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attribution as requested by the work’s original creator or licensee.
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Preface
Imagine a text that your students might actually read. Imagine a book that is the core of your course without the bloat. Imagine a book that uses customer value, digital technology, and cash flow as key themes rather than afterthought add-ins. Imagine a text that contains extensive ancillary materials— PowerPoints, websites, videos, podcasts, and guides to software—all geared to enhancing the educational experience. Sound good? Small Business Management in the 21st Century is your text.
This text offers a unique perspective and set of capabilities for instructors. It is a text that believes “less can be more” and that small business management should not be treated as an abstract theoretical concept but as a practical human activity. It emphasizes clear illustrations and real-world examples.
The text has a format and structure that will be familiar to those who use other books on small business management, yet it brings a fresh perspective by incorporating three distinctive and unique themes that are embedded throughout the entire text. These themes ensure that students see the material in an integrated context rather than a stream of separate and distinct topics.
First, we incorporate the use of technology and e-business as a way to gain competitive advantage over larger rivals. Technology is omnipresent in today’s business world. Small business must use it to its advantage. We provide practical discussions and examples of how a small business can use these technologies without having extensive expertise or expenditures.
Second, we explicitly acknowledge the constant need to examine how decisions affect cash flow by incorporating cash flow impact content in several chapters. As the life blood of all organizations, cash flow implications must be a factor in all business decision making.
Third, we recognize the need to clearly identify sources of customer valueand bring that understanding to every decision. Decisions that do not add to customer value should be seriously reconsidered.
Another unique element of this text is the use of Disaster Watch scenarios. Few texts cover, in any detail, some of the major hazards that small business managers face. Disaster Watch scenarios, included in most chapters, cover topics that include financing, bankers, creditors, employees, economic downturns, and marketing challenges.
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Chapter 1
Foundations for Small Business
The Twenty-First-Century Small-Business Owner
Source: Used with permission from Frank C. Trotta III.
Frank Trotta III is a recent college graduate, class of 2009, and an excellent example of the
twenty-first-century small business owner. At 23, he is already running his own business and
planning to open a second. This may be second nature because Frank III is a third-generation
small business owner. His grandfather, Frank Trotta Sr., opened a supermarket in 1945. His son,
Frank C. Trotta Jr., began his career by working in the supermarket. Soon he had his own
hardware department within the store and was beginning to understand what it takes to be a
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successful grocer. He observed his dad interacting with his customers and providing value
through customer service.
Frank Jr. now owns and operates one of Long Island’s most successful travel companies: the
Prime Time Travel Club. The experience Frank Jr. garnered from his father in customer service
became the tenet of his business philosophy: give customers value through personal attention
and service. At an early age, Frank III worked in his dad’s office when he was not busy with
school activities. He had a strong entrepreneurial leaning and became very interested in the
travel industry. In high school, Frank III worked for his dad and learned different facets of the
travel business. While attending a Connecticut university, Frank III reached out to other
students on campus and started his own side business: booking spring break trips. The same
people are now repeat customers who call him to book their vacations, honeymoons, and family
trips.
In his junior year, Frank III created a travel site of his own: Cruisetoanywhere.com. He is
involved with every aspect of the site: he takes all calls from the customer service number,
produces all the marketing campaigns, and works on contracts with both major and smaller
cruise lines. Although the site is still young, it has been very successful. Frank III is learning how
larger competitors do business and from their successes and mistakes. Customer service and
attention are his first priority. Frank III believes his competitive business edge comes from what
he learned from his father’s company and business skills such as planning and managing cash
flow from his professors. In addition to his cruise website, Frank III plans to launch another site,
Tourstoanywhere.com. He exemplifies the skill set that will characterize the twenty-first-century
small business owner: a clear focus on creating value for his customers, a willingness to exploit
the benefits of digital technology and e-commerce, and the ability to apply basic business skills
to the effective operation of the firm.
1.1 Small Business in the US Economy
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L E A R N I N G O B J E C T I V E S
1. Explain the significance of small business in American history and the US economy.
2. Define small business.
3. Explain how small business contributes to the overall economy.
4. Explain how small business impacts US employment. It’s an exciting time to be in small business. This is certainly not anything new, but you might not know it. Scan any issue of the popular business press, and in all probability, you will find a cover story on one of America’s or the world’s major corporations or a spotlight on their CEOs. Newspapers, talk radio, and television seem to have an unlimited supply of pundits and politicians eager to pontificate on firms that have been labeled as “too big to fail.” Listen to any broadcast of a weekday’s evening news program, and there will be a segment that highlights the ups and downs of the Dow Jones Industrial Average and the Standard and Poor’s (S&P) 500. These market measures provide an insight into what is going on in Wall Street. However, they are clearly biased to not only large firms but also huge firms. This creates the false notion that “real” business is only about big business. It fails to recognize that small businesses are the overwhelming majority of all businesses in America; not only are the majority of jobs in small businesses, but small businesses have also been the major driving force in new job creation and innovation. Small business is the dynamo of innovation in our economy. In 2006, Thomas M. Sullivan, the chief counsel for advocacy of the Small Business Administration (SBA), said, “Small business is a major part of our economy,…small businesses innovate and create new jobs at a faster rate than their larger competitors. They are nimble, creative, and a vital p
