Entrepreneurship - Chapters 5 & 6
Registration
Information provided to the government concerning the existence of, name of, nature of, and contact information for your business
Why Part-Time Businesses are Important
Most entrepreneurs start out working part time on their new business; The sheer number of part-time businesses makes them a major force in our economy; Officially, of the 25.9 million small businesses in the United States in 2012, almost half (10.8 million) were part-time businesses
Payment
Most online transactions use a credit card or an online payment system like PayPal
Disadvantages of Start-Ups
No initial name recognition; Require significant time; Very difficult to finance; Cannot easily gain revolving credit; May not have experienced managers and workers
Variance
Permission from a government organization to act differently that the laws state
Intellectual Property (IP)
Property coming from some sort of original thought, for example, patents, trade secrets, trademarks, and copyrights
Bricolage
Refers to the process of analyzing the resources available and creating a product or service from them
Takeover
Seizing of control of a business by purchasing its stock to be able to select the board of directors
Asset
Something the business owns that is expected to have economic value in the future
Permanence
The impression of long-term continuity a business gives others
Covenants
The limitations imposed on your property by your neighborhood group
Affordable Loss
The minimum possible expenditure of capital and otherresources in order to bring an entrepreneurial idea to market
Point of Indifference
The price at which a buyer is indifferent about buying or not buying the business
Buyout
The purchase of substantially all of an existing business
Buy-In
The purchase of substantially less than 100 percent of a business
Multichannel Marketing
The use of several different channels to reach your customers; for example, a Web site, direct mail, and traditional retailing
E-Commerce
The use of the Internet to conduct business transactions
Chargebacks
This is a fee the service levels on you for any of a variety of problems related to the sale
Spin-Off
A business that is created by separating part of an operating business into a separate entity
Conversion Franchising
agreement that provides an organization through which independent businesses may combine resources
Trade Name Franchising
agreement that provides to the franchisee only the rights to use the franchisor's trade name and/or trademarks
Stand Retail Disadvantages
variable income, legal requirements
Due Diligence
process of investigating a business to determine its value
Part-Time Employment (C5)
working for 35 or fewer hours a week
Moonlighting
working on your own part-time after your regular job
Business Format Franchising
agreement that provides a complete business format, including trade name, operational procedures, marketing and products or services to sell
Volatility
frequency of business starts and stops
Stand Retail Advantages
little investment, variety of locations, quickly established, easily ended
Product Distribution Franchising
agreement that provides specific brand name products which are resold by the franchisee in a specific territory
Stand Retail
he roadside, flea market, farmers' market, or craft fair business; one of the most ancient forms of business; Mentioned in the Bible; Tend to be semi-permanent; Success Factors: location, inventory
Aggrandizing
making your business or yourself seem more accomplished than it is
Home Retail Disadvantages
working "on the road", lack of a base to organize and work, variable income, finding ways for customers to reach you
Reciprocal Links
A listed, live connection to a different Web site, which in turn displays a similar link to the first Web site
Effectual Reasoning
A logical process in which one analyzes the resources available and restraints on the use of resources to create an attainable goal
Reserve Price
A minimum acceptable selling price in an auction; If the bidding does not exceed the price, the sale will not go through
Maker
A modern term for an inventor, in particular, an inventor who uses modern techniques like 3-D software and 3-D printers or do-it-yourself electronics to create new items
Discounted Cash Flows
Cash flows that have been reduced in value because they are to be received in the future
Inheriting a Business
Family Businesses Succession; Developing a Formal Management Structure; Succession Issues for the Founder; Succession Issues for the Successor; Ownership Transfer
Disadvantages of Purchasing an Existing Business
Finding a successful business for sale that is appropriate for you is difficult; Existing employees may resist change; Reputation may be a hindrance; Facilities and equipment may be obsolete
Finding a Business to Buy
First problem is finding a business for sale; Should be in an industry in which you have experience; Product or service that has demand and high margins; Adequate financing; Contact business brokers
Goals of Due Diligence
1. You are attempting to find any wrongdoing: (1) fraud, (2) misrepresentations of the sellers and (3) missing information 2. You are trying to find any inefficiencies, unnoticed opportunities, waste, and mismanagement.
The Five Paths to Business Ownership
1. You may start a new business 2. You may buy an existing business 3. You may franchise a business 4. You may inherit a business 5. You may be the manager of a business
Blog
A Web page in which entries are posted in reverse chronological order (i.e., the most recent at the top of the page)
Part-Time Business
A business in which the owner either participates fewer than 35 hours per week or operates on a temporary or seasonal basis while maintaining employment elsewhere for wages or salary
Buyouts
A buyout may take place all at once, with all stock being transferred at a single point in time; Sometimes buyouts are made with ownership being transferred over some agreed-upon time range.; Buyouts made by employees are examples of changes of ownership over time.
Synergy
A combination in which the wholeis greater than the sum of its component parts
Franchise
A legal agreement that allows a business to be operated using the name and business procedures of another firm
Professional Management
A professional manager of a small business is one who has the experience and skills to use a systematic approach to analyzing and solving business problems
Conflict of Interest
A situation in which a person faces two or more competing standards or goals
Pop-Up Business
A temporary business that offers services or products in a variety of locations for a brief period at a time
Episodic Businesses
A temporary, project-based, or sporadically operating business
E-Commerce and eBay Websites
Active eBay sellers number between 6.7 and 9.3 million in the United States alone; For part-timer entrepreneurs the online approach makes a highly attractive opportunity because it offers the advantages of a large market, 24/7 availability of your products, and a start-up which is quickly done and potentially inexpensive
RSS Feed
An Internet messaging service that pushes (sends) whatever Web material you specify to subscribers to that feed
Informational Web Sites
An Internet site designed to introduce and explain a business to others
Network Marketing
An approach to selling in which the salesperson recruits customers to become distributors of the product or service to others
Reverse Auction
An auction in which the low bid gets the business or wins
Transfer
An endgame strategy in which ownership is moved from one person or group to another
Intangibles
Assets, such as patents or trademarks, and liabilities, such as accounts payable, that have no physical existence
Advantages of Start-Ups
Begin with a clean slate; Use the most up-to-date technologies; Provide new, unique products or services; Can be kept small deliberately to limit the magnitude of possible losses
Making Do as a Way to Succeed
Both lean operations and bootstrapping are based on and share three underlying ideas: 1. Waste not, want not 2. Create, standardize, repeat. 3. Keep in touch.
Important Issues of Home-Based Business
Choose a work location inside your home that is away from noise, distractions, and family traffic; Be realistic about the amount of space you'll need for your equipment; An office door can keep business separate from family and the rest of life; Try your location out for a day or two to check out noise, traffic patterns, lighting needs, and distractions
Determining the Value of the Business
Comparable Sales; Financial Ratios; Industry Heuristics
Outsourcing
Contracting with people or companies outside your business to do work for your business
Poisoning the Well
Creating a negative impression among your employers' customers
Licensing
Documented permission from the government to run your business
Important Issues of Home-Based Part 2
Don't overload on hours of work, or on snacks from the refrigerator down the hall; Setup your work day to minimize distractions from household or family chores; Consider hiring help to handle household or family chores to free up your time; Set the ground rules early and stick with them
Advantages of Purchasing an Existing Business
Established customers; Business processes are already in place; Often requires less cash outlay
Moving from Part-Time to Full-Time Entrepreneurship
Key question is usually financial: Wait until there is a solid income; Make use of any transition services offered by the former employer; Recognize that initially, you will spend all your time running and marketing the business
Caveat Emptor
Latin: let the buyer beware; Philosophy sometimes used by businessesto put the burden for consumer protection onto the customer
Cannibalizing
Taking business away from your employer
Internet Informational Websites
The Internet's power comes from its being a very cost-effective and efficient way to contact your customers; Most small businesses need to have a Web site regardless of whether or not they use it for actual sales; Potential customers will use it to find you; If they've heard about you from something other than the Internet, they will use your site to find out more information about you and to decide if they want to actually contact you
Net Realizable Value
The amount for which an asset will sell, less the costs of selling
Cost to Start-Up
The amount of money it takes to start a new business
Delegation
The assignment of work to othersover whom you have power
Replacement Value
The cost to acquire an essentially identical asset
Book Value
The difference between the original acquisition cost and the amount of accumulated depreciation
Bootstrapping
Using low-cost or free techniques to minimize your cost of doing business
Full-Time Employment
Working more than 35 hours a week
Home Retail Advantages
ease of setup, low cost of start-up, ability to work away from home and employer
Home Retail
entrepreneur arranges a get-together at someone's home where participants can socialize and get acquainted with the entrepreneur and the products or services offered; Pioneered by Avon, Mary Kay
Boundary
separating and balancing business and home
Business-to-Consumer (B2C)
Business-to-consumer transactions using e-commerce
Steps to Follow When Acquiring a Business
1. Conduct extensive interviews with the sellers of the business. 2. Study the financial reports and other records of the business. 3. Make a personal examination of the site (or sites) of the business. 4. Interview customers and suppliers of the business. 5. Develop a detailed business plan for the acquisition. 6. Negotiate an appropriate price for the business, based upon the business plan projections. 7. Obtain sufficient capital to purchase and operate the business.
Minimum Viable Product
A concept central to lean business practices where you make a minimum product, but one that can be sold; By selling to customers and collecting feedback, an entrepreneur can develop a product at minimum cost
Sponsored Link
A form of paid advertising that gets your company's website at the top of a search list
Search Engine Optimization
A general approach to Web site design intended to result in the site being displayed toward the beginning of a search engine's (e.g., Google, Yahoo!, etc.) listing for that term
Start-Up
A new business that is started from scratch
Business-to-Business (B2B)
Business-to-business transactions using e-commerce
Strategic Partnerships
Formal or informal relationshipswith customers, vendors, or mentors to ensure the success of an entrepreneurial venture
Zoning Laws
Government specifications for acceptable use of land and buildings in particular areas
Time to Start-Up
How long it takes to start a new business
Legal Considerations
If and how you can transfer the franchise license to someone else; How you may terminate the contract; How the franchisor may terminate the contract; What disclosures you are required to make
Home-Based Business Features
Pop-Up Businesses; Mobile Offices; Virtual Offices, Executive Offices, and Incubators; Doing Business without a Business Organization
Leveraging Contingencies
The practice of and ability to seize upon novel opportunities that become apparent during the conduct of business
Hybrid Entrepreneurship
The process of initiating a business while simultaneously remaining employed for wages or salary
Casual (predictive) Reasoning (C6)
The process of setting a goal and then determining the strategy and resources required to attain the goal
Home-Based Business Facts
There were about 9.0 million home-based businesses in the United States in 2012, and they represented 33 percent of all firms; Home-based business meets at least two of the three criteria for start-up; It is inexpensive, since you are already living somewhere and you can get your business going where you live
Success Factors for Part-Time Businesses
Time management; Use a to-do list; Prioritize; Keep it in its own space (home based)
Revolving Credit
a credit agreement that allows the borrower to pay all or part of the balance at any time; As the loan balance is paid off, it becomes available to be borrowed again
Lean Business Practices
addresses the specifics of new business creation, particularly Internet-based businesses, where rapid experimentation and constant monitoring of viewers' choices are possible