Ch 6 Business Foundations
True or false: The principles of management are similar for a small neighborhood business and a giant global firm.
True
More personal _____________ service and the ability to respond quickly is an advantage for small businesses.
customer
zones are specific geographic areas to which governments attract private business investment by offering lower taxes and other government support.
Enterprise or Empowerment
______ are specific geographic areas to which governments attract private business investment by offering lower taxes and other government support.
Enterprise zones
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.
Here are more reasons for the growth of home-based businesses:
-Computer technology has leveled the competitive playing field, allowing home-based businesses to look and act as big as their corporate competitors. Fast broadband connections, smartphones, and other technologies are so affordable that setting up a business takes a much smaller initial investment than it once did. -Corporate downsizing has led many to venture out on their own. Meanwhile, the work of the downsized employees still needs to be done, and corporations are outsourcing much of it to smaller companies. -Social attitudes have changed. Whereas home-based entrepreneurs used to be asked when they were going to get a "real" job, they are now likely to be asked for how-to-do-it advice. -Newer tax laws have loosened restrictions on deducting expenses for home offices.
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.
interesting statistics about small businesses:
-There are over 30 million small businesses in the United States. Page 153 -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.
Small Business Administration (SBA)
A U.S. government agency that advises and assists small businesses by providing management training and financial advice and loans.The program provides very small loans (up to $50,000) and technical assistance to small-business owners. It is administered through a nationwide network of nonprofit organizations chosen by the SBA. Rather than award loans based on collateral, credit history, or previous business success, the program judges worthiness on belief in the borrowers' integrity and the soundness of their business ideas.
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.
Which of the following characteristics are needed to become a successful entrepreneur?
Action-oriented Initiative Tolerant of uncertainty
It is extremely important to develop a(n) ______________ ________________ before going to a bank for a loan, because it shows that you are aware of who the target market is, who the competition is, how much money you need, and exactly how you intend to turn a profit.
Blank 1: business Blank 2: plan
While a business plan is a detailed document with many sections, its overall purpose is to describe the nature of the business, the _________________ market, and the _______________ over the competition.
Blank 1: target Blank 2: advantages
An entrepreneurial ___________ is a group of experienced people from different areas of business who join together to form a ___________ team with the skills needed to develop, make, and market a new product.
Blank 1: team Blank 2: managerial or management
incubators
Centers that offer new businesses low-cost offices with basic business services.
Which part of the business plan summarizes the most attractive points of your project in as few words as possible?
Cover letter
intrapreneurs
Creative people who work as entrepreneurs within corporations.
venture capitalists
Individuals or companies that invest in new businesses in exchange for partial ownership of those businesses.
___________________ are creative people who work as entrepreneurs within Corporations
Intrapreneurs
Working at home has its challenges, of course. Here are a few:
Keeping work and family tasks separate. Getting new customers Managing time Abiding by city ordinances Managing risk.
Chris spent his own money on marketing research, and consulted his sister Kara, who is an accountant. They spent the next few months writing a business plan. Which of the following are some business functions Chris has addressed?
Knowing your customers Planning
______ are entrepreneurs willing to accept the risk of starting and managing a business that remains small, lets them do the kind of work they want to do, and offers them a balanced lifestyle.
Micropreneurs
Many micropreneurs are home-based business owners.
More than half of all small businesses are run from owners' homes
reasons people are willing to take the entrepreneurial risk:
Opportunity, Profit, Independence, Challenge.
market
People with unsatisfied wants and needs who have both the resources and the willingness to buy.
To help you succeed as a business owner, in the following sections we explore the functions of business in a small-business setting:
Planning your business. Financing your business. Knowing your customers (marketing). Managing your employees (human resource development). Keeping records (accounting). Looking for help The others are the heart of your operations once the business is under way.
A list of entrepreneurial attributes to look for in yourself includes:
Self-nurturing Self-directed Action-oriented Highly energetic Tolerant of uncertainty
enterprise zones
Specific geographic areas to which governments try to attract private business investment by offering lower taxes and other government support.These are also sometimes called empowerment zones or enterprise communities
True or false: Most entrepreneurs do not get their ideas from a flash of inspiration; they come more from their passions or looking at problems.
True
The SBA may provide the following types of financial assistance:
Standard 7(a) loans—loans made by a financial institution that the government will repay if the borrower stops making payments. The maximum individual loan guarantee is capped at $5 million. Microloans—amounts ranging from $100 to $50,000 to people such as single mothers and public housing tenants. SBA Express—program that accelerates the SBA response time to 36 hours. Loan limit $350,000. Export Express—loans made to small businesses wishing to export. The maximum guaranteed loan amount is $500,000. International Trade Loans—long-term financing to businesses that are expanding because of growing export sales or that have been adversely affected by imports and need to modernize to meet foreign competition. Loan limit $5 million. Community Adjustment and Investment Program (CAIP)—loans to businesses to create new, sustainable jobs or to preserve existing jobs in eligible communities that have lost jobs due to changing trade patterns with Mexico and Canada following the adoption of NAFTA. 504 certified development company (CDC) loans—loans for purchasing major fixed assets, such as land and buildings for businesses in eligible communities, typically rural communities or urban areas needing revitalization. The maximum guaranteed loan amount is $5 million for meeting the job creation criteria or a community development goal. The business must create or retain one job for every $65,000 ($100,000 for small manufacturers) provided by the SBA. CAPLine loans—loans to help small businesses meet their short-term and cyclical working capital needs. The maximum CAPLine loan is $5 million.
Which of the following is a factor that increases the chances of success of a small business over a large one?
The customer requires a lot of personal attention
Self-Employment Assistance (SEA) program
The program allows participants to collect self-employment payments instead of regular unemployment checks while they build their businesses
Which of the following is true regarding businesses with low failure rates, such as veterinary services, dental practices, and medical practices?
They often require advanced training to start. They do not tend to produce much growth.
Which of the following are true of entrepreneurs?
They will take calculated risks They tolerate uncertainty well
As a business grows, it becomes impossible for an entrepreneur to oversee every detail, even by putting in 60 hours per week.
This means that hiring, training, and motivating employees are critical.
How do you determine a fair price for a business?
Value is based on (1) what the business owns, (2) what it earns, and (3) what makes it unique. Naturally, an accountant will need to help you determine the business's value.
In addition to being highly energetic and having a tolerance for uncertainty, entrepreneurs must also be
action-oriented
Entrepreneurial attributes include:
action-oriented tolerant of uncertainty highly energetic
When writing a business plan, it is important to:
analyze the competition calculate how much money you need to start
Becoming a(n) ____________ is one of the best ways to learn about how to run a business.
apprentice or intern
A(n) ___________ is hired to assist the owner of a small business while gaining experience.
apprentice or trainee
David opened his own bicycle shop 30 years ago, and although he enjoyed his work, he needed more free time. When Josie requested to work as an apprentice, David was very willing. Before long Josie was able to run the store without any help. This is an example of how:
apprenticeships can benefit both the business owner and the apprentice
Angel investors
are private individuals who invest their own money in potentially hot new companies before they go public.
In 2019, online retail sales reached over $365 _________________ , or approximately _______________ percent of all retail sales.
billion; 12
Mark recently started a small consulting firm. He is drafting a detailed written statement that describes the nature of the business, the target market, the advantages the business will have over competition, and the resources and qualifications of the owner(s). Mark is writing a(n)
business plan
All organizations require the following:
capital information management
Totals that are shown in the Capital Required portion of a business plan should be the same as the ones shown in the _________ ______________ statement
cash flow
A banker or investor in a small business is very interested in making sure you are a person of good ___________ as a small business owner.
character
A good business plan is between 25 and 50 pages long and takes many months to write. A comprehensive business plan will include which of the following?
company background Executive summary Cover letter
If managers do not have expertise in all the necessary disciplines of the business, the Management Team portion of the business plan should mention outside
consultants
Examples of businesses that require high rates of advanced training are
dental practices veterinary services
A(n) _______ assumes risk when deciding to start and run a business.
entrepreneur
A(n) _________________ is someone accepting the risk of starting and running a business.
entrepreneur
Being self-directed, self-nurturing, action-oriented, and tolerant of uncertainty are all considered characteristics of a(n):
entrepreneur
Opportunity, profit, independence, and challenge are some reasons people are willing to take the risks of being a(n)
entrepreneur
A(n) ______ team is 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.
entrepreneurial
Many ________________ use their time, money, and energy to turn their passions into sustainable businesses. They are comfortable being their own bosses and are not afraid of failure.
entrepreneurs or micropreneurs
Local community college classes are a good place to start to learn about business and
entrepreneurship
Bankers receive many business plans every day, so the ________ ___________ of your business plan must be written to catch their interest quickly. Listen to the complete question
executive summary
Becoming an apprentice, talking to other business owners, and working for a successful entrepreneur are all examples of effective ways to obtain ______________ for running your own business.
experience, information, knowledge, or skills
Some causes of small-business ______ include underpricing or overpricing goods or services, starting with too little capital, going into business without first learning something about the industry or market, and underestimating how much time it will take to build a market.
failure
True or false: Addressing the cover letter on your business plan "To whom it may concern" is considered preferable.
false
Planning,________________ , keeping good business records, knowing your customers, and managing employees are what it takes to start and run a small business.
financing
The expansion and development of the Internet has sprouted a world of small web-based businesses. This, among other reasons, may explain why online sales are rapidly:
increasing
According to a recent study, offering low-cost offices with basic services to new businesses in the early stages of development results in an 87% success rate of _______________ graduates.
incubator
Business _____________ are centers that offer businesses in the critical stage of early development low-cost offices and access to basic services such as accounting, legal advice, and secretarial help.
incubators
Entrepreneurs start a business with the desire to grow the business and generate wealth while ________________ start a business that will stay small, allowing them to have a balanced lifestyle and the ability to do the kind of work they want to do.
micropreneurs
Entrepreneurs who are not interested in starting a mammoth corporation, but rather are interested in a balance between lifestyle and work are called
micropreneurs
Two advantages small firms have over large firms include more personal customer service and the ability to respond quickly to:
opportunities
An entrepreneur has several potential sources of capital:
personal savings; family and business associates; banks and finance institutions; angels, crowdfunding, and venture capitalists; and government agencies such as the Small Business Administration (SBA), the U.S. Economic Development Administration, and the Minority Business Development Agency.
Entrepreneurs often come up with an idea for a new business and need financing. At this stage, it is important to develop a business ______________ , which forces potential small-business owners to be quite specific about the products or services they intend to offer (answer is one word).
plan
Select reasons why people become entrepreneurs.
profit independence opportunity
Community Development Financial Institutions (CDFI) have been successful because they:
provide counseling on improving cash flow maintained financial discipline other lenders lack offer counseling on marketing strategies
Kayla wanted to open her own dress design business. She spent a few hours putting together a marketing plan, then selected an award-winning dress she designed and wore it to the meeting with the bank. The most likely reason she did not receive a loan was:
she did not develop a thorough business plan
Factors like the customer needing a lot of personal attention, the product not being easily made, and sales not being large enough to appeal to a larger firm all create opportunities for _____________ business success.
small
businesses are businesses that are independently owned and operated, are not dominant in their field of operation, and meet certain standards of size in terms of employees or annual receipts.
small
A business 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 is a(n):
small business
Managerial incompetence and inadequate financial planning are two common reasons for __________ - ____________ failure.
small business
Select the characteristics of an intrapreneur.
someone who uses company's resources to launch new products he or she generates profits by leveraging a firm's human financial and physical resources. a creative person who works within a corporation
Learning from others is a useful way to avoid pitfalls when starting a small business. Some things you may be told would include:
starting with enough money that finding and retaining good workers is hard to hire a good lawyer and accountant
An important quality for entrepreneurs is:
the ability to tolerate uncertainty
A business plan is a detailed written statement that describes:
the resources and qualifications of its owner(s) the target market
Daniel wanted to start his own small business. After spending his own money on marketing research, Daniel asked his friend Chase to be his accountant. They spent a few months writing a business plan, which then they presented to a bank. Daniel:
understands the steps needed to start a small business
In addition to good ideas, entrepreneurs must
want to see their dream become reality have a burning desire to realize and actualize their dream be action oriented
In addition to providing employment opportunities, small firms believe they offer other advantages over larger companies
—more personal customer service and the ability to respond quickly to opportunities.