Mgmt 470 Test 3
Problems with Comparable Sales Method
First, no two firms are exactly alike. Second, there are often no recent sales to use for comparison
Conversion (hit) Rate
How many prospects or leads you need to approach in order to make one sale
Key Performance Indicators (KPIs)
Measures or metrics that identify the outcomes that are most important to the success of a business
Effectuation
People may assess the assets available to them and the limits under which they must operate to establish the goal to be obtained and the methods of reaching the goal
Legitimacy
belief that a firm is worthy of consideration or doing business with because of the impressions or opinions of customers, suppliers, investors, or competitors
Value Strategy
best price, best product, best service
Industry
general name for the line of product or service being sold, or the firms in that line of business
Cost Strategy
generic strategy aimed at mass markets in which a firm offers a combination of cost benefits that appeals to the custome
Due Diligence
he process of investigating to determine the full and complete implications of buying a business
Business Incubator
organizations that provides financial, technical, and managerial help to start-up businesses
Mission Statement
paragraph that describes the firm's goals and competitive advantages
Secondary Research
past research which has already been performed and often already published
Spin-off
regular business practice that is done by businesses of all sizes and at all stages of development
External Legitimacy
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
Focus Strategy
generic strategy that targets a portion of the market, called a segment or niche
Business Life Cycle
introduction stage growth stage boom shake-out maturity stage decine stage
Process of Due Diligence
1. Conduct extensive interviews with the sellers of the business. 2. Study the financial reports and other records of the business. 3. Make a personal examination of the site (or sites) of the business. 4. Interview customers and suppliers of the business. 5. Develop a detailed business plan for the acquisition. 6. Negotiate an appropriate price for the business, based on the business plan projections. 7. Obtain sufficient capital to purchase and operate the business.
Three Major Problems with Book Value
1. The original cost of an asset might bear no relation to its current value 2. Depreciation is an arbitrary, although systematic, method of transferring asset value to expense 3. Internally developed assets, such as patents, trademarks, and trade secrets, do not have book value
Three Strategies for Businesses
1. differentiation strategy 2. cost strategy 3. focus strategy
Primary Goals for Performing Due Diligence
1st- information that greatly affects the value of the business and the advisability of purchasing it 2nd- how you, as a new owner, can make changes to increase its value. Both goals can give you a negotiating advantage
Elevator Pitch
30-second (100 words or less) action-oriented description of a business designed to sell the idea of the business to another
Decline Stage
A life cycle stage in which sales and profits of the firm begin a falling trend
Boom
A type of life cycle growth stage marked by a very rapid increase in sales in a relatively short time
Core Competencies
Skills, knowledge, and abilities that employees must possess in order to successfully perform job functions that are essential to business operations.
Introduction Stage
The life cycle stage in which the product or service is being invented and initially developed
Competitive Advantage
The particular way a firm implements customer benefits that keeps the firm ahead of other firms in the industry
Maturity Stage
The third life cycle stage, marked by a stabilization of demand, with firms in the industry moving to stabilize or improve profits through cost strategies
Distinctive Compentencies
Those features, benefits, or aspect of your business that are unique to your firm, or more strongly identified with your firm than with your competitors. This is the specialty for which your firm is best known
Bootstrapping
Using low-cost or free techniques to minimize your cost of doing business •Do without as long as you can. •Cut your personal and business expenses to the bone (e.g., take no salary, work from home). •If you need something, see if you can get it for free (like help from SCORE or former professors). If you cannot get it free, then borrow it, barter your time for it, rent it, or lease it before you buy it. •If you need to buy outside services, consider offering equity instead of money, but be stingy with this.
Sole Proprietorship
a business owned and managed by a single individual
Earned Media
a category of promotional tactic based on a public relations or publicity model that gets customers talking about products or services
Takeover
seizing of control of a business by purchasing its stock to be able to select the board of directors Is a hostile event In a takeover, the buyer (often called a raider) seizes control of the business without the permission of all owners
Earnings Multiple Ratio
simply firm value divided by actual or expected annual earnings
Industry Heuristics
simply rules of thumb that are commonly used to estimate firm value in relation to some easily observable characteristic of the business
Value Proposition
small business owners' unique selling points (also known as benefits) that customers can expect from your goods or services, including benefits that differentiate your offering from those of the competition
Types of Entry Wedges
supply shortages unutilized resources customer contracting second sourcing market reliquishment favored purchasing government rules
Strategy
the idea and actions that explain how a firm will make its profit. Whether you know it or not, all small businesses have a strategy. The strategy may be a blueprint for planning or a standard to compare actions against. Either way, strategy defines for you, your customers, and your competition how your business operates
Altruism
unselfish regard for the welfare of others
Three Keys to CRM
- One is handling problems that crop up after a sale. - The second is called customer relationship management (CRM), which focuses on the longer-term monitoring and promotion of customer interest and loyalty. - The third is growing customer sales, which builds from the customer development model of Blank and Dorf and the lean business practices movement.
Prototype
- name given to the first model of a product or service - Some prototypes may be functioning, but built in a way that no consumer would buy it (e.g., with exposed wires and sharp edges) but shows the product can do what is promised - Some prototypes look like the final product, but might not be functional - Prototypes are made to prove aspects of the idea and are seen as the first stop along the path of product/service creation
Lean Business Practices
- refer to systematically eliminating waste of time, materials, and money throughout a business - application created by Eric Ries that addresses the specifics of new business creation, particularly Internet-based businesses, where rapid experimentation and - constant monitoring of viewers' choices are possible include a set of tried-and-true methods that can lessen capital requirements and reduce cash outflows from the business
Brand Ambassador
A person who represents your brand, company, product, or service to others to increase brand awareness, sales, and positive attitudes among the public. They can be paid or volunteer. They often receive your products and services to use and show off to the public. Also called a spokesperson.
Shake-Out
A type of life cycle stage following a boom in which there is a rapid decrease in the number of firms in an industry
Growth Stage
An industry life cycle stage in which customer purchases increase at a dramatic rate
Incremental innovation
An overall strategic approach in which a firm patterns itself on other firms, with the exception of one or two key areas
Comparable Sales
Comparable sales of other firms in the same industry are commonly used to estimate the value of a business
Primary Research
Conducting research to collect new data to solve a marketing information need
Augmented Product
Core product plus features that tend to differentiate it from the competition
Cognitive Dissonance
Doubt that occurs after a purchase has been made. An inconsistency between experience and belief
Paid Media
a category of promotional tactic based on the traditional advertising model, whereby a brand pays for media space
Owned Media
a new category of promotional tactic based on brands becoming publishers of their own content in order to maximize the brands' value to customers
Pivot
a term describing a change of direction in the thinking of an entrepreneur or a firm, often based on new data or other findings
Business Format Franchising
agreement that provides a complete business format, including trade name, operational procedures, marketing, and products or services to sell
Product Distribution Franchising
agreement that provides specific brand-name products that are resold by the franchisee in a specified territory
Trade Name Franchising
agreement that provides to the franchisee only the rights to use the franchisor's trade name and/or trademarks
Key Resource Acquisitions
also called bulk asset purchases, are the only way a sole proprietorship may be purchased
Intangibles
assets, such as patents or trademarks, and liabilities, such as accounts payable, that have no physical existence 1. accounts receivable, 2. patents 3. licenses 4. liabilities
Customer Development Funnel
awareness interest consideration purchase unbundling up-sell cross-sell referalls
Operational Plans
business plan designed to be used internally for management purposes
Scope
characteristic of a market that defines the geographic range covered by the market—from local to global market scope refers to the geography of your target market
Scale
characteristic of a market that describes the size of the market—a mass market or a niche market
Synergy
combination in which the whole is greater than the sum of its component parts
Mass Market
customer group that involves large portions of the population
Book Value
difference between the original acquisition cost and the amount of accumulated depreciation
Replacement Value
estimate of what an identical asset would cost to be acquired and readied for service
Tangibility
item's capability of being touched, seen, tasted, or felt
Shared Media
media shared by consumers with other consumers, such as social media, blogs, mobile media, and viral channels as well as traditional word of mouth
Niche Market
narrowly defined segment of the population that is likely to share interests or concerns
Entry Wedge
opportunity that makes it possible for a new business to gain a foothold in a market
Retrenchment
organizational life cycle stage in which established firms must find new approaches to improve the business and its chances for survival
Buyouts
purchase of substantially all of an existing business - restricted to businesses that have a formal legal form of organization - accomplished through purchasing the ownership interest in the entity (partnerships and sole proprietorships do not exist separately from the owners and thus cannot be purchased)
Blue Ocean Strategy
pure innovation which results in a new product or service. These situations are rare. Typically with a new product or service, you also have a unique setting
Industry Analysis
research process that provides the entrepreneur with key information about the industry, such as its current situation and trends
Churn
turnover rate for your customers—the percentage of customers you typically lose after their first purchase from you
Co-marketing
type of media partnership where two products jointly pay to advertise together. Usually this is when customers use the two products together, like chips and salsa
Me-Too Enterprises
vast majority of start-up businesses are "me-too" enterprises. The business idea is simply to create another occurrence of a common business: a hair salon, restaurant, bar or lounge, rock band, sign company, plumbing service, yard care, and so on
Vision Statement
very simple 5- to 10-word sentence or tagline that expresses the fundamental idea or goal of the firm
Bricolage
word derived from the French verb bricoler ("to tinker"). In entrepreneurial usage bricolage refers to the process of analyzing the resources available and creating a product or service from them
Differentiation Strategy
ype of generic strategy aimed at clarifying how one product is unlike another in a mass market