978-1259912191 Chapter 12 Solutions Manual Part 2

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Chapter Twelve: Establishing Operations

Bonus Internet Exercises

Bonus Internet Exercise 12.1: Establish the Bank Relationship

(LO 12-3)

The authors discussed the important concepts related to the establishment of a

professional banking relationship with a banker at a bank or financial institution.

Consider the relationship you require to establish the finance operations at your new

small business.

Perform a Google search to discover the banks in your area and review the products

and services that they provide to a new small business owner. Evaluate at least two

different banks and answer the following questions.

1. What two banks did you research?

2. Describe the products and services they offer that assist new small business

owners with their finance operations?

3. Compare the products and services that you identified at each bank and discuss

the similarities and differences associated with them.

4. Discuss the location of each financial institution. Next, evaluate the location to

determine if the bank is convenient to the location of your new small business.

Does it offer online banking or other services that are convenient to the time

management needs of your new small business owner?

5. Evaluate each bank to discover if it offers insurance to its banking clients in the

event of a bank failure. Why is FDIC important to a bank’s client?

Bonus Internet Exercise 12.2: Bank Failures and the FDIC

(LO 12-3, 12-4, 12-6)

In this chapter we discussed the financing considerations to initiate the financing

operations, the important establishment of legitimacy, and the ways to ensure quality at

the new small business. A new small business owner chooses a bank that provides the

products and services the business requires. Visit the FDIC’s public list of bank failures

at http://www.fdic.gov/bank/individual/failed/banklist.html i(FDIC: Failed Bank List, 2017)

and discuss the following questions.

1. How many banks failed since 2010? Does the amount of bank failures surprise

you? Why or why not? Are any in your area?

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Chapter Twelve: Establishing Operations

2. Discuss what you would do if you found out that your bank failed. How would you

react?

3. Discuss how new small business owners would pay their payroll, monthly

obligations, and purchase supplies the week after their bank failed. What would

you do?

Bonus Internet Exercise 12.3: Location Strategy and the New Small Business

(LO 12-2)

One of the distinct actions that is required to initiate the operations of a new small

business is to select its location. Perform a search for commercial property using your

favorite search engine and evaluate potential locations in your area where you can

establish your new small business.

1. What website did you search? How will this information assist you with choosing

a location for your new small business?

2. How many establishments offer services to assist a new small business owner

with finding a location for the new small business?

3. How many properties are available in your area?

4. Summarize the findings of your research. Did you consider land, a strip shopping

center, or an anchor store for your new small business?

Critical Thinking Exercises

Critical Thinking Exercise 12.1: Planning and Operations Assessment

As we know from the text, planning is the very first step to consider in the development

process of a new small business venture. It is in this stage that a new business owner

decides whether or not to assume the risks associated with the establishment of the

new small business.

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Chapter Twelve: Establishing Operations

A new small business owner initiates operations after the owner decides to assume the

risk associated with a new small business.

1. List the ten suggested actions that new small business owners should take in

order to initiate their operations.

2. Summarize the actions that have the potential to crossover in the steps. Discuss

how a new small business owner can benefit from this process.

Critical Thinking Exercise 12.1 Planning and Operations Assessment – Notes

The student answers vary in the planning and operation assessment. They should list

the ten distinct actions that new small business owners should complete to establish

their operations.

1. Critical Path Chart

2. Location

3. Financing considerations

4. Legitimacy

5. Production management

6. Production charting

7. Quality

8. Equipment

9. Timing

10.Time management

In this lesson, the students evaluate which actions might overlap in the operations of the

new small business. Student answers will vary based on their perception of these

actions.

Critical Thinking Exercise 12.2: Establishing Finance and Legitimacy

As we learned in this chapter, financing the original payment associated with the

operational start-up of the new business assures that the new small business owner has

the appropriate resources required to initiate activities. In addition, the new small

business owner is concerned with the establishment of legitimacy to project a

professional image for the new business. The results of these initiatives enhance the

ability of the new small business to compete in the marketplace.

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Chapter Twelve: Establishing Operations

1. Discuss the initial payments that a new business owner must finance when the

operations are established. List at least 10 and discuss how they contribute to

the new small business start-up plans.

2. Discuss the actions that a new small business owner might implement to project

a legitimate image in the business community. List at least ten and discuss how

each contributes to the professional image of the new small business.

3. Summarize how these actions contribute to the planning process for the new

small business. What other tasks should the new small business owner complete

to initiate the business operations?

Critical Thinking Exercise 12.2: Establishing Finances and Legitimacy – Notes

A. Financing the initial payments:

1. Security deposits

2. Utility set-up fees

3. Purchase/lease of initial equipment and installation

4. All licenses and inspections

5. All initial supplies (this is a significant and overlooked expense)

6. Hiring and training of initial staff

7. Initial advertising expenses

8. Bank set-up fees

B. Legitimacy tasks:

1. A business checking account with the firm’s name printed on the checks.

Consider starting the check number at a higher rate than 001.

2. A business credit card

3. A bank line of credit

4. Professional business cards

5. Professional letterhead, billing slips, etc.

6. Professional advertising material

7. A business address included on material adds prestige

8. Job titles: Inexpensive and encourage liberal use

9. Receptionist or an individual to answer the telephones

10.A professional web-page (quality is essential)

11. A board of advisors or board of directors that are active and reputable in the

community

12.Endorsements from respected individuals or groups.

Follow up discussion for students

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Chapter Twelve: Establishing Operations

1. There are costs associated with financing the initial operations of the firm which

can be expensive. What are the options for a new small business owner who

does not have the funds required to fund these operations?

2. Refer to Chapter 2 and discuss how business incubators assist the new small

business owner. The authors in the text discussed that incubators facilitate office

space at a reduced rate and provide receptionist services, conference room

facilities, and basic office equipment (copying, fax, internet, telephones,).

NOTE: It is beneficial for a new small business owner to evaluate the costs

associated with the new business start-up operations and those that an incubator

service might provide.

Critical Thinking Exercise 12.3: Critical Path Table and Charting

(LO 12-1)

The authors in the text emphasized that underestimating the amount of time it will take

to begin operations is a mistake that harms a new business. New small business

owners must estimate their time very generously, since many critical steps may take

significantly longer than originally planned.

Develop a Critical Path Table for your new small business.

CRITICAL PATH TABLE

STE

TAS

TIME TO

COMPLETE

ACTUAL TIME

INVOLVED

PREVIOUS TASK

REQUIRED

RESPONSIBILI

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Chapter Twelve: Establishing Operations

Next, develop a Critical Path Chart that illustrates how the activities fit together and

build upon each task. Develop your chart and identify the list of tasks that are expected

to take the longest amount of time. How will you manage your time to ensure that your

new small business initiates operations on time?

Critical Thinking Exercise 12.3: Critical Path Table and Charting – Notes

This lesson works great in a time-frame that allows the student the time to establish a

business. The expected completion time could be during the course of the class or a

semester project, time permitting.

In this lesson, each student is expected to complete a Critical Path Chart that illustrates

the steps required to initiate operations at the new small business. Each student will

identify the tasks required, the estimated time to complete the task, the actual time

involved, the previous tasks required to complete that specific task, and the individual

who is responsible for completing each task.

Next, each student develops a Critical Path Chart to reveal the set of activities that were

dependent upon each other. The student will document the tasks that were expected to

take the longest amount of time. This data is imperative in the small business planning

process. The students learn how to plan for a new small business, the steps that are

involved in initiating its operations, and how to gain a comprehensive analysis to

manage their time.

Bonus Cases

Bonus Case 12.1: Conferences and Operations Planning for the New Entrepreneur

(LO 12-6)

The authors in the text discussed that a production management system is an effective

method that is necessary to ensure the new small business owner has effective

planning initiatives in place for the new small business. How can these owners ensure

that they plan the production process for their new small businesses? One method

discussed in the text is to develop a production chart to illustrate the small business’s

production plans.

There are companies that provide the new small business owner conferences to assure

that the new small business owner establishes effective production plans for the

owner’s respective industry. Consider how a new small business owner can utilize

conferences as a help in developing new small business plans.

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Chapter Twelve: Establishing Operations

1. How can a new small business owner utilize conferences to enhance the

planning goals for the new small business operations?

2. Do you believe that conferences are an effective method of planning for the new

small business?

3. Conduct research and discover the conferences that are available for your type

of business that can assist you with your new small business operational plans.

Do you believe that each will help you? Why or why not.

Bonus Case 12.1: Conferences and Operations Planning for the New Entrepreneur

–Notes

The purpose of this lesson is to provide the students with tools that might assist them

with their new small business operational planning needs. Many business types offer

conferences that provide planning tools, training, and other benefits to assist

businesses with the formation of their operational goals.

Students are expected to evaluate a business type and determine whether or not

conferences are essential in their operational start-up and planning needs. The student

answers will vary based on the business type they select.

Bonus Case 12.2: Communication Enhances Operational Efficiency

(LO 12-3, 12-7)

The authors in the text discussed the details of financing operations and the initial

payments required for a start-up business. At this part of the planning process, it is

interesting to discover what new small business owners should consider to enhance the

quality of their business communications.

Discussion Question:

1. Summarize how an entrepreneur can enhance the quality of an owner’s

communications at the new small business. Be specific.

2. What initiatives can a new small business owner put in place to enhance the

quality of the new business operations?

3. How can effective decision making at this stage of the planning process save

time and money later?

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Chapter Twelve: Establishing Operations

Bonus Case 12.-3: Contingency Planning for the New Small Business

(LO 12-7)

The authors discussed the importance of quality as a competitive tool in the

management associated with the operations of the new small business. New small

business owners evaluate criteria to implement a sound business plan for their

businesses. They evaluate the operations associated with their businesses. As a result,

they ensure that they have completed the required tasks to assure that they establish

their operations in the marketplace.

Business owners and executives evaluate the marketplace to determine those logical

assessments that provide support to their business operations. Frequently, businesses

discover processes and procedures to assist them with their new business. One

important consideration is to identify the planning required in the event of a natural

disaster or other catastrophe that could impact their business operations.

What will happen to the business in the event of an emergency? To illustrate this

concept, new small business owners should consider a contingency plan in the event of

an emergency. For example, according to the recent study, “25% of businesses do not

reopen following a major disaster” and the reported failure rate increases to “50%

among businesses without a contingency plan (Maltby, 2009)ii.” The contingency plan is

an important consideration for the new small business owner.

Discussion Questions:

1. Why do you think it is important to identify a contingency plan for the new small

business? Will you consider one at your new small business?

2. Consider that you are a small business owner and you had a natural catastrophe

that impacted the new business. What would you do without a contingency plan?

Make a list of 5 things.

3. How could you develop a contingency plan for your new small business?

Endnotes

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i FDIC: Failed Bank List. (Last updated on February 16, 2015).

http://www.fdic.gov/bank/individual/failed/banklist. Retrieved on February 16, 2015

ii Maltby, E. (September 9, 2009). Readying for the worst. The Wall Street Journal.

http://online.wsj.com/article/SB125250249415695553.html. Retrieved on November 20, 2009.