BUS 1201 Chapter 5

Distribution

includes retailing, wholesaling, transportation, and communications encompassing industries concerned with the movement of goods from the producer to the consumer.

In the last decade, the number of small businesses in the United States has

increased by 49%

What is SBA's (small business administration) definition of small business and what constitutes "small"?

it is independently owned, has to be operated for profit and it can't be dominant in its field.

explain how SB help economy with employment

its created 63% of new jobs, provide 67% of workers with their first job, more likely to hire younger, older and part time workers, and empty 1/2 of US workforce

According to the Census Bureau and Federal Reserve, about 50 percent of all new businesses begin with:

less than $30,000 in total capital.

give examples of cash flow problems

long time to turn profit need. Loans/ financing, pay suppliers and employees

give examples of what comes along with government regulation

lots of paperwork, tax forms, regulations within industry and hiring

how does SBA offer mgmt (management) assistance?

management courses- functions, duties and roles of mgmt, also in-person and on-line. - minority assistance programs - SCORE -ACE - SB institutes - SB development centers - SBA publicaitions

venture capital

money that is invested in small (sometimes struggling) firms that have the potential to become very successful.

how many more patents are SB producing than large patenting firms?

more innovative, producing 16 to 17 times more

how many Businesses will survive for 10 years or more? why do the others fail?

most will fail due to poor management and only 31% survive for 10 or more years.

does the SBA provide business loans?

no, they connect SB with private lenders like bank and partially guarantee repayment.

dual-branded franchise

one in which two franchisors offer their products together. This is a new small-business trend

t/f small businesses bounce back faster after an economic downturn than large businesses.

true

true/false 2/3 of SB fail

true

true/false Small businesses are not guaranteed to succeed

true

what are SB development centers? SBDC

university based groups that provide individual counseling and practical training to owners of small businesses

what are small business investment companies?

venture capital firms.

U.S. Commercial Service

will assist small businesses that would like to sell their products overseas

what are people more likely to go into a business with? give examples

with a low initial investment. ex: retail, wholesale, transportation and communication.

what else does SB do?

fill needs larger firms can't or won't

what does it mean to be under-capitalized?

to be struggling for money

t/f small businesses create cyclical unemployment.

false

whats The average SBA-guaranteed business loan

$300k

To qualify as a small business, a retail establishment may not exceed

$7 million in annual sales.

obligation for a franchise?

- The obligation to follow a specific accounting system -the obligation to pay a franchise fee - The obligation to observe certain minimum operating hours - The obligation to maintain insurance coverage

why do SB fail?

1. cash flow problems 2. poor management skills 3. expanding too quickly 4. government regulation

true/ false Small businesses, by definition, can be dominant in their fields.

false, they cannot

what are the characteristics of entrepreneurs?

1. entrepreneurial spirit in US 2. independent 3. determine own destiny (control and flexibility) 4. family history of SB ownership 5. they are young. 70% are bt ages of 22-24 6. motivation- desire or need (job) or opportunity (idea) 7. they tend to be risk loving 8. 30% be an entrepreneur for the challenge.

what are 5 advantages of small businesses (SB)

1. personal relationships with customers and employees 2. community involvement of small business (ex: sponsor sport teams) 3. ability to adapt to change 4. simplified record keeping (small size) 5. freedom and independence

what are disadvantaged of small businesses (SB)?

1. risk of failure 2. limited potential (limited financially and advancement possibilities are limited) 3. limited ability to raise capital (banks don't tend to lend to SB- most are under-capitalized) 4. don't last beyond owners lifetime.

how much does SB (small business) employ out of all private sector employees?

1/2

explain technical innovation within SB

16 to 17 times more patents per employee in SB than large innovative firms. according to OMB (office management of Business) more than half the major tech advance of 20th century were from SB ex: air conditioning, air plane, insulin, jet engines, helicopters.

What is the largest guaranteed loan one could be granted?

2 million

There are approximately ___ businesses in the United States

28 million

what percent of total exported value do SB export?

33%

what percent does SB represent of US payroll?

42%

To be classified as a small business, a manufacturing plant can employ no more than

500 people

what percentage of new jobs did SB create in the last 20 years?

63%

what percent of Americans say they want to start a business?

70%

whats the average life of an SBA-guaranteed business loan

8 years

what percent of all export firms do SB make up?

97.5%

what percent do small business firms represent of all firms that employee people?

99.7%

small-business investment company

A small privately owned firm providing venture capital to small businesses

ACE

Active corps of executive- Volunteer organization where executives in business donate their time in order to assist small businesses in the United States with planning, strategy, and marketing.

what were the primary uses for franchises in the early days of franchise agreements?

Automobile dealerships and service stations

the relationship between franchisors and franchisees:

Disagreements between the two parties have increased and contract disputes are causing many lawsuits.

what is something that would not be included in the BUS plan?

Government regulations

Sarah has opened her own cosmetology business in a small shopping center with a lot of foot traffic. It is most likely that

It may take several years for a new business to show a profit.

What do the minority assistance programs do?

Minority Business development agency: awards grants to develop and increase business opportunities for member of racial and ethnic minorities.

what are SBA publications?

SBA issues management, marketing, and technical publications dealing with hundreds of topics of interest to present and prospective managers of small firms.

what are SB institutes? SBI

SBI: groups of senior and graduate students in business administration who provide management counseling to small businesses

what is SCORE

Service corps of Retired Executives- a group of businesspeople who volunteer their services to small businesses through the SBA

what is a "business plan"?

a guide for starting a running your business with 3 purposes of communication (to investors), management (track, monitor, and evaluate) and planning (timelines and milestones).

franchise

a license to operate an individually owned business as though it were part of a chain of outlets or stores. The agreement to enter into a franchise is called a franchise agreement -have a very high success rate compared to other small businesses

The typical payments paid by a franchisee to a franchisor are:

a one-time franchise fee and monthly royalties based on sales.

franchisee

an individual or company that purchases a franchise.

franchisor

an individual or organization that grants a license to another to operate an individually owned business as though it were part of a chain of outlets or stores -the party the franchisee will go to for advice regarding operating the franchise as it is in the franchisor's best interest for the franchise to succeed and the franchisor has experience specific to operating this kind of outlet -benefits from the franchise agreement because they have fast and selective distribution of products.

what are high initial investments?

construction, manufacturing (expensive for stuff) and mining

what is the Small Business administration SBA

created by congress in 1953, government agency that assist, counsels, and protects the interest of small businesses in the US. provides financial and management assistance and counseling. -The most popular SBA course is a course that surveys eight to ten areas of business management

The most common form of franchising today is one in which a

franchisor supplies brand names, techniques, or other services instead of a complete product.

SBIC

government agency that works closely with small business financing needs. - privately owned firm

The primary financial function of the Small Business Administration is to

guarantee loans

give examples of some management skills

have to keep employees, keep up with paperwork, and manage inventory

what is the purpose of a business plan?

to communicate the plan, how to manage, and think about planning

A small distribution industry business could include:

retail, wholesale, transportation, or communications establishment

what are in between investments?

salons, doctors, vets. etc. they all need training.

How easy is it start a business in the US?

starting a business in the US takes less than a week and less than $1000 and a minimal amount of paperwork. this ease encourages lots of new businesses to start and in 2013, over 1.2 million new business were started.

One of the disadvantages of owning a franchise:

the owner will work very hard and put in long hours about six days a week to make the operation successful

Jeff Katz, the founder of Orbitz, Inc., when speaking about new businesses recently said, "A flat checkbook is the mother of invention." He was referring to

the reality that small-business workers are more innovative than workers in large businesses

how do SB deal with large firms?

they provide competition to large firms and force them to innovate and become more efficient.