Chapter 5

Define the Small Business Administration

Created by Congress in 1953, is a governmental agency that assists, councils, and protects the interests of small businesses in the United States.

Define Franchising, Franchisor Franchisee,

Franchising is the actual granting of a franchise. Franchisor is an individual or organization granting a franchise. Franchisee is a person or organization purchasing a franchise.

SCORE

Service Corps of retired executives, are counselors to America's small businesses, created in 1964, is a group of more than 11,000 retired and active business people, including more than 2000 women who volunteer their services to small business through SBA

3. Providing Competition

Small businesses challenge larger, established firms in many ways, causing them to become more efficient and more responsive to Consumer needs

4. Filling Needs of Society and Other Businesses

Small firms also provide a variety of goods and services to each other and too much larger firms. Large firms generally buy parts and assemblies from smaller firms because it is less expensive than manufacturing the parts in their own factories

2. Providing Employment

Small firms hire a larger portion of employees who are younger workers, older workers, woman, or workers who prefer to work part-time. Small businesses provide 67% of workers with their first jobs and initial on the job training in basic skills.

1. Providing Technical Innovation

Studies show that the incidence of innovation among small-business workers is significantly higher than among workers in large businesses. Small firms produce two and a half times as many Innovations as large firms relative to the number of persons employed.

Advantages of Franchising?

The franchisor gains fast and well controlled distribution of its products without incurring the high cost of constructing and operating it's own Outlets. The franchisee gets the opportunity to start a business with limited capital and to make use of the business experience of others.

Disadvantages of Franchising?

The main disadvantage of franchising affects the franchisee, and it arises because the franchisor retains a great deal of control. The franchisor's contract can dictate every aspect of the business: Decor, design of employee uniforms, types of signs, and all the details of business operations.

Importance of small businesses in our economy

1) Providing technical innovation 2) Providing employment 3) Providing competition 4) Filling needs of society and other businesses

Pros of Small Business

1)Personal relationships with customers and employees 2)Ability to adapt to change 3)Simplified record-keeping 4)Independence 5)Advantages of sole proprietorships

Cons of Small Business

1)Risk of failure 2)Limited potential 3)Limited ability to raise capital

Characteristics of Entrepreneurs

1)They desire to create a new business. 2)independence 3)A desire to determine one's own destiny 4)A willingness to find and accept the challenge 5)Family background 6)Age (more than 70% are between 24 and 44 years of age)

Service Industries

Accounts for more than 48% of all small businesses. Of these, about 3/4 by such non-financial services as Medical and dental care; watch, shoe, and TV repairs; hair cutting and styling; restaurant meals; and dry cleaning.

Production Industries

Includes Construction, mining, and manufacturing industries. Only about 19% of all small businesses are in this group.

Distribution Industries

Includes retailing, wholesaling, transportation, and communication -- industries concerned with the movement of goods from producers to Consumers. It accounts for approximately 33% of all small businesses