Quiz 2

Small business threats

1. High risk of failure (risk involved, but odds improve after the first 5 years, lot of businesses close for other reasons though ) 2. Lack of knowledge and experience (many only have knowledge in their product, not how to run a business at the same time) 3. Too little money (takes awhile to gain momentum at first ) 4. Bigger regulatory burden (complying with federal regulation is tough, congress is trying to fix this though for small businesses) 5. Higher health insurance costs (administrative costs for small health plans are much higher than for large businesses, so it is hard for small businesses to offer coverage

Small business opportunities

1. Market niches (many small firms uniquely positioned to exploit small, but profitable, market niches) 2. Personal customer service (can be more personal because it is smaller) 3. Lower overhead costs 4. Technology (ebay, small companies can sell via the web)

Accidental inventions

1. Microwave Ovens: When World War II scientist Percy Spencer was inspecting a magnetron tube at a Raytheon lab, he noticed that a candy bar in his pocket had melted, which sparked the idea of using microwaves for cooking. Today, more than 90% of households have microwave ovens. 2. Viagra: The pills failed to achieve their original goal, but clinical trials did yield some startling secondary benefits, which gave rise to a brand new multibillion-dollar business for Pfizer. 3. Post-it Notes: 3M scientist Spencer Silver developed the repositionable adhesive for Post-it Notes. But they didn't become a product until his co-worker, Art Fry, was looking for a sticky, reusable bookmark to replace the paper bookmarks that kept slipping out of his church hymnal. Fry proposed the product

Funding options for starting a business

1. Personal resources: if borrow money, keep it as professional as possible 2. Loans: can be tough to get a commercial loan, only 20% launch with commercial loans - small business association partially guarantees loans from local commercial vendors and they have a micro-loan program that lends small amounts of money to businesses through community non profits 3. Crowdfunding (process of funding ventures by raising money from a large number of investors via the internet - mainly used for nonprofits - gofundme 4. Angel investors (wealthy individuals who invest in promising startup companies to make money for themselves - look for companies likely to grow 30-40% per year, and then be bought or go public) 5. Venture capital firms: fund high potential new companies in exchange for a share of ownership as high as 60%

Three types of small businesses

1. Service: 48% Financial services, medical care, repair shops, haircutting/styling, dry cleaning, etc. 2. Distribution: 33%: Retailing, wholesaling, transportation, communications (movement of goods from producers to consumers). 3. Production: 19%: Construction, mining and manufacturing

3 types of business ownership

1. Sole Proprietorship: owned and managed by one person 2. Partnership: usually like a law firm a. General partnership: all equally liable b. Limited partnership: designate 1/2 as main and then others are liable for what they put in 3. Corporation: conventional, individual, limited liability company, S corporation

3 options for starting a business

1. Start your business from scratch 2. Buy an established business 3. Buy a franchise

Self made millionares 12 qualities

1.Be confident. 2. Be curious. 3. Be excellent 4. Be consistent 5. Be forceful 6. Be fearless 7. Be unpredictable 8. Be unreasonable 9. Be unduplicable 10. Be dominant 11. Be controversial 12. Be universal

GEM

Global Entrepreneurship Monitor Measures the annual rate of new business start ups across a range of countries

Tools for business success

Gain experience (roughly 3 years in the field working for someone else), learn from others (use network to get introductions), educate yourself (school entrepreneur program, websites, events, blogs, etc), access SBA resources ($, information, range of free services), develop a business plan (written after used personal funding resources)

A country's early phase entrepreneurship rate

Includes the % of adults who have been running their own business from 3 months to 3.5 years

What is a small business

It is independently owned and operated Not dominant in its field of operation Falls within the size limits of the small business administration (varies by industry)

Biggest franchsies

McDonalds, KFC, Burger Kind

Entrepreneur's today

Micropreneurs: home based businesses and web based businesses Intrapreneurs: entrepreneurs within a business (people at google who have made gmail or google earth)

Pros and cons of starting a business from scratch

P: all on you, dont have to deal with the previous owners bas choices, sense of pride and ownership Cons: pressure, time, money, hard to get credit from suppliers/lenders without any history, challenging

Pros and cons of Sole Proprietorship

P: ease of starting and ending, being own boss, pride of ownership, legacy, keep profit C: assume all the risk, limited financial resources, management challenges, time commitment, limited growth and life span

Pros and cons of coporatiosn

P: limited liability, size, ability to raise money, perpetual life, ease of ownership change, ease of attracting talent, separation of ownership from management C: initial cost, extensive paperwork, double taxation, size, difficulty of termination, possible conflict with stakeholders

Pros and cons of franchises

P: management and marketing assistance, personal ownership, nationally recognized name, financial advice and assistance, lower failure rate C: Large start up costs, shared profit, management regulation, restrictions on selling, fraudulent franchisors

Pros and cons of running a franchise

P: management expertise and consulting is usually included, franchises offer advice and financing, very low 5% first year failure rate C: less opportunity for creativity because requirements, something goes wrong with the national brand and you suffer too, initial purchase price expensive plus there is a % of sales royalty fee

Pros and cons of a partnership

P: more financial resources, shared management, pooled knowledge, longer survival rate, no special taxes C: unlimited liability, division of prodits, disagreement among partners, difficulty of termination

Pros and cons of buying an established business

P: structure/concepts already are in place, relationships with customers and suppliers are established, getting financing and credit is easier C: it is being sold for a reason, working with someone else's idea can be boring for an entrepreneur, may inherit old mistakes such as poor employees relations or a pending lawsuit

Entrepreneurship around the world

Per capita Income: In lower income countries like China and Chile, high percentage of entrepreneurs because there is no other choice - necessity entrepreneur Opportunity costs: Entrepreneurship rates are significantly lower in countries that provide high level of employment protection (hard to be fired) and strong unemployment insurance (financial support if somehow fired) Cultural/political environment Extensive, complex regulations can hinder entrepreneurship by raising barriers More supportive nations get a boost from limited regulation + strong government support (US, New Zealand)

Significant facts of small businesses

Recent success: nearly 80% of businesses started in 2014 were still in business the following year...the highest survival rate since 2005. Small businesses with 1 to 9 employees have an even higher survival rate. 62% of these 3.7 million are over five years old...having an even greater chance of survival Minorities: 29% of small businesses • Immigrants: 14% • Women: 36% • Veterans: 9% There are nearly 30 million small businesses in the U.S About 97% of non-farm businesses are considered small Small businesses account for more than 50% of U.S. GDP The first jobs of about 80% of Americans are in small business Small businesses generate 60% to 80% of all new jobs in the U.S More than 75% of business owners run their business without employees Small businesses provide jobs for about 43% of the U.S. workforce Produced 16.5 times more patents per employee than large firms

Beer Article!

Study Beer Article

Types of mergers

Vertical merger: companies in different stages of the supply change in different industries Horizontal: when in the same industry but not necessarily competitors: for example a luxury car company and a midsize car company Conglomerate: not alike whatsoever but see some potential to merge: for example a golf company and a video company team up to make instructional videos

Entrepreneurs are seeking

a. greater financial success b. independence c. flexibility d. challenge e. survival

Other entrepreneur facts

about 10% of the top 200 chain restaurants now have food trucks. Highest Entrepreneur rates in Senegal, Ecuador, Botswana, Lebanon Lowest in: Malaysia, Bulgaria, Morocco, Germany, Italy

Entrepreneurial characteristics

vision, self-reliance (comes with internal locus for control which means you are responsible for what happens- they have to get permits, keep people in check, etc), energy (typically 12 hour work day 6/7 days a week), confidence, tolerance of uncertainty (take risks, especially financial), tolerance of failure (failure is learning)