EEE Final Study Guide

guerilla marketing

a low budget approach to marketing that relies on ingenuity, cleverness, and surprise rather than traditional techniques

product attribute map

a map that illustrates a firm's positioning strategy relative to it's major rivals

equity financing

a means of raising money by exchanging partial ownership in a firm, usually in the form of stock, for funding

What is a brand?

a name, term, symbol, design, or combination thereof that identifies a seller's products and differentiates them from competitors' products

Provisional Patent Application

a part of patent law that grants "provisional rights" to an inventor for up to one year, pending the filing of a complete and final application

strategic alliance

a partnership between two or more firms that is developed to achieve a specific goal

business method patent

a patent that protects an invention that is or facilitates a method of doing business

Utility Patent

a patent that protects the functionality of the invention

inside directors

a person who is also an officer of the firm

intern

a person who works for a business as an apprentice or trainee for the purpose of obtaining practical experience

economies of scale

a phenomenon that occurs when mass producing a product results in lower average cost

niche market

a place within a large market segment that represents a narrow group of customers with similar interests

Moral Hazard

a problem a firm faces as it grows and adds personnel, the assumption is that new hire will not have the same

brand management

a program that protects the image and value of an organization's brand in consumers' minds

Target Market

a set of buyers sharing common needs or characteristics that the company decides to serve

Balance Sheet

a snapshot of a company's assets, liabilities, and owner's equity at a specific point in time

idea-expression dichotomy

the legal principle describing the concept that although an idea is not able to be copyrighted, the specific expression of an idea is

copyright bug

the letter c inside a circle with the first year of publication and the author copyright owner

Fair Use

the limited use of copyrighted material for purpose such as criticism, comment, news, reporting, teaching, or scholarship

viral marketing

a new marketing technique that facilitates and encourages people to pass along a marketing message about a particular product or service

advisory board

a panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis

board of directors

a panel of individuals who are elected by a corporation's shareholders to oversee the management of the firm

SBIR Program

Small Business Innovation Research (SBIR) competitive grant program that provides over $2.5 billion per year to small businesses for early stage and development projects

pro forma financial statements

financial statements projecting future years' operations

Bootstrapping

finding ways to avoid the need for external financing or funding through creativity, ingenuity, thriftiness, cost-cutting, or any means necessary

Copyright

form of intellectual property law that protects original works of authorship, including literary, dramatic, musical, and artistic works

dept financing

getting a loan

sustained growth

growth in both revenues and profits over a sustained period of time

Four types of trademarks

-trademark -service mark -collective mark -certification mark

Sources of Debt Financing

1. Commercial Banks 2. SBA Loans 3. Other Sources (Vendor Credit, Factoring, Merchant Cash Advance, and Peer to Peer Lending)

Difference between economies of scale and scope

-Scale relies on its scale of production while scope relies on its range of operations

Difference between advertising and PR

-advertising is creating paid announcements promoting something. -PR is a strategic communication process that builds mutually beneficial relationships

Exclusions from trademark protection

-immoral or scandalous matter -deceptive matter -descriptive marks -surnames

internal growth strategies

-new product development -other product related strategies -international expansion

Trade secret protection methods

-physical measures -written agreements

Three ways to segment a market

-segmentation of the market -selecting a target market -crafting a unique positioning strategy

Three steps to prepare for debt or equity financing

1. Determine precisely how much money you need 2.Determine the type of financing or funding that is most appropriate 3.Develop a strategy for engaging potential investor or bankers

Seven members of a new venture team

1. Founder or founders 2.Key Employees 3. Board of Directors 4. Other professionals 5. Lenders and investors 6. Board of advisors 7. Management team

Steps in putting an ad together

1. Identify the purpose of the ad 2. Determine the target audience 3. Select a medium 4. Create the ad 5. Select a place and time for the ad to appear 6. Fulfill expectations

Six-step process for obtaining a patent

1. Make sure the invention is practical 2. Determine the type of application to file 3. Hire a patent attorney 4. Conduct a patent search 5. File a patent application 6. Obtain decision from U.S. Patent and Trademark Office

Common mistakes firms make regarding intellectual property

1. Not properly Identifying all of intellectual property. 2. Not fully recognizing value of intellectual property 3. Not legally protecting intellectual property 4. Not using intellectual property as a part if overall plan

Sources of Personal Financing

1. Personal Funds 2. Friends and Family 3. Bootstrapping

Three reasons startups need funding

1. cash flow challenges 2. capital investments 3. lengthy product development cycles

Elevator Pitch

30 second/100 words or less action oriented description to create "hook"

Income Statement

A financial statement showing the revenue and expenses for a fiscal period.

constant radio method of forecasting

A forecasting approach using the percent of sales method in which expenses items on a firm's income statement are expected to grow at the same rate as sale

trade secret

A formula, device, idea, process, or other information used in a business that gives the owner a competitive advantage in the marketplace.

10-K

A report similar to the annual report except that it contains more detailed information about the company's business.

copyright infringement

A violation of the exclusive rights of a copyright holder, such as copying, distributing, or performing the copyright owner's work without permission unless the use is otherwise authorized by law.

Uniform Trade Secrets Act

An act drafted in 1979 by a special commission in an attempt to set nationwide standards for trade secret legislation; although the majority of states have adopted the act, most revised it, resulting in a wide disparity among states in regard to trade secret legislation and enforcement.

External Growth Strategy

An emphasis on acquiring vendors and suppliers or buying businesses that allow a company to expand into new markets.

relevant industry experience

An entrepreneur's ability to successfully launch and grow a firm has also been studied

SBA Guaranteed Loan Program

An important source of funding for small businesses in general in which approximately 50 percent of the 9,000 banks in the United States participate.

Plant Patent

Any new varieties of plants that can be reproduced asexually

Budgets

Are itemized forecasts of a company's income, expenses, and capital needs and are also an important tool for financial planning and control.

regression analysis

Statistical method used to determine whether a relationship exists between variables and the strength of the relationship.

Financing Activities

Cash flow activities that include (a) obtaining cash from issuing debt and repaying the amounts borrowed and (b) obtaining cash from stockholders, repurchasing shares, and paying dividends.

liability of newness

Companies often falter because the people who start them aren't able to adjust quickly enough to their new roles and because the firm lacks a "track record" with outside buyers and suppliers.

Preferred Attributes of the Founder(s) of an Entrepreneurial Venture

Higher Education Prior Entrepreneurial Experience Relevant Industry Experience Broad Social and Professional Network:

Design Patent

Invention of new, original, and ornamental designs for manufactured products

Advertising

Making people aware of a product or service in hopes of persuading them to buy

pro forma income statement

Merely a matter of plugging in the numbers

long-term liabilities

Obligations not due to be paid within one year or the operating cycle, whichever is longer.

consultant

One who gives professional or technical advice

Marketing 4 P's

Product, Price, Place, Promotion

Marketing Mix

Product, Price, Place, Promotion

Financial Ratios

Relationships between important financial data that is expressed as a fraction or a percentage.

Marketing Segmentation

The process of classifying people who form a given market into even smaller groups

Investing Activities

The purchase and sale of land, buildings, equipment, and securities.

Accounts Receivable

The total amount of money owed to a business.

link joint venture

a joint venture in which the position of the parties is not symmetrical and the objectives of the partners may diverge

core competencies

Things a company does extremely well, which sometimes give it an advantage over its competition

lease

a legal document that defines the conditions of the rental agreement between the tenant and the landlord

Lanham Act

a 1946 law that spells out what kinds of marks (including brand names) can be protected and the exact method of protecting them

Line of Credit (LOC)

a borrowing 'cap' is established, and borrowers can use the credit at their discretion.

peer-to-peer lenders

a category of financial transactions which occur directly between individuals or "peers"

skills profile

a chart that depicts the most important skills that are needed and where skills gaps exist

Liquidity

a company ability to meet its short-term financial obligations

Licensee

a company that purchases the right to use another company's intellectual property

inventory

a company's merchandise, raw material, and product waiting to be sold

preliminary prospectus

a document issued by an investment bank that describes the potential offering to the general public while the SEC is conducting an investigation of the offering (also red-herring)

assignment of invention agreement

a document signed by an employee as part of the employment agreement that assigns the employer the right to apply for the patent of an invention made by the employee during the course of his or her employment

Sarbanes-Oxley Act

a federal law that was passed in response to corporate accounting scandals involving prominent corporations, like Enron and WorldCom

investment bank

a financial institution that acts as an underwriter or agent for a firm issuing securities

Factoring

a financial transaction whereby a business sells its accounts receivable to a third party, called a factor, at a discount in exchange for cash

intellectual property audit

a firm's assessment of the intellectual property it owns

press kit

a folder typically distributed to journalists and made available online that contains background information about a company and includes a list of the company's most recent accomplishments

vendor credit

a form of credit in which a vendor extends credit to a business in order to allow the business to buy its products and/or services upfront but defer payment until later

virtual assistant

a freelancer who provides administrative, technical, or creative assistance to clients remotely from a home office

patent

a grant from the federal government conferring the right to exclude others from, selling, or using an invention for the term of the patent.

scale joint venture

a joint venture in which the partners collaborate at a single point in the value chain to gain economies of scale in production or distribution

market penetration strategy

a strategy designed to increase the sales of a product or service through greater marketing efforts or through increased production capacity and efficiency

product line extension strategy

a strategy that involves making additional versions of a product so they will appeal to different clientele

Trademark

a symbol, word, or words legally registered or established by use as representing a company or product.

founding team

a team of individuals chosen to start a new venture; has an advantage over firms started by an individual because a team brings more talent, resources, ideas, and professional contacts to a new venture than does a sole entrepreneur

spin-ins

a transaction that takes place when a large firm that has a small equity stake in a small firm, decided to acquire a 100% interest in the firm

corporate venture capital

a type of capital similar to traditional venture capital, except that the money comes from corporations that invest in new ventures related to their areas of interest

private placement

a variation of the IPO in which there is a direct sale of an issue of securities to a large institutional investor

road show

a whirlwind tour taken by the top management team of a firm wanting to go public; consists of meetings in key cities where the firm presents its business plan to groups of investors

intellectual property

a work or invention that is the result of creativity, such as a manuscript or a design, to which one has rights and for which one may apply for a patent, copyright, trademark, etc.

venture-leasing firms

act as brokers, bringing the parties involved in a lease together

promotion

activities planned by a company to communicate the merits of its products to its target market with the goal of persuading people to buy the product

Operating Activities

activities that effect the net income, depreciation, and changes in current assets and liabilities other than cash and short-term debt

Cost of sales

all of the direct costs associated with producing or delivering a product or service, including the material costs and direct labor costs

reward-based crowdfunding

allows entrepreneurs to raise money in exchange for some type of amenity or reward

intend-to-use trademark application

am application based on the applicants intention to register and use a trademarks

service

an activity or benefit that is intangibles and does not take on a physical form such as an airplane trip or advice from an attorney

exclusive distribution arrangements

an agreement that gives a retailer or other intermediary the exclusive rights to sell a company's products in a specific area for a specific period of time

buzz

an awareness and sense of anticipation about a company and its offerings

reference account

an early user of a firm's product who is willing to give a testimonial regarding his or her experience with the product

trade shows

an event at which goods or service in a specific industry are exhibited and demonstrated

assumption sheet

an explanation in a new firm's business plan of the sources of the numbers for its financial forecast and the assumptions used to generate them

Geographic Expansion

an internal growth strategy in which an entrepreneurial business grows by simply expanding from its original location to additional geographical sites

liquidity event

an occurrence such as a new venture going public, finding a buyer, or being acquired by another company that converts some or all of a company's stock into cash

secondary market offering

any later public issuance of shares

homogeneous

areas of expertise are very similar to one another

Fixed Assests

assets used over a long period of time. Ex buildings, real estate, equipment

Networking

building and maintaining relationships with people whose interests are similar or whose relationship could bring advantages to a firm

technological alliances

business alliances that cooperate in R&D, engineering, and manufacturing

international new ventures

businesses that, from inception, seek to derive significant competitive advantage by using their resources to sell products or services in multiple countries

fixed costs

cost that a company incurs in operating a business whether it sells something or not

variable costs

cost that are not fixed that a company incurs as it generates sales

Current Ratio

current assets divided by current liabilities

Working Capital

current assets minus current liabilities

promissory note

details the terms of a loan agreement

heterogeneous

diverse in terms of their ability and experience

Final Prospectus

documents issued by the investment bank after the Securities and Exchange Commission (SEC) has approved the offering that sets a date and issuing price for the offering

Public Relations (PR)

efforts made by a company to shape the way audiences perceive the company; how a brand is seen by the public (public image) can have an effect of the brand's actions

improving an existing product or service

enhancing a product or service's quality by making it larger or smaller, making it easier to use, or making it more up-to-date, thereby increasing its value and price potential

joint venture

entity created when two or more firm pool a portion of their resources to create separate jointly owned organization.

forecast

estimate of a firms future sales, income, expenses, and capital expediential

Internal Growth Strategy

growth strategy that rely on efforts generated within the firm itself, such as new product development, other product related strategies, or international expansion

equity-based crowdfunding

helps businesses raise money by tapping individuals who provide funding in exchange for equity in the business

Efficiency

how productively a firms utilizes it assets relative to it rate of return

Computer Software Copyright Act

in 1980, congress passed this act, which amended previous copyright acts; now, all forms of computer programs are protected

target

in an acquisition the firm that is acquired

Business Angels

individuals who invest their personal capital directly in start-ups

Organic growth

internally generated growth within a firm that does not rely on outside intervention

limited partners

investors who invest in venture capital funds

product

is the good or service a company offers to its target market, offer thought of as something having physical form

current assets

items that can or will be converted into cash within one year

Current Liabilities

liabilities due within a short time, usually within a year

merchandise and character licensing

licensing of a recognized trademark or brand that the licensor typically controls through a registered trademark or copyright

technology licensing

licensing of proprietary technology that the licensor typically controls by virtue of a utility patent

Price to Earnings Ratio (P/E)

market price per share divided by earnings per share

operating expenses

marketing, administrative costs, and other expenses not directly related to producing a product or service

certification marks

marks, words, names, symbols, or devices used by a person other than its owner to certify a particular quality about a product or service

percent of sales method

method for expressing each expense item as a percentage of sales

Other Assets

miscellaneous assets including accumulated goodwill

profit margin

net income divided by net sales

rounds

once a venture capitalist makes as investment in a firm, subsequent investments

prior entrepreneurial experience

one of the most consistent predictors of future entrepreneurial performance

Economic Espionage Act

passed in 1996, an act that makes the theft of trade secrets a crime

freelancer

person who is in business for themselves, works on their own time with their own tools and equipment, and performs services for a number of different clients

Accredited Investor

person who is permitted to invest in higher-risk investments such as business start-ups

value-based pricing

pricing method in which the list price is determined by estimating what consumers are willing to pay for a product and then backing off a but to provide a cushion

cost-based pricing

pricing method in which the list prices is determined by adding a makeup percentages to the product's cost

The four primary financial objectives of a startup

profitability, liquidity, efficiency, stability

sales forecast

projection of a firm's sales for a specified period

pro forma balance sheet

provides a firm a sense of how its activities will affect its ability to meet its short-term liabilities and how its finances will evolve over time

Financial Management

raising money and managing a company's finances in a way that achieves the highest rate of return

historical financial statements

reflect past performance and are usually prepared on a quarterly and annual basis

one year after first use deadline

requirement that a patent must be filed within one year of when a product or process was first offered for sale, put into public use, or was described in any printed publication. If this requirement is violated, the right to apply for a patent is forfeited

productive opportunity set

set of opportunities the firm feels it's capable of pursuing

service marks

similar to ordinary trademarks but used to identify the services or intangible activities of a business rather than a business's physical product

outside directors

someone who is not employed by the firm

employee

someone who works for a business

single-purpose loan

specific amount of money is borrowed that must be repaid in a fixed amount of time with interest

Statement of Cash Flows

summarizes the changes in a firms cash position for a specified period of time

profitability

the ability to earn a profit

Signaling

the act of a high-quality individual agreeing to serve on a company board of director, indicating that the individua believes that the company has the potential to be successful

Patent Infringement

the action of one party engaging in the unauthorized use of another's patent

economies of scope

the advantage a firm accrues through the scope (or range) of its operations rather than from the scale of its production

price-quality attribution

the assumption consumers naturally make that the higher priced product is also the better quality product

Adverse Selection

the challenge a firm must face as it grows such that as the number of employees a firm needs increases, it becomes more difficult to find the right employees, place them in appropriate positions, and provide adequate supervision

Licensor

the company that owns the intellectual property in a licensing agreement

New Product Development

the creation and sale of new products (or services) as a means of increasing a firm's revenues

Owner's Equity

the equity invested in the business by its owners plus the accumulated earning retained by the business after paying dividends

Initial Public Offering (IPO)

the first sale of stock by a firm to the public

licensing agreement

the formal contract between a licensor and licensee

Licensing

the granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions

new-venture team

the group of founders, key employees, and advisors that move a new venture from an idea to a fully functioning firm

7(A) Loan Guaranty Program

the main Small Business Administration (SBA) program available to small businesses operating through private sector lenders providing loans that are guaranteed by the SBA; loan guarantees reserved for small businesses that are unable to secure financing through normal lending channels

place

the marketing mix category that encompasses all of the activities that move a firm's product from its place of origin to the consumer( also know as distribution)

spin-out

the opposite of a spin-in that occurs when a larger company divests itself of one of its smaller divisions

acquisition

the outfight purchase of one firm by another

yield rate

the percentage of investment opportunities that are brought to the attention of angel investors that result in an investment

carry

the percentage of the profits the venture capitalists get

break-even point

the point at which the costs of producing a product equal the revenue made from selling the product

merger

the pooling of interests to combine two or more firms into one

Market leadership

the position of a firm when it is the number one or the number two firm in an industry or niche market in terms of sales volume

Crowdfunding

the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.

managerial capacity problem

the problem that arises when the growth of a firm is limited by the managerial capacity that a firm has available to investigate and implement new business ideas

Disintermediation

the process of eliminating layers of intermediaries, such as distributors and retailers, to sell directly to customers

due diligence

the process of investigating the merits of a potential venture and verifying the key claims made in the business plan

pro forma statement of cash flows

the projected flow of cash into and out of the company during a specified period

Burn Rate

the rate at which a company is spending its capital until it reaches profitability

pace of growth

the rate at which a firm is growing on an annual basis

distribution channel

the route a product takes from the place it is made to the customer who is the end user

managerial services

the routine functions of the firm that facilitate the profitable execution of new opportunities

brand equity

the set of assets and liabilities linked to a brand and enables it to raise a firm's valuation

brand

the set of attributes - positive or negative - that people associate with a company

stability

the strength and vigor of the firm's overall financial posture

acquirer

the surviving firm in an acquisition

sales process

the systematic process a business engages in to identify prospects and close sales

Sweat Equity

the value of the time and effort that a founder puts into a new firm

follow-on funding

the various stages in the venture capital process, from the seed stage to buyout financing

General Partner

the venture capitalist, who manage the funds

entrepreneurial services

those services that generate new market, product, and service ideas

social plug-ins

tools that websites can use to provide their users with personalized and social experiences

Debt to Equity Ratio

total liabilities/stockholders equity

net sales

total sales minus allowances for returned goods and discounts

collective marks

trademarks or service marks used by the members of a cooperative, association, or other collective group, including marks indicating membership in a union or similar organization

marketing alliances

typically matches a company with a distribution system with a company with a product to sell in order to increase sales of a product or service

STTR Program

variation of SBIR for collaborative research projects that involve small businesses and research organizations, such as universities or federal laboratories

sources of equity funding

venture capital, business angels, initial public offerings

secondary meaning

when consumers begin to associate a specific term or phrase with a specific trademarked item.

Outsourcing

work that is done for a company by the people other than the company's full-time employees

derivative works

works that are new renditions of something that is already copyrighted, which are also copyrightable

Finanical Statements

written reports that quantitively describe a firms financial health