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lectures.zipLectures/ch01 (2).ppt
An Introduction to E-Business
Chapter 1
Understanding the power and appeal of operating an online venture
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How the Internet and World Wide Web got started
The advantages of selling on the Internet
What kinds of products you can sell online
The primary e-business models
Do You Already Know?
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The Internet and World Wide Web
History
What developers hoped to accomplish
E-Business
Advantages
Comparison with physical business world
Marketable products
Consumer goods, information, professional services, and much more
Three commonly used e-business models
What You Will Find Out
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What You Will Be Able to Do
Use the Internet and World Wide Web as a public space that mirrors the real world
Recognize and use the advantages of starting and operating an online business
Select an appropriate product or service for selling online
Choose an appropriate model for creating an e-business
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The History of the Internet and E-Businesses
In the Beginning
A Galactic Network
ARPANET
Electronic mail
TCP/IP
The Internet
Global network of computer networks
The best bet for entrepreneurial success
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Worldwide collection of electronic documents
Tim Berners-Lee
In the real world
E-Commerce
Education
Business and Government
The World Wide Web
World
Wide
Web
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Low Start-up Cost
Steady Stream of New Customers
Every Product is Welcome
Every Seller is Welcome
The Power of Selling on the Internet
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What Can You Sell Online?
Just about anything!
Delivery problems? Find a solution!
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Consumer Products
Most traditional application of e-commerce
Not ideal place to sell all consumer items
Information
The commodity that has fueled rapid growth of cyberspace
Search engines and Links pages
Personal recommendation sites
Personal touch sells
Example: About.com
What Can You Sell Online?
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What Can You Sell Online?
Professional Services
Attorneys
Physicians
Psychotherapists
Technology and Computer Opportunities
Computers
Internet Service Providers
Software
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More E-Business in Action
Online Opportunities for Artists
Host Art Galleries
Example: Art Xpo
Publish your writing
Learn how to start a blog
Sell your music with quality Web site
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Operating E-Business vs. Using Promotional Web Site
E-Business models
Revenues generated directly through and because of a Web site
Traditional bricks-and-mortar firm
Uses Internet to encourage customers to physically visit a business to make their purchases
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E-Business in Action
Three commonly employed e-business models
The Online Storefront
Online Auctions
Advertising-Based E-Businesses
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The Online Storefront
Most common type of e-commerce site
Displays and provides information about products or services
Accepts orders for products or services,
Most include shopping cart
Successful ones emulate best aspects of bricks-and-mortar stores
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Online Auctions
Sites allow anyone to buy or sell items
Do not manage product but bring buyers and sellers together
E-Bay one of most successful
Founded by Omar Omyidar
45 million active members
15 million auctions at any given time
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Advertising-Based E-Businesses
Popular models for ad-focused sites:
Portals such as BizOffice.com
Search engines (Yahoo, Google, etc.)
Classifieds
Personal ads, job listings, housing, and more.
Information exchange
Blogs, user groups
MySpace.com, Facebook.com, Friendster.com
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Understand: What Have You Learned?
Assess your knowledge of the basics of the Internet and e-business opportunities:
http://www.wiley.com/college/holden
Assess Your Understanding
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Copyright Notice
© 2008 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.
All clipart courtesy of Microsoft.com
Photo: Kathy Kerrigan
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Copyright by John Wiley and Sons, 2006
Lectures/ch02 (1).ppt
The Law, Ethics, and Customer Policies
Chapter 2
Creating an E-Business that is Both Legal and Responsible
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The four most common options for legally organizing a business
Which licenses and identification numbers you need when starting a business
The difference between trademark and copyright
If running a business ethically and legally are the same thing
How effective customer policies can help improve business
Do You Already Know?
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The advantages and disadvantages of various legal options for organizing a business
How to keep your business legal with regard to licenses, zoning laws, and identification numbers
The importance of trademark and copyright protection
What You Will Find Out
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Why running a business ethically involves more than simply following the law
That developing a strong relationship with customers requires putting policies in writing.
. . . And More
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What You Will Be Able to Do
Choose whether to operate your business as a proprietorship, partnership, corporation, or LLC
Determine which laws apply to your e-business and ensure that you are in compliance with them
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. . . And More
How to register trademarks and file for copyrights—when it is appropriate
Develop a code of conduct that outlines a business’s core principles for employee behavior
Write a customer pledge and online policies that explain to customers how they should expect to be treated
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What To Do First?
Ensure the enterprise will follow all the laws regarding new businesses
Have a plan for being responsible citizens
Understand the importance of establishing a trusting relationship with future customers
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Four primary options:
Ownership
How many will have stakes in business?
Liability
Where does the legal responsibility reside?
Taxes
Subject to varied forms of taxation
Financing
Can play significant role in determining structure
Legal Organization Options
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Quickest, easiest, least expensive method of forming a business
Freedom and ability to operate in secrecy
Possible substantial financial rewards
Downside
Full exposure to business’s liabilities
Fully accountable for losses and legal matters
Size and lifespan could be limited
Going it Alone as a Sole Proprietor
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Operating as a Partnership
Benefits
Simple, inexpensive to form
owners have liability and tax responsibility
Access to better financing
Disadvantages
Lack of liability protection for owner
Possible conflicting styles
Departure or death of partner
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Structure
Duties
Profits
Conflicts and crises
Dissolution
Topics in Drafting a Partnership
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When it’s Right to Incorporate
Corporation is separate from individuals who create or work for it
Offers protection for owners
Two common types of incorporation
C corporation
Offers most flexibility when seeking investors
S corporation
No more than 75 shareholders
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Limited Liability Company (LLC)
Flexible
Has tax advantages of partnership
Has formal structure, legal protection provided by corporation
Allows unlimited number of partners
Permits raising money by taking on investors
Members not personally liable for action of company
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Setting up and operating legally
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Federal Tax Identification Number
Sales Taxes
Business Bank Account
Business Licenses
Zoning for Home-Based Businesses
Trademark: device or mark that protects words, names, symbols, sounds, or colors that distinguish goods and services offered by one firm from those sold by others
Copyright: Intellectual property law that protects creative works, giving exclusive rights to owner to sell, reproduce, distribute the work
Patent: property right excluding others from making, using, importing, offering invention for sale; granted by U.S. government
Understanding Copyrights and Trademarks
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Registering Trademarks
® Used after business has received final notification that trademark is federally registered by company
Up to business to enforce own trademarks
Insert Figure 2-1 “BizOffice” showing ® mark
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Filing for Copyright
Fairly inexpensive
Rules pertaining to Web sites and online distribution material:
Domain names cannot be copyrighted
Original computer programs can be copyrighted
Entire databases can be copyrighted
Electronic newsletter can be protected if information is original
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The Basics of Business Ethics
Ethics and Laws
Codes of Conduct
Social Responsibility
Creating a Customer Pledge
Develop internal pledge first
Develop external (public) pledge
Privacy Policies
Clearly state firm’s commitment to customer privacy and data security
User Agreements
Terms or conditions by which visitors or customers are allowed to use site.
Establishing Online Policies
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. . . More Policies
Shipping and Return Policies
Explain details of how and when orders are handled and shipped
Include conditions under which products can be returned or service declined
Other Policies
Message board or chat room policies
Exporting
Spam
Endorsement and linking to other sites’ policies
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Assess Your Understanding
Understand: What Have Your Learned?
Go to www.wiley.com/college/holden to assess your knowledge of basics of business law, ethics, and customer policies
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Copyright Notice
© 2008 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.
All clipart courtesy of Microsoft.com
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Copyright by John Wiley and Sons, 2006
Lectures/ch04.ppt
Financing and Launching an E-Business
Chapter 4
Finding the money, employees, and professional support needed to start up
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How to start a business on a tight budget by bootstrapping
The most common sources of start-up financing
What insurance and tax requirements come with employees
What the advantages are of buying an existing Web site
Do You Already Know?
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Techniques for minimizing the initial investment in starting an e-business
The common sources of financing for a new e-business, including friends, family, and bank loans
When it is right to hire employees and what insurance, tax, and benefit requirements come with them
That there are several advantages and risks associated with purchasing an existing Web site
What You Will Find Out
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Calculate the necessary start-up costs and launch a business by bootstrapping
Identify and utilize appropriate sources for financing a new e-business
What You Will Be Able To Do
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Hire employees that fit a specific need and fulfill the subsequent insurance and tax requirements
Evaluate an existing Web site and determine whether purchasing it would be better than starting a new site
. . . And More
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Explore techniques for keeping start-up costs to a minimum
The amount of money available and its sources help define rules by which a new firm must operate
Launching a Business on a Tight Budget
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Calculating Start-up Costs
Launching fully functional e-commerce site requires financial investment of at least several thousand dollars
Two components to estimating start-up costs:
Money to cover equipment and whatever is required to take an e-commerce site live
Money to cover ongoing expenses until business generates adequate revenues to cover expenses
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Bootstrapping an E-Business
Bootstrapping – a matter of building a business with minimal resources and making a little money go a long way
Rules of bootstrapping
Keep other sources of income as long as possible
Consider other part-time employment
Optional: Freelance work, short-term consulting jobs, etc.
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Techniques for Keeping Costs Low
Become frugal
Spend only when necessary
Budget wisely
Create a financial plan that tracks income, expenses, and projected sales
Use other people’s money
Sacrifice for the business
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. . . More Cutting Costs
Barter to keep costs low
Barter – to pay for products or services without using cash; instead, exchanging other products or services
Southern Barter – example of formal barter-exchange organization
Inspire, don’t hire
Use demo software and freeware
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Advantages of Bootstrapping
Positively affect a new business by:
Maintaining control of ownership
Quick decision-making
Minimizing risk
Maintaining a cash-is-king mindset
A bootstrapping success story:
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Common Sources of Financing
Personal savings
Friends and family
Bank loans
Angel investors
Venture capital
Credit cards
Other sources
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Personal Savings
Most common source of start-up funds for new businesses
Gives owner more incentive to succeed
Cheaper and more flexible for a new business
Could create hardship if business fails
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Friends and Family
Advantages
Money easy to obtain
Cash can be obtained quickly
Potential large pool of investors
Disadvantages
Can be problems with unstructured terms
Can give up too much stock
Business could interfere with relationships
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Bank Loans
Prepare a loan proposal
Detailed information on amount of capital needed
How money will be used
Include up-to-date business plan
Owner should have good credit history and above-average FICO score
Other loan options
Home equity loans
High-interest loans
Small Business Administration microloan
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Angel Investors
Angel investor – an individual willing to invest money in start-up or young companies
Usually does not seek active role in a company, but may seek advisory role
Less likely to demand immediate return on investment, but may require fairly large stake in business
Online resources:
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Venture Capital
Venture capital – financing provided by specialized investment firm that operates with expectation of high risk and high return on investment
Not easiest route for new e-business
Not recommended resource for brand-new companies by most experts
Designed for businesses that need aggressive (very large) amount of money
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. . . More Venture Capital
Most venture capitalists expect the company
Has already used seed money
Has a proven track record
Has an experienced management team in place
Is in a “hot” industry
Is in a high-growth stage
Has owners willing to relinquish control
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Credit Cards
Popular choice for funding business
Over 80% of small businesses use personal and business credit cards
Can be expensive source of financing
Use sparingly and pay off balance quickly
Look for cards offering rewards based on spending or total balance
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Other Sources of Financing
Grants – monetary awards that do not have to be repaid
Catalog of Federal Government Assistance
Business incubators – organizations established to support entrepreneurial development
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Hiring Employees
Consider freelance contractors – self-employed people hired under terms of a contract to provide a service.
When hiring new employees
Plan to offer workers benefits
Obtain appropriate workers’ compensation insurance
Plan for withholding appropriate taxes and funds for other benefits
4-‹#›
Assembling a Team
Each employee should fulfill a specific need
Guidelines for hiring
Always ask for resume, samples of work, three professional references
Try to hire people with passion for computer technology and experience
Special consideration to candidates who respond promptly and courteously
Select people with talents closely matching the business’s needs
4-‹#›
Copyright by John Wiley and Sons, 2006
22
Insurance and Benefits
Basic business insurance package:
Workers’ compensation
General liability
Auto (if applicable)
Property/casualty
Basic insurance benefit package for employees
Health insurance, including dental and vision-care insurance
Life insurance
Long-term disability insurance
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Employee Forms
Basic IRS employment forms to be prepared:
Form W-9
Form 1099
Form W-4
Form W-2
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Purchasing an Existing Web Site
Suitable for new business owners more interested in business aspect than Web site aspect.
Important consideration before purchasing:
Could similar e-business be launched for less money than it would cost to purchase new site?
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Advantages of Buying an Existing Web Site
Benefits of purchasing an existing site compared to launching a brand-new business:
Override start-up costs
Eliminate time to market
Gain established customer base
Improve financing opportunities
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Evaluating a Site’s Potential
Use techniques such as three-rings exercise and SWOT analysis
Get as much information as possible from current owner
Ask to see business plan and compare projections to actual numbers
4-‹#›
Risks of Buying an Existing Site
Determine if business has active and committed core of buyers
Be alert for following red flags:
Dormant sites
Supplier problems
Competition
Customer issues
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Understand: What Have You Learned?
Assess your knowledge of the basics of financing and launching an e-business:
http://www.wiley.com/college/holden
Assess Your Understanding
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Copyright Notice
© 2008 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.
All clipart courtesy of Microsoft.com
4-‹#›
Copyright by John Wiley and Sons, 2006
Lectures/ch05.ppt
Accounting and Taxes
Chapter 5
Keeping track of an e-business’s numbers and giving the government its fair share
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The common options are tax year and accounting method
That legal form affects how a business must manage income taxes
Which employment taxes e-businesses must pay
How outside professionals can help with accounting and taxes
Do You Already Know?
5-‹#›
The options for tax year and accounting method and how to read basic financial statements
How each of the common legal forms must manage federal income taxes
Which employment and sales taxes e-businesses might be required to pay
That outside professionals can provide essential support for accounting and tax issues
What You Will Find Out
5-‹#›
Select a tax year and accounting method; understand balance sheets and income statements
Correctly file and pay federal income taxes for your business's legal form
Withhold and pay taxes on behalf of your employees and determine when to collect sales tax from customers
Identify needs that can be fulfilled by outside professionals and select ones that are a good match for your business
What You Will Be Able To Do
5-‹#›
The Basics of E-Business Accounting
Interpreting income statements and other financial statements part of successfully operating e-business
Important accounting-related decisions must be made before start-up
Helpful resources:
Easy-to-use software packages
Accounting professionals
5-‹#›
Tax Year
Tax year – defined accounting period used to provide annual snapshot of a business’s financial status and for filing taxes with IRS
Two common options:
Calendar year
Follows month-to-month pattern
IRS rules generally require entities whose earnings pass through to shareholders to adopt this method
Fiscal year
Can be adapted to operational schedule
5-‹#›
Accounting Methods
Must be selected before start-up
Decision does not require IRS approval
IRS rules require certain types of businesses to choose one method or another
Business may change methods after start-up with IRS approval
Seek advice of CPA
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Cash Basis Accounting
Cash basis - Requires reporting earnings when received and expenses when incurred
IRS does not approve if:
Business is C corporation with average annual gross receipts of more than $5 million
Business is partnership that has corporation (other than S corporation) as partner; and has average gross receipts above $5 million
Business is a tax shelter
Business has inventory
5-‹#›
Accrual Basis
Accrual basis - revenues reported when earned; expenses reported as of date owed
Business can use another method if
Business is qualifying taxpayer that passes gross receipt test
Business is not a tax shelter
Firm is qualifying small-business taxpayer that passes gross receipt test
Business is not prohibited from using cash method
Firm is eligible business as determined by IRS
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The Balance Sheet
Balance sheet - detailed summary of a business’s financial status at a fixed point in time
Divided into three parts:
Assets
Liabilities
Owner’s equity
Always balances and governed by equation: Assets=Liabilities+Owner’s Equity
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Assets
Assets - everything of value that a business owns and typically include:
Cash
Accounts receivable (A/R)
Inventory
Fixed assets
Miscellaneous
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Liabilities
Liabilities - represent all the debts of a business and can include:
Accounts payable (A/P)
Accrued expenses
Long-term liabilities
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Owner’s Equity
Owner’s equity - represents amount of claim the owner(s) can make against the assets of the company, or how much they have invested in their company
5-‹#›
The Income Statement
Income statement – provides quick snapshot of business’s revenues and expenses and a measure of how much profit was made or loss incurred over a given period of time and include:
Income (sales during a period)
Cost of goods sold during period
Operating expenses (administrative and selling)
Net income (loss)
5-‹#›
Income taxes for E-Businesses
Businesses must pay the amount of taxes due every quarter
Can be estimated amount
Business’s form of legal organization will have significant impact on how federal income taxes will be managed
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Sole Proprietorships
Sole proprietorship – business solely owned by one person
Owner responsible for paying all business’s income taxes; in fact, business taxes integrated into owner’s individual return
5-‹#›
Partnerships and LLCs
Pass-through entities – their income and losses are passed through to their owners.
Must file Form 1065 U.S Return of Partnership Income
This form reports pass-through amounts to government
Same amounts reported on Schedule K-1 which serves as kind of W-2 for partnerships
5-‹#›
Corporations
C Corporations exist separately from owners and are responsible for paying own taxes and filing own returns
Corporations subjected to rather heavier taxes than other business forms
S corporations treated as pass-through entities.
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Employment Taxes
Business is responsible for paying taxes on behalf of all workers, part-time and full-time
Taxes paid on behalf of employees:
Federal and state income tax
Social Security and Medicare taxes (FICA)
Federal unemployment tax (FUTA)
5-‹#›
Self-Employment Taxes
Sole proprietorships or single-person LLCs must calculate and make quarterly payments of estimated self-employment tax to IRS
Self-employment tax is combined Social Security and Medicare tax that is computed on Schedule SE of Form 1040 as percentage of earnings
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Sales Tax
E-businesses should apply for and obtain a sales tax license before their Web sites go live.
Currently, a business that sells to people in any state where it has a physical presence must collect tax from customers originating from that same state.
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Use and Excise Taxes
Use taxes – a tax imposed on goods purchased in another state that replaces sales tax that would have been paid if goods purchased in home state
Excise taxes – taxes imposed on manufacture, sale, and consumption of various consumer goods and services
5-‹#›
Accounting and Tax Professionals
Four types of professionals suited for needs of small business:
Certified Public Accountant (CPA)
Enrolled Agent
Tax Attorney
Bookkeeper
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Putting Professionals to Work
Set up an accounting system
Offer advice on the firm’s legal organization
Compile and review financial statements
Prepare and file taxes
Assist in long-term financial planning for business
Ensure proper amounts and types of taxes being filed
Offer assistance in completing and submitting all quarterly tax documentation and other forms that might be required annually
5-‹#›
Finding and Selecting Professional Support
To find and select best match for new e-business, use:
Referrals
Local organizations
Professional associations
American Institute of Certified Public Accountants
National Association for Enrolled Agents
American Association of Attorney-Certified Public Accountants
5-‹#›
. . . Finding and Selecting
Issues to explore when selecting professional support
Experience
Availability
Firm size
Philosophy
Work style
5-‹#›
Accounting Software
Wide variety developed to support small business market
Small e-business start-ups should focus on entry-level software; e.g., Quickbooks or Peachtree First Accounting
Cost determined by:
Brand
Features
Industry
5-‹#›
Understand: What Have You Learned?
To assess your knowledge of basics of accounting and taxes for an e-business, visit
http://www.wiley.com/college/holden
Assess Your Understanding
5-‹#›
Copyright Notice
© 2008 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.
All clipart courtesy of Microsoft.com
5-‹#›
Copyright by John Wiley and Sons, 2006
