Introduction

For most entrepreneurial or small businesses management is the key factor to which success can be attributable. The vast majority of small businesses fail within the first five to ten years. According to a study by Dunn & Bradstreet the reason for these failures was not lack of knowledge of the business's product or service, but rather issues related to managing the business. There are those who argue that managerial skills are not important for entrepreneurs because in most cases their businesses remain small. Countering that, however, is the argument that entrepreneurial ventures remain small because of a lack of appropriate management. Clearly the lack of adequate management is at the top of the list for reasons for business s failure.

Potential investors are well aware of the fact that most small business failures are due to poor management. They may in fact have invested in such companies before and lost money. Consequently, it should be no surprise that this is one of the first sections of a business plan they focus their attention. Their major concern is with the competence of the entrepreneur to run the business. To assure potential investors and the entrepreneur/owner that the necessary personnel are in place to run the company, this part of the plan should emphasize the strengths and weaknesses of the business's management. In the case of the latter, be sure to mention how they will be corrected or compensated for.

The operations section of the business plan focuses on the day-to-day fu nctions of running the business. It demonstrates that management has the necessary experience to deliver the product or service they produce for the intended target market. In some businesses, operations is very simple and straightforward. In others it may be very complex and difficult to understand. In retail, for example, operations is fairly straight forward. It involves all those tasks related to buying the product, transporting the product to the place of business, storing the product, displaying the product, selling the product, and delivering the product. This could include such factors as site location, choosing suppliers, obtaining a line of credit, inventory control, etc. All of these tasks, while time consuming, are straight forward and easily understandable by potential investors.

In manufacturing, on the other hand, operations may be much more complex, requiring design, assembly and use that only highly trained personnel understand. As a result, describing the business's operations for potential investors becomes much more difficult. Being too technical can result in the plan being turned down simply because investors don't understand what it is your trying to convey. In this case it is advisable to emphasize the entrepreneur's ability to produce the product. Nevertheless, a complete detailed description the operations should still be conducted, but it should be included in the section of the plan containing supporting materials or as an appendix.

In this lesson the emphasis will be on retail operations. However, the major topics covered are also applicable to manufacturing.

Topics

• Managerial competence
• Management organization
• Management balance
• Management skills
• Operational factors

Objectives

• To develop a management competency profile of the entrepreneur
• To establish and organizational structure
• To develop a management system that has balance
• To identify the skills required for a good manager
• To develop operational procedures

Lesson Description

This lesson will require students to assess their capabilities for managing a business. Next they will learn the importance of developing an organization that has "balance" with regard to its management team. An organizational chart will be developed illu strating key personnel and their responsibilities. Students will also learn what skills are required to be a good manager. Finally, operational procedures will be discussed.

Materials

• Activity 8-A: Description of Personal Background Characteristics of Principals
• Activity 8-B: Organizational Chart
• Activity 8-C: Evaluating Management Skills
• Activity 8-D: Operational Factors
• Visual 8-1: Reasons for Business Failures
• Visual 8-2: Description of Personal Background Characteristics of Principles
• Visual 8-3: Organizational Structure
• Visual 8-4: Management Skills
• Visual 8-5: Operational Factors

Procedure

1. Explain to students that management is a key factor in the success of any small business. In many cases this is the first thing investors consider when deciding to finance a business venture. Using Visual 8-1: Reasons for Business Failures, emphasize that the vast majority of small businesses fail in the first 5-10 years. The most common factor relates to poor management.

2. Ask students what personal background a good manger should possess. The focus here should be on past history and work related experience rather than specific managerial skills. Man agerial skills will be discuss later on during the lesson. Possible responses should include business background, management experience, education, age, reasons for starting a business, physical condition, related work experience, etc. Compare their responses with those in Visual 8-2: Description of Personal Background of Characteristics of Principals.

3. Ask students to discuss the aspects of their own personal background that make them feel competent to manage a business. Discuss possible shortcomings and how they might overcome or compensate for them.

4. Hand out Activity 8-A: Description of Personal Background Characteristics of Principals. Instruct students to complete the exercise and turn it in during the next class period.

5. Regardless of how talented an individual is every business still requires an organizational structure to effectively carry out the different functions of the organization. Using Visual 8-3: Organizational Structure discuss the components of an organizational structure. Have students discuss how a small business functions when it may only employ three or four persons. (The owner may have to wear several hats).

6. Explain to students that an important aspect in developing an organizational structure is "balance." Balance refers to making sure all the management functions necessary to run the business are in place. For example, is the necessary expertise in place or available to deal with the issues involved in managing the business's marketing, finance, inventory, etc. Again the issue of to few employees comes into play. Have students brainstorm possible solutions to this problem. One solution is to hire outside professionals, i.e., accountant, lawyer, advertising agency, sales reps, etc.

7. Hand out Activity 8-B: The Organizational Chart. Instruct the students to complete the exercise and turn it in during the next class period.

8. Lead a discussion focusing on the skills required to be a good manager. Make a list on the board of those skills students mention. Compare the list with those in Visual 8-4: Management Skills. Have students discuss the extent to which they posses those skills. Brainstorm ways students might acquire managerial skills.

9. Hand out Activity 8-C: Evaluating Managerial Skills. This should be completed and handed during the next class period.

10. Explain to students that the operations section of the business plan focuses the on day-to-day activities required to insure the successful operation of the business and to get the produ ct to the consumer. Sometimes this is very simple and straightforward. Other times it is very complex and difficult to understand. Compare retailing to manufacturing. Using Visual 8-5: Operational Factors discuss the different factors involved in the operations. Ask students which factors would apply to their businesses and how they would deal with them.

11. Distribute and go over Activity 8-D: Operational Factors. Instruct students complete the exercise and turn it in during the next class period.

Closure

Briefly review the major points regarding management and operations. Point out to students that after finishing the assigned activities they should use the results to write up the remainder of their marketing strategy section.

Assessment

Using the worksheets from Activities 8-A, 8-B, 8-C and 8-D students should write up the three dimensions of the marketing strategy presented in this lesson and hand them in during the next class period.