Contemporary Business CHAPTER

Business plan components

- An executive summary and an introduction - Financial and marketing sections - The company's mission and visions - An outline of what makes the company unique - The customers and the competition - Financial evaluation of the industry and market conditions - An assessment of the risks

Franchising

A contractual business arrangement between a manufacturer or another supplier and a dealer such as a restaurant or a retailer. Franchised businesses account for nearly 50% of retail sales.

Employee-owned corporations

A corporation in which workers buy shares of stock in the company that employs them, often through an employee stock ownership plan (ESOP's)

Types of corporations

A firm is considered a domestic corporation in the state where it is incorporated, while foreign corporations are those who do business in one state while being incorporated in another. Alien corporations operate in the United States but are incorporated in another country.

Collective (cooperative) ownership

A form of ownership where owners join forces to operate all or part of the activities in their firm or industry. Often referred to as a co-op.

Corporation

A legal organization with assets and liabilities separate from those of its owner(s). Advantages include limited liability and expanded financial capabilities. A major disadvantage is double taxation.

Small business

A vital component of our economy, small businesses account for approximately 98% of U.S. firms. A small business is generally defined as an independent business having fewer than 500 employees. However, the size can vary according to the industry.

Women-owned businesses

About 40% of U. S. businesses, more than 10 million firms, are owned by women. Many women leave large corporations when they feel blocked from opportunities for advancement or seek self-employment as a method to spend more time with family.

Partnership

An association of two or more persons who operate a business as co-owners by voluntary agreement. Advantages include ease of formation and greater financial capability. Disadvantages include unlimited liability, difficulty dissolving, and personal conflicts.

Family-owned business

Considered the backbone of American business. These firms come in a variety of sizes and legal structures.

Corporate management

Corporations generally have up to five levels of management: stock holders, board of directors, top managers, middle managers, and supervisory managers.

Business plan

Every business needs a plan in order to succeed. A business plan is a written document that provides an orderly statement of a company's goals, the methods by which it will achieve these goals, and the standards by which it will measure its achievements.

Inadequate financing

First-time business owners assume that their firm will generate enough funds from their initial sales to finance continuing operations. However, most don't turn a profit for months or even years due to start-up costs.

Problems in franchising

Franchise fees and future payments are costly to franchisees. They may give up some independence under the franchise contract, and the entire franchise can be adversely affected by bad performance at one franchise unit.

Benefits to franchising

Franchising allows the franchisor to expand the business more rapidly, while the franchisee can take advantage of name recognition, an established management system, and a prior performance record.

Home-based businesses

Half of all small businesses are home based due to access to the internet and the availability of communication devices.

Creating new industries

In a typical year, small firms will develop twice as many product innovations per employee, and produce 13 times more patents per employee than larger firms.

Business Incubators

Low cost shared business facilities available to small start-up ventures developed by community agencies.

Venture Capital

Money invested in a small business by another business or a group of individuals in exchange for an ownership share.

Not-for-profit corporations

Organizations whose goals do not include pursuing a profit. About 1.5 million not-for-profits operate in the United States in sectors such as museums, libraries, and hospitals.

Sole proprietorship

Ownership of an organization by a single individual, considered the simplest and most common form of business. Common in industries such as repair shops, small retail stores, and service providers. Advantages include ease to dissolve and management flexibility. Disadvantages include personal liability, limited financial resources, and a lack of long-term continuity.

Where and how businesses incorporate

Proximity to customers and access to a good labor pool are reasons for choosing a location. Although U.S. firms can incorporate in any state, some states such as Delaware are considered easier to incorporate in. States grant a corporate charter, which formally establishes a corporation.

Creating new jobs

Small businesses create approximately three out of four new jobs in the U.S. economy as opposed to larger firms. The majority of new job growth is among firms that provide services instead of goods. They also hire those who traditionally have had a difficult time finding work, such as women returning to the workforce.

Typical ventures

Small businesses in America operate in nearly all industries, but tend to be concentrated in the retail, wholesale, construction, agriculture, and services sectors.

Small Business Administration

The Small Business Administration (SBA) is a federal government agency concerned with helping small U.S. firms by providing advice, training, and securing government contracts. While not a provider of loans, the SBA guarantees small-business loans made by private lenders.

Minority-owned Businesses

The growth in the number of businesses owned by African-Americans, Hispanics, and Asian-Americans has far outpaced the growth in the number of U.S. businesses overall, particularly in the services and retail industries.

Public ownership

The ownership and operation of an organization by a government unit or agency.

Management shortcomings

These include lack of people skills, inadequate knowledge of finance, inability to track inventory or sales, poor assessment of competition, and a lack of time to do everything required.

Mergers

Two or more firms that combine to form one company. A vertical merger combines firms operating at different levels of production. A horizontal merger joins firms in the same industry, while a conglomerate merger combines unrelated firms.

Franchising agreements

Two principles in a franchising agreement are the franchisee, the individual or firm purchasing the franchise, and the franchisor, the firm whose products are sold by the franchisee.

Government regulation

Unlike large-business who hire specialists to help the firm comply with government regulation, small- businesses have a limited staff.

Joint venture

A partnership between companies formed for a specific undertaking.

Acquisitions

One firm purchases the property and assumes the obligations of another, or when one firm buys a division or subsidiary from another firm.