Ch 5 Management

Barrack opens a bagel shop and at the end of each day has five dozen bagels left over that he cannot sell the next day due to health code restrictions. He has misjudged

inventory

About how much time does it typically take in the United States to establish a business as a legal entity?

less than a week

Venture capital

money that is invested in small (and sometimes struggling) firms that have the potential to become very successful

How old is the average entrepreneur?

more than 70% are between 25-44

Increases in productivity for the past 200 years are characterized by

new ways to do a job with less effort and at a lower cost.

small business

one that is independently owned and operated for profit and is not dominant in its field

Automobile dealerships and ___ were the primary uses for franchises in the early days of franchise agreements.

service stations

Small-business development centers (SBDCs)

university-based groups that provide individual counseling and practical training to owners of small businesses

Money invested in small, new, or struggling firms that have the potential to become very successful is called

venture capital

Freddie's Fenders is seeking a loan from the SBA. If he seeks the average-size SBA-guaranteed business loan he will borrow

$300,000.

Franchisee

- a person or organization purchasing a franchise

Small-business investment companies (SBICs)

- privately owned firms that provide venture capital to small enterprises that meet their investment standards

Franchising arrangements fall into three general categories

1. A manufacturer authorizes a number of retail stores to sell a certain brand-name item 2.A producer licenses distributors to sell a given product to retailers 3.A franchisor supplies brand names, techniques, or other services instead of a complete product.

3 broad categories of industry

1. distribution 2. service 3. production

Jennifer would like to open her own business. According to the SBA, in 2017 women were 51 percent of the U.S. population, and owned at least ___ percent of all small businesses.

36

Jennifer and Raleigh are considering starting a small business and are weighing the pros and cons of doing so. Which of the following would not be a good reason to start a small business?

Desire for guaranteed financial return.

Leticia would like to start a business and has investigated starting her own or buying a franchise. Which of the following is an advantage to purchasing a franchise?

Guidance from the franchisor

A potential franchisor is concerned that the franchisees will destroy the reputation of the company and end up hurting his business. Which of the following should he use to protect his interests?

He can ensure that the new stores are operated according to his own standards through the franchise agreement

Joshua, age 15, knew several professional tennis players who had several tennis rackets and extra tennis gear that had been given to them by their sponsors. They did not use them because they had all they could use. He contacted the tennis players and bought the extra rackets and gear from them. He resold the rackets and gear to individuals through his web page. He saved most of his money and when he had enough money to lease a building, he leased a storefront on a busy street and made it into a sporting goods department store. When he was generating sufficient income from the store he began importing goods from other countries and added these to his sporting goods offerings. He invested his profits in energy stocks which returned a large gain and gave him the ability to start other businesses. By the age of 30, Joshua was a multi-millionaire. In a recent interview, he said he determined at an early age that he would only work for himself and had wanted to have his own business all of his life. Which of the following best describes Joshua?

Joshua is an entrepreneur

Why Some Entrepreneurs and Small Businesses Fail

Lack of capital and cash-flow problems Lack of management skills Overexpansion

Marilyn and Macy are arguing about the primary financial function of the Small Business Administration. Marilyn argues that the SBA's primary function is to lend money. Macy argues that its primary function is to guarantee loans. Who is correct?

Macy because the SBA's primary financial function is to guarantee loans.

SCORE is the acronym for

Service Corps of Retired Executives

Anastasia has started a dry cleaning business but is having difficulties with various aspects of organizing and operating the business. Which of the following organizations would most likely give her the help she needs?

Small-business institutes

Genesis and Iziegbe are having a mother-daughter day together. Iziegbe took Genesis to Burger King for breakfast followed by a massage at Massage Envy, a fruit drink at Juice It Up, and getting nails done at Red Persimmon. They finish their day with frozen yogurt from Yogurtland. What do these businesses have in common?

They are franchises

Business plan

a carefully constructed guide for the person starting a business

Small Business Administration (SBA)

a governmental agency that assists, counsels, and protects the interests of small business in the United States

The SCORE Association

a group of businesspeople who volunteer their services to small business through the SBA

Franchise

a license to operate an individually owned business as though it were part of a chain of outlets or stores

Crowdfunding

an alternative to traditional financing in which entrepreneurs post descriptions of their project or business online and then invite people to contribute; contributors typically get a reward based on their contribution level

Franchisor

an individual or organization granting a franchise

3 purposes of a business plan

communication, management, and planning

Mary's Models is a successful model airplane store. It is so successful that she has decided that, for a fee, she will allow others to use her business name, materials, and methods in operating their own business. Henry approaches her about operating his own business under the terms above. What is the name of the business agreement Henry would sign?

franchise agreement

Reno decides to purchase and operate a McDonald's restaurant. Reno is a

franchisee

The most common form of franchising today is one in which a

franchisor supplies brand names, techniques, or other services instead of a complete product.

Small-business institutes (SBIs)

groups of senior and graduate students in business administration who provide management counseling to small businesses

Angel investors

private individuals who invest money in exchange for ownership in the company and who, at some point, hope to sell their ownership stake for a profit

Terry's Tires made just under $750,000 last year, according to the Small Business Administration. Terry's is a

small business

Business students at universities can work together to provide management counseling to small businesses in their community. This program is part of the

small-business institute.

Franchising

the actual granting of a franchise

service

•Includes both nonfinancial (medical and dental care, TV repair, hair styling) and financial services (accounting, insurance, real estate)

distribution

•Includes retailing, wholesaling, transportation, and communications—industries concerned with the movement of goods from producers to consumers

production

•Includes the construction, mining, and manufacturing industries