LESSON 1 Business Infrastructure

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LESSON 1 Business Infrastructure
"Imagination is more important than knowledge
because knowledge is limited, whereas imagination
embraces the entire world."               ..Alber
t Einstein
Introduction Identify a business owner that you
think is really successful...and what factors
appear to contribute to his/her success.
Objectives  Identify personal characteristics
that are critical for small business ownership. 
And, what type of venture is best for your
style. Describe the vision, mission and
infrastructure needs (bank, physical location,
utilities) of the business venture you intend to
work on during this course.
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Lecture point one
Several personal qualities will be necessary to
successfully establish and run a business.  Take
a moment to assess your strengths and weaknesses
in four critical areas  promotion, financial,
operational, and personal.  Your evaluation of
your promotional skills should focus on your
abilities to plan, negotiate and follow-up on
sales contacts evaluate competitors plan and
execute advertising, promotion and public
relations efforts and develop strategies that
include effective pricing, distribution and
packaging.
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Examination of your financial acumen will
consider your ability to do cash flow planning,
budgeting, day-to-day bookkeeping, periodic
analysis, and tax preparation.  Closely aligned
to that, your examination of operational skills
will identify strengths and weaknesses in
employee management, general business logic,
scheduling of activities, and trouble-shooting
for potential problems. 
Finally, an examination of your personal
qualities will consider your oral presentation,
written communication and technical (computer,
etc.) skills as well as your ability to work
with others, handle stress, deal with setbacks,
and making decisions by yourself.  It is
important to keep in mind that you don't need to
have high marks in all areas, but you should have
an initial "savvy" from which to learn. 
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The first thought process that should be
encountered in this course should surround the
idea of your skills and personal makeup as they
relate to the concept of self-employment. 
Typically, the best entrepreneurial candidate
will be someone who seeks release from the
constraints of a routine job, or is skilled at
their craft and determines that they would rather
put that talent to work for themselves. Be
forewarned that in no way will successful small
business ownership create a lot of extra time.  I
have a favorite saying..."If you go into business
for yourself, you only have to work
half-days...then you can do whatever you want
with the remaining twelve hours."  You will
likely work long hours and trade one boss
telling you what is wanted for as many people as
you have customers telling you what they want.
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This sounds like a dismal picture, but your quest
to satisfy those many customers will prove to be
very satisfying--when it's for your business. 
That driving force will unleash your creativity
and energy to produce your core product/service. 
It will also, at times, tax your dedication when
you must also do business functions you don't
like--for example, your daily record keeping and
tax reports.  We'll deal with that later in the
course. To help you evaluate your readiness
for a business venture, take a few moments to
honestly evaluate your personal strengths and
weaknesses on the checklist that is found on
pages 7 and 8 of your textbook.  When you are
done, you should calculate your score and read
the author's evaluation.  As with any quick
test of this nature, it is only a modest
indicator of probable success, but should
provide some insights regarding what part of
your preparation needs work.
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• According to some research, one in five
  people--regardless of nationality, gender or
  education--has what it takes to succeed in small
  business.  It also indicates that most
  entrepreneurs
• dislike working for others--unless they are
  customers
• require little sleep to keep their
  energy-quotient high
• have poor family skills (their business comes
  first)
• those that do balance family and work, involve
  spouses and
• children in the business
• often copy the successful ideas of others (many
  of which are
• large businesses)
• frequently sell one business to start another
  (they get bored)
• are often mavericks and not good team players
• usually bet their own money (not others' capital)
  on the venture
• dislike partnerships--even though they could use
  more input
• hold high regard for producing a high-quality
  effort
• raises his/her ethical standards
• because their own name is at stake
• make mistakes, but remember what
• went wrong and learn from them

1/5
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               Its time to get started on
your first reading assignment. I have
developed a series of questions that will guide
you to the most important points to remember in
each reading assignment.  These are to be
completed and sent to me for evaluation by the
due date on the course schedule. Click here for
Study Quiz One. Just in case you skimmed over
it in your reading, take another look at the
section "Matching Your Skills with New Business
Ideas", starting on page 13. If you didn't
evaluate your personal situation already, take a
moment to assess your current entrepreneurial
skills.  Keep in mind that even the very
successful entrepreneurs don't have the full
complement of skills needed.  They seek help for
the areas where they are weakest. You should do
this as well.
This reading
assignment will focus on chapters one through
four, which focus on personal and financial
start-up issues.
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Lecture point two
One of your startup decisions could be whether to
start from scratch, buy an existing business, or
buy a franchise.  Here are some questions that
may help clarify your thoughts.

• Answer "yes" to these questions before starting
  from scratch
• Do you have an idea that appears to be unique or
  unique spin on
• an existing idea?
• Do you honestly think your ideas are the best
  ideas around?
• Do you enjoy being on the edge...alone?
• Are you willing to plan all the details for each
  step to be taken?
• Is your idea on fire inside your head?

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• B. Answer "yes" to these questions before you buy
  an existing
• business
• Do you know of a business that is for sale, and
  are drawn to it like a
• magnet?
• Is that business doing well, but you have an idea
  to make it grow and
• prosper?
• Do you enjoy tweaking existing systems to improve
  them?
• Do you follow through on details?
• Do you think cleaning up someone else's mess is
  fun?

• C. Answer "yes" to these questions before you
  enter a franchise
• agreement
• Do you want to be taught how to run a
  business?
• Do you want to walk into an existing system?
• Do you need help with technology,
  telecommunications, and
• determining a location?
• Do you enjoy "going by the book" and following
  others' directives?
• Source Hattie Bryant's book, Beating the Odds
  (Prima Publishing)

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Your assessment of your existing skills and/or
your ability to acquire other needed skills will
be a major input toward your decision regarding
the type of business venture you choose.  Your
text also clarifies many of the issues associated
with franchising.  Take time to evaluate the
advantages and disadvantages you could encounter.
Not just any business will succeed.  Careful
analysis of environmental trends must be matched
to your personal skills and needs.  What are the
hottest business areas today?  You will want to
follow the lead of a surfer...catch the wave as
it begins its swell and ride it as it matures. 
You don't want to start a business that is
starting its downward trend.  Look for trends
that show growth is on the horizon.
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What's hot today?  Is there a trend for fitness? 
This could produce business ventures specializing
in clothing for running, exercising, and biking
or healthy food offerings, etc.  Is there a trend
toward social consciousness?  This could lead to
opportunities relating to the biodegradable,
ozone preservation, or anything that doesn't
pollute categories.   Since both spouses seem to
work and there are many single-parent
households, is time precious?  You could provide
any service that gives people the most for their
time planning and organizing their time could be
valuable.  Always test the trend that affects
consumer behavior and adapt a business venture
that capitalizes on that trend when it is near
the starting-point.
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Lecture Point Three
Picture yourself in a new venture. What
challenges would you need to overcome? Click
here to see a video of a venture.
Clearly, the first step toward establishing a
small business venture is to determine the kind
of business that 1) fits your personality and
talents, 2) has a significant customer base, and
3) will provide you with personal satisfaction. 
Once that has been established, there is the
task of clarifying what will be needed to get
the business operational.  The development of
that infrastructure is the focus of this lesson.
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Perhaps the first step in this important segment
is to determine the organizational structure that
is best for your start-up venture.  There are
three general areas of business organization to
consider--with various sub-categories.
The sole proprietorship is, perhaps, the most
attractive for a beginning small business
venture.  It is simple to establish and provides
a lot of freedom for financial management of your
enterprise.  The partnership is also fairly
straightforward to establish.  There are
two legal variations general
partnership (all partners are iable for
business debts), and limited partnership
(all partners have limited
liability for business debts, but
at least one must have general
liability). 
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Finally, there are various forms of the
corporation.  Since the corporation is a
state-established entity, each state has various
formats.  Here are a few  C corporation, S
corporation ,  and Limited Liability Company. 
These are spelled-out in detail on pages
50-61--identifying the general advantages and
disadvantages of each.  
In many cases, the small business will start out
as a sole proprietorship because the business
is taxed using your personal Federal 1040 tax
rate.  During start-up years the business income
is usually low and your tax rate is
commensurately low.  As the business gains
income in later years, however, it might be to
your advantage (your accountant will advise
you) to switch to a corporate structure to take
advantage of the corporate rate as it levels
out in comparison to the individual rate.
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Regardless of the form you choose, you will want
to file a Form SS-4 with the Internal Revenue
Service.  It is an application for an Employer
Identification Number (EIN).  You might respond
that it isn't necessary in your case because you
will not have employees.  It is still a good idea
to get an EIN to provide your business with a
separate identity from your personal affairs
(even as a sole proprietorship).  The EIN is like
a social security number for your business.  You
can click here to get to the Internal Revenue
Service website to download a copy of this form.
"There is no security on this earth there is
only opportunity." --Gen. Douglas MacArthur
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Lecture Point Four

• At some point, we should address the potential
  for business failure.  It is important to know,
  up-front, what causes malfunction and provide
  some remedies.  Here are some of the reasons
  businesses are soon on the auction-block
• owner doesn't know the costs (usually overhead)
• overspending on nonessentials (nice
• office furniture, etc.)
• weak accounting system (don't know
• where business stands
• financially)
• avoid outside help (too "macho" to
• ask for guidance)
• choose the wrong people (go for cheap, rather
  than competent)
• don't keep up in the field (people buy from
  knowledgeable leaders)
• don't provide quality product or service (quality
  is very important)
• choose the wrong business 

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• Of course, with a little knowledge and the sense
  to get some help when needed, a business can be
  successful.  Here are some remedies and
  preventions for failure
• have reserve money for startup (about six months
  worth)
• be ready for change as needed (listen to your
  customers for
• direction)
• seek advice from others
• hire people only as needed (try temporary and
• part-time to try it out)
• get involved in networking (talking with other
• business owners provides insight)
• keep inventory current (old stuff gathers dust
• and doesn't contribute to profit)
• stay involved--be a presence in the business 
• stay with the concept (don't wander--you will
• confuse customers)
• learn from your mistakes
• And, there are many more insightful comments that
  can be made.  

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Long story short, you will need a lot of stamina
and forward-thinking to make this work.  Always
ask yourself, "why is this customer buying from
me?" and continually shape your business to meet
those needs.  We will explore this important
customer-focus concept in Lesson
Two. The assignment for this first
lesson is to establish the infrastructure for
your business venture.  As in the previous
assignment, for some of you this will be an
evaluation of what already exists for others
it will be an exercise to establish important
working relationships that will become a part of
your everyday business setting.  Your next effort
will be to determine a Business Infrastructure.
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• Study Quiz on Business Infrastructure (Chapt. 1,
  2, 3 4)
• Describe five of the ten roles that your text
  identifies as part of the business owners job.
• Describe five of the qualities your texts author
  indicates are essential for business owners.
• Explain niche marketing.
• How do you go about finding an existing business
  to buy, and examining potential opportunities?
• 5. Explain five advantages and five
  disadvantages of entering a business franchise.

• What are the four questions your text identifies
  as important for a new business owner to answer?
• Explain the three financial responsibilities to
  consider when assessing your potential
  profitability.
• Identify ten common startup expenses and identify
  ten common cash requirements needed for the first
  90 days.
• Identify five information sources that will help
  you determine sales forecasts.
• 10. Select two forms of organization you
  could use, and explain the pros and cons of each.

Lesson 1
Click here for e-mail link to your instructor.
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• Periodically, you will encounter, as part of the
  lesson, a link to a video that helps clarify the
  lesson. Since these videos are located within
  another website, you will need to follow this
  series of steps to view them on your computer
• Click on the hotlink provided. This movie is
  called Entrepreneurship Second Chance Body
  Armor.
• When you reach the movie publishers page, click
  on Video Library on the right-hand side of the
  screen, then, use the left scrollbar at the next
  screen to get to the identified movie title.
• Click on the movie title (hotlink) -- the video
  box on the right-hand side of your screen will
  activate using Quicktime video software. (If you
  dont have Quicktime on your computer, you can
  click to download it for free.)
• The video will take a few minutes to download to
  your computer. You might want to click on the
  pause ll button below the video window and do
  something else for 5 minutes before letting it
  play.

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Return to MGT253 Index
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Business Infrastructure Project

• 1. Describe the specific small business idea
  you intend to use as the focus of your efforts
  this
• semester, and what factors identify the unique
  personality of the business.
• 2. Select a business name that reflects the
  desired image for your business. Include a
  tag-line that clarifies the business focus, if
  the name doesnt.
• 3. Describe who needs the product or service,
  and the benefits they expectwhy this is a good
  idea.
• 4. Write-out a vision for your businesswhat
  you intend it to be in five years. Write-out a
  mission for your businesshow you intend it to
  function in order to get to that vision.
• 5. What qualifications do you have to run this
  business? How will you compensate for
  deficiencies?
• What licenses does your business need to operate,
  and what government office issues them?
• Identify a specific location (physical or
  virtual) for your business. What will be your
  estimated
• costs for site preparation (remodeling,
  fixtures, etc.)?
• 8. What will be estimated costs for
  utility/telephone deposits, and ongoing monthly
  charges
• for your business?

Index page
Click here for e-mail link to your instructor.