Studies have shown that almost all small business managers carry sufficient insurance
protection.
A major weakness of a family business is that it has greater difficulty than a nonfamily
business in focusing on long-run decision making.
A business plan is prepared for external use only”for example, to interest potential
investors.
Differentiate between net cash flow and net profit.
Small firms can offer several nonfinancial incentives that appeal to both managerial and
nonmanagerial employees.
The level of complexity of a business affects how much planning is appropriate.
Give an example of an unethical practice that might tempt a small business in each of
the following areas: marketing, management, and finance or accounting.
The balance of the U.S. workforce is rapidly shifting toward higher proportions of
women, older workers, and racial minorities.
“Boo-boo research” refers to that part of any customer loyalty program that reaches out
to lost customers to learn why they took their business elsewhere.
You Make the CallSituation 4
James Ridings’s firm, Craftmade International, Inc., sells ceiling fans. Originally,
Ridings was a sales representative for a company that sold plumbing supplies. When the
company added ceiling fans to its line, Ridings developed a number of customers who
bought the fans. Some time later, when the firm eliminated the ceiling fans, Ridings had
customers and nothing to sell them. Consequently, in 1997, he became partners with
James Ivins, a sales representative for a firm that imported ceiling fans. They scraped
together $30,000 and bought 800 fans from Taiwan, which were quickly sold.
Encouraged, Ridings raised $45,000 to buy more fans. Again, they sold quickly. By the
end of the first year, Ridings and Ivins had putt together a sales force of 15 persons and
were selling 3,000 fans per month. By 1999, the two men had started designing their
own high-quality and high-profit-margin fans. Sales had grown to $10 million, and the
firm was profitable. However, while the firm’s sales were increasing at 50 percent per
year, a problem developed: The firm ran into cash problems. At one critical point,
Ridings had to persuade a supplier to accept stock in lieu of payment on a $224,000
order. Another time, Ridings and Ivins had to approach 16 bankers within a matter of a
few days before finding someone who would loan them $100,000 to pay their bills.
Question 1 Craftmade International, Inc. is a successful firm when it comes to growing,
but what are its owners overlooking?
Question 2 What steps would you suggest to Ridings and Ivins to solve their problems?
Small firms are pursuing a focus strategy if they adapt their efforts to concentrating on a
specific niche within the market.
The industry environmentis made up of very broad factors that influence allor at
least mostbusinesses in a society.
A trademark registered today will remain effective for 5 years and may be renewed for
an additional 5 years.
In a small business, a human resource manager is generally desirable when employee
morale is satisfactory and the labor turnover is extremely low.
The critical factor in locating factories is customer accessibility and convenience.
The franchise disclosure requirements of the Federal Trade Commission specify that
franchisors must provide potential franchisees with written disclosures providing
important information about the franchisor, the franchised business, and the franchise
relationship, and allow them at least ten business days to review it.
The unique features of a local environment can yield benefits to small firms locating
there.
Small business owners cannot formulate codes of ethics; they must be issued by law or
by professional associations.