Skills for Growth:
Business Management Tools
Session 9
Date:
Due:	Section V: Parts A and D
Class Opener (10 min.)
Articles of interest, best / worst news, brainteaser, etc.
Instructor Topics (60 min.)
(20 min.)	1.	Dealmaking and Contract Management
How Deals Are Made
Contract Management
(5 min.)	2.	Managing Resources
Green Business Incentives
(20 min.)	3.	Financial Management
Budgeting
Cash Flow Management
Ratios and Benchmarking
(15 min.)	4.	Project Management
—No guest speaker this session—
Break (20 min.)
Refreshments
Networking activity
Work Period (90 min.)
Homework Review—Cash Flow Projections and Financial Statements
Workbook Preview—Session 10
Assignment for Session 10
WORKBOOK	Complete the worksheets in Workbook Session 9. WRITE	After completing the Session 9 worksheets, follow the instructions on the Writing Your Business Plan page at the end of the worksheets to complete the Cover and Title Page, Table of Contents, Section I. Executive Summary, and Appendix. TEXT	Read Chapters 28 through 31 (Managing Growth, Options for Growth, Valuing and Buying a Business, and Congratulations).
Additional Instructor Notes
Session 9
Dealmaking and Contract Management
As an entrepreneurs, your successful growth depends on your ability to negotiate deals, get paid and manage contracts. Use OHD 9-1 to introduce the five basics of negotiation.
Ask the question: With whom do you negotiate, and why? Log answers on the board. Then, discuss whether it’s appropriate to use the same negotiating style for all parties listed.
Many people see negotiation as a conflict that the more aggressive negotiator always wins. In reality, the best negotiators are cooperative and flexible. They know that their own interests depend on creating a win-win outcome that leads to a stable working relationship.
Use OHD 9-2 to explain soft, hard and win-win negotiations.
How Deals Are Made
Use OHD 9-3 to describe the stages of negotiation. Then, use OHD 9-4 to discuss the traits of good negotiators.
The important thing to stress here is the difference between positions and interests. Your position is what you say you want (more money, faster turnaround, larger orders). Your interests are the things that motivate you to take your position (your goals, needs, concerns, hopes). It’s important to understand the difference. Otherwise, you may spend a lot of time arguing over positions, only to end up with an agreement that doesn’t satisfy your interests.
When you’re stuck on a negotiating point, ask yourself: “Who is this more important to?” If you can figure out the answer to that question, you will know when to compromise, when to walk away and when to remain firm. Use OHD 9-5 to explain other ways of overcoming problems.
Contract Management
A signed contract is a very valuable asset, provided you manage it professionally. Delivering exceptional performance under contract requires continuous, consistent management.
These days, an efficient contract management system is not optional. Outsourcing and offshoring, collaboration with multiple freelancers and contractors, the shift to simplified e-procurement systems among government and big business—all these opportunities require constant attention to contract terms and performance.
Also, most small business have leases, software licenses, maintenance agreements, warranties, website hosting agreements, and dozens of other contracts to manage.
Failing to manage contracts can cause you to miss out on time-sensitive incentives and discounts. It can also lead to errors, wasted effort and missed deadlines. A study by the International Association for Contract Management found that losses due to inefficient contract management may equal up to 9.2 percent of annual revenues.
Use OHD 9-6 to highlight key contract management tasks. Point out that contract management software can help you track performance, compliance and deliverables. It can also tell you when it’s time to perform contract management tasks.
To renew or not to renew?
When it’s time to renew a contract, assess how valuable it is to you. If it’s not meeting your expectations, either negotiate more favorable terms or cancel it. Use OHD 9-7 to discuss criteria for evaluating contracts and contract partners.
Even if you intend to renew, review the contract to make sure all information is up to date. Your contact or billing information—or your vendor’s—may have changed since you last looked at the contract, so make sure everything is current before you sign up for another year.
Exceeding expectations
Given the choice between simply meeting the terms of your contract or exceeding them, you should always do more rather than less. Keys to exceeding expectations include meeting goals ahead of schedule or below cost, sharing expertise, and making yourself available when needed.
Reviewing your performance
As with all other aspects of your business, you can only improve contract management by reviewing and critiquing your past performance. Use OHD 9-8 to discuss ways of doing this.
Managing Resources
NOTE: This section of the TEXT offers advice on saving energy, water, paper and other resources. It’s a very useful overview, and we hope students will refer to it often as their businesses grow. But it’s not really practical to run through it in class. Instead, refer students briefly to the worksheets, and encourage them to ask themselves these questions:
What hazardous materials does my business use? Does using them increase my shipping, storage, training or insurance costs? Could nonhazardous substitutes solve these problems?
What materials flow into and out of my business? What processes and products are causing pollution, safety risks and inefficiency?
Is poor inventory management adding to my disposal costs?
Where and how is energy being wasted? What are the solutions, and what help is available?
As energy, fuel and water prices rise—and global regulatory and competitive pressures intensify—there is no business that can’t benefit from managing resource use. By improving efficiency and looking at the real costs of doing business, companies of all sizes are boosting their quality and their bottom line. No matter what kind of business you run, it makes good sense to run it as efficiently as possible! Encourage students to review their business plan and operations with an eye toward improving efficiency and avoiding waste.
Green Business Incentives
Many utilities and states offer rebates for energy-saving equipment and facility improvements. Some also offer low-interest loans for upgrades. Before teaching this class, we recommend that you visit the Database of State Incentives for Renewables and Efficiency (www.dsireusa.org) for up-to-date information. Also, note that the Energy Independence and Security Act of 2007 stipulates that SBDCs must do more to help small businesses save energy.
Financial Management
NOTE: Given that you’ve just assigned two sets of difficult financial worksheets, students may have questions on financial management that relate directly to these sessions. Where possible,  relate your answers to practical issues students may be having with finishing their financial statements or financing proposals.
Nothing is more crucial to a growing business than financial management skills. Even if you get outside help, there’s no substitute for hands-on financial management.
Remember: There’s a financial side to every business decision you make. If you’re not getting the right financial information when you need it, or you don’t have the skills you need to interpret it, you have no way of knowing if you’re making the right decisions.
Budgeting
Although budgets are usually annual, small and growing businesses may need to budget more often to stay on top of changing cost, revenue and sales trends. Review your budgets monthly—or weekly, for crucial or high-risk budgets—and think about what they’re telling you. Are you carrying expenses out of habit? Are your sales goals too low? Should you update your costs to reflect market conditions? Are your variable costs in line with your budget?
Cash Flow Management
For growing companies, no skill is more crucial than managing cash. Analyze your cash flow weekly. It’s not the most exciting part of running a business, but it’s one of the most important!
Also, comparing your monthly cash flow statement against actual inflows and outflows can help you assess how well you’ve planned. This is essential for entrepreneurs who are pursuing growth.
Review the biggest drains on cash flow (interest payments on debt; cash tied up in excess inventory; uncollected accounts receivable).
When sales go up, expenses often follow. Any time expenses rise faster than sales, you have a problem. Monitoring your cash flow gives you the ability to identify and fix such problems.
Ratios and Benchmarking
Growing businesses should regularly be using these tools to assess their progress, identify and solve problems, and keep their growth on track.
Use OHD 9-9 to remind students of the four types of ratios. Note that credit analysts usually look at liquidity and capital structure ratios to assess financial risk. Equity analysts are more interested in asset management and profitability ratios, which help them assess its potential for success.
Remember: A ratio is simply one number divided by another. It becomes meaningful only when compared to relevant data through benchmarking:
Internal ratio analysis compares a present ratio for your business to a past (or expected) ratio for your business in order to see changes over time.
External ratio analysis compares your business’s ratios with those of competing firms, or with industry averages, to see whether you’re doing better or worse than average.
There are three main sources for external ratios and benchmarks:
Trade associations often publish pertinent data about their members.
Private firms such as Dun & Bradstreet and Standard & Poor’s compile ratios.
U.S. government agencies offer all sorts of industry data, including ratios.
Emphasize that benchmarking only works when businesses are similar. If you sell tractor parts, it may be no big deal if your customers take three weeks to pay. But if you run a hot dog stand, you’re in trouble! To know what ratios are telling you, you need to know the norms in your industry for businesses of your type and size.
If possible, show some examples of ratio analysis using at least one example of each of the four types of ratios. If possible, use real data to provide an example of benchmarking. Demonstrate how management decisions (e.g., extending credit) can change ratio outcomes.
Project Management
Project management is the process of defining, planning, and accomplishing projects while minimizing uncertainty and risk.
Use OHD 9-10 to introduce the four elements of project management. Note that failing to manage one of these elements will affect the others. For example, if scope changes, it will inevitably affect time, money and resources.
The responsibility for project management belongs to the project manager, who must guide and facilitate the project management process outlined on OHD 9-11.
Vendor Management
As mentioned earlier, bringing a project to fruition may require managing outside vendors and contractors. Differences in motivation, culture and resources can cause friction, so the first step in avoiding problems is to vet prospective vendors and contractors. They should have a proven track record, as well as similar or complementary values and working methods to your business.
Next, clearly establish contractual duties and obligations. Spell out deadlines and deliverables clearly, and make sure both parties understand them.
Last, choose methods for prompt, professional communication. Unclear or unreliable communications are a huge red flag when dealing with prospective vendors and contractors!
Quality Control
Client needs and expectations are the baseline for quality control. This means you need to know exactly what “quality” means to each of your clients. Understanding client expectations is basic to project management. Always set higher, aspirational quality standards in order to exceed these expectations.
Although quality control adds extra expense, its cost will rarely exceed the cost of failing to meet the client’s standards. Regular quality checks will catch problems before they grow, and help to assure your team, your partners and your client that high standards are being met at every stage.
Checks are especially important before each deliverable is due. Anything your client will review should be checked carefully for compliance not just with the contract terms, but also with your internal quality standards. Of course, this includes deliverables from vendors and contractors.
Don’t leave quality checks up to chance or try to squeeze them in between other tasks. Instead, assign clear responsibility for them, and include them in your project schedule.
Status Reporting
Throughout the project, issue status reports to keep stakeholders focused, engaged and aware. Stick to a schedule (e.g., once a week), and keep your reports brief, direct and easy to understand. If you lack this skill, delegate the task to a competent team member.
Project Management Tools
If time allows, introduce project management tools like Gantt charts and critical path analysis (CPA). Emphasize that many software programs can create these charts and simplify other aspects of project management. Finding a good program should be a priority for anyone who wants to improve project management skills, particularly if growth is their goal. You can also refer students to the Tech Tip in Chapter 27 Project Management, which discusses software options.
Work Period
NOTE: Be prepared to use most of this extended work period to help students complete their cash flow projections and financial statements. Again, if some students have completed the worksheets successfully, ask them to help students who are still struggling. You can also use this period to help students get caught up on the marketing plan or on any other section that is giving them trouble. If necessary, consider creating work groups for specific sections of the plan.
Homework Review—Session 8
Ask the questions: How many of you have chosen one or more money sources to pursue? What do you think is the single biggest obstacle to getting the capital you need? Listen carefully to the answers and—if necessary—offer help or advice with creating financial statements and tailoring the business plan to the needs of lenders and investors.
After reviewing Session 8, help your students get caught up on earlier worksheets.
Workbook Preview—Session 9
Executive Summary Worksheet (page 9-160). Note that this one-page summary must entice the reader to read the rest of the plan.
Cover Page and Table of Contents (page 9-162). Advise students on designing a cover sheet that is unique to their business (logo, photos, etc.).
Appendix Worksheet (page 9-164). Discuss choosing supporting documents for specific audiences.
Assignment Review—Session 10
Have students look at the Assignment for Session 10 at the bottom of the Session 9 Student Outline page. Stress the importance of reading the Session 10 text before the next class.
Use OHDs 1-13 and 1-14 to show the NxLeveL® Business Plan Outline, so that students understand how this assignment completes the NxLeveL® Business Plan. Use the NxLeveL® sample business plans to show typical approaches to these sections.
Discuss how you want the completed plan turned in (in a binder or not, with or without dividers for the sections, etc.). Discuss graduation plans if they are to be included in Session 10.
Overheads for Session 9
OHD	9-1	Five Basics of Negotiation
OHD	9-2	Three Negotiating Styles
OHD	9-3	Stages of Negotiation
OHD	9-4	Traits of Effective Negotiators
OHD	9-5	Overcoming Negotiation Problems
OHD	9-6	Key Contract Management Tasks
OHD	9-7	Evaluating Your Contract Partners
OHD	9-8	Improving Your Performance
OHD	9-9	Four Types of Ratios
OHD	9-10	Four Elements of Project Management
OHD	9-11	The Process of Project Management
Suggested Supplemental Materials for Session 9
Articles or YouTube videos discussing the stages of negotiation
Articles on resource management and pollution prevention
Green consumer data from the Natural Marketing Institute (www.nmisolutions.com)
Articles on project management software and other tools
You have the option of finding reputable articles and publications for use in class, or suggesting that students search them out on their own and share what they find with the rest of the class. Keep track of supplemental materials you used by making notes below. (This will be helpful if you choose to teach this course again.)
Supplemental materials used for Session 9
Notes

Learning Objectives
Understand the importance of negotiating and contract management in the business world. Consider ways to save money, save energy, improve efficiency and avoid regulations by managing resources. Gain a deeper understanding of budgeting, ratio analysis and benchmarking. Understand the basics of project management.