Entrepreneurship Exam 2

permanence

The impression of long-term continuity a business gives others.

covenants

The limitations imposed on an individual's property by the neighborhood group.

niche market

A narrowly defined segment of the population that is likely to share interests or concerns.

proprietary technology

A product or service or an aspect of one that is kept as a trade secret or is protected legally using patent, copyright, trademark, or service mark.

network marketing

An approach to selling in which the salesperson recruits customers to become distributors of the product or service to others.

industry dynamics

Changes in competitors, sales, and profits in an industry over time.

Describe the stages of industry dynamics.

Introduction-starts with a few firms Growth -general public becomes involved Boom- Other firms jump in for the boom Shake-out- Many firms close down Maturity- Stable number of firms Decline- death of some industries Retrenchment-survival

preselling

Involves introducing your future product to potential customers and taking orders for later delivery.

Describe four special-purpose types of business plans.

Mini Plan- usually sent to private banks, investment clubs, or vc firms Informational Plan- do not want to share financials Key employee/partner- lacks financials also called summary, concept or idea plan Invention plan- focuses on market and operationalization typically lacks marketing strategy Operational plan- full business plan with added details of major techniques, methods, recipes, formulas, and sources

net realizable value

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

external legitimacy

The extent to which a small business is taken for granted, accepted, or treated as viable by organizations or people outside the small business or the owner's family.

variance

(1) The difference between an actual and budgeted revenue or cost (2) Permission from a government organization to act differently than the laws state.

caveat emptor

A Latin expression that means "let the buyer beware," which has been made into a philosophy sometimes used by businesses to put the burden for consumer protection onto the customer.

scope

A characteristic of a market that defines the geographic range covered by the market—from local to global.

scale

A characteristic of a market that describes the size of the market—a mass market or a niche market.

synergy

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

heuristic

A commonsense rule; a rule of thumb.

pioneering business

A firm whose product or service is new to the industry or is itself creating a new industry.

screening plan

Also called a mini-plan, gives the basic overview of the firm and a detailed look at the financials.

parallel competition

An imitative business that competes locally with others in the same industry.

entry wedge

An opportunity that makes it possible for a new business to gain a foothold in a market.

Incremental innovation

An overall strategic approach in which a firm pattern's itself on other firms, with the exception of one or two key areas.

intangibles

Assets, such as patents or trademarks, and liabilities, such as accounts payable, that have no physical existence.

aggrandizing

Attempting to make your business or yourself seem more accomplished or grander than reality.

Describe the challenges of being an entrepreneur part-time.

Challenges include: Delegation- assigning work to subordinates Outsourcing- Employs outsiders to handle a function Conflicts of interest- what's best for your business is not what's best for your job Cannibalizing- taking business from your employer Poisoning the well- creates a negative impression among employers' customers Moving to full time- financial is usually the key question

replacement value

The cost to acquire an essentially identical asset.

internal understanding

The extent to which employees, investors, and family members involved in the business know the business's purposes and operations.

volatility

The frequency of business starts and stops.

affordable loss

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

magic number

The post-tax income the entrepreneur personally seeks from the business.

due diligence

The process of investigating a business to determine its value and potential for investment.

earnings multiple

The ratio of the value of a firm to its annual earnings.

multichannel marketing

The use of several different channels to reach your customers; for example, a website, direct mail, and traditional retailing.

Describe the four basic forms of franchising.

Trade name- An agreement that provides to the franchisee only the rights to use the franchisor's trade name and/or trademarks. Product distribution- An agreement that provides specific brand-name products that are resold by the franchisee in a specified territory. Conversion- An agreement that provides an organization through which independent businesses may combine recourses. Business format-An agreement that provides a complete business format, including trade name, operational procedures, marketing, and products or services to sell.