Chapter 7: Small Business, Entrepreneurship, & Franchises

Which of the following is an appealing benefit that entrepreneurs enjoy? a. Minimal workload b. Minimal risk c. Flexible schedule d. Fixed income

c. Flexible schedule

In the context of funding options for small businesses, which of the following statements is true of crowdfunding? a. It is more preferred by large corporations than small businesses. b.It consists of money attained through personal resources. c. Its sites are used to funds nonprofits. d. Its sites provide guarantors in case a venture fails.

c. Its sites are used to funds nonprofits.

Which of the following statements is true of people with an external locus of control? a. They feel that they have complete control over their lives. b. They validate their own efforts. c. They believe that the actions of others can control their fate. d. They are extremely self-reliant.

c. They believe that the actions of others can control their fate.

external locus of control

A deep-seated sense that forces other than the individual are responsible for what happens in his or her life.

... are individuals who finance start-up companies with high growth potential in exchange for a share of ownership.

Angel investors

What are the pros of buying an established business?

The concept, organization structure, and operating practices are already in place. Relationships with customers, suppliers, and other stakeholders are established. Getting financing and credit is less challenging.

People who risk their time, money, and other resources to start and manage a business are known as?

entrepreneurs

Small Business Development Centers (SBDCs)

Local offices—affiliated with the Small Business Administration—that provide comprehensive management assistance to current and prospective small business owners.

internal locus of control

A deep-seated sense that the individual is personally responsible for what happens in his or her life.

business plan

A formal document that describes a business concept, outlines core business objectives, and details strategies and timelines for achieving those objectives.

Small Business Administration (SBA)

An agency of the federal government designed to maintain and strengthen the nation's economy by aiding, counseling, assisting, and protecting the interests of small businesses.

SCORE (Service Corps of Retired Executives)

An organization—affiliated with the Small Business Administration—that provides free, comprehensive business counseling for small business owners from qualified volunteers.

venture capital firms

Companies that invest in start-up businesses with high growth potential in exchange for a share of ownership.

What are the threats of a small business?

High risk of failure (Starting a new business involves a lot of risks, but the odds improve significantly after the five-year mark.) Lack of knowledge and experience (Entrepreneurs often have expertise in a particular area but lack the background to run a successful business.) Too little money (Lack of start-up money is a major issue for most new firms, since ongoing profits don't usually begin for months, or even years.) Bigger regulatory burden (Small firms spend 45% more per employee than big firms, simply complying with federal regulations.) Higher health insurance costs (Small-scale health plans are much more expensive, making it harder to offer employees competitive coverage.)

angel investors

Individuals who invest in start-up companies with high growth potential in exchange for a share of ownership.

How does entrepreneurship affect societies around the world?

Societies need entrepreneurs to ensure that new ideas actualize and people are able to self-employ when their economy does not provide for their basic needs. High in lower-income countries as they aim to increase the per capita income. Low in countries that provide a high level of employment protection and do not provide cultural support.

What characteristics does an entrepreneur have?

Vision, Self-reliance, Energy and confidence, & Tolerance of uncertainty and failure.

What are the impacts of Small Businesses?

Vital to the U.S. economy, Create new jobs, Fuel innovation, & Business ownership for minorities.

What are the cons of buying an established business?

Working with someone else's idea can be a lot less fun for some entrepreneurs. You may inherit old mistakes that can range from poor employee relations to pending lawsuits.

What are the cons of buying a franchise?

You have less opportunity for creativity since agreements tie you to franchise requirements. If something goes wrong with the national brand, your business will suffer, too. The initial purchase price can be steep, and that doesn't include ongoing percent-of-sales royalty-free.

... is a characteristic that most successful entrepreneurs possess. a. Energy b. Intolerance of failure c. External locus of control d. Apathy

a. Energy

Which of the following is one of the largest crowdfunding sites in terms of traffic? a. Kickstarter.com b. Futurelearn.com c. Cesim.com d. Businessinsider.com

a. Kickstarter.com

What are the cons of starting a business from scratch?

It's all you. That's a lot of pressure. It takes time, money, and sheer sweat equity to build a customer base. Without a track record, it's harder to get credit from both lenders and suppliers. From securing permits to hiring employees, the logistics of starting a business can be challenging.

What are the pros of starting a business from scratch?

It's all you; your concept, decisions, structure, etc. You don't have to deal with the prior owner's bad decisions.

What are the opportunities of a small business?

Market niches (A small segment of a market with fewer competitors than the market as a whole. Market niches tend to be quite attractive to small firms.) Personal customer service (With a smaller customer base, small firms can develop much more personal relationships with individual customers.) Lower overhead costs (Many small firms can hold down overhead costs by hiring fewer managers and fewer specialized employees.) Technology (The Web has played a powerful role in opening new opportunities for small businesses in both local and global markets.)

What are the pros of buying a franchise?

You're buying your own piece of a well-known brand and proven way of doing business. Management expertise and consulting come with the franchise package. Franchisers offer not only advice but also the financing that can make the purchase possible. These advantages add up to a low 5% first-year failure rate.

Entrepreneurs must understand that no conventional lending source, whether private or government, will: a. lend all of a start-up's funding. b. charge interest for start-ups that show high profit gains in its first quarter. c. associate with start-ups that do not have a recognized brand name. d. lend any money to start-ups.

a. lend all of a start-up's funding.

Entrepreneurs who mortgage their homes for the business and stake their reputation on the success of an unproven product demonstrate: a. a low tolerance of failure. b. a high tolerance of uncertainty. c. an external locus of control. d. low self-reliance.

b. a high tolerance of uncertainty.

Which of the following is a characteristic of successful entrepreneurs? a. Apathy b. Intolerance of failure c. Intolerance of uncertainty d. Confidence

d. Confidence