Day 10: 1/17/2014

Day 10 of class we finally put our Entrepreneurial Experience into action.  Our business idea was based on the fact that students have all of these textbooks they have no use for after their class is over.  They have the option to sell it back to the bookstore, but they will only get a fraction of what they bought it for.  Our idea for a small business is to sell students’ textbooks to Amazon.com for much more money than the bookstore will give them.  The name we decided on was Briar Cliff Book Sellers, or BCBS for short.  Because of the way that the Amazon buy back is set up, we are only able to get amazon credit instead of cash.  However, I don't think the customers would really mind because they can use the credit to buy back new textbooks from Amazon.  The way that we will make money is that we will sell the books back and then take a 10% commission of the total sales. 

We started out by making something like an executive summary about what each person is going to do.  Connor and Tommy’s job was to actually help write the executive summary about what each person’s job is.  Matt’s job was to write the email that was going to be sent out to students. My job was to type up the flyers that we were going to hang up around campus to get publicity for our business.  I also typed up a sales form to keep track of a customer’s information and the textbooks and prices we were selling them for.  We also each advertised some from our personal Facebook and Twitter accounts.  The emails were sent out and I was pretty amazed at how quickly we received responses!  I would say the email was the most successful form of advertisement, but the Facebook and Twitter also got some responses. 

Thursday night, 1/16, we went and collected books from different customers.  I was amazed at the collection of books that some people had.  The customer who I received books from had a whole box of probably 15 books and Amazon would only give money for 7 of them.  That night I priced out all the books and input the textbooks and prices into our sales sheet.  I then email the sheet to the customer to make sure that he was alright with the textbooks and prices we were selling them for. 

We then met Friday morning in the lounge in Baxter.  This is when we actually took the textbooks and sold them back to Amazon.  For the 7 books that I was in charge we sold them for $159, so roughly $15.90 for us, thus around $4 per person.  Total we have over $400 worth of books and not everyone who wanted to have us sell books for them were able to get their books to us.  So, this is a little more than $10 per person that we made.  After we submitted all the books back to Amazon, we packaged up the books with materials that we got for free from the mailroom.  We then took them back to the mailroom and UPS picked them up later that day.  The books should get to Amazon sometime later this week and, once they do, we will get the credit. 

I was pretty happy with the way that our small business turned out.  While we did get a decent amount of textbooks to sell, it did not result in a huge amount of money for us.  I did learn a fair amount about starting a business, though.  It is a lot more work than I thought it would be, whether it is getting customers or actually picking up the books from the customers.  I also think it would have been beneficial to advertise more.  Most of the customers we received where all people who knew one of the team members personally.  I think if we were able to build a reputation, then people who did not know us would actually come give us their business.  One important concept I learned was about bootstrapping.  While we did not make a bunch of money, one benefit was that we did not have a single cost.  The way we sold the books back, Amazon paid for the shipping of the books back, and we got all the packaging material for free from the mailroom. 

Overall, it was a very good experience and I have learned a lot from class, but also from our entrepreneurial experience.  I do not know yet where my life and career are going to take me, but I most certainly think that I have a little bit of entrepreneurial spirit in met and believe that whether I actually start my own business or not, through hard-work and innovation, will make myself a bunch of money.

Day 9: 1/16/2014

Day 9- we have only one class period left.  Today we looked at chapters 13 and 14.  Chapter 13 looked at some of the different types of leadership and management styles.  There are many different types of leadership that range from authoritative, where the leader sets goals and has a “come follow me” attitude, all the way to democratic style of leadership, which gives the employees a large say in what the company does.  Now, these are two broad ends of the spectrum in terms of leadership, but every person leads in a different way.  And, different people need to be led in different ways.  Some people need to be told exactly what to do and they are great at following directions.  However, there are people like me, who are much more independent- give me task and I will get it done. 

Chapter 13 then moves on to other important stages in growing your business, focusing on hiring, managing, and letting go of employees.  I think this is a little further than we really need to learn in this class.  One of the most important things small businesses need to take care of is human resources, which can be very tricky.  I actually took a human resource management class last semester and I was amazed at how much there is to know for human resources.  There are literally hundreds and thousands of rules about who you hire, how you treat them, and if you decide to terminate them.  At the beginning, you will have to take care of all the human resources and you need to be extremely careful because we live in a very litigious culture and there is always a chance of being sued.   

Chapter 14 takes a little different approach and looks at what you need to do if you enter into a franchise rather than start your own business from start.  There are advantages to doing both.  Buying into a franchise can be more beneficial in the beginning because, often times, they will teach you how to run the franchise and they pay for national TV commercials, however, you often have to follow strict corporation rules and the franchise will often take some of your profits.  Like we discussed in class, I researched Jimmy John’s and I believe that they take 6% of your sales.  If you start your own business, you have to figure out how to run it on your own and you have to do all your own advertising, but you also get to keep all of your own profits. 

We did not watch any more Shark Tank today, instead, we got into our Entrepreneurial Experience groups. Our group, The Briar Cliff Book Sellers, finalized what we are each going to do.  So far we have three customers who each say they have a box or boxes of old books.  I am surprised that we have that much business already, so I would consider it a success so far.  Each of us are meeting with some of the customers tonight and we are going to return and package the books tomorrow morning. In tomorrow's blog I will give the final details and result of our new business.

Day 8: 1/15/2014

Day 8- we looked at both chapters 11 and 12.  Chapter 11 starts out by looking at some of the different types of business you can start.  The three broad types of businesses are: sole proprietorship, partnership, and corporation.  A sole proprietorship is the simplest and easiest type of business to form.  It has one owner and all profit goes to him.  While this is a decent idea because you get all the profits, you also assume all the risk.  A partnership is similar to a sole proprietorship, but you can have multiple partners that are in charge of the business.  A corporation is the most difficult and expensive business to form.  However, there are also numerous tax benefits such as lack of risk.  There are numerous different types of corporations such a C corp., S corp., and Limited Liability corp.  Limited Liability Corp. or LLC, is a relatively new type of corporation, but is very useful if you want to form a corporation as a small business. 

Chapter 11 then moves into some basic other information you need to know, such as information about bankruptcy and intellectual property.  Intellectual property is a key factor because you do not want other people stealing your ideas or brand.  A trademark is any words, symbols, or designs that identify or distinguish the source of the goods (products) of one party from those of others.  Another extremely important part of starting a new business is securing a patent.  This basically ensures that if you invent a new product or process, the United States government guarantees you and only you the right to use this product or process. 

We then moved into chapter 12, which focuses on actually operating your new business.  The beginning of this chapter focuses a good amount on manufacturing businesses.  The traditional route of manufacturing businesses is that they manufacture the product, then sell it to a wholesaler, who then in turn sells the product to a retailer, who then sells to the consumer.  However, with the use of new technology, there are often times that less people touching the product before the consumer receives it.  With the invention of the internet there is often times where the consumer can directly buy the product from the manufacturer.  The example we gave in class is that you can now simply go to Nike’s website and order directly from Nike, often cheaper than you can buy it in the store. 

There two entrepreneurs we saw on Shark Tank today were very interesting.  There first idea was a party for children.  I thought it was a little stupid, but I suppose I could see where some parents would like this for their kids.  They also did a horrible job of explaining where their income came from.  At first it sounded like they got all their money from ticket sales, and then they kept saying stuff about sponsorships, which I was generally confused on what they meant by that.  They did not get any money from any of the “sharks”.  This did not surprise me, but if they had exampled their income better and had better business plan, I think they would have had a much better shot as getting cash.  The second entrepreneur was a cowboy who invented his own work-out system.  Honestly, I was surprised that only one “shark” invested.  I am not a super huge fan about those work-out commercials, but his system seemed a lot better than some of the stupid work-out fads I have seen on TV.  He had a really huge personality and it seemed like his product worked.  On top of his work out system, he also had a work out machine which actually looked decent.  I am glad he got money for his idea.  

Day 7: 1/14/2014

Day 7- we started out by looking at chapter 10, which focused on financing new businesses.  One of the things that we are constantly told about entrepreneurship is that you cannot be afraid to fail.  The reason that we are told this so often is because it is hard to be an entrepreneur; not only it is hard just to get started in owning your own business, it is even harder to be successful.  The statistic that is given in the book is that around 20% to 25% of new business fail from bankruptcy within the first eight years.  The other 75% to 89% are terminated due to owners selling the business, changing operations, or owners retiring.  Now, this does not mean that the entrepreneurial venture was unsuccessful.  We saw that one entrepreneur on Shark Tank said a previous venture he created and sold within 18 months. 

The chapter then moved on to look at some of the ways to finance a new business.  There are three different ways to finance with: earning, equity, or debt.  There are benefits to using all three of these different types of financing.  Being in corporate finance last semester, I learned a fair amount about types of financing.  Before that class, I usually just assumed the best way to finance was by putting in your own money or using money the company earned.  One of the most interesting things I learned was that it can actually be very beneficial to use debt to finance ventures.  One of the main reasons is that you can use the interest you pay as a tax shield, which can be extremely beneficial.  Another benefit is that, by using debt financing, you can get a greater return on your investment.  For example, if a project is going to cost $100 dollar and return $150, if you use entirely your own $100 you get a 50% return.  However, if you use half debt, then you are using $50 of your own cash and $50 of the banks, but now you still get a return of $150, thus now your return on your own money is 100%! This is a very basic example because you are not accounting for interest expense and various other factors, but I thought that was just one of the most interesting things I learned. 

The chapter then looked more in depth at different types of financing.  There are gifts and grants that are available to new businesses that can be helpful.  These are especially nice because you do not have to pay them back.  You can also go with the traditional types of financing, such as getting a loan from a bank.  But, if this is your first business you are starting, banks are often weary of loaning money.  There is also important type of investing that is used in new businesses, which is using venture capitalists or angels.  There are basically people who have already earned a bunch of money, and they are often entrepreneurs themselves.  This is almost what you could callShark Tank.  There are many different ways that this type of financing is set up, but it usually is just a loan that the entrepreneur has to pay back, or, another common way, is just to give up equity in the company in exchange for the cash. 

The episode of Shark Tank that we watched today was interesting.  The first entrepreneurs basically put LED lights in a cooler.  It is a pretty decent idea, but I think the key to their product was the fact that they had it patented.  They ended up making a deal with Kevin, which I think was a decent idea because he will be able to get them setup with larger cooler manufacturers and they can just make money off of the patent.  I believe the deal was that Kevin gets something like 33% of their profit from royalties.  Which is a lot of royalties, but I think they made good decision because in the long run it will make them much more successful by havingKevin help them.  The second product was basically just a big meat shot.  This also did sound like a good idea because, according to the judges, it was delicious meat.  But, I think all the “sharks” knew that there was a bunch of competition and this was just not a project they were going to make a bunch of money on.  

Day 6: 1/13/2014

In class we moved into chapter 8, which talks solely about the different financial statements that are extremely important when starting your own business.  The three statements are the income statement, the balance sheet, and the cash flow statement.

The income statement is one of the more basic, yet most important, financial statements all business use.  An income statement basically covers how much income the company brings and what expenses the company has to generate that income.  The very first part of the income statement is income or revenue that company received.  Then you subtract the variable costs the firm incurred, which gives you the contribution margin.  After you find the contribution margin, you subtract the fixed costs, leaving you with either a net profit or net loss. 

The income statement gives you a view of the entire year or quarter one of what income the company has brought in or will bring in.  The balance sheet, however, gives you a snapshot of the assets, liability, and owners’ equity of a company at a certain point in time.  The basic equation for a balance sheet is:     assets = liabilities + owners’ equity.  The balance sheet is used to show what assets the company owns, and who has the rights to these assets.  Liabilities can be both short term and long term.  Whatever value is left after you pay the credits will give you how much value the owners have in the company, thus the equation to figure out the value of owners stake you the company the equation would be:              owners’ equity = assets – liabilities.  You can use this equation in many different ways to figure out how much a company is worth and why it is worth that.

In short, the income statement gives you a picture of a company’s revenue and expenses, whether in cash or credit.  The balance statement give you a “snapshot” of a company’s assets, liabilities, and equity at a certain point in time.  The final important statement for new businesses is the statement of cash flows.  It is different from the income statement in that the cash flow statement only shows what cash comes in and what cash goes out.  This is important because it shows how much cash a business is actually taking in and how much cash it is spending. 

We also watched another Shark Tank.  There were two entrepreneurs that invented this new and improved type of tape that is extremely strong.  They initially came in asking for, I believe, $90,000 for 10% stake in their company.  This was one of the lowest prices for equity I have seen on the show, thus valuing their company at $900,000.  One of the “Sharks” was out because of previous business agreements, but three of the “Sharks” were interested.  They got a variety of different offers and, when they left to talk in private, the “Sharks” discussed how they had undervalued their company, which is pretty uncommon from what I have seen of the show.  They came back and wanted basically their original offer, but they wanted a whopping $2 million in line of credit.  I don’t how exactly how the “sharks” do a line of credit, but I assume it basically means they can borrow up to $2 million at any time for any business purpose.  Considering they came in valuing their company at $900,000, I was little surprised that they wanted a $2 million line of credit.  The “sharks” where also very surprised, but in the end, they settled on a deal with Lori Greiner for something like $120,000 for 12% equity and then she would provide them with extra cash if they needed it.  I think it was a good deal on their part because not only will she help them advertise and sell their product, it will be nice to have someone to get cash if they need it.  

Day 5: 1/10/2014

Friday was the halfway point of our class.  So far I had learned many different ways to become an entrepreneur.  At the beginning of class Anthony Rossi came in and talked to us about becoming an entrepreneur.  He gave us a lot of advice about starting your own business.  He did tell us some of the same stuff we have been hearing all week such as not being afraid to fail.  He also told us that an important thing to do is just to go out there and talk to people.  He suggested that all of us go to Biz Brew.  Which is basically just a meeting of young professionals where they talk about different business ideas they have.  This does sound like a very interesting event to attend.  He then took us down to his office in the entrepreneurship center.  His office was not huge but he did point out that having this office really allows him to make money because it cuts down on his overhead costs.  He doesn’t have to pay for phone or anything like that.  He then brought out this big list of business ideas that he had.  He has started on almost every one of his ideas.  It was crazy to see all of the ideas he had.  He had business ideas from everything such as a drunk driving service to smart phone apps.  I thought it was really cool and motivational to see how you can be an entrepreneur at a young age. 

We took our first test in this class and I thought it went alright.  We covered basically all of the material up to chapter 6.  At the end of the test we watched another episode of Shark Tank.  We then had to write a couple paragraphs about what we thought about the product and if we thought they got money.  The product presented was an app that allows you to print off a postcard from any picture you take on your smart phone, and then sign your signature.  The “sharks” all had serious concerns about this business.  He started with $1.6 million and was already down to $185,000.  He and the “sharks” both knew that he was bleeding money and really needed an influx of cash.  But most of the “sharks” thought that while this idea was decent, it was not worth the risk.  I agree with the “sharks” for the most part.  I agree that is was an okay idea.  But my concern is that how often people are going to do this.  They download the free app once and then print out a couple postcards and then lose interest.  I did not think that any of the “sharks” would invest but in the end one did which kind of surprised me.  He did ask for a significant amount more of the company equity and in the end the entrepreneur ended up taking the deal which I thought was a good decision. 

We also covered a part of chapter 7 which was mostly about the start-up and some more basic financial information about new businesses.  I have said this before but being an accounting major I have seen a fair amount of this information before.  This chapter looks at the two basic different kinds of costs for a business: fixed and variable.  Fixed costs are costs that will not change over the short run, regardless of how much product you manufacture or service you provide.  Examples of this would be rent.  If you are a dentist, you have the pay the same amount of rent every month regardless of how many patients you see.  This does not mean the fixed costs will never change, they just cannot change over the short run.  If in five years you decided to move buildings, this will cause you fixed costs to change.  Variable costs are costs which depend on how much of a good or service you provide.  If you are a manufacture of beer, a variable cost for you would be aluminum for cans.  For every can of beer you produce you must use aluminum for each can, if you don’t produce a can of beer, you do not need to use any aluminum. 

Chapter 7 also looks at some of the most basic equation in business and accounting.  The most basic being that gross profit equals revenue minus fixed and variable costs.  So if you can sell an ice cream bar for $1.00 and your fixed cost is $.30 and your variable costs are $.20, than your gross profit is $.50 per ice cream bar.  Chapter 7 than goes on to give some more advice about the beginning stages of starting a new business.  It says to do things such as make sure you have good accounting practices and to keep good track of them. 

Being half-way through this class I am very happy that I decided to take it for J-term.  I do believe that I have some entrepreneurial spirit in me and I have learned a lot so far.  At the end of my sophomore year I was seriously considering switching to just a business administration major and not accounting.  I even had switched advisors and gotten my schedule.  But over that summer I talked to some people about it and decided that the best path for me to take was accounting.  When people are giving advice about being an entrepreneur they say that you don’t have to be an accountant to run a business, if you have a passion than you can run your own business.  But I do think that having a basic understanding of accounting really helps you in every stage of owning you own business.  I do now know what the future holds for me but I believe that having a knowledge of accounting will help me in the future regardless of what path I take in life.  

Day 4: 1/9/2014

Day 4 we talked a lot about chapter 5, which looked at the marketing mix and plan.  Though I already discussed the four P’s of a marketing mix, I will talk about them a little more today.  The four P’s are product, place, price, and promotion.  There are basically two different types of businesses, product and service.  Product is an object that people buy.  A service is an intangible action that is often done in exchange for a fee.  We also talked about how to successfully create and maintain a brand.  This can be done in many different ways, but to condense it, you want to always provide the customer with the best service or product on a consistent basis.  You can also do things such as advertise to put your name out there. 

One of the most important facets of any new business is the place.  When it comes to place, the key is location, location, location.  On the other hand, the invention of the internet has made this a little less important because now you can find new product or services all around the world with the click of a button.  However, where you are located at is still very important, especially if you are a service business.  Judy gave us the example of the cool building that has been around seven different restaurants in the past ten years simply because it was located a block off Hamilton Avenue.  It might have had delicious food, but because people did not see it all the time, out of sight, out of mind, they did not think of going to eat there. 

We moved a little bit into chapter 6 before the end of class.  Chapter 6 really focused on the selling of your new product or service.  There are many different ways to try to help your business sell itself.  You can advertise and wait for customers to come to you, but the squeaky wheel gets the grease.  You are only going to be truly successful at selling your product if you get up and go out and try to sell your product.  Go talk to managers of big stores and set up meeting with owners of companies.  Even if they are not thrilled about your new product, they will love that you got up and took action to make your business successful.   Even if they do not want to buy your product, you can still learn from your failure.  Maybe ask them why they don’t want you product, or what improvements they think you should make. 

I thought the two videos we watched were very interesting.  I think a food truck is a great idea.  But, I believe that the most important concept I learned from this video was that even though the owners had to work really hard, they still enjoyed their work because it was their own.  They owned their own business and that made the long hours and hard work worth it.  The second video about the microlending was very interesting as well.  I had never heard of microlending before this, but it sounds like a good idea to me.   I believe that giving loans to immigrants and helping them start their own business is not only righteous, but also truly embraces the American spirit.  This country was founded by immigrants and we wanted to be free, not only from other countries, but also free do what we want, even on work.  I believe that this is an amazing concept that is not only good for the immigrants and women it directly helps, but also good for the country as a whole.  I love the United States and I am extremely glad to see this kind of entrepreneurship and kindness take place in the greatest country on the planet!

God Bless the U.S.A.!!!!!