Bus 508 week 3 discussion questions and journal entry

Slide #

Scene/Interaction

Narration

Slide 2

Picture of reception area for company with logo in background

Tammy: Welcome again to Contemporary Business.

Slide 3

Office of Cliff Walters, Company President (silver-haired tall gentleman in his early 60s) Office should be a large executive’s office with fine furniture; Cliff and Tammy should be sitting in a seating area off to the side from his desk

Tammy: Good morning, Cliff! Thank you for taking the time to speak with me this morning regarding Walters Aeroworks and your vision for this organization. I know that you have put a lot of yourself into this business, and if you would, could you please share the reason why you started this business?

Cliff Walters: Tammy thanks for being here. I’ve heard some wonderful things about you.

To answer your question, I started this company fifteen years ago with four friends that shared a love of flying. We all had our own planes at the same airport; we also loved the idea of building our own planes based on World War I and World War II designs. We would often meet in one of the hangars to talk about how we could make the parts that we all needed for our aircrafts. Based on those conversations, we came to the reality that the only way this was going to happen was if we got our resources together and started to manufacture the parts ourselves. This is how Walters Aeroworks got started.

Slide 4

Same location as slide 2

Tammy: So, Cliff, what was your original vision? I know you said you all shared the love of flying, but what made you think that this would be a viable enterprise that would make money?

Cliff Walters: It seemed that we all had friends that were also interested in World War I and World War II aviation. We would often attend the major fly-in at Wright-Patterson Air Force Base in Dayton, Ohio every other year. This particular fly-in hosted the same kind of airplane people from all over the world. There were also local events that we were able to participate in and share our love of building planes.

We compared notes with others and realized that there was a wide open marketplace that we could take advantage of and fill two purposes: our own needs for the aircraft we were building, and then also help the rest of the aircraft builders and manufacturers across the world with their needs.

Slide 5

Same office location but from another angle

Tammy: So if I understand you correctly, your vision was to support the ongoing work of aircraft builders in their love of aviation and military history?

Cliff Walters: Exactly! So the five of us formed a small company that included all of us as founders. We understood the importance of a successful small business to the overall economy of our community.

Slide 6

Same as slide 4

[Transition to next slide automatically – fade effect]

Tammy: So, how did you decide what kind of company you were going to form?

Cliff Walters: We looked at all of the different kinds of private business ownership and decided on the one that made the most sense to us. Let’s look at an interactive exercise here to talk about the different kinds of private business ownership.

Slide 7

Show bubble chart with different kinds of business ownership that the students can click

Sole Proprietorship

Cliff Walters: Click the icons on the side here to learn about each type of private business ownership.

7-1

Cliff Walters: The first one we will look at is a Sole Proprietorship.

Sole proprietorship is the most common form of business ownership. There is no legal distinction between the sole proprietor’s status as an individual for his or her status as a business owner. This type of ownership is usually concentrated among small businesses such as repair shops, small retail stores, and service providers such as plumbers, hair stylists and photographers. Although these companies are easy to form and dissolve, the biggest disadvantage here is the owner’s personal financial liability for all debts of the business. Most sole proprietors are unable to pay the desired salaries that qualified, experienced employees seek.

And in case you are wondering - Walter’s Aeroworks is not this kind of business.

Slide 7-2

Partnership

Cliff Walters: Next we have a Partnership type business.

A partnership is an association of two or more people who operate a business as co-owners by voluntary legal agreement. They are easy to form by registering the business name and obtaining any necessary licenses. About 2.5 million businesses are organized as partnerships in the United States. They also tend to be larger and even more profitable than sole proprietorships.

Tammy: But what are the disadvantages of a partnership?

Cliff Walters: Great question! While they are easy to form, partnerships are difficult to dissolve due to each partner bearing full responsibility for the debts of the firm; as well as being liable for the actions of the other partners. So, to dissolve or totally break up the partnership, the partner or partners that want out will have to find someone to buy his or her interest in the firm. Even though this type of business has possible tax advantages, it has many disadvantages regarding assets, but a well-written partnership agreement can mitigate some of the negative situations.

Although it may seem that our company is a partnership because of our multiple founders, that’s not the case.

Slide 7-3

Corporation

Cliff Walters: A corporation is a legal organization with assets and liabilities separate from those of its owners. Because of this arrangement, stockholders have only limited financial risk, so if the firm fails, the stockholders only lose the money that they have invested. The stockholders also have protection for their personal savings, as these are not at risk if the company fails.

Walters Aeroworks is a corporation but a different kind of corporation, which we will explain.

Slide 7-4

Employee-Owned Corporations

Cliff Walters: We are actually an employee-owned corporation where the people that are employed by the company can buy shares of stock in the company. This type of corporation is becoming very popular; about twenty percent of all employees of for-profit companies own stock in their corporations. By having everyone that works here be a shareholder, we have a deeper level of commitment from everyone because they benefit when the company does well.

Tammy: I had no idea that these types of corporations are becoming so widely known.

Cliff Walters: It is pretty amazing, and it speaks to the success of these companies, because people have the personal responsibility for the success or failure of the business. That really fits in with what the five of us envisioned for when we began this business.

Slide 8

Still in Cliff’s office, but back to the original view

Tammy: Thank you for sharing how you came to the realization that the employee-owned corporation was the best for your company.

Cliff Walters: Part of what we also had to consider was all of the factors for incorporation; for example, what state to incorporate in, what was everyone’s initial investment, how we would set up our internal organization, what organizational structure, number of people, and so on. We had to consider how many others we were going to bring into the business based on the business functions that we needed to support.

Tammy: I can see that all of these considerations would have been very important to the initial success or failure of the business. Starting out too fast could have made the business fail, but with careful consideration of all of these factors, it appears that you made good business decisions.

Slide 9

Still in Cliff’s Office

Cliff Walters: Thank you, but it was not as easy as it seems.

Tammy: What do you mean?

Cliff Walters: Well, let’s look at how we develop a business plan. This was a very intricate stage.

Tammy: Well, let me hear your thoughts as to why a business plan is so important?

Slide 10

Different view in Cliff’s office

Cliff Walters: A well-written business plan serves two very important functions. First, it organizes the business and validates its central idea. This means that we defined the formal direction of business and it really made the five of us think through the realities of running and financing the business. None of us had ever run our own business before, so it was a sobering moment.

Second, it summarizes the business and its strategy to obtain funding from lenders and investors. This means that we have a blueprint to refer to when we are running our business and it keeps us focused toward our goals. Note that a business plan is vital in starting a business. Writing an effective business plan can consist of 20 to 50 pages of business formation and characteristics, and it can take six months to complete, depending on the organization.

Tammy: I see what you mean.

Cliff Walters: So let me spend a little more time here explaining all of the critical components of a well-written business plan.

In order, click the tabs on the side of the screen to learn more.

Slide 11

Picture of the outline of a business plan (similar to figure D.2) being shared by Cliff and Tammy

Cliff Walters:

The Executive Summary. A good business plan has six main sections as you can see by the example that I have given you. In the first section, the executive summary is a one to two page snapshot of what the overall business plan explains later in more detail. You describe your strategy for succeeding in a positive and realistic way so that you answer the first questions that anyone would have about your business. It provides focus on the issues that are most important to the business’s success and saves the supporting matters for the remainder of the document.

To sum it up, it’s pretty much an overview of the company and why you are in business.

Slide 11-2

Same picture as previous slide

Focus on Sections II and III of the business plan

Cliff Walters:

Table of Contents and Introduction. The next part of the plan is the table of contents that just shows the full contents of the plan. After the table of contents comes the introduction. This is where you begin to show further details about the business. It describes the company, past, present and future. For example, when we wrote our initial business plan, we included the information about how we made the decision to form the company in the first place. It gave our potential investors an opportunity to see the foundation of the company from our perspective.

Tammy: What else goes into the Introduction?

Cliff Walters: Another key component in the introduction is the description of the management team – who they are, their key qualifications including education, training and experience. For this part of the plan, we included the information regarding the fact that we were all amateur aircraft builders with a love of aviation, and this passion is why we were starting the company.

Tammy: That had to be a great tie-in and really gave people a good idea of why you are so passionate about your business! There is one more part to the introduction, right?

Cliff Walters: Yes, Tammy, you are correct. The last component in the introduction is a description of the products and/or services that the company will provide. You talk about what products you offer, and why your particular company is so special. You may also want to mention the approximate costs of the products that you want to sell. In our case, we talked about the particular products we had selected for the initial start-up and why they were important to us and our fellow airplane builders.

Slide 11-3

Still looking at the business plan example

Focus now on section IV, Marketing Strategy

Tammy: So what is the next section of the business plan?

Cliff Walters: Section four of the plan is known as the Marketing Strategy. This section describes the market’s need for the product or service and how the company will fulfill that need. The marketing strategies are not based on informal projections or observations, but rather on market analysis. If it is done properly, you can define your target market and position your business within that sector to get its share of sales. In our case, we distributed a survey to every amateur aircraft builder that we had ever met at fly-ins and other events. We then asked them to identify their most immediate needs in building their planes. We later compared all of their answers and then decided on which products were the ones that we wanted to start with.

Tammy: So you looked beyond just your own needs and considered the marketplace as part of your initial product development?

Cliff Walters: That’s right! We also included our distribution, pricing and promotional goals as part of our marketing strategy. This is an important part of determining how effective we could be in getting market shares in a niche market.

Tammy: Did you consider competition as part of your marketing strategy?

Cliff Walters: We certainly did! We looked at who our competitors were and if we would be able to match or beat their prices and the quality of the products that they were offering. In some cases, we made the decision that our competitors had a better product than we could produce, so we did not include that product in our catalog. For those where we had no competition, or we thought we had a better quality product, we chose to include it in our product line.

Tammy: It sounds like you really spent a lot of time making those initial product decisions and that it served you well in your success. I know there are still two more sections of the business plan. Which section is next?

Slide 11-4

Same view, but now focusing on part V, Financing the Business

Cliff Walters:

Next is Financing the Business. Obviously, the goal of any for profit business is to make money. Everything that we decided about the business ties into the financial component of the plan. Even if we were not going to get outside financing we needed to demonstrate the cost of the products, operating expenses, expected sales revenue and profit along with the amount of the business owners’ personal funds that would be invested to get the business operational.

We had to make some assumptions that had to be realistic; for example, where did we want to locate the business, get the equipment we needed, and start producing products. In our case, we took about six months to accomplish the start-up of the business. This process included developing our website, getting our production facility operational and producing the first products that we took to some of the fly-ins for our fellow plane builders to look at and provide feedback.

Tammy: Wow! That sounds like that may have been the hardest part of the plan to develop!

Cliff Walters: It certainly was and it was accomplished through a lot of late nights after we all had worked our nine-to-five jobs. None of us quit our jobs until we knew that the business was ready to go!

Slide 11-5

Same view, but now focusing on part VI, Resumes of Principals

Cliff Walters: Let me now tell you about the final section of the business plan. This section includes the résumés of the principals behind the business, or the management team. Each résumé should include detailed employment information and accomplishments and may also include business affiliations, professional memberships, hobbies and leisure activities.

For the five of us, we spent a lot of time expanding the section on hobbies and leisure activities because this is where the whole concept of the company came from. We also highlighted our business expertise by showing the positions we all had held in our various corporate assignments. We were trying to show that we had the right management team to run the business.

Slide 12

Show the website:

http://www.gaebler.com/entrepreneur-characteristics.htm

Tammy: Cliff, what do you think of some important characteristics of effective entrepreneurs, like you and your four partners?

Cliff Walters: Well, let me think about it. <pause for a few minutes> I can think of ten characteristics:

An eye for opportunity: Many entrepreneurs start by finding a need and quickly satisfying it.

Independence: Even though most entrepreneurs know how to work within the framework for the sake of profits, they enjoy being their own boss.

An appetite for hard work: Most entrepreneurs start out working long, hard hours with little pay.

Self-confidence: Entrepreneurs must demonstrate extreme self-confidence in order to cope with all the risks of operating their own business.

Discipline: Successful entrepreneurs resist the temptation to do what is unimportant or the easiest but have the ability to think through to what is the most essential.

Judgment: Successful entrepreneurs have the ability to think quickly and make a wise decision.

Ability to accept change: Change occurs frequently when you own your own business, the entrepreneur thrives on changes and their businesses grow.

Make stress work for them: On the roller coaster to business success the entrepreneur often copes by focusing on the end result and not the process of getting there.

Need to achieve: Although they keep an "eye" on profits, this is often secondary to the drive toward personal success.

Focus on profits: Successful entrepreneurs always have the profit margin in sight and know that their business success is measured by profits. Is this your profile or would you rather do your job, pick up your paycheck and leave the headaches to someone else? Most of us, quite easily, choose the latter.

As I think through this list, we at Walters Aeroworks are motivated to expect quick and concrete results. I hope that I answered your questions.

Tammy: It certainly did. Thanks so much for sharing all of this important information with me today. Not many people have this opportunity.

Cliff Walters: You’re welcome, Tammy. I hope you have a better understanding about our approach to the business plan, and understand certain characteristics that motivate entrepreneurs in today’s world. Many entrepreneurs have started a business because they one, have a passion for something, and two, have a better way of doing it than what’s already out there.

Oh, and please make sure you head over to the threaded discussion forum to take part in this week’s assigned discussion. So far the feedback from everyone has been great!

Thank you and take care now.