Entrepreneurial Small Business Chapter 6

business format franchising

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

conversion franchising

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

product distribution franchising

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

trade name franchising

An agreement that provides to the franchisee only the rights to use the franchisors trade name and/or trademarks.

Lean Business Practices

An application that addresses the specifics of new business creation, particularly internet-based businesses, where rapid experimentation and constant monitoring of viewers choices are possible.

transfer

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

terminate

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.

walkaway

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

Book Value

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

Asset Valuation

A business is worth the value of its assets minus the value of any liabilities.

workout

A form of business termination in which the firms legal or financial obligations are not fully met at closing.

Franchise

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

Effectual Reasoning

A logical process in which one analyzes the resources available and restraints on the use of resources to create an attainable goal.

Start-up

A new business that is started from scratch.

Point of Indifference

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

Buyout

The purchase of substantially all of an existing business.

Buy-in

The purchase of substantially less than 100 percent of a business.

Takeover

The seizing of control of a business by purchasing its stock to be able to select the board of directors.

pass off

Type of business transfer where the owner gives the business to someone else without a payment.

Sell off

Type of business transfer where the seller gets only a fraction of the value of the business.

Bootstrapping

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

Affordable loss

Minimum possible expenditure of capital and other resources in order to bring an entrepreneurial idea to market.

Discounted cash flows

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

Synergy

Combination in which the whole is greater than the sum of its component parts.

Minimum Viable Product

Concept central to lean business practices where you make a minimum product, but one that can be sold. By seeing to customers and collecting feedback, an entrepreneur can develop a product at minimum cost.

Comparable Sales Method

Estimate the value of a business.

start new, buy an existing, franchise a business, inherit a business, manager of a business

Five paths to business ownership:

strategic partnerships

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

Franchising

Legal agreement that allows one business to be operated using the name and business procedures of another.

serial entrepreneur

Person who opens multiple businesses throughout his or her career.

Financial Ratios

Place a value on businesses because industry ratios are independent of the size of the business.

Leveraging contingencies

Practice of and ability to seize upon novel opportunities that become apparent during the conduct of business.

Bricolage

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

Causal Reasoning

Setting a goal and then determining the strategy and resources required to attain the goal.

net realizable value

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

Replacement Value

The cost to acquire an essentially identical asset.