Small Business Exam 3

A Spin-Off

A business that is created by separating part of an operating business into a separate entity

Synergy

A combination in which the whole is greater than the sum of its component parts; business results are greater than the sum of the input

Heuristics

A commonsense rule; rule of thumb used to estimate firm value in some relation to some easily observable characteristics of the business

Effectuation

A logical process in which one analyzes the resources available and restraints on the use of resources to create an attainable goal

Niche Market

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

Business Incubators

A workspace created to offer startups and new ventures access to resources needed; often leasing spaces, etc

Conversion Franchising

an agreement that provides and organization through which independent businesses may combine resources -Century 21 real estate combines individual real estate business with nationwide brand name and enhanced advertising effectiveness

Trade Name Franchising

an agreement that provides only the rights to use the franchisor's trade name and/or trademarks -example; auto dealerships

Shared Media

called word of mouth or referral advertising; promotional mentions of your brand, firm, product, or services with them made by customers and posted through social media sites

Comparable Sales of Other Firms

commonly used to estimate the value of a business -Problems: no firms are exactly alike and often no recent sales to use to compare

Retrenchment Stage

established firms must find new approaches to improve business and its chances or survival

Industry

general name for the line of product or service being sold, or firms in that line of business -example; the restaurant industry

Key Performance Indicators

measures or metrics that identify the outcomes that are most important to the success of a business

Retrenchment

organizational life cycle stage in which established firms must find new approaches to improve the business and its chances for survival

Product Distribution Franchising

provides the franchisee with specific brand name products, which are resold by the franchisee in a specific territory -example; true value hardware

Earned Media

public relations and press relations, or "free ink"; try to get in early on in business, when other organizations talk about you, your firm, or products sold and didn't pay for the mentions

Lean Business Practices

reduces the financial risk of start-up and early operations when start-up capital is limited; eliminating waste and producing a minimum viable product

Maturity Stage

stabilization of demand, with firms in the industry moving to stabilize or improve profits through cost strategies

Industry Analysis

studying the dynamics and trends of the industry

Legitimacy

the belief that a firm is worthy of consideration or doing business with because of the impressions or opinions of customers, suppliers, investors, or competitors

Replacement Value

the cost to acquire and prepare an essentially identical asset

Introduction Stage

the first stage where the product or service is being invented and initially developed

Strategy

the idea and actions that explain how a firm will make its profit; all businesses have a strategy that defines your customers and competition

Conversion Rate

the measure of how many visitors to your website are actually willing to make a commitment to the product or service that is being provided

Prototype

the name given to the first model of a product or service, made to prove aspects of the idea and are seen as the first step along the path of product/service creation; also called minimum viable products

Takeovers

the seixing of control of a business by purchasing its stock to be able to select the board of directors

Decline Stage

the stage where sales and profits begin a falling trend

Churn

the turnover rate for your customers- the percentage of customers you typically lose after their first purchase from you; you want to minimize it

Co-Branding

when two companies or brands combine to make new product or service that combines both brands (Nike Lebron shoes)

Paid Media

you pay for an ad placement; generally referred to as bought or paid advertising, paid media promotions where your firm pays another for the placement and distribution of the material

Owned Media

your website, newsletters, emails, signage, etc; promotional materials directly and wholly owned by your company

Mass Market

Involves large portions of the population- broad approach that targets the entire market

Competitive Advantage

The particular way you implement your customer's benefits that keeps your firm ahead of other firms in your industry or market

Break-Even

The points at which total cost and total revenue are equal

Due Diligence

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

Earnings Multiple

The ratio of the value of a firm to its annual earnings; firm value divided by actual or expected annual earnings

Distinctive Competencies

Those features, benefits, or aspects of your business that are unique to your firm, or more strongly identified with your firm than with your competitors

Differentiation Strategy

Type of generic strategy aimed at clarifying how one product is unlike another in a mass market; show how your firm offers some combination of value benefits that it different from others; few businesses use it

Bootstrapping

Using low cost or free techniques to minimize your cost of doing business -Maximize the value of low costs by obtaining free expertise

Scope

Where do you plan to sell- locally, regionally, nationally, globally? A characteristic of a market that defines the geographic range covered by the market- from local to global

Scale

Whom do you plan to sell to- everyone or targeted market? A characteristic of a market that describes the size of the market- a mass market or a niche market

Elevator Pitch

a 30 second (100 words or less) action-oriented description of a business designed to sell the idea of the business to another

Operational Plans

a business plan designed to be used internally for management purposes; designed to be used as working documents within a business -included detailed specifications of the major techniques, methods, recipes, formulas, etc used by the firm to do its work

Focus Strategy

a generic strategy that targets a portion of the market

Mission Statement

a paragraph that describes the firm's goals and competitive advantages

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

Vision Statement

a simple 5-10 word sentence or tagline that expresses the fundamental idea or goal of the firm

Key Resource Acquisitions

also called bulk asset purchases, the only way a sole proprietorship can be purchased; comprise purchasing only the assets of the business

Core Competencies

The main work of a firm in a particular line of business; skills all competitors have

Primary Research

An approach to researching based on the gathering of new information, using techniques such as interviewing, surveying, and observation -Observation, focus groups, surveying

Secondary Research

An approach to researching based on the use of existing information, often from government, commercial, or academic databased and research efforts

Entry Wedge

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

Incremental Innovation

An overall strategic approach in which a firm patterns itself on other firms, with the exception of one or two key areas in which you seek to do things in a new way

Intangibles

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

Primary goal for performing due diligence

Attempting to find any wrongdoing (fraud, misrepresentations, or missing information) and trying to find any insufficiencies, unnoticed opportunities, waste, and mismanagement

Keys to Customer Relationship Management (CRM)

CRM: focuses on monitoring and promoting customer interest and loyalty Keys: gathering data on current or prospective customers and analyzing the data

First step for performing due diligence

Conduct extensive interviews with sellers of the business, study financial reports, make a personal examination of the site of the business, interview customers and suppliers of the business, and develop a detailed business plan for the acquisition

Augmented Product

Core product features that tend to differentiate it form the competition -example; brand names, packaging, special features

Bricolage

Derived from bricoler (to tinker); refers to the process of analyzing the resources available and creating a product or service for them; making something from whatever you have at hand

Me-too Enterprises

Products are essentially similar to something already on the market; customers are familiar, some protection from failure with only competitive advantage being location

Blue Ocean Strategy

Pure innovation; a strategy based on creating a new product or service that has no competitors

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

Book Value

The difference between the original cost of an asset and the total amount of depreciation expense that has been recognized to date; unreliable because depreciation is arbitrary and some assets have no book value

External Legitimacy

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

Altruism

If your product helps the community, a group, the environment, or the world, it is a benefit

Operating Margins

Measures how much profit a company makes after paying for variable costs of production

Cost Strategy

a generic strategy aimed at mass markets in which a firm offers a combination of cost benefits that appeals to the customer

Co-Marketing

a type of media partnership where two products jointly pay to advertise together; usually this is when customers use the two products together (chips and salsa)

Business Format Franchising

an agreement that provides a complete business format, including trade name, operational procedures, marketing, and products/services to sell -example; McDonald's

Tangibility

an item's capability of being touched, seen, tasted, or felt

a pivot

describes a change of direction in the thinking of an entrepreneur or a firm, often based on new data or other findings

Shake-Out Stage

stage following a boom in which there is a rapid decrease in the number of firms in an industry- many firms shut down

Growth Stage

stage where customer purchases increase at a dramatic rate; the "boom" stage

Buyouts

the purchase of substantially all of an existing business