Chapter 5 - Small business, entrepreneurship, and franchises

Small business

One that is independently owned and operated for profit and is not dominant in its field

Components of a business plan

1) Introduction 2) Executive summary 3) Benefits to the community 4) Company and industry 5) Management team 6) Manufacturing and operations plan 7) Labor force 8) Marketing plan 9) Financial plan 10) Exit strategy 11) Critical risks and assumptions 12) Appendix

4 questions a business plan should answer for banking officials and investors.

1) What exactly is the nature and mission of the new venture? 2) Why is this new enterprise a good idea? 3) What are the businessperson's goals? 4) How much will the new venture cost?

Business plan

A carefully constructed guide for the person starting a business. Consider it as a tool with three basic purposes: communication, management, and planning.

Franchise

A license to operate an individually owned business as if it were part of a chain of outlets or stores.

Franchisee

A person or organization purchasing a franchise

Small-business investment companies (SBICs)

A privately owned firm that provides venture capital to small enterprises that meet its investment standards.

1) Personal relationships with customers and employees 2) Ability to adapt to change 3) Simplified record keeping 4) Independence

Advantages of staying a small business:

Franchisor

An individual or organization granting a franchise

Service corps of retired executives (SCORE)

Counselors to America's Small Business, created in 1964, is a group of more than 11,000 retired and active business people, including more than 2,000 women who volunteer their services to small businesses through the SBA. The collective experience of SCORE volunteers spans the full range of American enterprise. These volunteers have worked for such notable companies as Eastman Kodak, General Electric, IBM, and Procter & Gamble. Experts in areas of accounting, finance, marketing, engineering, and retailing provide counseling and mentoring to entrepreneurs

Small business administration (SBA)

Created by Congress in 1953, is a governmental agency that assists, counsels, and protects the interests of small businesses in the United States. It helps people get into business and stay in business. Provides both financial assistance and management counseling. Recently, they provided training, technical assistance, and education to more than 3.5 million small businesses. It helps small firms to bid for and obtain government contracts, and it helps them to prepare to enter foreign markets.

Small-business institutes (SBIs)

Created in 1972, are groups of senior and graduate students in business administration who provide management counseling to small businesses

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

Disadvantages of going from a small to big business:

Dual-branded franchises

In which two franchisors offer their products together, are a new small-business trend.

Venture capital

Money that is invested in small (and sometimes struggling) firms that have the potential to become very successful. In many cases, only a lack of capital keeps these firms from rapid and solid growth.

1) Capital 2) Management 3) Planning

Small businesses are prone to failure. What are the key ingredients in the survival of a small business? (3)

Franchising

The actual granting of a franchise

Entrepreneurial spirit

The desire to create a new business.

Women's business centers (WBCs)

The national network of nearly 100 educational centers throughout the United States. They assist women in starting and growing small businesses and seek to "level the playing field" for women entrepreneurs, who still face unique obstacles in the business world.

Service industries

This category accounts for more than 48 percent of all small businesses. Of these, about three-quarters provide such nonfinancial services as medical and dental care; watch, shoe, and TV repairs; haircutting and styling; restaurant meals; and dry cleaning.

Distribution industries

This category includes retailing, wholesaling, transportation, and communications— industries concerned with the movement of goods from producers to consumers.

Production industries

This category includes the construction, mining, and manufacturing industries.

Small-business development centers (SBDCs)

University- based groups that provide individual counseling and practical training to owners of small businesses

1) Distribution 2) Service 3) Production

Various kinds of businesses generally fall into three broad categories of industry: