Friday, April 21, 2006

Small Business Management - CH 15

Sources of equity financing

Capital is any form of wealth employed to produce more wealth.

Three forms of capital are commonly identified:

  • fixed capital -- used to purchase a company's permanent or fixed assets
  • working capital -- represents the businesses temporary funds and is used to support the business as normal short-term operations
  • growth capital -- requirements surface when an existing businesses expanding or changing its primary direction

Various sources of equity capital available to entrepreneurs:

  • owner's personal savings -- most common
  • friends and family members
  • Angels -- private investors who not only invest their money in small companies, but they also offer valuable advice and counsel to them
  • limited partners -- some business owners have success financing their companies by taking on limited partners as investors or by forming an alliance with a corporation
  • venture capital companies -- for- profit professional investors looking for fast-growing companies in hot industries
  • going public

When screening prospects, venture capital firms look for competent management, a competitive edge, a growth industry, and important intangibles that will make a business successful. Some owners choose to attract capital by taking their companies public, which requires registering the public offering with the SEC.

Going public involves:

  • choosing the underwriter
  • negotiating a letter of intent
  • preparing the registration statement
  • filing with the SEC
  • meeting state requirements

advantages of going public

  • can raise large amounts of capital
  • improve access to future financing
  • improve corporate image
  • gaining listing on the stock exchange

disadvantages of going public

  • dilution of the founders ownership
  • loss of privacy
  • reporting to the SEC
  • filing expenses
  • accountability to shareholders

Here are some other alternatives available to entrepreneurs wanting to sell shares of equity to investors rather than going to the complete registration process;

  • regulation S-B
  • regulation D (rule 504)
  • Small Company Offering Registration (SCOR)
  • regulation D (rule 505 and Rule 506)
  • Private Placements
  • Section 4(6)
  • Rule 147
  • regulation A
  • direct stock offerings
  • foreign stock markets

Small Business Management - CH. 8

Launching a successful business requires an entrepreneur to create a solid financial plan. Not only is such a plan unimportant told in raising the capital needed to get a company off the ground, but also as an essential ingredient in managing a growing business.

Earning a profit does not occur by accident; it takes planning.

Financial statements

entrepreneurs rely on three basic financial statements to understand financial conditions of the companies:

  • The balance sheet. Built on the accounting equation: assets = liabilities + owners equity
    it provides an estimate of the company's value on a particular date
  • The income statement. This statement compares the firm's revenue against its expenses to determine its net income (or loss). It provides information about the company's bottom line.
  • The statement of Cash flows. This statement shows the change in the Company's working capital over the accounting period by listing the sources and the uses of funds.

Projected financial statements are a basic component of a sound financial plan. They help the manager plot the Company's financial future by setting operating objectives and by analyzing the reasons for variations from targeted results. Also, the small-business in search of startup funds will need these pro forma statements to present to prospective lenders and investors. They also assist in determining the amount of cash, inventory, fixtures, and other assets the business will need to begin operation.

Ratio analysis

the 12 key ratios are divided into four major categories:

  • liquidity ratios -- would show the small firm's ability to meet its current obligations
  • leverage ratios -- which tell how much of the Company's financing is provided by owners and how much by creditors
  • operating ratios -- show how effectively the firm uses its resources
  • profitability ratios -- which disclosed the company's profitability

Many agencies and organizations regularly publish such statistics. If there is a discrepancy between the small firm's ratios and those of the typical business, the owner should investigate the reason for the difference. A below average ratio does not necessarily mean that the business is in trouble.

To benefit from ratio analysis, the small company should compare its ratios to those of other companies the same line of business and look for trends over time.

When business owners detect deviations in the company's ratios from industry standards, they should determine the cause of the deviations. In some cases, such deviations are the result of sound business decisions; in other instances, however, ratios that are out of the normal range for the particular type of business are indicators of what could become serious problems for the company.

Business owners should know their firms breakeven point, the level of operations at which total revenues equal total costs; it is the point at which companies neither earned a profit nor incur a loss. Although just a simple screening device, break even analysis is a useful planning and decision-making tool.

Small Business Management - CH. 7

Guerrilla marketing plans

a major part of an entrepreneur's business plan is the marketing plan, which focuses on the company's target customers and how best to satisfy their needs and wants. A solid marketing plan should pinpoint the specific target markets the company will serve, determine customer needs and wants to market research, analyze the firms competitive advantages and build a marketing strategy around them, and create a marketing mix that meets the customer's needs and wants.

Sound market research helps that under pinpoint his or her target market. The most successful businesses have well-defined portraits of the customers they are seeking to attract.

Market research is the vehicle for gathering the information that serves as the foundation of the marketing plan. Good research does not have to be complex and expensive to be useful.

Conducting a market research:

  • define the problem: "what do you want to know?"
  • collected data from either primary or secondary sources
  • analyze and interpret the data
  • draw conclusions and act on them

When plotting a marketing strategy, owners must strive to achieve a competitive advantage, some way to make their companies different from and better than the competition.

Guerrilla marketing strategies to develop a competitive edge:

  • nichepicking
  • entertailing
  • Building a consistent branding strategy
  • emphasizing their uniqueness
  • connecting with their customers
  • focusing on customer needs
  • emphasizing quality
  • paying attention to convenience
  • concentrating on innovation
  • dedicating themselves to serve
  • emphasizing speed

the Web offer small-business owners tremendous marketing potential on a par with their larger rivals. Entrepreneurs are just beginning to uncover the Web's profit potential, which is growing rapidly. Successful web sites are attractive, inviting, easy to navigate, interactive, and offer users something of value.

The four P's of the marketing mix:

  • Product. Entrepreneurs should understand where in the product lifecycle their products are.
  • Place. The focus here is on choosing the appropriate channel of distribution and using it most efficiently.
  • Price. Price is an important factor in customers purchase decisions, but many small businesses find that nonprice competition can be profitable.
  • Promotion. Promotion involves both advertising and personal selling.

Thursday, April 20, 2006

Small Business Management - CH. 6

A business plan serves two essential functions. First and most important, a guide to a company's operations by charting its future course in devising a strategy for following. The second function of the business plan is to attract lenders and investors. Applying for loans or attempting to attract investors without solid business plan rarely attracts needed capital. Rather, the best way to secure the necessary capital is to prepare a sound business plan.

Basic elements of the business plan

  • executive summary
  • Mission statement
  • company history
  • business and industry profile
  • description of the Company's business strategy
  • profile of its products or services
  • statement explaining its marketing strategy
  • competitor analysis
  • owners and offer servers résumés
  • plan of operation
  • financial data
  • loan or investment proposal

Three tests every business plan must pass

  • Reality test. The external component of the reality test revolves around proving that a market for the product or service really does exist. The internal component of the reality test focuses on the product or service itself.
  • Competitive test. The external par of the competitive test evaluates the companies relative position to its key competitors. The internal competitive test focuses on the management team's ability to create a company that will gain an edge over existing rivals.
  • Value test. To convince lenders and investors to put their money into the venture, a business plan must prove to them that offers a high probability of repayment or an attractive rate of return.

Business plan presentations

Lenders and investors are favorably impressed by entrepreneurs who are informed and prepared when requesting a loan or investment.

Tips include

  • demonstrating enthusiasm about the venture but not being overly emotional
  • "hooking" investors quickly with an upfront explanation of the new venture, its opportunities, and anticipated benefits to them
  • using visual aids
  • hitting the highlights of your venture
  • not getting caught up into much detail in early meetings
  • avoid the use of technological terms
  • rehearse the presentation before hand
  • close by reinforcing the nature of the opportunity
  • be prepared for questions

The five C's of credit

  • Capitol. Lenders expect small businesses to have an equity base of investment by the owner that will help support the venture during times of financial strain.
  • Capacity. A synonym for capacity is cash flow. The bank must be convinced of the firm's ability to meet its regular financial obligations and to repay the bank loan, and that takes cash.
  • Collateral. Collateral includes any assets the owner pledges to the bank as security for repayment of the loan.
  • Character. Before approving a loan to a small business, the banker must be satisfied with the owner's character.
  • Conditions. Conditions such as interest rates, the health of the nation's economy, and industry growth rate surrounding a loan request also affect the owner's chance of receiving funds.

Small business management - CH. 5

Buying an existing business
Advantages --
  • may have good location
  • established employees and suppliers
  • equipment is installed with established capacity
  • pre-existing inventory
  • established trade credit
  • ready to operate
  • build off the expertise of previous owner
  • may be discounted

disadvantages

  • may be for sale due to deterioration
  • previous owner may have created ill will
  • employees inherited may not be suitable
  • location may not be suitable
  • equipment and facilities may be obsolete
  • change and innovation are hard to implement
  • inventory may be outdated
  • accounts receivable may be worth less than face value
  • the business may be overpriced

the right way to buy a business

Buying a business can be a treacherous experience was the buyer is well-prepared. The right way to buy a business is by analyzing your skills, abilities, and interest to determine the ideal business for you; preparing a list of potential candidates, including those who might be in the hidden market; investigating and evaluating candidate businesses and evaluating the best one; exploring financing options before you actually need the money; and, finally, ensuring a smooth transition.

Rushing into a deal can be the biggest mistake a business buyer can make. Before closing a deal, every business buyer should investigate five critical areas:

  • why does the owner wished to sell? Look for the real reason.
  • Determine the physical condition of the business. Consider both the building and its location.
  • Conduct a thorough analysis of the market for your products or services. Who are the president and potential customers? Conduct an equally thorough analysis of competitors, both direct and indirect. How do they operate and why do customers prefer them?
  • consider all of the legal aspects that might constrain the expansion and growth of the business. Did you comply with the provisions of a bulk transfer? Negotiate a restrictive covenant? Consider ongoing legal liabilities?
  • analyze the financial condition of the business, looking at financial statements, income tax returns, and especially cash flow.

Placing a value on a business is partly an art and partly a science. There is no single best method for determining the bayou of the business. The following techniques are useful:

  • the balance sheet technique/adjusted balance sheet technique
  • the earnings approach/excess earnings method
  • capitalized earnings approach
  • discounted future earnings approach
  • market approach

Negotiating the deal

selling a business takes time, patience, and preparation to locate a suitable buyer, struck a deal, and make the transition. Sellers must always structure a deal with tax consequences in mind. Comment exit strategies include a straight business sale, forming a family limited partnership, selling a controlling interest in the business, restructuring the company, selling to an international buyer, using a two-step sale, and establishing an employee Stock ownership plan (ESOP).

The first roll of negotiating is never confuse price with value. In a business sale, the party who is the better negotiator usually comes out on top. Before beginning negotiations, a buyer should identify the factors that are affecting the negotiations and then develop a negotiating strategy. The best deals are the result of a cooperative relationship based on trust.

Wednesday, April 19, 2006

Small Business Management - Ch. 4

Franchising has proved its viability in the US economyit has become a key part of the small-business sector because offers many would-be art ignores opportunity to own and operate a business with a greater chance for success. Despite its impressive growth rate to date, the franchising industry still has a great deal of room left to grow, especially globally. Describing the future of franchising, one expert says, "franchising has not yet come close to reaching its full potential in the American marketplace."

Through franchise businesses, consumers can buy nearly every good or service imaginable -- from singing telegrams and computer training to tax services and waste eating microbes.

A new franchise opened somewhere in the United States every eight minutes and somewhere in the world every 6 1/2 minutes. Franchises account for more than 50% of all retail sales, totaling more than one trillion, and they employ more than 8 million people in more than 100 major industries.

Franchising is a method of doing business involving a continuous relationship between a franchisor and a franchisee. A franchisor retains control of the distribution system, whereas the franchisee assumes all the normal daily operation functions of the business.

There are three types of franchising:
  • trade name franchising -- the franchisee purchases only the right to use a brand-name
  • product distribution franchising -- which involves a license to sell specific products under a brand-name
  • pure franchising -- which provides a franchisee with a complete business system

benefits and limitations of buying a franchise

the franchisor has the benefits of expanding his or her business on limited capital in growing without developing key managers internally.

The franchisee also receives many key benefits:

  • Management training and counseling
  • customer appeal of a brand-name
  • standardized quality of goods and services
  • national advertising programs
  • financial assistance
  • proven products and business formats
  • centralized buying power
  • territorial protection
  • greater chances for success

disadvantages involved in buying a franchise:

  • franchise fees and profit sharing
  • strict adherence to standardized operations
  • restrictions on purchasing
  • limited product lines
  • possibly ineffective training programs
  • less freedom

legal aspects of franchising

the FTC's Trade Regulation Rule is designed to help the franchisee evaluate a franchising package. It requires each franchisor to disclose information covering 23 topics at least 10 days before accepting payment from potential franchising. This document, the Uniform Franchise Offering Circular (UFOC) is a valuable source of information for anyone considering investing in a franchise.

To buy a franchise the right way requires that you about the way yourself, researcher market, consider your franchise options, get a copy of the franchisor's UFOC and study it, talk to existing franchisees, asked the franchisor some tough questions, then make your choice.

The franchise contract

the amount of franchisor -- franchisee litigation has risen steadily over the past decade. Three reasons are responsible for most franchisor -- franchisee disputes: termination of the contract, contract renewal, and transfer and buyback provisions.

Trends influencing franchise include:

  • international opportunities
  • emergence of smaller nontraditional locations
  • multiple unit of franchising
  • Master franchising
  • piggyback franchising or cobranding
  • products and services targeting aging baby boomers

Small Business Management Ch 3. - Summary

The key to choosing the right form of ownership is understanding the characteristics of each form and knowing how they affect an entrepreneur's personal and business circumstances.

Factors to consider include:

  • tax implications
  • liability expense
  • start up and future capital requirements
  • managerial ability
  • control
  • business goals
  • management succession plans
  • cost of formation

sole proprietorship

A sole proprietorship is a business owned and managed by one individual and is the most popular form of ownership.

Sole proprietorships offer these advantages:

  • simple to create
  • least costly form to begin
  • owner has total decision-making authority
  • no special legal restrictions
  • easy to discontinue

Sole proprietorships suffer from these disadvantages:

  • Unlimited personal liability of owner
  • limited managerial skills and capabilities
  • limited access to capital
  • lack of continuity

partnerships

A partnership is an association of two more people who co-own a business for the purpose of making a profit.

Partnerships offer these advantages:

  • easy to establish
  • complementary skills of partners
  • division of profits
  • larger pool of capital available
  • ability to attract limited partners
  • little government regulation
  • flexibility
  • tax advantages

partnership suffer from these disadvantages:

  • unlimited liability of at least one partner
  • difficulty in disposing of partnership interest
  • lack of continuity
  • potential for personal and authority conflicts
  • partners bound by the law of agency

corporations

A limited partnership operates like any other partnership except that it allows limited partners (primary investors who cannot take an active role in managing the business) to become owners without subjecting themselves to unlimited personal liability for the company's debt.

A corporation, the most complex of the three basic forms of ownership, is a separate legal entity. To form a corporation, an entrepreneur or must file the articles of incorporation with the state in which the company will incorporate.

Corporations offer these advantages:

  • limited liability of stockholders
  • ability to attract capital
  • ability to continue indefinitely
  • transferable ownership

Corporation suffer from these disadvantages:

  • cost and time in incorporating
  • double taxation
  • potential for diminished managerial incentives
  • legal requirements and regulatory red tape
  • potential loss of control by the founders

alternate forms of ownership

An S corperation offers its owners omitted liability protection but avoids the double taxation of C corporations.

A limited liability company, like an S corperation, is a cross between a partnership in a corporation. However, it operates with out the restrictions imposed on an S corperation. To create an LLC, an entrepreneur or must file the articles of organization and the operating agreement with the secretary of state.

A joint venture is like a partnership, except that it is formed for specific purpose.

Much like a joint venture, a syndicate is a private investment group formed for the purpose of a large commercial project whose scope is larger than the capacity of an investor to finance alone.

Small Business Management - Ch. 2 Summary

Strategic planning, often ignored by small companies, is a crucial ingredient in business success. The planning process forces potential entrepreneurs to subject their ideas to an object of evaluation in a competitive market.

The goal of developing a strategic plan is to create for the small company a competitive advantage -- the aggregation of factors that sets a small business apart from its competitors and gives a unique position in the market. Every small firm must establish a plan for creating a unique image in the mind of its potential customers.

Small businesses need a strategic planning process designed to suit their particular needs. It should be relatively short, be informal and not structured, encourage the participation of employees, and not begin with the extents of objective setting. Linking the purposeful action of strategic planning to an entrepreneur's idea can produce results that shape the future.

The nine steps in the strategic planning process:
  1. develop a clear vision and translate it into a meaningful mission statement. Highly successful entrepreneurs are able to communicate their vision to those around them. The firm's mission statement answers the first question of any venture: what business and high-end? The mission statement sets the tone for the entire company.
  2. Assess the company's strengths and weaknesses. Strings are positive internal factors; weaknesses are negative internal factors.
  3. Scan the environment for significant opportunities and threats facing the business. Opportunities are positive external options; threats are negative external forces.
  4. Identify the key factors for success in the business. In every business, key factors determine the success of the firms in it, and so they must be an integral part of the company strategy. Key success factors are relationships between a controllable variable at a critical factor influencing the firm's ability to compete in the market.
  5. Analyze the competition. Business owners should know their competitors almost as well as an interim company. A competitive profile matrix is a helping tool for analyzing competitors strengths and weaknesses.
  6. Create company goals and objectives. Goals are the broad, long-range targets of the firm seeks to accomplish. Objectives are quantifiable and more precise; they should be specific, measurable, assignable, realistic, timely, and written down. The process works best when subordinate managers and employees are actively involved.
  7. Formulate strategic options and select the appropriate strategies. A strategy is the gameplay in the firm plans to use to achieve its objectives and mission. It must center on establishing for the firm the key success factors identified earlier.
  8. Translate strategic plans into action plans. No strategic plan is complete until the owner puts into action.
  9. Establish accurate controls. Actual performance rarely, if ever, matches plans exactly. Operating data from the business serves as guidepost for detecting deviations from plans. Such information is helpful when plotting future strategies.

The strategic planning process does not end with these nine steps; however, it is an ongoing process that the owner must repeat.

Three basic strategic options:

cost leadership -- a company pursuing a cost leadership strategy starts to the the lowest cost producer relative to its competitors in the industry

differentiation strategy -- a company following a differentiation strategy seeks to build customer loyalty by positioning its goods or services in the unique or different fashion. The firm strives to be better than its competitors at something to customer values.

Focus strategy -- a focus strategy recognizes that not all markets are homogeneous. The principal idea of the strategy is to select one or more segments, identify customers special needs, wants, and interest, and approach them with a good or service designed to excel in meeting these needs, once, and interest. Focus strategy is built on differences among market segments.

The balanced scorecard

just as a pilot in command of a jet cannot fly safely by focusing on the single instrument, an entrepreneur cannot manage a company by concentrating on a single measurement. The balanced scorecard is a set of measurements unique to a company that includes both financial and operational measures and gives managers a quick yet comprehensive picture of the Company's total performance.

Tuesday, April 18, 2006

Project Management - Ch. 11 - Summary

18 as a group of individuals working independently to achieve a common goal.Teamwork is the cooperative effort by members of a team to achieve that common goal. The effectiveness -- or lack thereof -- of the project team can make a difference between project success and project failure.

Project teams evolve through various stages of development. For thing, the initial stage of the team development process, involves the transition from individual to team member. During this stage, individuals on the team began to get acquainted. During the storming stage, conflict emerges and tension increases. Motivation and morale are low. Members may even resist teen information. However, after struggling through the storming stage, the team moves into the norming stage of development. Relationships among team members and between the team and the project manager have become settled, and interpersonal conflicts have been resolved for the most part. The fourth and final stage of team development and growth as the performing stage. And this stage, the team is highly committed an eager to achieve the project objective. The members feel a sense of unity.

Characteristics often associated with effective project teams include a clear understanding of the project objective, clear expectations of each person's role and responsibilities, a results orientation, a high degree of cooperation and collaboration, and a high level of trust. Barriers to team effectiveness include unclear goals, unclear definition of roles and responsibilities, lack of project structure, lack of commitment, poor communication, poor leadership, turnover of project team members, and dysfunctional behavior.

Teambuilding -- developing a group of individuals to accomplish the project objective -- is an ongoing process. It is the responsibility of both the project manager in the project team. Socializing a multimember supports teambuilding. To facilitate socializing, team members can request that they be physically located in one office area for the duration of the project and they can participate in social events.

Ethical behavior is necessary within a project organization and its crucial in project business relationships with the customer, suppliers and subcontractors. Customers and suppliers want to do business with a contractor or project organization they can trust. Intentional distortion, deception or misrepresentation is outright unethical. Two actions a project organization can take to help prevent any wrongdoing is to have a written policy on ethical behavior and to provide training about ethics in the workplace. A policy on ethical behavior should include topics on expectations, processes for reporting misconduct, and consequences of engaging in unethical practices. Misconduct or conflict of interest activities must be addressed and appropriate disciplinary action taken to show that such behavior is unacceptable and will not be tolerated. Every member of the project team must feel accountable for his or her actions. Personal integrity is the foundation for workplace ethics.

Conflict on projects is it inevitable. During a project, conflict can emerge from a variety of situations. It can involve members in the project team, the project manager, and even the customer. Sources of potential conflict on projects include differences of opinion on how the work should be done, how much work should be done, at what level of quality to work should be done, who should be assigned to work on which tasks, the sequence in which the work should be done, how long the work should take, and how much the work should cost. Conflict can also arise because of prejudices or differences in individual's values and attitudes.

Conflict is not just for the project manager to resolve; conflict among team members should be handled by the individuals involved. Dealt with properly, conflict can be beneficial because it causes problems to surface and be addressed.

It is unusual for a team to complete a project without encountering some problems along the way. A good nights that problem-solving approach is to develop a problem statement, identify potential causes of the problem, gather data and verified most likely causes, identify possible solutions, evaluate the alternative solutions, determine the best solution, revise the project plan, implement the solution, and determine whether the problem has been solved. Brainstorming is a technique used in problem-solving in which all members of a group contribute spontaneous ideas. And brainstorming, the quantity of ideas generated is more important than the quality of the ideas.

Good time management is essential for a high-performance project team. To manage their time effectively, team members should identify weekly goals, make a to-do list for each day, focus on accomplishing the daily to-do list, control interruptions, learn to say no to activities that do not leave them closer to their goals, make effective use of waiting time, handle paperwork only once, and reward themselves for accomplishing their goals.

The successful project manager

  • accepts responsibility for making sure the customer is satisfied that the work scope is completed in a quality manner, within budget, and on time
  • is proactive in planning, communicating, and providing leadership to the project team to compost a project objective
  • inspires a project team to succeed and to win the confidence of the customer
  • involves the project team in developing the project plan, and ensures a more comprehensive plan to gain the commitment of the team to achieve the plan
  • is proactive in addressing problems. They do not take a let's wait and see how things work out approach
  • has a project management information system that distinguishes accomplishments from busyness
  • has strong leadership abilities, the ability to develop people, slick communication skills, good interpersonal skills, the ability to handle stress, problem-solving skills, and time management skills
  • has a participative and consultative leadership style in which the project manager provides guidance and coaching to the project team
  • will show that they value the contributions of team members when they seek advice and suggestions from team members
  • can foster motivation through recognition. Positive reinforcement helps stimulate desired behavior; behavior that is recognized or rewarded gets repeated
  • does not monopolize, seek the spotlight, or try to take credit for the work of others
  • is optimistic and have high, yet realistic, expectations of themselves and each person on the project team
  • enjoy their work and encourage the same positive attitude on the part of the project team members
  • set a positive example for the team in terms of expected behavior
  • provides opportunities for learning and development by encouraging team members to take the initiative, take risks, and make decisions
  • realizes that takes are part of the learning and growth experience
  • spend more time listening than talking. They listen to the needs expressed by the customer and the ideas and concerns expressed by the project team
  • communicates in a timely, honest, unambiguous manner
  • creates an atmosphere that fosters timely and open communication without fear of reprisal, and must be understanding of differing viewpoints
  • remain composed and do not panic when autumn for seen a fence cause turmoil on the project
  • make effective use of their time, have self-discipline, are able to prioritize, and willing to delegate
  • establishes procedures for how changes will be documented and authorized at the start of a project

Effective delegation

  • Make sure team has a clear understanding of the results expected
  • team must have access to the resources needed to accomplish tasks
  • focus on the results expected from the team members rather than the details of how they do it
  • have a system to follow up to monitor progress
  • advice team members on how it when they are to let you know how they are progressing and when to seek advice
  • advice team on how progress will be measured and evaluated
  • encourage the team to speak freely without fear of criticism
  • give team members freedom to perform their work without over managing
  • encourage team members to make decisions within their level of authority
  • provide coaching when needed
  • encourage and be supportive of the team's suggestions

Common barriers to effective delegation

  • The project manager has a personal interest to the task or think she can do it better or faster herself. In this case, she must force yourself to let go and have confidence in the other individuals. She's under stand the other people may not do things exactly the way she would.
  • The project manager lacks confidence in the capability of others to do the work. In this case, you should be sure that he does the capabilities, potential, and limitations of each member of the project team so that he could select the most appropriate person for each task.
  • The project manager is afraid that he will lose control of the work and not know what is going on. In this case, he should set up a system for regularly monitoring about a waiting progress toward the expected results.
  • Team members fear criticism for mistakes or lack self-confidence. In this case, the project manager has to show confidence in each individual, offer regular encouragement, and understand the mistakes are opportunities for learning rather than occasions for criticism.

Developing the skills needed to be a project manager

  1. gain experience -- work on as many projects as you can. Each project presents a learning opportunity. Ask for mentors - learn from them.
  2. seek out feedback from others
  3. conduct a self evaluation and learn from your mistakes
  4. interview project managers who have skills that you want to develop in yourself
  5. participate in training programs -- seminars, workshops, videotapes, audio tapes, and self-study materials
  6. join organizations -- Project Management Institute and Toastmasters are examples
  7. read -- subscribe to journals, lookup articles, or read books on the skills you wish to acquire
  8. volunteer

Project Management - CH. 10 Summary

It is the responsibility of the project manager to make sure that the customer satisfied that the work scope is completed and the quality manner, within budget, and on time. The project manager has primary responsibility for providing leadership in planning, organizing, and controlling the work effort to accomplish the project objective. In terms of planning, the project manager has to clearly define the project objective and reach agreement with the customer on this objective. In terms of organizing, the project manager must secure the appropriate resources to perform the work. In terms of controlling, the project manager needs to track actual progress and compare it with planned progress.

The project manager is a key ingredient in the success of a project and needs to process a set of skills that will help the project team succeed. The project manager should be a good leader who inspires the people assigned to the project to work as a team to implement the plan and achieve the project objective successfully; be committed to the training and development of the people working on the project; be an effective communicator who interacts regularly with the project team, as well as with any subcontractors, the customer, and her /his own company's upper management; and have good interpersonal skills. It is important that the project manager developed a relationship with each person on the project team and effectively use his or her interpersonal skills to try to influence the thinking and actions of others.

An effective project manager can handle stress and has a good sense of humor. In addition, he or she is a good problem solver. Although it's easier to identify problems and to solve them, good problem-solving starts with the early identification of a problem or potential problem. Good project managers also manage their time well.

These essential skills can be developed through experience, by seeking out feedback from others, by conducting a self-evaluation and learning from your own mistakes, by interviewing effective project managers, by participating in training programs, by joining organizations, through reading, and through involvement with volunteer organizations in which the skills can be tested.

Project managers need to be good delegators. Delegation it involves empowering the project team to achieve the project objective and empowering each team member to accomplish the expected results for his or her area of responsibility. It's the act of allowing individuals to carry out assigned tasks successfully.

One other important component of the project manager's job is managing and controlling changes to minimize any negative impact on the successful compost root of the project objective. To do this successfully, the project manager, at the beginning of the project, should establish procedures regarding how changes will be documented and authorized.

Monday, April 17, 2006

Project Management - Ch. 9 Summary

Project costs are estimated when a proposal is prepare for the project. Once the decision is made to go forward with the proposed project, it's necessary to prepare a budget, or plan, for how and when funds will be spent over the duration of the project. Once the project starts, it's important to monitor actual costs and performance to ensure that everything is within budget. Several parameters should be monitored at regular intervals during the project: cumulative actual amount spent since the start of the project, cumulative earned value of the work performed since the start of the project, and cumulative budgeted amount planned to be spent, based on the project schedule, from the start of the project.

Cost planning starts with the proposal for the project. The cost section of the proposal may consist of tabulations of the contractors estimated costs for such elements as labor, materials, subcontractors and consultants, equipment and facilities rental, and travel. In addition, the proposal might also include an amount for contingencies, to cover unplanned expenses.

The project budgeting process involves two steps. First, the project cost estimate is allocated to the various work packages in the project work breakdown structure. Sakic, the budget for each work package is distributed over the duration of the work package so that it's possible to determine how much of its budget should have been spent at any point in time.

Allocating total project cost for the various elements, such as labor, materials, and subcontractors, to the appropriate work packages and the work breakdown structure will establish a total budget cost (TBC) for each work package. Once a total budgeted cost has been established for each work package, the second step in the project budgeting process is to distribute each TBC over the duration of its work package in order to determine how much of the budget should have been spent at any point in time. This amount is calculated by adding up the budget cost for each time. Up to that point in time. This total amount, known as the cumulative budgeted cost (CBC), will be used in analyzing the cost performance of the project. The CBC for the entire project or each work package provides a baseline against which actual cost and work performance can be compared at any time during the project.

Once the project starts, it's necessary to keep track of actual cost and committed cost so that they can be compared to the CBC. In addition, it is also necessary to monitor the earned value of the work that has been performed. Determining the earned value involves collecting data on the percent complete for each work package and then converting this percentage to a dollar amount by multiplying the TBC of the work package by the percent complete. This figure can then be compared to the cumulative budgeted cost and the cumulative actual cost.

After this has been done, the project cost performance can be analyzed by looking at the total budgeted cost, the cumulative budgeted cost, the cumulative actual cost, and the cumulative earned value. They are used to determine whether the project is being performed within budget and whether the value of the work performed is in line with the actual cost.

Another indicator of cost performance is the cost performance Index (CPI), which is a measure of the cost efficiency with which the project is being performed. The CPI is calculated by dividing the cumulative earned value by the cumulative actual cost. Another indicator of cost performance is cost variance (CV), which is the difference between the cumulative earned value of the work performed and the cumulative actual cost.

Based on analysis of actual cost performance throughout the project, it's possible to forecast what the total cost will be at the completion of the project or work package. There are three different methods for determining the forecast cost at completion (FCAC). The first method assumes that the work is to be performed on the remaining portion of the project or work package will be done at the same rate of efficiency as the work performed so far. The second method assumes that, regardless of the efficiency rate the project or work package has experience in the past, the work to be performed on the remaining portion of the project or work package will be done according to budget. The third method for determining the forecasted cost at completion is to reestimate the cost for all the remaining work to be performed and then add this reestimate to the cumulative actual cost.

The key to effective cost control is to analyze cost performance on a regular and timely basis. It's crucial that cost variances and inefficiencies be identified early so that corrective action can be taken before the situation gets worse. Cost control involves analyzing cost performance to determine which work packages may require corrective action, deciding what specific corrective action should be taken, and revising the project planned (including time and cost estimates) to incorporate the play in corrective action.

It is important to manage the cash flow on a project. Managing cash flow involves making sure that sufficient payments are received from the customer and time so that you have enough money to cover the cost of performing the project (employee payroll, charges for materials, invoices from subcontractors, and travel expenses, for example). The key to managing cash flow is to ensure that cash comes in faster than it goes out.

Project Management - Ch.8 Summary

Resources to include people, equipment, machines, tools, facilities, and space. Among the people may be different types, such as painters, designers, cooks, computer programmers, and assembly workers.

The consideration of resources as another dimension (beyond the element of time) to planning and scheduling. In many projects, the amounts of the various types of resources available to perform the project activities are limited. Several activities may require the same resources at the same time, and there may not be sufficient resources available to satisfy all the demands. If sufficient resources are not available, some activities may have to be rescheduled for later time when the resources are available for them.

One way to consider resources is to take them into account when drawing the logical relationships among activities and the network diagram. In addition to showing the technical constraints amung activities, the network logic can also take into account resource constraints. The sequence of activities can be drawn to reflect the limited availability of a number of resources. If resources are to be considered in planning, it's necessary to indicate the amounts and types of resources needed to perform each activity. For this reason, a resource profile is often developed.

Resource leveling, or smoothing, is a method for developing a schedule attempts to minimize the fluctuations in requirements for resources. This method levels the resources that they are applied as uniformly as possible without extending the project schedule beyond the required completion time. Resource leveling attempts to establish a schedule in which resource use is made as level as possible without extending the project be on the required completion time. In resource leveling, the required project completion time is fixed, and the resources are buried in an attempt to eliminate fluctuation.

Resource limited scheduling is a method for developing the shortest schedule when the number or amount of available resources is fixed. This method is appropriate when the resources available for the project are limited and these resource limits cannot be exceeded. This method will extend the project completion time is necessary in order to keep within the resource limits. It is an iterative method in which resources are allocated to activities based on the least slack. The steps are repeated until all the resource constraints have been satisfied. In resource limited scheduling, the resources are fixed, and the project completion time is varied (extended) in order not to exceed the resource limits.

For large project that requires many different resources, each of which has a different limit of availability, resource limited scheduling can get very complicated. Various project management software packages are available that will assist with this process.

Saturday, April 15, 2006

Project Mangagement - Ch. 7 Summary

Once a project actually starts, it's necessary to monitor the progress to ensure that everything is going according to schedule. This involves measuring actual progress and comparing it to the schedule. If any time during the project it is determined that the project is behind schedule, corrective action must be taken to get back on schedule. The key to effective project control is to measure actual progress and compare it to play and progress on a timely and regular basis and to take necessary corrective action immediately. Based on actual progress and on consideration of other changes that may occur, it's possible to calculate an updated project schedule regularly and forecast whether the project will finish ahead of or behind its required completion time.

A regular reporting. Should be establishe for comparing actual progress of play in progress. Reporting may be daily, weekly, biweekly, or monthly, depending on the complexity or overall duration of the project. During each reporting period, two kinds of data or information you need to be collected; data on actual performance and information on any changes to the project scope, schedule, or budget.

The project control process continues throughout the project. In general, the shorter the reporting period, the better the chances of identifying problems early in taking effective corrective actions. But I project gets too far out of control, it may be difficult to achieve the project objectives without sacrificing skill, budget, schedule, or quality.

Throughout a project, some activities will be completed on time, some will be finished ahead of schedule, and others will be finished later than scheduled. Actual progress -- whether faster or slower than play -- will have an effect on the schedule of the remaining, on completed activities of the project. Specifically, the actual finish times (AF's) of completed activities will determine the earliest start in earliest finish times for the remaining activities in the network diagram, as well as the total slack.

Throughout a project, changes may occur that have an impact on the schedule. These changes might be initiated by the customer or the project team, or they might be the result of an unanticipated occurrence. Any type of change -- whether initiated by the customer, the contractor, the project manager, a team member, or an unanticipated event -- will require a modification to the plant in terms of skill, budget, and/or schedule. When such changes are agreed upon, a near baseline plan is established and used as the benchmark against which actual project performance will be compared.

Once data have been collected on the actual finish times of completed activities and the effects of any project changes, an updated project schedule can be calculated.

Schedule control involves four steps:

  1. analyzing the schedule to determine which areas may need corrective action
  2. deciding what specific corrective actions should be taken
  3. revising the plan to incorporate the chosen corrective actions
  4. recalculate the schedule to evaluate the effects of the planned crack of actions

Corrective actions that will imitate the negative slack from the project schedule must be identified. These corrective actions must reduce the duration estimates for activities on the negative slack paths. When analyzing a path of activities as negative slack, you should focus on two kinds of activities: activities that are near term and activities that have long duration estimates.

There are various approaches to reducing the duration estimates of activities. These include applying more resources to speed up connectivity, citing individuals with greater experience or more experience to work on the activity, reducing the scope or requirements for the activity, and increasing productivity through improved methods or technology.

Thursday, April 13, 2006

Project Management - Ch. 6 Summary

after a plan is developed for a project, the next step is to develop a project schedule. The first step in this process is to estimate how long each activity will take, from the time it is started until the time it is finished. It's a good practice to have the person who will be responsible for negativity estimate its duration; however, with larger projects this is often not possible.

And activities duration estimate must be based on the quantity of resources expected to be used on the activity. The estimate should be aggressive, yet realistic. A consistent time base, such as hours or days or weeks, should be used for all the activity duration estimates.

The earliest are in earliest finish (ES and EF) Times and the latest start in latest finish (LS and LF) times can be calculated for each activity. The ES and EF times are calculated by working forward through the network. The earliest start time for an activity is calculated on the basis of the projects estimated start time and the duration estimates for proceeding activities. The earliest finish time for an activity is calculated by adding activities duration estimate to the activities early start time. The earliest start time for particular activity must be the same as or later than the latest of all the earliest finish times of all the activities leading directly to that particular activity.

The LS and LF times are calculated by working backward through the network. The latest finish time for an activity is calculated on the basis of the projects required completion time and the duration estimates for succeeding activities. The latest our time is calculated by subtracting the activities duration estimate from the activities latest finish time. The latest finish time for particular activity must be the same as our earlier than the earliest of all the latest start times of all the activities emerging directly from that particular activity.

The total slack for particular path through the network is common to and shared among all activities on that path. If it is positive, it represents the maximum amount of time that the activities on a particular path can be delayed without jeopardizing completion of the project by the required time. If total slack is negative, it represents the amount of time that the activities of the path must be accelerated in order to complete the project by the required time. If it's a row, the activities on that path do not need to be accelerated but cannot be delayed. The critical path is the longest (most time-consuming) half of activities in the network diagram and represents a series of activities that cannot be postponed without delaying the entire project.

Scheduling the development of an information system is a challenging process. Unfortunately, such scheduling is often done in a haphazard manner, and thus a large percentage of IS projects are finished much later than originally promised. One of the most important factors and effective scheduling is arriving at activity duration estimates that are as realistic as possible. The project manager should be aware of the common problems that often push IS development projects beyond their scheduled completion date. Project management software packages can help with the scheduling process.

Project Management - Ch. 5 Summary

Planning is the systematic arrangement of tasks to accomplish an objective. The plan lays out what needs to be accomplished and how it is to be accomplished. The plan becomes a benchmark against which actual progress can be compared; then, if deviations occur, corrective action can be taken.

The first step in the planning process is to define the project objective -- the expected result were end product. The project objective is usually defined in terms of scope, schedule, and cost. The objective must be clearly defined and agreed upon by the customer and organization or contractor that will perform the project.

Once the project objective has been defined, the next up is to determine which work elements, or activities, need to be performed to accomplish it. This requires developing a list of all the activities.

The work breakdown structure (WBS) breaks the project down into manageable pieces, or items, to help ensure the all the work elements needed to complete the project work scope are identified. It is a hierarchical tree of end items that will be a compost or produced by the project team during the project. It usually indicates the organization or individual responsible for each work item.

a responsibility matrix is often develop to display, in tabular format, the individuals responsible for clutching the work items in the WBS. It is a useful tool because it emphasizes who is responsible for each work item and shows each individual's role in supporting the overall project.

Finally, network planning is a technique that is helpful in planning, scheduling, and controlling projects that consist of many in a related activities. In addition, it is also useful for communicating information about projects. There are several different network plan formats that can be used; the two most popular are activity in a box (AIB) and activity on the arrow (AOA).

In the activity of the box format, each activity is represented by a box in the network diagram, and a description of the activity is written within the box. In the activity on the arrow format, each activity is represented by an arrow in the network diagram, and activity description is written above the arrow.

After a list of activities has been created, a network diagram can be prepared. When deciding on the sequence in which the activity should be drawn to show their logical presidential relationship to one another, you must determine (1) which activities must be finished immediately before a given activity can be started, (2) which activities can be done concurrently, and (3) which activities cannot be started until prior activities are finished.

Project planning is a critical activity and developing an information system (IS). A project-management planing tool, or methodology, called the systems development life cycle (SDLC) is often used to help plan, execute, and control IS development projects. The SDLC consists of a set of phrases or steps: problem definition, said some analysis, system design, system development, system testing, and system implementation. All of these need to be completed over the course of the development project.

Numerous project management software packages are available to help project managers plan, track, and control projects in a completely interactive way.

internal post project evaluation

  1. technical performance
    1. how did final scope of work compared to scope of work at start of project?
    2. Were there many changes to the work scope?
    3. Were the changes handled properly in terms of approvals and documentation?
    4. What impact did the changes have on the project costs and schedule?
    5. Was the work scope totally completed?
    6. Where the project work and deliverables completed in a quality manner?
    7. Did they meet the expectations of the customer?
  2. cost performance
    1. how did the final project costs compare with the original project budget and with the final project budget?
    2. Which included any relevant changes and project scope?
    3. If a fixed-price contract, was a profitable?
    4. If cost reimbursement contract, was the project completed within the customer's budget?
    5. Were there any particular work packages that overran or under ran their budgets by more than 10%?
    6. Over the causes of any cost overruns?
    7. Or the cost estimates realistic?
  3. schedule performance
    1. how did the actual project schedule compare with the original schedule?
    2. What were the causes of any fluctuations?
    3. How was performance on the schedule associated with each work package?
    4. Where the activity duration estimates realistic?
  4. project planning and control
    1. was the project planned in sufficient detail?
    2. Or the plants updated in a timely manner to incorporate changes?
    3. Was actual performance compared with plant performance on a regular basis?
    4. Or data on actual performance accurate and collected in a timely manner?
    5. Was the planning and control system used on a regular basis by the project team?
    6. Was a use for decision-making?
  5. customer relationships
    1. was every effort made to make the customer a participate in the success of the project?
    2. With a customer asked on a regular basis about the level of satisfaction with the progress of the project?
    3. Where their regularly scheduled face-to-face meetings with the customer?
    4. With the customer informed of potential problems in a timely manner and asked to participate in the problem-solving process?
  6. team relationships
    1. was very team feeling and a commitment to the success of the project?
    2. Whether any conditions that impeded teamwork?
  7. communications
    1. was the team kept informed of the project status and potential problems a timely manner?
    2. Was the project environment conducted to open, honest, and timely communications?
    3. Or project meetings productive?
    4. Or written communications within the team and with the customer sufficient, insufficient, or overburdening?
  8. problem identification and resolution
    1. or mechanisms in place for team members to identify potential problems early?
    2. Was problem-solving done in a thorough, rational manner?
  9. recommendations
    1. based on the team's discussion and a valuation of the above items, what specific recommendations can be made to help improve performance on future projects?

Project Management - CH.4 Summary

Performing, or doing, the project -- implementing the proposed solution -- is the third phase of the project lifecycle. This phase starts after a contract or agreement is drawn up between the customer and the contractor or project team, and ends with the project objective is accomplished and the customer satisfied that the work has been completed in a quality manner, within budget, and on time.

This third phase has two parts: doing the detailed planning for the project and then implementing that plan to accomplish the project objective. It is necessary to develop a plan that shows how the project tasks will be accomplished within budget and on schedule. Planning determines what needs to be done, who will do it, how long will it take, and how much it will cost. The result of the planning effort is a baseline plan for performing the project. It is important that the people who will be involved in performing the project also participate in planning the work. Participation builds commitment. Once the plan has been established, the project team, led by the Project manager, implements the plan.

Risk management involves identifying, assessing, and responding to project risks in order to minimize the likelihood and impact of the consequences of adverse events on the achievement of the project objective. Risk identification includes determining which risks may adversely affect the project objective and what the consequences of each risk might be if they occur. Assessing each risk involves determining the likelihood that the risk of that will occur in the degree of impact the event will have on the project objective. Risk response planning involves developing an action plan to reduce the impact or likelihood of each risk, establishing a trigger point for when to implement the actions to address each risk, and assigning responsibility to specific individuals for implementing each response plan. During the project, it is important to a value wait all risks to determine if there are any changes to the likelihood of occurrence or the potential impact of any of the risks; also, new risks may be identified that were not considered as a risk earlier in the project.

While the project work is being performed by the project team, it is necessary to monitor progress to ensure that everything is going according to plan. The project control process involves regularly gathering data on project performance, comparing actual performance to plant performance, and taking corrective actions if actual performance is behind plain performance. Project management is a proactive approach to controlling a project, to insure that the project objective is achieved even when things don't go according to plan.

The fourth and final phase of the project lifecycle is terminating the project. It starts after the project work has been completed. If her press of this phase is to learn from the experience gained on the project in order to improve performance on future projects. Post Project evaluation activities include both individual meetings with team members and a group meeting with the project team. It is also important to meet with the customer to access the level of customer satisfaction and determine whether the project provided the customer with the anticipated benefits. Projects may be terminated before completion for various reasons. They may be terminated by the customer because of dissatisfaction. This can result in a financial loss and tarnish the reputation of the contractor organization performing the project. One way to avoid early termination due to customer dissatisfaction is to monitor the level of customer satisfaction continually throughout the project and take corrective action at the first hit of any dissatisfaction.