Business Ch. 6

The size of the world market is about

7 billion

The business plan will include

an analysis of the competition.

Griffin is focusing his attention on finding full-time employment now that he has graduated. He has decided to narrow his job search to jobs with a major corporation and ignore the possibility of working for a small business. His job search strategy

will likely limit his job prospects since most new jobs are with small businesses.

You may have a business idea that is a good opportunity if:

~It fills customers' needs ~You have the skills and resources to start a business. ~You can sell the product or service at a price customers are willing and able to pay—and still make a profit. ~You can get your product or service to customers before your window of opportunity closes (before competitors with similar solutions beat you to the marketplace). ~You can keep the business going

Small businesses have several advantages over large businesses in international trade

~Overseas buyers often enjoy dealing with individuals rather than with large corporate bureaucracies. ~Small companies can usually begin shipping much faster. ~Small companies can provide a wide variety of suppliers. ~Small companies can give customers personal service and undivided attention because each overseas account is a major source of business to them.

Stats about small businesses

~There are over 30 million small businesses in the United States. ~Of all nonfarm businesses in the United States, almost 96 percent are considered small by SBA standards. ~Small businesses account for more than 43 percent of the gross domestic product (GDP). ~Nearly 400,000 tax-paying, employee-hiring businesses are started every year. ~Small businesses employ more than half of all private-sector employees. ~About 80 percent of U.S. workers find their first jobs in small businesses.

5 Challenges of Working at Home

1) Getting new customers 2) Managing Time 3) Keeping work and family tasks separate 4) Abiding by city ordinances 5) Managing risk

4 reasons people are willing to take the entrepreneurial risk

1) Opportunity 2) Profit 3) Independence 4) Challenge

5 Entrepreneurial Attributes

1) Self-directed 2) Self-nurturing 3) Action-oriented 4) Highly energetic 5) Tolerant of uncertainty

7 Ways to tell if a home business is a scam

1) The ad promises that you can earn hundreds or even thousands of dollars a week working at home. 2) No experience is needed. 3) You need to work only a few hours a week. 4) There are loads of CAPITAL LETTERS and exclamation points!!!!! 5) You need to call a 900 number for more information. 6) You're asked to send in some money to receive a list of home-based business opportunities. 7) You're pressured to make a decision NOW!!!!

Small Business Administration (SBA)

A U.S. government agency that advises and assists small businesses by providing management training and financial advice and loans.

Small Business

A business that is independently owned and operated, is not dominant in its field of operation, and meets certain standards of size (set by the Small Business Administration) in terms of employees or annual receipts.

Business Plan

A detailed written statement that describes the nature of the business, the target market, the advantages the business will have in relation to competition, and the resources and qualifications of the owner(s).

Entrepreneurial Team

A group of experienced people from different areas of business who join together to form a managerial team with the skills needed to develop, make, and market a new product.

Small Business Investment Company (SBIC) Program

A program through which private investment companies licensed by the Small Business Administration lend money to small businesses.

Service Corps of Retired Executives (SCORE)

An SBA office with volunteers from industry, trade associations, and education who counsel small businesses at no cost (except for expenses).

Travis benefited from his experience working for an established private company that provided state-of-the-art lighting for music venues around town. Although confident that he could start his own lighting business, he had limited capital to buy the necessary equipment needed to successfully compete with established companies. Which strategy would best help Travis achieve his goal of business ownership?

Begin by offering to take over management of his employer's business, allowing the owner to enjoy some leisure time.

Incubators

Centers that offer new businesses low-cost offices with basic business services.

Charlie remembers his grandfather telling him, "If you can find something you like to do, and somebody is willing to pay you to do it, that's the secret to a great life." The way Charlie saw it, this was his chance. For the past five years, he's been splitting his time between school and working at a local tree farm. The owner recently announced he was ready to retire. As Charlie began creating a business plan, he contemplated what the business might be worth. How much will he need to buy this business? What step should Charlie take next?

Charlie should speak with the current owner and determine the total value of assets (what the business owns), its earning potential, and its unique advantage.

Intrapreneurs

Creative people who work as entrepreneurs within corporations.

Micropreneurs

Entrepreneurs willing to accept the risk of starting and managing the type of business that remains small, lets them do the kind of work they want to do, and offers them a balanced lifestyle.

Venture Capitalists

Individuals or companies that invest in new businesses in exchange for partial ownership of those businesses.

Market

People with unsatisfied wants and needs who have both the resources and the willingness to buy.

Which government agency is responsible for encouraging the development of small business?

Small Business Administration

Enterprise Zones

Specific geographic areas to which governments try to attract private business investment by offering lower taxes and other government support.

What statement best describes the outlook for small businesses in international markets?

The world is a larger, and potentially a more lucrative, market than the U.S. domestic market.

Small businesses often have advantages in international markets. Which best describes one those advantages?

They can provide individualized customer service as opposed to impersonal corporate bureaucracies.

Procter & Gamble

a multinational marketer of household products, was formed in 1837 by William Procter, James Gamble, and a total of $7,000 in capital.

What is a characteristic of successful entrepreneurs?

action-oriented

Ford Motor Company

began with an investment of $28,000 by Henry Ford and 11 associates.

Amazon

began with investments by founder Jeff Bezos's family and friends. Bezos's parents invested $300,000, a huge portion of their retirement account. Today they are billionaires.

Jill opened a bakery in a seaside resort town. She was positive she had the perfect location as plenty of hotels and inns were within walking distance of her storefront. She planned to use her grandmother's recipes and only the finest ingredients for the upscale resort customers. During her first week of business, she was disappointed with lackluster sales. In fact, only a few resorts seemed to have any customers that week. Jill most likely

did not research or understand the local business cycle.

A(n) __________ is a group of experienced professionals from different areas of business who join together to develop, make, and market a new product.

entrepreneurial team

One of the hurdles small businesses face when deciding to export is

financing is often difficult to find.

To be considered part of a market, an individual must

have both a willingness to buy and the financial resources needed to buy.

Located at Monsanto's world headquarters, the Nidus Center is a unique __________ facility. The tenants are biotechnology companies who are at various stages of product development. The agricultural giant, Monsanto, the Danforth Foundation, Washington University-St. Louis, Saint Louis University, and several venture capital firms contribute seed money for these small start-up ventures that receive approval to further develop their ideas at the Nidus Center.

incubator

The executive summary section of the business plan contains

information that will capture the attention of bankers and other investors who receive many business plans every day.

A(n) __________ is a valuable source of information regarding techniques to reduce a firm's exposure to risk.

insurance agent

George Eastman

launched photographic giant Kodak in 1880 with a $3,000 investment.

DuPont

manufactures thousands of products under such brand names as Teflon and Lycra, was started in 1802 by French immigrant Éleuthère Irénée du Pont de Nemours. Some 18 shareholders provided $36,000 in start-up money.

Conversations with people who start their own business often reveal that

many small business owners got their entrepreneurial idea from a previous job.

Two key management functions that need particular attention when starting a business are

planning and financing.

For several years, Lanie has volunteered to play the piano and sing at a local nursing home. Now, Lanie has decided to get into the growing eldercare market. She created Music and Memories, a nonprofit corporation that would hire local talent to perform her own music productions directed toward this market. In order to write and produce several productions each year, Lanie needed start-up funds. An instructor at the local community college suggested that she begin by __________, because this effort would help introduce her idea to interested investors as well as suggest government grant applications that Lanie might pursue.

preparing her business plan

A Small Business Investment Company (SBIC) is a(n)

private investment company that is licensed by the SBA to make loans to small businesses.

Entrepreneurs learn that there are many legal and financial issues involved in starting their business. The best way for the small business owner to resolve these issues and protect the firm's resources is to

seek and pay for expert guidance and assistance.

Jack, Jane, and Jarvis want to open a local cafe that serves a unique offering of coffee, weekend entertainment, and a limited menu of desserts. In one of the preliminary meetings, Jarvis presented a list of reasons that small businesses fail. Although many of the ideas on this list were applicable to many types of business, one challenge pertained specifically to the restaurant and bar business. The challenge he referred to was

some of the easiest businesses to start have the least growth prospects and greatest failure rates.

Avon

the familiar beauty products retailer, started in 1886 with $500 David McConnell borrowed from a friend.

Dr. Desai just graduated from dental school. She is hoping to acquire the necessary funding to start her own dental practice. One advantage of this type of business is

the service is individualized and not easily mass-produced.

Intrapreneurs make use of __________ to develop and launch new products and generate new profits.

their employer's existing human, financial, and physical resources

As a high net worth individual, Samantha searches for developing companies in need of additional funding to achieve their goals. In return for this __________, she expects to give up some percentage of ownership in the business.

venture capital