Chapter 6 Foundations of Business

Examples of how technology has helped increase small business exporting

- PayPal : small business to get paid automatically when they conduct global business online - helps find customer without expenses of international travels

private investment companies licensed by the SBA to lend money to small business ; able to keep defaults to a minimum by identifying a business' trouble spots early and giving entrepreneurs advice, in some cases rescheduling loan payments

- Small Business Investment Company (SBIC) Program

some things that all organizations demand

- capital - good ideas - planning - information management - budgets (financial management in general) - accounting - marketing - good employee relations -good overall managerial know-how

examples of how states are becoming strong supports of entrepreneurs

- creating programs that invest directly in new businesses - state commerce departments serve as clearinghouse for such programs - creating incubators and technology centers to reduce start-up capital needs

what is the appeal of angel investors?

- creditworthy borrow gets money faster - easier than going through a bank - cost less than a bank loan

business idea that is a good opportunity if

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

challenges of working from home

- getting new customers - managing time - keeping work and family tasks separate - abiding by city ordinances - managing risks

the easiest businesses to start have the _____ growth and the ______ failure rate (example?) ; the easiest to keep alive are _____ to get started (example?) ; ones that can make you rich are both _____ to start and _____ to keep going (example?)

- least ; greatest (restaurants) - difficult (manufacturing) - hard ; hard (automobile assembly)

reasons for small-business failures

- managerial incompetence - inadequate financial planning

benefits of entrepreneurial team

- members can combine creative skills with production and marketing skills right from the start - can ensure more cooperation and coordination later among functions in the business

Small Business Administration - started ______ demonstration program in 1991. provides very small ____ and _____ assistance to small business owners - rather than award loans based on collateral, credit history, or previous business success it judges worthiness on belief in the borrowers _______ and the ________ of their business ideas

- microloan ; loans ; technical - worthiness ; soundness

small business have several advantages over large business in international trade

- overseas buyers often enjoy dealing with individuals rather than with large corporate bureaucracies - small companies can usually begin shipping much faster - provide a wide variety supplier - can give customers personal service and undivided attention

entrepreneurial attributes

- self-directed - self-nurturing - action-oriented - highly energetic - tolerant of uncertainty

how to determine fair price for a business

- what the business owns - what it earns - what makes it unique

small business owners disadvantages

- work long hours - rarely take vacations - after many years, they may feel stuck and think they cant get out because they have too much time/effort invested

some advantages of small businesses over larger companies

-more personal customer service - ability to respond quickly to opportunities

Why are so many small business having difficulty getting started in global business

1) financing is often difficult to find 2) would be exporters do not know how to get started and do not understand the cultural differences between markets 3) the bureaucratic paperwork can threaten to bury a small business

no better way to learn small-business management than by becoming an ______ or working for a successful _______ why?

apprentice ; entrepreneur - many got idea for their businesses from their prior jobs ; rule of thumb is : have 3 years experience in a comparable business at first

reasons why people are willing to take the entrepreneurial risk

1) opportunity - to share in American dream; may not have skills for today's complex organizations but do have initiative and drive to work long hours demanded by entrepreneurship; corporate managers that leave corporate life; more opportunities for women/minorities/elder/disabled 2) Profit 3) independence (freedom to pursue your own passion) 4) challenge - take moderate calculated risks, they don't just gamble; tend to seek achievement more than power

to help you succeed as a business owner, in the following sections we explore the functions of business in a small-business setting:

1) planning your business 2) financing your business 3) knowing your customers (marketing) 4) managing your employees (human resource developments) 5) keeping records (accounting)

an entrepreneur has several potential sources of capital

1. personal savings 2. family and business operations 3. banks and finance institutions 4. angels and venture capitalists 5. government agencies such as the Small Business Administration (SBA) 6. Farmers Home Administration 7. Economic Development Authority 8. Minority Business Development Agency

____ % to _____ % of nation's new jobs are in small businesses

60-80

businessperson who sets up an effective _______ system early will save much grief later

Accounting

why are hiring, training, and motivating employees critical?

because of business grows, it becomes impossible for entrepreneurs to oversee every detail ; even putting in 60 hrs per week

Design an accepted business plan and give you valuable financial advice as well as lend you money when you need it

Commercial loan officer

Who are two other invaluable experts for small business

Commercial loan officer and an insurance agent

_______ ______ _______ ________ (_____) may be a source of funding for businesses in lower-income communities why?

Community Development financial institutions - already playing a big role in the economic recovery ; borrowers don't repay loans, CDFI's take hit not investors. also provides business counseling

Explain all the risks associated with a small business and how to cover them most efficiently with insurance and other means like safety devices and sprinkler systems

Insurance agent

-allows businesses to raise up to 1 million a year from private investors without making initial public offering - allows businesses to solicit larger investments in exchange for either ownership shares in business/commitment to repay loan - many prefer the terms _________ or _____ _______ for this form of fund raising

Jobs Act of 2012 - crowdfunding ; equity crowdfunding

Necessary and invaluable aid is a competent experienced ______ who knows and understands small business - can help with _______, ________ , ________ ________ and protection against ________

Lawyer - leases, contracts, partnership agreements ; liabilities

Inexpensive marketing research study may help you determine where to ____ , whom to select as your _____ ______ , and what is an effective strategy to reaching it

Locate, target market

outline of comprehensive business plan Section (8) __________ plan - minimum _____ size - ___________ required - production __________ - ________-________ methods - ________ control - plant _______ requirement - estimates of ______ costs should be based on primary research

Manufacturing - plant - machinery - capacity - inventory-control - quality - personnel - product

Most small and medium sized firms cannot afford to hire experts as employees so they must turn to ______ _____

Outside assistance

small business might want to consider requesting funds from the

Small Business Investment Company (SBIC) Program

People that acquire more wealth often demand ________ products that are not ___-______ and are willing to pay more for niche goods that small business offer

Specialized; mass-produced

history of the ______ = history of its entrepreneurs

U.S.

an online marketing strategy in which a business rewards individuals or other businesses (affiliates) for each visitor or customer the affiliate sends to its website

affiliate marketing

one of the easiest way to start a web-based business?

affiliate marketing

private individuals who invest their own money in potentially hot new companies before they go public - this form of individual investing is also called?

angel investors - peer-to-peer lending or crowdfunding

outline of comprehensive business plan Section (9) __________

appendix

a ____ _____ forces potential small business owners to be quite specific about its products/services they intend to offer

business plan

a detailed written statement that describes the nature of the business, the target market, the advantages the business will have over competitors, and the resources and qualifications of the owner

business plan

outline of comprehensive business plan Section (5) ___________ required - indicate amount of capital needed to commence and continue _______ - describe how _____ are to be used - make sure totals are same as ones on ___ ____ statement - this area will receive a great deal of review from potential ________ so must be clear and concise

capital - operations - funds - cash flow - investors

executive summary is suppose to...

catch interest quickly

outline of a comprehensive business plan Section (2) _______ background - describe company's _____ to date, potential _______ considerations, number areas of _____ and ______, summarize firm's _____ condition, pasts and current _____ sheets, _____/______ statements, and other relevant _______ records - include description of ______ coverage - investors want to ensure that ______/______ do not pose major threat to company

company operations; legal risk; opportunities financial balance; income/cash flow - death/mishap

a business plan will analyze ______, _____ how much money they need to start, and cover other details of ______

competition; calculate; operation

outline of a comprehensive business plan (1) is a ___ ____

cover letter

often entrepreneurs are reluctant to recognize that to keep growing, they must ______ _________ to others - best serve themselves and business if they.....

delegate authority - gradually recruit and groom employees for management positions

another way to encourage entrepreneurship is ______ _______

enterprise zones

most important elements of small-business success is knowing the _____

market

specific geographic areas to which government attract private business investment by offering lower taxes and other government support

enterprise zones (also called empowerment zones and enterprise communities

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

entrepreneurial team

accepting the risk of starting and running a business

entrepreneurship

outline of a comprehensive business plan Section (1) _____ summary - management summary of the proposed _____ - include short description of the ____, and discuss major ______ and ______

executive venture business; goals and objectives

SBA's ______ ______ ______ program provides export financing opportunities for small business - finance variety of needs including participation in foreign trade ______, _______ translations for use in foreign market, lines of _____ for export purposes, and ____ ____ and ______ for production of goods and services to be exported

export express loan - shows, catalog ; credit ; real estate and equipment

outline of comprehensive business plan Section (4) __________ plan - provide 5 year projections for ________ , _________ , and ______ sources - don't assume _______ growth - adjust plan for funding a various ______ of the company's growth - explain the ______ and _______ used to determine the estimates - assumptions should be reasonable and based on _____ and ______ trend - make sure all totals ____ up and are _____ through the plan - stay clear of excessively ambitious _____ projections, rather, offer _________, ________, and _________ scenarios - not only reveal how _______ the bottom line is to sales fluctuations, but also serve as good management ________

financial - income, expenses, and funding - straight - stages - rationale and assumptions - industry and historical - add ; consistent - sales ; best-case ; expected ; worst-case - sensitive ; guides

how can you use small business owners disadvantages to YOUR advantage

find a successful business person and tell them your eager to learn the business and would like to serve as an apprenticeship period but then after that you would like to help owner/manager by becoming assistant manager. then at end of two years, make this offer: owner can retire/work only part time, and you will take over management of the business. establish a profit sharing plan with the owner plus pay yourself a salary

one that is independently owned and operated, is not dominant in its field of operation, and meets certain standards of size in terms of employees or annual receipts - only considered small in relationship to other businesses in its ______

how small business administration (SBA) defines small business - industry

created a category of "investor visas" that allows 10,000 people to come to the U.S. each year if they invest 1 million in an enterprise that creates or preserves 10 jobs

immigration act by congress in 1990

offer new businesses in the critical stage of early development low-cost offices with basic services such as accounting, legal advice, and secretarial help

incubators

entrepreneurship in a large organization is often reflected in the efforts and achievements of _________

intrapreneurs

creative people as entrepreneurs within corporations what do they do?

intrapreneurs - he or she generates profits by leveraging a firm's human, financial, and physical resources. the idea is to use a company's existing resources to launch new products and generate new profits

one and the greatest advantage of small business is the ability t0.....

know their customers better and adapt quickly to their ever-changing needs

benefits of micropreneurs - what people are commonly these?

lets them do the kind of work they want to do and offers them a balanced lifestyle - home-based business owners

small business know needs by

listening

outline of comprehensive business plan Section (7) ____________ analysis - in retailing/other industries _______ of a business is one of the most important factors - provide comprehensive ___________ analysis of consumer in area of proposed business as well as ________ ______ analysis and ______ and _______ counts

location - location - demographic ; traffic pattern ; vehicular and pedestrian

outline of a comprehensive business plan Section (3) _________ team - _________ chart - job _______ of listed positions - detailed _______ of current/proposed executive mediocre idea with proven management funded _____ than great idea with inexperienced team - managers should have expertise in all disciplines necessary to ____ and ____ business - if not, mention outside _______ who will serve in these roles and describe their _______

management organization descriptions resume start ; run consultant qualifications

a business plan is _____ for talking with bankers or other investors

mandatory

consists of consumers with unsatisfied wants and needs who have both resources and willingness to buy

market

outline of comprehensive business plan Section (6) ________ plan - don't underestimate __________ - review industry ______, ________, and ______ market segment - discuss _______ and ______ of product/service - most important thing investors want to know is what makes the product more ______ than what is already available and whether the product can be _______ - compare _______ to competitions - forecast ______ in dollars and units - outline ______, _______, _______, and _____ ______ program - make sure cost agree with those projected in _______ statements

marking - competition - size, trends, target - strengths and weaknesses - desirable ; patented - pricing - sales - sales, advertising, promotion, public relations - financial

entrepreneurs willing to accept the risk of starting and managing a type of business that remains small

micropreneurs

what do web based business have to offer to succeed

more than the same merchandise customers buy at stores; must offer unique products or services

why are employee relations important for small business management

not easy finding good help when you offer less money, skimpier benefits, and less room for advancement than larger firms do

_______ and _______ are the primary concerns when you start your business

planning and financing

one of the major causes of small business failures is ____ _______

poor management

government can also join with _____ _____ to promote entrepreneurship

private entities

Obama announced creation of "____ _____"

promise zones

calls on federal agencies to help business owners cut through bureaucracy to win federal grants and bring schools, companies, and nonprofits together to support literacy programs and job training

promise zones

what does the Small Business Administration (SBA) do?

providing management training, providing financial advice, and providing loans

why are employees of small companies more satisfied with jobs than their counterparts in big business?

quite often find their jobs more challenging, their ideas more accepted, and their bosses more respectful

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

small business administration (SBA)

_____ ____ _____ were more likely to grant loans than larger regional banks Why?

smaller community banks - know customers better, more flexibility to make lending decisions based on everything they know about their customers, rather than on a more automated basis as larger banks must

choosing the right ____ of business is critical

type

_____ capitalists may finance your project for a price - ask for ____ ____ in company in exchange for cash to start business - why is this a problem? - since widespread failure of web-startups, have been willing to invest _____ and expect more _____ on their investment if new company is sold

venture - heft stake - take too large of stake, you could lose control of business - less ; return

what gives more control over destiny

working in and starting a small business