SBANC Newsletter
January 31, 2006
Issue 406-2006
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QUOTE
"Every day, you'll have opportunities to take chances and to work outside
your safety net. Sure, it's a lot easier to stay in your comfort zone.. in my
case, business suits and real estate.. but sometimes you have to take risks.
When the risks pay off, that's when you reap the biggest rewards."
--
Donald Trump
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FEATURE PAPER
Weathering the Storm:
Preparing New Ventures for an Adverse Event
The following paper was written by Donna Marie De Carolis, Yi Yang, and Edward
Nelling of Drexel University and David L. Deeds of the University of Texas
at Dallas. This paper was presented at the 2006 SBI/USASBE Joint Conference.
Abstract
Analogous to captains that prepare their vessels for tumultuous
waters, entrepreneurs should prepare new ventures for the adverse
event. We tackle the question of what new venture characteristics
mitigate the impact of negative performance effects of adverse events.
Our investigation of clinical terminations in biotechnology reveals
that generic assets (cash and liquid assets) do not sustain a new
venture through the adverse event. Our findings illustrate the importance
of building unique assets (alliances and a strong product pipeline)
to limit wealth destruction. Unique firm capabilities represent “time” and “ability” to
recoup and chart a new course.
Read
the Entire Paper...
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CONFERENCES
AACSB
|
| Who: |
Association to
Advance Collegiate Schools of Business
|
| What: |
Getting the Most from a Business Advisory
Council
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| Where: |
Tampa, Florida, USA |
| When: |
February 23 - 24, 2006 |
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Women's
Business Leadership Program
|
| Who: |
The
William S. Spears School of Business at Oklahoma State
University
& the Oklahoma International Women's Forum
|
| What: |
Women's Business Leadership Program
|
| Where: |
Tulsa, Oklahoma, USA |
| When: |
March 1, 2006 |
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2006
ACME Conference
|
| Who: |
Association
of Collegiate Marketing Educator (ACME)
|
| What: |
2006 ACME Conference
|
| Where: |
Oklahoma
City, Oklahoma, USA |
| When: |
March 1-4, 2006 |
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NCIIA
10th Annual Meeting
|
| Who: |
National
Collegiate Inventors & Innovators Alliance
|
| What: |
NCIIA 10th Annual Meeting
|
| Where: |
Marriott Portland Downtown, Portland, Oregon,
USA |
| When: |
March 23-25, 2006 |
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Young
Entrepreneur Conference
|
| Who: |
The Institute
for Entrepreneurship
|
| What: |
Young Entrepreneur Conference
|
| Where: |
Four Points by Sheraton in Milwaukee, Wisconsin,
USA |
| When: |
March 29, 2006 |
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CALLS FOR PAPERS
The
Macromarketing Society
|
| Who: |
The
Macromarketing Society
|
| What: |
"Macromarketing
- The Future of Marketing?"
|
| Where: |
Queenstown,
New Zealand |
| When: |
June
6-8, 2006 |
Submission
Deadline:
February 7, 2006
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2006
CIBER Conference on Language & International Business
|
| Who: |
Georgia
Institute of Technology
|
| What: |
2006
CIBER Conference on Language & International Business
|
| Where: |
Atlanta,
Georgia, USA |
| When: |
April
5-9, 2006 |
Submission
Deadline:
February 17, 2006
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International
Society of Business Disciplines
|
| Who: |
International
Society of Business Disciplines
|
| What: |
Semi-Annual Professional Meeting
|
| Where: |
Las Vegas, Nevada, USA |
| When: |
March 19-22, 2006 |
Submission
Deadline:
March 1, 2006
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Allied
Academies
|
| Who: |
Allied Academies
|
| What: |
2006 Spring International Conference
|
| Where: |
Hilton New Orleans Riverside, New Orleans,
Louisiana, USA |
| When: |
April 12-15, 2006 |
Submission
Deadline:
March 6, 2006
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Small
Business Institute
|
| Who: |
SBI |
| What: |
Mid
Year Meeting
|
| Where: |
Louisville,
Kentucky, USA |
| When: |
October
12-15, 2006 |
Submission
Deadline:
May 15, 2006
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TIP OF THE WEEK
Techniques
to Increase Cash Inflows
There
are several simple methods that can be used to increase the amount
of cash flows while simultaneously reducing
the effects of irregular
or seasonal patterns of receipts. Five proven techniques are:
- Taking
deposits and progress payments
- Offering
discounts for prompt payment
- Asking
for you money
- Taking
on noncore paying projects
- Factoring
receivables
Deposits
and progress payments can greatly smooth the receipt of cash in businesses
which otherwise have highly variable levels of cash flows.
For example, many businesses that involve summer activities,
such as water parks, are open as few as 100 days per year. However,
many costs,
such as rent, taxes, maintenance, security, and utilities, continue
year-round. These types of businesses often choose to obtain
cash flow during the closed season by selling season tickets or other
forms of
advance purchase. Progress payments are payments that are received
from your customer as you achieve predetermined goals in a lengthy
project. Progress payments are very common in the construction
industry where individual projects may take years to complete.
Requiring
deposits is advisable in many kinds of businesses in which
the process to fulfill a contract with a customer requires
significant amounts of time or additional capital. Examples of this
type
of business are building contractors, consultants, and manufacturers
of custom
machinery.
Discounts
for prompt payment will often motivate your customers to make payments
in a timely manner. It is common for wholesale suppliers
to offer their customers terms of a 2 percent discount for payment
within 5 to 10 working days. You must carefully balance the cost
of providing the discount with the cost of obtaining the needed
cash from
other sources. The cost of a discount for prompt payment is deceiving.
Consider that you are operating a wholesale distributorship of
plumbing supplies, with an average margin on sales of 22 percent,
and you provide
a 2 percent discount for prompt payment. A customer purchases
$100 of supplies on account. What is the effect on your profitability?
Your
profit margin will decline from $22 to $20, a decline in gross
margin of 9.1 percent.
Asking for
your money is at once the most simple and the most effective
way to obtain payment from customers. Surprisingly, many owners
and managers of small businesses are loath to call customers
and request
that they pay what they owe. However, you will find that few,
if any, businesspeople will be offended by a polite phone call
requesting payment.
This is especially true of the owners and managers of small
businesses who have encountered cash flow difficulties themselves.
Very
often, a request for prompt payment will be honored, if possible.
Of course,
there is an implied obligation that, if at some time in the
future the customers encounter cash flow problems, you will also
be
understanding and cooperative, helping them through their own
rough spot.
Taking on noncore
projects can often provide desperately needed cash during slow
business periods. Possibilities are limited
only by your
imagination. Signgraphics, Inc., of Kansas City, Missouri,
during slow times in early spring, often will send a crane
truck and operator to
hoist air-conditioning and other equipment onto the roofs
of buildings. Bill Millers' Barbecue of San Antonio, Texas, for
a fee, deep-fries
whole turkeys for customers during the slow restaurant periods
immediately preceding Thanksgiving and Christmas. Rowan Oak
House B&B, in Salisbury,
North Carolina, as do many bed and breakfasts, during its
slow seasons, sells "murder mystery weekends" that
include lodging, breakfast, dinner, and a role-playing mystery
game,
complete with costumes and
props.
Factoring
receivables should be considered only if other, less expensive
methods to
increase cash flows have
not been
sufficient.
Factoring
is a method of borrowing against receivables. The factor
will usually lend between 75 percent and 80 percent of
the amount
of uncollected
receivables. As the receivables are collected, the factor
deducts a proportional principal amount and remits the
remainder, less
its fee,
typically 5 percent of the gross receivables, to the business.
To
factor your receivables, your customers must have good credit
ratings. Your credit rating is irrelevant because
it is the
customers who pay
the factor, not you. To provide for losses on uncollectible
accounts, some factors either hold back some of the remittances
or charge back
any uncollected amounts at the end of a specified contract
period.
| Katz,
Jerome A., and Richard P. Green. Entrepreneurial Small
Business. New York: McGraw-Hill/Irwin,
2007. 412-414.. |
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ANNOUNCEMENTS
SBANC Wins
Small Business Institute Showcase Award
SBANC Staff: (from left to right) Ashley Ford, Brandon
Tabor,
Dr. Don B. Bradley III, Olivia Johnson, and Garion McCoy
At the 2006 annual joint meeting between the Small Business Institute
(SBI) and the United States Association for Small Business and Entrepreneurship
(USASBE) in Tucson, Arizona, the University of Central Arkansas' SBI
program and its Small Business Advancement National Center (SBANC) were
awarded the Showcase Award, which recognizes SBI Programs and Directors
for innovative development.
The SBI Program and SBANC are both under the direction of Dr. Don B.
Bradley III. The SBI Program sends either individual students or student
teams to help a business expand or solve problems within a business,
such as computerization, pricing, marketing, human resources, financing,
accounting, etc. The program also works with non-profits and start-ups.
The UCA program has received numerous innovation awards for its rural
development work with small communities. SBANC provides consulting information
to small businesses and entrepreneurs through its weekly e-newsletter
and its website (http://www.sbear.uca.edu). In the past, the Showcase
Award has been presented to outstanding small business programs at Kansas
State University, the University of Louisville, the University of Cincinnati,
California State-Fullerton, and Indiana University.
Dr. Bradley also received USASBE's Family Business Leadership Award
and Family Business Service Award. In addition, he serves on the Board
of Directors of both SBI and USASBE.
At the conference, Dr. Bradley presented a paper co-authored with former
UCA MBA student Tchiko Ngbichi on Entrepreneurial Opportunities in West
Africa.
The
SBANC Newsletter is provided as a service to the members of our affiliates:
Academy of Collegiate Marketing Educators (ACME),
Association for Small Business & Entrepreneurship (ASBE),
Decision Sciences Institute (DSI),
Federation of Business Disciplines (FBD),
International Council for Small Business (ICSB),
Institute for Supply Management (ISM),
The International Small Business Congress (ISBC),
Marketing Management Association (MMA),
Small Business Administration (SBA),
Service Corps of Retired Executives (SCORE),
Small Business Institute (SBI),
Society for Marketing Advances (SMA),
United States Association for Small Business & Entrepreneurship
(USASBE), U.S.
Department of Veterans Affairs (VA), and Western Decision Sciences
Institute (WDSI). If you are interested in membership or
would like further information on one of our affiliates, please see
our web
site at http://www.sbaer.uca.edu
SBANC STAFF
Main Office Phone: (501) 450-5300
Dr.
Don B. Bradley III, Executive Director of SBANC &
Professor of Marketing;
Direct Phone: (501) 450-5345 Ashley
Ford, Development Intern
Garion
McCoy, Development Intern
Brandon
Tabor, Development Intern
To subscribe or
unsubscribe to the SBANC Newsletter, please E-mail SBANC at sbanc@uca.edu |
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