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We are almost 2/3 of the way through this course. By now, Im sure you have an opinion on it and what your students are learning. If you have the time and are so inclined, and you like this course I would be ever so grateful if you would share your comments with me. Testimonies — just a short comment by you or any student — which we can share on the website make a big diference. c21 Publishing is a small company — a small business — and we don’t have the marketing resources or connections like say a Scholastic or Pearson has — or that the banks or financial services ofering free curriculum have. We would’t use your full name or give out your email address or anything. We use initials and title (such as “9th Grade FCS teacher” or “8th grade student” ) and location such as Omaha, Nebraska. Please send any comments to financialliteracylessons@gmail.com. I promise, will not make this plea again until the very last podcast.
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In this podcast, we’re exploring Lesson 12 Small Biz Whiz. Once again, the information in this lesson goes above and beyond the national standards. Since owning a small business is both a source of income and a means of building wealth, I think it’s an important topic that your students should learn about. It fits right into our Unit Two theme of Building Wealth.
As we discuss in Lesson 4, freelancing — that is independent contracting — is currently the fastest growing sector of the labor economy. 34% of people or 53 million Americans freelance. That means they own their own small business. Some are just side gigs such as a second job or a hobby they’ve turned into an income producer. But many are not. Many are the owner’s sole means of support. With numbers like that, it’s quite likely that some of your students may one day start a business. They should understand that owning a business is both a means of earning an income and a means of building wealth. They should also have a basic understanding of some of the principles of being a small business owner.
This lesson begins on page 210 of the Instructor’s Guide, so let’s turn to it now.
The Instructional Resource for this lesson is SCORE.org In the practice activity, students are asked to write a simple business plan. SCORE has a lot of resources in their website to help them do this. Specifically, they should look at Score.org/ startyourbusiness. I love our country’s entrepreneurial spirit. But a lot of people don’t pursue their dreams of owning their own business because they get overwhelmed right at the start by the red tape. They don’t really know how or where to start and give up on their dreams. I started this business years ago and can’t imagine having been able to do it without my legal knowledge and legal background. Even as an attorney, I was occasionally stumped about the logistics of owing and running a business. If you have students interested in one day starting business, they should know that there are many excellent resources online to help them including score and sba.gov (Small Business Administration) and should take advantage of the free expertise and resources these organizations provide to help them be successful entrepreneurs.
On page 212, Gaining Attention, we get students involved in the lesson topic by engaging them in a discussion about whether they have any dreams of owning their own business. If so, what kind of products or service do they see themselves providing? You can also ask students whether if any of them work for their family’s business and what they think about that experience.
On page 212 is a chart with some stats that may surprise your students. First, I think it’s remarkable that the definition of a small business is 500 or fewer employees because a business with 500 employees seems pretty big. We tend to think of it as a mom and pop operation, but that is the generally accepted definition of a small business.
Also, regarding the data on the states, you may need to periodically research and update this information, because it changes over the years. (See The Kaufman Index) For example, types of startups change and the more-or-less small business-friendly states can change.
One of the most important things students should get out of this lesson is that running a small business is not a punch in/punch-out-of-work type of lifestyle. It is a 24/7 proposition. You are the person responsible 24/7 and there is always “something else” that can be done — another chore to complete, phone call to return or email to answer. Ultimately, running a business can be very rewarding, but it is extremely time consuming. In fact, it is the underestimation of the time it takes to manage and run a business that is the main reason people walk away from a small business.
On pages 212 and 213, we discuss some of the traits of a small business owner. Given the fact that half of small businesses fail or close within five years, the potential small business owner should weigh very carefully whether they have the traits they need to survive those early years. You can read about some of them on page 213. Students should not be discouraged if they feel they lack 1 or 2 of the traits of a successful small business owner because they can be developed. And just knowing about or being able to identify your particular weakness goes a long of way toward managing or overcoming it. For example, you may have a student who feels like they don’t delegate well. They can work on their delegation skills or create some guidelines for hiring people whom they trust very well and feel confident in delegating to. There are also programs to help them develop leadership skills if that’s the trait they don’t feel they’ve mastered. So these traits can be learned and developed.
Looking at page 213, these are some of the skills of a small business owner. Traits and skills are diferent things. A small business owner usually starts out wearing many many hats including money manager, marketing manager, IT manager, HR manager and customer relations manager. Hopefully, the business grows enough over time and produces enough income to enable the business owner to hire employees or freelancers to handle these jobs. However, when just starting out, a small business owner does it all. These skills are really important for the survival and success of a small business. Thankfully, if you have a student interested in being a business owner they can learn many of these skills through online courses or in business courses in college. You can read about the skills of a successful small business owner on pages 213 and 214.
Moving over to Roman Numeral III on page 214. Every business must operate within a legal structure. A small business owner should understand that some types of structures provide more protection from personal liability than others. There are diferent types of business structures within which to operate: corporations, partnerships, limited liability corporations, and sole proprietorships. Students don’t have to be experts on the diferent types of entities, but they should know that (a) there are diferent types business structures — not just one; (b) they afect personal liability and tax liability diferently; and (c) if they open a business, they should talk to an expert about which is best suited for their business goals.
There are a lot of formalities and laws that govern businesses and you have to comply with them or possibly face fines and penalties. I’ve said it in prior lessons — this is no time to go it alone. Someone who wants to own or operate a small business should consult an accountant and a legal expert because doing it right the first time by forming the correct entity, filing the correct paperwork, and getting the right licenses and permits is important.
On page 215, we discuss buying a business. This is a way many people get into small business ownership. Some of your students may have never heard the term “due diligence” but they should become familiar with it because if they embark on a career that involves any kind of buy and selling of assets, they’ll hear that term a lot. It’s the pre-purchase, kick-the-tires, investigation and inspection process and it’s very important. A financially literate person know that anytime you buy anything from anyone else, go the extra mile. Inspect all aspects of it. Leave no stone unturned, especially in the case of buying a business. Know what you are investing in. Discovering something that is a liability or a problem during due diligence period doesn’t necessarily mean you should not buy the business, but it does possibly call for some renegotiation of the terms.
Speaking of licenses and permits, some of those are listed on page 215 Roman Numeral IV. You generally can’t just jump into running a business because there are a lot of permits and licenses you have to have in order to start operating. There are federal tax laws, business regulations, licenses and local permits depending on the type of business, there can be many regulatory agencies involved. Fortunately, there are places a prospective business owner can go for help. And those are listed on page 216 and 217.
Finally, we talk about how wealth is built in a small business. That is Roman Numeral VI on page 217. Many people have built their small business into a very valuable asset. A student interested in being a business owner should understand that there are two goals for their business: One is to provide an income for themselves. The other is to build their wealth. To build wealth in a business, the profits must be reinvested in the business to build and expand product lines and increase their customer base. A portion of the profit should be reserved in order to weather an economic or other downturn. Too many people strip their business of all income, so there’s nothing left over to build its value. A profit margin tells the value of the business. Students should understand that profit margins can be increased two ways: By increasing revenue and also by reducing expenses.
On page 218, we have the Big Picture real aloud.
The Practice Activity A follows the exploits of entrepreneurs Linda and Melinda as they open their own small business. Practice Activity B is the business plan I mentioned earlier in the podcast. There are many good business plan templates online. I suggest they find a simple business plan template and complete a very simple business plan. The goal is not that students to become experts in writing a business plan. The goal — or goals — are that they understand what a business plan is, when it’s used, what they generally contain, and why business plans are of use to a small business owner.
The Debate-Persuade-Inform activity is a fun one. It is a Small Biz Whiz survey. This is a survey of small business owners. It can be done in your local area or students can contact business owners online all around the country – identifying that they are students participating in a financial literacy class and learning about small businesses. Students can work in teams or they can work alone but they should interview or send a survey to small business owners about the benefits and challenges of owning a small business.
The curated technology is one that fits right into our Debate Persuade Inform Activity: Survey Monkey or Poll Daddy. You can use one of these sites to create the class survey and combine students’ results.
It would also be great, if you have the time, to invite a few local small business owners into your classroom to talk about the challenges and benefits of running a small business or tell students about opportunities and the pitfalls they have experienced. Café owners, doctors, accountants, tech freelancers, you could have kind of a round table discussion with prepared questions. I’m sure your students could learn a lot about small business ownership from your local small business owners.
In our Next Lesson’s Ponder and Predict, we are issuing a warning. There’s a wealth devouring predator on the loose in the U.S. What might it be? What is this potentially catastrophic destroyer of wealth?
Finally under Assign, we have a Blog Q which relates back to the traits of a small business owner. It asks students to consider whether, if they were a small business owner, would people want to work for them? What would employees like most about them and what might they like least about working for them?
That wraps up Lesson 12 and it also completes unit 2, Building Wealth. I’ll see you next time for Lesson 13, Credit Card Craze where we start our unit in Protecting and Preserving Wealth.