MGT 3200 Chapter 6

Earnings Multiple

ratio of the value of a form to its annual earnings

Book Value

the difference between the original acquisition cost and the amount of accumulated depreciation

Affordable Loss

the minimum possible expenditure of capital and other resources in order to bring an entrepreneurial idea to the market

Cavet Emptor

"Let the buyer beware" which has been made into a philosophy sometimes used by businesses to put the bur-den for consumer protection onto the customer

Revolving Credit

A credit agreement that allows the borrower to pay back part or all of the balance at any time As the loan balance is paid off, if becomes available to borrow again

Franchise

A legal agreement that allows a business to be operated using the name and business procedures of another firm

Buy-In

the purchase of sustainability less than 100 percent of the business

4 sets of resources

1. Access to capital 2. own skills and abilities 3. own knowledge 4. Network of friends and business associates

Steps to starting your own business

1. Goal (what is your venture) 2. Strategy (how to achieve this goal) 3. Test Feasibility to determine the market

Increasing Odds of Start-Up Success

1. Start Business in business incubator: Agency whose purpose is to help start-up firms 2. Take Part in Mentoring Programs: avoid mistakes and good managing advice 3. Have a detailed start-up budget 4. Produce a product or service for which their is a proven demand 5. Secure outside investment 6. Start with more than one founder 7. Have experience managing small firms 8. Have Industry experience

5 Paths to Business Ownership

1. Start a new Business 2. Buy an existing Business 3. Franchise a business 4. Inherit a business 5. Be a manager of a business

Spin-Off

A business what is created by separating part of an operating business into a separate entity

Synergy

A combination in which the whole is greater than the sum of its parts

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

Discounted Cash Flow

Cash flows that have been reduced in value because they are to be received in the future

Replacement Value

Cost to acquire an essentially identical asset

Asset

Something the business owns that is expected to have economic value in the future

Net Realizable Value

The amount for which an asset will sell, less the cost of selling

Lean Business Practices

(Created by Eric Ries) addresses the specifics of new business creation, particularly internet-based businesses where rapid experimentation and constant monitoring of viewers choices are possible

3 Principles of reasoning

Affordable loss strategic partnership leveraging of contingencies

Business Format Franchising

An agreement that provides a complete business format including trade name, operational procedures, marketing and products/services to sell

conversion Franchising

An agreement that provides an organization through which independent businesses may combine resources

Production Distribution Franchising

An agreement that provides specific brand-name products that are resold by the franchise in a specified territory

Trade Name Franchising

An agreement that provides to the franchise only the rights to use the franchisor's trade name and/or trademark

Transfer

An endgame strategy in which ownership is moved from one person or group to another

Termination

An endgame strategy in which the owner closes down a business

Bankruptcy

An extreme form of business termination that uses a legal method for closing a business and paying off creditors when debts are substantially greater than assets

Intangibles

Assets, such as patents or trademarks, and liabilities such as accounts payable that have no physical existence

BASIC

Beginner's All-purpose Symbolic Instruction Code

Walkaway

Business termination in which the entrepreneur ends the business with the obligations met

Workout

Business termination in which the firm's legal or financial obligations are not fully met at closing

Strategic Partnerships

Formal or informal relationships with customers, vendors or mentors to ensure the success of an entrepreneurial venture

Effectual Reasoning

Logical process in which one analyzes the resources available and restraints on the use of resources to create an attainable good

Founders

People who create or start a new business

Serial Entrepreneur

Person who opens multiple businesses throughout their career

Casual (Predictive) Reasoning

Process of setting a goal, determining the strategy and resources required to attain the goal

Takeover

Seizing of control of a business by purchasing the stock to be able to select the board of directors

Leveraging Contingencies

The practice of and ability to seize upon novel opportunities that become apparent during the conduct of business

Point of Indifference

The price at which a buyer is indifferent about buying or not buying the business

Due Diligence

The process of investigating a business to find its value

Buyout

The purchase of substantially all of an existing business

Sell-Off

Type of business transfer where the seller gets only a fraction of the value of the business This is done to maintain employment of the staff and service for the customers....

Bootstrapping

Using low-cost or free techniques to minimize your cost of doing business

Employee Stock Ownership Plan (ESOP)

a formalized legal method to transfer some or all of the ownership of a business to its employees

Start-up

a new business that is started from scratch

heuristic

a rule of thumb (commonsense)

Bricolage

the process of analyzing the resources available and creating a product or service from them

Pass-Off

type of business transfer where the owner gives the business to someone else without payment. Done often times to maintain employment of staff and service for the customers