ESB prep

ESB Prep

Small Business Types:

-A franchise is a licensed business that has established operations, products or services, and branding. This business requires more money upfront but has less risk involved.

-When a customer makes a purchase from a business, it is a business to customer (B2C). When a business makes a purchase from another business, it is a business 2 business transaction.

Opportunity Types: Benefits and Drawbacks

Buy an existing business:

Benefit: preexisting customers

Drawbacks: Expensive

Legal Structures:

General or limited partnership: disperses financial responsibility and dissolves upon the death of a partner.

C Corporations: best for international businesses, C corporation have limited liability, and are double taxed

Sole proprietorship: responsible for all and are easy to create

S corporations: lower tax rate that prevents the company form being double taxed.

Limited Liability Corporations: an excellent single owner option, shields the owner from liability.

Roles and Compensation

CEO (chief executive officer) : reports to board of directors.

CFO- Chief financial officer

COO- Chief operations officer

CTO- chief technology office

CMO-chief marketing officer

*-compensation can be hourly, salary, commission, piecework, and equity.

Business Life Cycle Stages

Stage 1: Existence

Stage2: Survival

Stage 3: Success stage

Stage 4: Take off stage

Stage 5: resource maturity stage

Stage 6: pivot or persist

Stage 7: exit plan stage

Five Steps of Human centered design

Step 1: empathize (listen to what the customers want)

Step 2: Interpret (interpret what they said)

Step 3: Ideate (form ideas to solve the problem (brainstorm)

Step 4: Prototype

Step 5: Test and evolve

Characteristics of an entrepreneur

-self-reliant, forward thinking, resiliency, innovative, collaborate with others, have growth mindsets, recognize opportunities, and tolerate risks.

A Business plan includes:

-20-40 pages

-an executive summary

-marketing plan, organizational structure

-financial plan

A pitch deck contains:

-10-20 slides

-A brief overview of the business plan

-outlines the business (visual)

-what funding is needed

-financial projections

-usually presented as a slide show

-needs to attract investors

A lean canvas: A one-page document covering problems, solutions, and key details of a business plan, cost, and revenue.

Examples: problem, solution, key metrics, unique value proposition, unfair advantage, channels, customer segments, cost structure, revenue streams.

· Hot dog question is 400

Intellectual Property Laws

Patent- protects an invention form being copied

Trademark- protects brand names, logos, and business names

Trade secret- Protects a company’s practice, process, or formula from being shared with competitors

Marketing and Sales

Market Research

· Target market- a group of customers that will buy your product or service, helps a business focus on the area they will see most, helps a business determine the price of products or services.

· Primary data- first-hand accounts such as interviews and surveys, focus groups

· Secondary data- articles, academic journals, interprets primary data, and often contains personal bias.

Evaluating Competition

Two Types:

· Direct competition: A business that sells the same or similar products or services.

· Indirect Competition: A business that sells similar products that could meet the same need.

SWOT Analysis: Strength, weakness, opportunities, threat analysis.

A value proposition

-if you see a value proposition: market is the right answer

-a single compelling message of why your business is better than others.

-value: better price; Opportunity: only business of that kind in the area; etc.

Market Platforms

-Most dominant medium for marketing is television advertising

-digital: marketing is growing on social media platforms like face book and Instagram which market to their users through sponsored content, paid ads, and influencers

-Non digital: mail, newspapers, and billboards are physical marketing tools that can be effective.

Market Segments

· Behavioral data or buying patterns: used to understand the buying habits of customers, possible customers, those who will not pay high prices, those who are looking for promotions and discounts.

· Geographical data: show the location of a sale to show areas of high and low sales, possible customers, those who live near a company, those in older neighborhoods.

· Demographic data: reveals statistical information about customers, such as age and ethnicity, possible customers, those with higher incomes

· Psychographic data: reveals customer values and motivation, possible customers, those with busy lifestyles, those who like modern décor and conveniences.

Elements of a Marketing Plan

· A delivery plan outlines how products or services will be sold and delivered to costumers

· Situation analysis is an analysis is an element that utilizes a SWOT analysis

· A budget outlines marketing cost

· Strategies and tactics are actions needed to execute the marketing plan

· Offer or message shows customers that value of a company

· The four Ps that makes up a company’s marketing mix are product, price, place, and promotion.

Sales process

1. Prospecting: the step of the sales process where potential customers would be identified

2. Approach is the step of the sales process where you would contact potential clients

3. The presentation step is where the presentation would be shown to the customer

4. The objection is the step of the sales process where you answer the customers concerns

5. The closing step is where the customer would decide to purchase the product

6. Follow up

Sales channels

Two main sales channels:

· Digital sales are made over the internet like amazon and Ebay. Digital sales channel allows a company to reach a greater number of customers, however a drawback to digital sales is having to pay shipping costs

· Physical sales channels are brick stores where customer can purchase items. This location provides and in-person experience where a customer can interact with employees.

Product and Distribution

-product market fit: one has reached product/market fit when their sales volume is high and continues to grow because customers buy the products ad recommend them to others.

* Idea stage: develop an idea for a product or service

* prototype: phase to determine how your product or services solves customers problems

*create a minimum viable product (MVP) that is tested and refined until it is user friendly and ready for the market

* Launch stage: where your business is legally formed, and sales start to occur. To help with the launch stage you should form a value hypothesis to articulate why customers are likely to use your product. A value hypothesis should promote product features, pricing, and your business model, identify your product and the problem it solves

* traction is where you begin to earn money

* growth- product market fit- continue to refine and market

Quality control

-external quality standards: health and safety inspectors, government regulatory agencies, industry standards

-internal quality standards: 1-define/set in measurable terms, 2- establish testing methods, 3-review results, 4-refine and improve process

-what two aspects of a product do minimum viable products (MVPs) test:

-ease of use

-functionality

Digital and Physical products and services

· Consumers can buy an already crated product or service

· Consumers can build their own software

· Buying software ca save you time

· Software that must be built can take months

· Need to analyze control, cost, maintenance, time, and value to determine whether a building or buying option is best for the,

· Business owners must also consider the pros and cons of leasing or buying physical items and official space

Distribution Channels

-Two main types of distribution channels

* direct channel: door to door- allows the consumer to make a direct purchase directly from manufacturer; less complicated to use; generally, have lower priced goods

* Indirect channel: uses a middleman, also known as intermediaries like wholesalers, retailers, and agents to sell their products to end customers; disadvantages tend to be more time consuming. Tend to more expensive due to middle man (whole sale, retailers, agents).

Distribution vs Fulfillment centers

-are both indirect distribution channels

-referred to as the same thing, but they are not the same

* fulfillment centers: -receives, processes, and fills customer orders on behalf of your business

-strategically stores your products, so a customer who places an order the product can be quickly picked up and sent out

*distribution centers:-receives and temporarily stores goods before fulfilling the customers’ orders and commonly service retail stores

-receive product from suppliers

Business Finance

Hot Dog question- answer: $400

Customer Acquisition costs:

-the formula used to determine a company’s acquisition cost is marketing expenses divided by the number of new customers for the period.

CAC=(marketing expenses + sales expenses)/number of new customers for the period

Practice

1-8

2-9

Customer retention cost

[(number of customers at the end of the period - number of new customers during the period) / number of customers at the start of the period] x100

(e-n/s)x100

Selling Price

Cost x 1.xx

Ie) 10 x 1.35

Equity

-Asset: anything you own: cash, account, receivable, inventory, equipment and company vehicles

-Liabilities- money that the company owes

(Assets-Liabilities = equity)

Net income= total income – cost of goods sold – expenses

Gross income = income-cost of goods

Income tax= gross profit x tax rate

Break event point:

total expenses/ Selling price – cost

Calculating cash flow:

Ending cash balance= total cash-total cost

Burn Rate= months starting balance – months ending balance a or b on the test 850$

Run Rate= current revenue x12 (one year)

Return on Investment

Net profit= value of investment – cost investment

ROI (return on investment) = (net profit / cost of investment) x 100

Fixed vs variable vs start up costs

Venture capital for startups

-venture capital is a form of private equity and a type of financing that investors provide to startup companies that are believed to have long-term growth potential

Bootstrapping: when an owner uses their own savings to fund the business

Small business Administration (SBA): loans with interest that need to be repaid

Angel investor: helps fund a business or specific projects usually for a stake in the company \

Crowd funding: when a business owner shares their startup business on an online platform to presell their prodcuct