Small (and Large) business basics - Is Small Business for you - Part 3 It's a hot summer afternoon, and you're sweating it out under the shade of an elm tree in your front yard. "Boy, it's hot," you say to yourself, sighing. "I could sure go for a glass of lemonade." And that's when you seize upon your business idea. With no lemonade stand in sight, you figure that you've found an untapped market of thirsty customers.
You start by asking some of your neighbors if they would buy lemonade from you, and you quickly discover that the quality, service, and location of your proposed business may attract a fair number of customers. You've just conducted your first market research.
After you determine that your community has a need for your business, you also need to determine the location of your business. Although you could set up in front of your house, you decide that your street doesn't get enough traffic. To maximize sales, you decide to set up your stand on the corner down the road. Luckily, Mrs. Lizzie gives you permission to set up in front of her house, provided that she gets a free glass of lemonade. You've just negotiated your first lease, and you've just had your first experience at bartering.
With a tiny bit of creativity and ego, you determine the name of your business: The World's Best Lemonade Stand. Several transactions with parents and the grocery store later, and you have your lemonade stand (the store), your cash box, a table, a pitcher (your furniture and fixtures), and the lemonade (your inventory). The World's Best Lemonade Stand is now ready for business!
From the moment you first realized that you weren't the only one who might be interested in buying some lemonade, you faced the same business challenges and issues that all small-business owners face. As a matter of fact, the business challenges and issues your lemonade stand faces are the same that Microsoft and every other Fortune 500 company faces. The basics of doing business are the same, no matter what size the business is:
"" Sales: Microsoft sells software applications; you sell lemonade. A sale is a sale no matter what the product or service or how large or small the ticket price.
"" Cost of goods: Microsoft buys packaging materials and advertising space for its software from its vendors and suppliers; you buy lemons and sugar and paper cups for your lemonade from the grocery store.
"" Expenses: Microsoft has employee wages and pension plans (or employee benefits; see Chapter 16); you have sign-making costs and bubble-gum expenditures to keep your employees happy (also a form of employee benefits).
"" Profit: Profit is what's left over after Microsoft subtracts the cost of its goods and expenses from its sales; the same is true for your lemonade stand.
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