 410
Physical examinations, job applicants, 533
Physical facilities, 239–241
business image and, 241
designing of, 239
equipping of, 239–241
global businesses and, 481–482
Physical inventory system, 556
Piecework, 539
Piercing the corporate veil, 213
Piggyback franchising, 96
Piggyback marketers, 487
PlanetFeedback.com, 370
Plank, Kevin, 564
Plant patent, 408
Pledged accounts receivable, 587
Pluck, 252
Poka-Yoke, 560–561
Polak, Alicia, 52
Poland, 473
Polaroid, 408
Political/legal trends, 71
Political risk, global business, 483
Pollock, Josh, 474–475
Polo, Marco, 468
Poor Richard’s Almanac (Franklin), 94
Pop-up ads, 453
Porter, Jim, 352, 353, 355
Porter, Michael, 72–73, 82, 85
Poss, James, 54
Post-purchase customer
evaluation, 379–380
Potomac River Running, 694
Power of Ethical Management, The (Blanchard
and Peale), 49
Power of Nice, The (Thaler and Koval), 499
Predator/parasite con?icts, 132
Pre-emptive right, of stockholders, 212
Preferred provider organization (PPO),
617–618
Premier Inc., 413
Premier Pet Products, 392
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Index 740
Presentations
business plan, 163–165
delivery tips, 510, 511
sales, 445–447
Prestige pricing, 422
Prete, Michael, 567
Price, 419
Price, Heidi Smith, 16
Price, Mark, 628–629
Price, setting of, 419–423
cost determination for, 419–420
customer demand and, 420–423
Price Improvement Team, 658
Price lining strategy, 428
Pricing and credit decisions, 418–436
credit management, 432–436
o?ering credit, 429–432
pricing strategies, 426–429
pricing systems, 423–426
setting prices, 419–423
Pricing section, of marketing plans, 183
Pricing strategies, 426–429
dynamic pricing, 428
follow-the-leader pricing, 427
penetration pricing, 426–427
price lining, 428
skimming pricing, 427
variable pricing, 428
Pricing systems, 423–426
break-even analysis, 423–425
markup pricing, 425–426
Primary data, 186–187
Prime rate, 323
PrintPaks, 356
Pritzker, Penny, 401
Privacy, 45–46
Private carriers, 412
Private employment agencies, 525
Private equity investors, 327–330
Private placement, 332, 348–350
Procter & Gamble, 82
Product, 405
Product advertising, 450
Product and supply chain management,
389–413
channels of distribution, 410–413
innovation and, 391–395
legal issues in, 406–409
new product development, 397–398
operational growth and, 390–391
product life cycles, 396
product strategy, 404–406
supply chain management, 409–410
total product, 398–404
Product and trade name
franchising, 95
Production-oriented philosophy, 177, 178
Product item, 404
Product knowledge, in personal selling, 444–445
Product life cycle, 396
Product life cycle extension, 470–471
Product line, 404
Product mix, 404
Product mix consistency, 404
Product/service plan
de?nition of, 159
in marketing plans, 181–182
Product strategy, 404–406
de?nition of, 404
options for, 406
product marketing vs. service marketing,
404–405
Professional corporation, 217
Professional employer organization (PEO),
540–541
Professional managers, 500
Pro?tability
?nancing and, 312–315
forecasting of, 289–290
Pro?t and loss statements, 263
Pro?t retention, 310
Pro?ts before taxes, 263, 264
Pro forma statements
in cash ?ow forecasting, 300–301
de?nition of, 160, 287
examples of, 290
Project manufacturing, 552
Promotion, 441
Promotional mix, 442
Promotional planning, 440–460
advertising practices, 449–457
budgets, 443–444
communication process, 441–443
personal selling, 444–449
sales promotional tools, 457–460
Promotional Products Association
International, 458
Promotion section, of marketing plans, 183
Property insurance, 615–616
Property risks, 603–605
Prospecting, 445
Prospectus (o?ering memorandum), 164–165
Proximate cause, 607
Pryor, Alex, 184
PSC Info Group, 277
Psychological examinations, 532
Psychological in?uences, on customers,
381–382
Public employment o? ces, 525
Publicity, 458–460
Public sale, of stock, 332
Pugsley, Cathy, 694
Pugsley, Ray, 694
Pulte Homes, 219
Punitive damages, 607
Purchase-order ?nancing, 326
Purchasing, 562–568
coops, 565
forecasting supply needs, 567–568
information systems, 568
make-or-buy decisions, 563
measuring supplier
performance, 566
outsourcing, 563–565
relationships with suppliers, 566–567
strategic alliances and, 567
supplier diversi?cation, 565
via Internet, 565
Purchasing power, 189
Pure risk
de?nition of, 603
liability risks, 605–608
personnel risks, 608–609
property risks, 603–605
Q
Qara Argentina, 482
Q3 Innovations, 252
Quality, 557–562
certi?cation for, 561–562
as competitive tool, 557–558
customer focus and, 558
de?nition of, 557
inspection vs. poka-yoke, 560–561
product vs. service, 558
in service businesses, 562
statistical methods of, 561
“The Basic Seven” tools of, 560
Quality circles, 560
Questionnaires, 186–187
Quintillion software, 231
Quiznos, 100–101
R
R. J. Grunt’s, 559
Radar Corporation, 69
Radio, as advertising media, 451–452
Radio Tag, 78
Raheja, Raj, 76
Raimondo, Tony, 481
Rainbow International, 96
Ramirez, Austin, 140
Rancatore, Gus, 42
Rancatore, Mimi, 42
Rapaport, Bernard, 25
Raphael, Rose Anne, 242
Raw materials, 236
Real estate mortgages, 321
Real property, 603
Reasonable (prudent person) standard, 606
Receivables starvation case, 299–300
Recession, 3
Reciprocation, 205
Recruit or Die (Resto, Ybarra and Sethi),
523–524
RedPeg Marketing, Inc., 694
Reeboot Strategy, 12–13
Reference checks, 531
Reference groups, 383–384
Referrals, 445
Refugees, 12
Regeneration Partners, 319
Regus Group PLC, 238
Reilly, Edward, 366
Rejuvenation Lamp and Fixture
Company, 376
Relationship selling, 447–448
Reliability, testing, 532
Reluctant entrepreneurs, 12
RentACoder.com, 248
Repayment schedule, 323–324
Repetitive manufacturing, 552
Replacement value method, 697
Replacement value of property, 604
Research. See Marketing research
Resources
availability of and location
selection, 236
for business plan preparation, 165–168,
170–172
tangible/intangible, 74
Resources, inside-out analysis, 74
Responsible Entrepreneur, The (Hall), 57–58
Resto, Chris, 523–524
Retailer credit cards, 432
Retailing equipment, 240
“Retail is detail,” 558–559
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Index 741
Retained earnings
de?nition of, 270
as equity capital, 296
Retargeted advertising, 453
Retirees, 21
Retirement income, 609
Return on assets
de?nition of, 278, 314
overview of, 279
Return on equity, 280, 314
Revolution Motors, 393
Revolving charge account, 431
Revolving credit agreements, 320–321
Reyna, Chuy, 629
Reynolds, Paul, 20
Rhoads, Je?, 429
Rice University, 164
Rich Dad, Poor Dad (Kiyosaki), 390, 451
Risk
critical, 159–160
?nancial, 315–316
Risk control, 611
Risk ?nancing, 611–613
Risk management, 601–619
business risk, 603
de?nition of, 609
principles of insurance programs,
613–615
process of, 609–613
types of insurance programs, 615–619
types of pure risk, 603–609
Risk retention, 611
Risk transfer, 611
Risucci, Damon, 422
RMA (Risk Management Association) Annual
Statement Studies, 288
Roberson, John, 540
Robert Morris Associates, 293
Roche, Colin, 575–576
Rockell, Phil, 251
Rockell, Stephanie, 251
Rodgers, Pamela, 362, 654–655
Rodgers Chevrolet, 362, 654–655
Rogers, Steven, 632
Romanov, Alex, 410–411
Romanov, Ilya, 411
Ronnenbaum, Chad, 252
Ronsse, Bobby, 575–576
RoofAds, 72
Rosborough, Greg, 165
Rosenblum, Pete, 78
Ross, Glenn, 497
Rotary Club, 204
Rothenberg, Randall, 63
Rottenberg, David, 222
Rotter, J. B., 21
Roux, Clive, 576
Royalties, 480
Royalty payments, 102
Rubin, Joe, 329
Run chart, 560
Russia, 469–470
Ruth?eld, Scott, 524
Ryan, Patrick, 311
Ryan Brothers Ambulance Service, 311
S
Saber, Jay, 72
Sabre, Steve, 635
Sahlman, William A., 73, 164
Sales & Marketing Management
(magazine), 195
Sales forecast
de?nition of, 193
limitations of, 194
in pricing process, 425
process of, 195
Sales-oriented philosophy, 177, 178
Salespeople compensation, 448–449
Sales presentations, 445–447
Sales promotion, 457
Sales promotional tools, 457–460
publicity, 458–460
specialty items, 457–458
trade show exhibits, 458
use of, 460
Sales representatives, 448
Salmans, Scott J., 30, 33, 341, 523
Sampling error, 561
Samwer, Alexander, 74
Samwer, Mark, 74
Samwer, Oliver, 74
Sanders, Dan J., 363
Sanders, George, 235
Sandoz, Eric, 393
Santoli, Lorraine, 68
Sarbanes-Oxley Act (2002), 332, 348
SAS Institute, Inc., 374
Satterwhite, Stephen, 324
Saudi Arabia, 467
Savarese, Chris, 69
SBA. See U.S. Small Business
Administration (SBA)
Scatter diagram, 560
Scheduling, operations, 552–553
Scheer, Ken, 69
Schell, Jim, 643–645
Schlosser, Eric, 231
Schultz, Howard, 20
Schumpeter, Joseph, 391–392
Scienti?c Intake, 392
SC Johnson Company, 123
Scogin, Hal, 209
S corporation
de?nition of, 216
percentage of new businesses, 213
scope of, 216–217
Scully, Barbara, 660–661
Seabury, Gordon, 624
Seahorse Power Company, 54
Search Engine Advertising (Seda), 456
Search engine optimization (SEO), 456
Search Wizards Inc., 16
Sears, 364
Secondary data
de?nition of, 185
sources of, 185–186
Securities and Exchange Commission (SEC),
332, 346, 348, 349
Seda, Catherine, 456
Seeing What’s Next (Anthony), 19
Segmentation variables, 190
Selame, Elinor, 401
Self, Tyler, 20
Self-employment. See Sole proprietorship
Self-insurance, 611
Seller ?nancing, 343
Sellers, 84–85
Seller’s remorse, 356
Semel, Scott, 391
Semprevivo, Joseph, 31, 626–627
September 11, 2001 terrorist attacks, 606
Serendipity, 65
Service business
operations in, 549–551
planning and scheduling, 553
process of, 551
quality in, 562
Service Corps of Retired Executives (SCORE),
167, 515, 631
Service marks, 402
Sethi, Ramit, 523–524
7(A) Loan Guaranty Program (SBA), 330
Seven Habits of Highly Successful People, The
(Covey), 24
7(m) Microloan Program (SBA), 331
Sevin Rosen Funds, 329
Sewell, Carl, 373
Sewell Village Cadillac, 373
Sexual harassment, 541
Shapiro, Brendan, 694
Shapiro, David, 40
Shapiro, Margie, 694
Shepherd Auto Sales, 612
Shera, Lolly, 237
Sherman, Andrew, 40
Sherman Antitrust Act (1890), 428
Shipman, Marisa, 243
Shipman Associates, Inc., 243
Shirky, Clay, 61
Shogren, Alex, 65
Shopping.com, 453
Short-range plans, 504
Short-term liabilities, 268
Short-term notes, 269
Shotgun clause, 639, 640
Shuman, Je?rey, 222
Shurman, Anthony, 423
Sikes, Mark, 79–80
Silicon Valley, 14
Sims, Dorothy Clay, 473
Singer Sewing Machine, 94
Single-segment strategy, 192
Siriaphanot, Supranee, 635
Site availability and costs, 237–239
Site Selection (magazine), 234
Six Flags, 553
Skills-based volunteerism, 40
Skimming price strategy, 427
Skype, 466, 473
Slack, Gary, 451
Slack Barshinger, 451
Slinger, Mick, 342–343
Sloan, David, 344
Small business, 5–6
Small Business Administration. See U.S. Small
Business Administration (SBA)
Small Business Development Centers (SBDCs),
167, 171, 516
Small Business Gateway (EPA website), 53
Small Business Innovative Research (SBIR)
Program (SBA), 331
Small business investment companies (SBICs)
(SBA), 331
Small business marketing, 176
SMART, 542
Smarter.com, 662–663
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Index 742
Smith, Garry, 126
Smith, Gordon, 349
Smith, Norman R., 15
Smith, Tim, 164
SmithBucklin Corp., 345
Smoot, JC, 458
Smoot, Reid, 458
Smyk, Stephen, 242
Social capital, 205
Social classes, 383
Social entrepreneurship
de?nition of, 52
emerging trend, 52–54
Social networks
de?nition of, 204
examples of, 74, 204, 445, 455, 456
impersonal referrals on, 445
purpose of, 204–205
Social responsibilities
de?nition of, 39
small businesses and, 39–41
Social Security Administration, 618
Social shopping websites, 460
Sociocultural trends, 71
Sociological in?uences, on customers,
382–384
Softsoap, 82
Software. See also speci?c software
a?ordability of, 19
anti-spam, 453–454
in business plan preparation, 166–167
IVR, 370
spam preview, 454
The Solar Store, 218–219
Sole proprietorship
comparisons to, 214–215
de?nition of, 205
dissolution upon owner’s death, 214
income taxes, 215
percentage of new businesses, 213
scope of, 205–207
Sologig.com, 248
Solon, 602
Someday Café, 42
Southwest Airlines, 410, 550
Southwest Securities, 354
Space Adventures, Ltd., 81
Spain, 480
Spaly, Brian, 203
Spam, 453–454
SpamWeed software, 454
Spanglish Diseño, 10
Span of control, 506
SPANX, 500–501
Spartan Constructors LLC, 16
Special-purpose equipment, 240
Specialty Blades, Inc., 349
Specialty items, promotional, 457–458
Speci?c stop loss limit, 611–612
Spin Automotive Group, 80, 82
Spinelli, Stephen, 18, 22
Spira Footwear, Inc., 175, 181–183, 195
Spirer, Lowell J., 122
Spirit Airlines, 78
Spirit of Asia, 478
Spolsky, Joel, 522
Spontaneous debt ?nancing, 295, 310
Spook.com, 456
SportStation.com, 429
Stakeholders, 33–43
customers, 36–37
de?nition of, 34
employees, 37, 39
ethical issues, 33–34
government and, 36, 41–43
owners’ interests, 34, 36
social responsibilities, 39–41
Standard & Poor’s 500 Index, 122
Staples, 150
Starbucks, 75
Startups, 60–86
analyses of ideas, 71–77
de?nition of, 62
feasibility of, 83–86
innovative thinking, 67–70
sources of ideas for, 64–67
strategy selections, 77–82
types of ideas for, 62–64
States
enterprise zones in, 235
as ?nancing source, 331
variance of taxes in, 234–235
Statistical inventory control, 555
Statutory liability, 605–606
Steelcase, Inc., 38
Steingold, Fred, 209
Stella & Dot, 148
Stemberg, Thomas, 150
Stevens, Mark, 163
Stevens, Terry, 327
Stewart, Cecilia “Chia,” 6–7, 16
Stewart, J. O., 25
Stewart, Martha, 11, 398
Stiberman, Sergio, 68
Stillman, Polly, 127
Stites, Jack, 18
Stites, John “Johnny” II, 18, 30, 43, 259, 351, 372
Stock certi?cate, 212
Stockholders, 212, 216, 222
Stock incentives, 539
Stock sales, 332–334
Stone, Christie, 515
Stoner, Todd, 180
Stony?eld Farms, 690
Storage, 412
Stratasys, Inc., 400
Strategic alliance matchmakers, 221
Strategic alliances, 218–222
Strategic decisions, 80
Strategic plans, 504
Strategy, 77
Strickland, Lea A., 210
StudVZ, 74
StyleFeeder, 460
Subchapter S corporation, 216–217
Subcultural analysis, 383
SUBWAY Restaurants, 98, 501
Supplier diversi?cation, 565
Supply chain management, 409–410
Supply Chain Operations Reference (SCOR)
model, 566
SurveyMonkey, 184
Survey of Buying Power (magazine), 195
Survey of Current Business report, 194
Surveys, 184–189
Sustainable competitive advantage
de?nition of, 394
innovation and, 394–395
Sutter Hill Ventures, 352
Swartz, Addie, 398–399
Swartz, John Roscoe, 286
Sweet spot, 76
SWOT analysis
competition, 180
de?nition of, 75
examples of factors, 75
integration of analyses, 75–77
Synchronous management, 569–570
Synergy Fitness Club, 422
T
Table Occasions, 6–7
Taghaddos, Siamak, 421
Tag lines, 329, 450
Tanenbaum, Stephen, 165
Tangible resources, inside-out analysis, 74
Target, 401
Target markets, 189–193
Tau Publishing, 311
Taxable pro?ts, 263, 264
Taxes
home-based business and, 244
income, 215–217, 234–235
nonpayment of, 41–42
on pro?ts, 263, 264
state, 234–235
transfer of ownership and, 141
Tech Image, 345
Technological trends, 71–72
Technology
corporate investment in, 332
CRM and, 373–375
fused deposition modeling, 400
green, 54
in home-based businesses, 244
innovation vs., 19
startup ideas and, 63, 69–70
trends in, 71–72
Technovative, 220
TechStars, 21
Telephone surveys, 184
Television, as advertising media, 451–452
Tempest, The (Shakespeare), 495
Temporary help agencies, 525–526
Term loans, 321
TerraCycle, 685, 687
Tessie and Tab (magazine), 356
Testing, job applicants, 532
Thailand, 628
Thaler, Linda Kaplan, 499
Theft, 39
Third-party logistics ?rms (3PLs), 413
ThisNext, 460
Thomas, Joyce, 242–243
Tico Beans Co?ee, 515
Tillis, Cedric, 333
Time savers, 512–513
Timmons, Je?ry, 18, 22
TissueKups, 68
The Title Place, 13
Tom’s of Maine, 690
The Tool Shed, 180
Toots Shor’s, 440
TOPICS Entertainment, 220–221
Tortilla King Inc., 344
Tort liability, 606–608
Torts, 606
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Index 743
Toscanini’s, 42
Total asset turnover, 279
Total cost
de?nition of, 419
pricing and, 419–420
Total product, 398–404
branding, 398–399, 401–402
labeling, 403
packaging, 402–403
warranties, 403–404
Total quality management (TQM), 557–558,
667–668
Tote Le Monde, 65–66
Toy Fair 2007, 458
Toyoda, Shoichiro, 568
Toyota Motors, 568–569
Toyota Production System (TPS), 569
Trade associations, 293, 451
Trade credit
de?nition of, 268, 269, 431
pricing and, 432
from suppliers, 325, 649–651
Trade-credit agencies, 434
Trade dress, 409
Trade intermediaries
de?nition of, 486
examples of, 487
Trade leads, 486
Trademarks
de?nition of, 402
legal issues in, 407–408
Trade missions, 486
Trade names and trademarks, 98, 181
TradePort, 486
Trade secrets, 182
Trade shows, 186, 458
Tradewind Strategies, 466, 470
Training, 533–538
Train Runner (magazine), 684
Tran, Jacquelyn, 246
Transactional relationships, 366
Transaction-based model, E-commerce, 251
Transfer of ownership, 141
Transportation, 236, 412
TransUnion, 434
Le Travel Store, 641–642
Trebond, Isabella, 187
Trends and countertrends, 68, 71–72
Troubled Asset Relief Program (TARP), 311
Troutwine, Chad, 394
Trump, Donald, 32
Truth-in-Lending Act (1968), 436
Tsao, Harry, 662–663
Twenty-foot rule, 380
24-hour rule, 368–369
24/7 e-tailing, 248
Twin Star Industries, 460
Twitter.com, 204, 445
Two-bin inventory system, 557
Twombly, Janice, 222
Tyco, 332
Type A ideas, 63
Type B ideas, 63–64
Type C ideas, 64
U
Ugallery.com, 165
Ukrop’s Super Markets, 47–48
Uncle Dan’s, 624
Under Armor, 564, 687
Underlying values, 47
Understanding Your Financial Statements
(Schell), 643, 645
Unger, William, 356
Uniform Franchise O?ering Circular
(UFOC), 110
United Companies Inc., 585
United Kingdom, 481, 482
United Knitting, 681
United Parcel Service (UPS), 413, 567, 605
Unity, 128
Univenture Media Packaging, 566
University of Alabama, 238
University of Southern California, 165
University of Texas, 165
Unlimited liability, 206
Unsatis?ed needs, 190
Unsegmented strategies (mass marketing),
190–191
Urban Science, 234
U.S. Census Bureau, 9, 195, 234
U.S. Copyright O? ce, 408
U.S. Customs and Border Protection, 480
U.S. Department of Agriculture, 403, 479
U.S. Department of Commerce, 195, 454,
466–467, 478. See also speci?c divisions
U.S. Department of Labor, 527–529
U.S. Environmental Protection
Agency (EPA), 53
U.S. Export Assistance Centers
(USEACs), 485
U.S. Federal Trade Commission (FTC), 103,
109, 110, 403
U.S. Food and Drug Administration, 403
U.S. Patent and Trademark O? ce (USPTO),
407–408
U.S. Small Business Administration (SBA).
See also speci?c divisions
business plan preparation, 167
on environmental laws, 53
on exporting, 476–477
as ?nancing source, 330–331, 488
franchisee loans, 100
global businesses and, 488
on restaurant failure rates, 630
small ?rms contribution to economy, 3
websites, 100, 631
USAToday
on customer service, 369–370
Utility patent, 408
V
Valcheron, Alfred, 393
Validity, testing, 532
Valkirs, Gunars, 200
Valpak, 105–106
Valuation based on comparables, 697–699
Valuation methods, 696–700
asset-based valuation, 697
based on comparables, 697–699
cash ?ow-based, 699–700
Values, 47, 126
Value-to-earnings ratio, 697–698
Vance, Libby, 687, 693
Vander Baan, Leslie, 80, 82
Van Dyke, Chris, 623–625
Van Meter Industrial, Inc., 342–343
Variable costs, 420
Variable pricing strategy, 428
Variables, statistical, 561
vAuto.com, 366–367
Vehar, Jonathan, 498
Vellmure, Brian, 364
Veloso, Rodrigo, 165
Ventura Transfer Company, 137
Venture capital ?rms, 328–330, 528
Veritas Prep, 394
Vérité Co?ee, 20
Vernon, Raymond, 470
VetFran Directory (IFA), 99
Virtual business incubators, 515
VISA, 432
Visador Corporation, 341, 699
Visionary leaders, 496
Visioni Research Organization, 20
Vital Marketing, 498
Voting control, 313, 316
W
Wadhawan, Neil, 76
Wage and salary levels, 538, 666
Walgreens, 548
Wall Street Journal
on business equipment ownership,
239, 240
franchising opportunities in, 103
on LIBOR rates, 323
online ads for business sales, 631
on Web 2.0 usage, 374–375
Wal-Mart Stores, Inc., 96, 122, 501, 548, 559
Walmsley, Lee, 457
Walmsley, Rhonda, 457
Walsh, Steven, 525
Walt Disney Company, 124, 480
Walton, Sam, 501
Ward, John L., 134
Warranties
in customer service plans, 181–182
de?nition of, 403
total product and, 403–404
Warren, Neil Clark, 636–637
Waste, elimination of, 568–569
Watermarket Store, 79
Wayne, Nate, 130
Wayne, Tamiko, 130
Wealth, 11–12
Web 2.0, 374–375, 526. See also Blogging
Web advertising, 452–457.
See also Blogging
a? liate programs, 453
banner ads and pop-ups, 453
corporate websites, 454–456
direct e-mail promotion, 453–454
domain names, 454
promotion of sites, 455–456
pros and cons, 452
search engine listings, 456
sponsorships and linkages, 454
user-friendly sites, 454–455
Web design tips, 455
Weblog. See Blogging
Web logging, 251–252
Websites. See also eBay; Social
networks; Web advertising
A.G.A. Correa & Son, 661
Alando.de, 74
Amazon.com, 248
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Index 744
angel investors, 328
Association for Enterprise
Opportunity (AEO), 333
Atayne, LLC, 687
BareBabies.com, 391
BeautyEncounter.com, 246
billybobteeth.com, 251
Biosite, Inc., 200
Blogger.com, 457
Bonobos, 203
bounce rates, 455
BuiltNY, 286
BusinessPartners.com, 208
CareerBuilders.com, 526
Center for International Business
Education and Research, 486
Certi?ed Business Brokers, 112
Charge.com, 430
Chocolate Bar, 464
CNNMoney.com, 454
Commercial Service (exports), 478
Copywriting.com, 450
Country Supply, 657
CouponMountain.com, 662
CRMGuru.com, 366
design tips, 182, 455
Dun & Bradstreet, 434
Dylan’s Candy Bar, 395
Easyjournal, 252
eHarmony.com, 636
Elance.com, 248
Entrepreneur magazine, 67
EPA, 53
Expedia.com, 410
Facebook.com, 204, 445
Federation of International Trade
Associations, 486
Foley’s NY Pub & Restaurant, 440
Franchise Registry (SBA), 100
FundingPost.com, 329
GlassTileStore.com, 249
GlobeSt.com, 459
Goshow Architects, 494
Government Liquidation, 459
Graphic Arts, 402
Guayaki Sustainable Rainforest
Products, Inc., 184
Guru.com, 248
Hardy Boat Cruises, 661
Headsets.com, 537–538
Horse.com, 389
Inc. magazine, 644
Inc.com, 292
Institute of Management
Consultants USA, 516
International Licensing Industry
Merchandisers’ Association, 659
IRS, 216
Kaboodle, 460
Kellogg’s, 626
Kosher.com, 248
LeaseTrader.com, 68
Leidenheimer Baking Company, 601
LinkedIn.com, 204, 445
MarketingProfs.com, 450
Marketresearch.com, 634
Modern Postcard, 547
Monster.com, 526
MySpace.com, 204, 445
National Association of Professional
Background Screeners, 531
National Association of Professional
Employer Organizations, 541
Nau, 624
Nicole Miller Inc., 418
oDesk.com, 248
1-800-FLOWERS.COM, 374
On-Hold Guy, 369
Overstock.com, 250
PayPal, 430
PlanetFeedback.com, 370
Promotional Products Association
International, 458
RentACoder.com, 248
Rodgers Chevrolet, 362
SBA, 100, 631
SCORE, 631
Shopping.com, 453
Site Selection magazine, 234
Smarter.com, 662
for social networks, 204
social shopping, 460
Sologig.com, 248
Spira Footwear, Inc., 175
Spook.com, 456
SportStation.com, 429
Stella & Dot, 148
StyleFeeder, 460
SurveyMonkey, 184
ThisNext, 460
TradePort, 486
Twitter.com, 204, 445
Ugallery.com, 165
U.S. Census Bureau, 234
U.S. Commerce Department, 485
U.S. Copyright O? ce, 408
U.S. Customs and Border Protection, 480
U.S. Federal Trade Commission, 103, 110
U.S. Small Business Administration, 185
USPTO, 407
vAuto.com, 366
Wall Street Journal business sales
ads, 631
WhatsBuzzing, 460
White?ash.com, 455
White Mountain Footwear, 401
WhitePages.com, 524
WordPress.com, 21, 457
Yelp.com, 204
Zappos.com, 498
Zillow.com, 72
Web sponsorship, 454
Weetjens, Bart, 53
Wehrum, Kasey, 292
Weiner, Louis, 652
Weinroth, Adam, 252
Weiss, Allen, 450
Weiss, Carter, 286
Wente, C. H., 132
Wente Vineyards, 132
Werner, Ben, 393
West, Jack, 93, 98
Wetpaint, 455
Wettach, Megan, 4
Wetzel’s Pretzels, 37
Wexler, Debbie, 455
Whann, Sandy, 601–602
WhatsBuzzing, 460
Wheaties, 450
Wheeler, Scott, 527
White, Steven, 136
White?ash.com, 455
White Mountain Footwear, 401
WhitePages.com, 524
Whiting, Ben, 218
Wilkes, Carol, 8
Wilkinson, Huber, 251
Wilkinson, Jane, 251
Willis, Ethan, 164
Wilson, Ron, 646–648
Wilson, Ron L., II, 392
Windows Live Local, 72
Windows of Opportunity, 53
Wingstop, 99
Win–win negotiation, 510–511
Wolfe, Winston, 30, 168, 288, 401
Women entrepreneurs, 15–17
Women’s Business Enterprise, 16
Wong, James, 288
WordPress.com, 21, 457
Workers’ compensation insurance, 616–617
Workers’ compensation legislation, 605
Workforce diversity, 527–528
Working capital, 291
Working-capital cycle, 576–578
Working-capital management, 576
Working Excellence, 694
Work made for hire, 408
Work teams, 497
WorldCom, 332
World Is Flat, The (Friedman), 18
World Trade
on trade markets, 485–486
Wou, Tia, 65–66
Wright, Perry, 369
WriteBrain Media, 457
Wrobel, Leo A., 612
W.S. Darley & Co., 632–633
X
Xerox Company, 408
Y
Yadav, Anil, 107
Yahoo!, 248, 311, 456, 524, 526
Yarbrough, Nichole, 612
Ybarra, Ian, 523–524
Yelp.com, 204, 445
Yen, Eve, 664–665
Ylitalo, Troy, 230–231
Yolles, Ian, 623–625
Yosha Enterprises Inc., 423
Young Presidents’ Organization, 513
Youngs, Ross O., 566
YouTube, 456
Yuku, 455
Yum! Brands, 99
Z
Zappos.com, 498
Zaslow, Bryan, 292
Zennstrom, Niklas, 466
Zero State Capital, Inc., 352
Zillow.com, 72
Zimmer, George, 531–532
ZIPS Dry Cleaners, 99
Zoning ordinances, 243
Copyright 2009 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
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