Chapter 5

Existing business have what advantages?

- A built-in network is already established with customers, suppliers, and distributors - Reduces some of the guesswork inherent in starting a new business - Entrepreneur who buys an existing business also takes on any problems the business already has

Baby boomer generations consists of 75 million Americans, what are specifics?

- Wealthy, but many small businesses do not actively pursue it - Travel, finance planning, and health care will continue to grow as they age

New businesses sometimes borrow more than half of their financial resources, what are examples of this?

- Banks are the main suppliers of external financing - Federal level: the Small Business Administration (SBA) offers financial assistance to qualify business - Look to family and friends as sources for long-term loans or other assets for an ownership interest in the business - State the agreement clearly in writing before money changes

What are the advantages of reputation?

- Because of capacity to focus on narrow niches, can develop enviable reputations for quality and service

Millennials/Generation Y number around 83 million and are not solely concerned about money, what are specifics?

- Concerned with advancement, recognition, improved capabilities - Need direct, timely feedback and recognition

What are the disadvantages of franchises?

- Fees and profit sharing - Standardized operations - Restrictions on purchasing - Limited product line - Possible market saturation - Less freedom in decisions

What are the advantaged of focus?

- Focus efforts on a precisely defined market niche (a specific group of customers)

What are qualities minority-owned businesses?

- Growing faster than other classifiable firms - Represent 28.6% of all small businesses

What are the disadvantages of inability to cope with growth?

- Growth requires owner to give up some direct authority

What are the disadvantages of small business ownership?

- High stress level - High failure rate - Undercapitalization - Managerial inexperience or incompetence - Inability to cope with growth

What are the advantages of small business ownership?

- Independence - Costs - Flexibility - Focus - Reputation

What are the technological and economic trends?

- Internet usage continues to provide new opportunities - Increase in service exports - Creates new opportunities to expand operations abroad - Economic turbulence provides both opportunities and threats - Can react quickly to change and can stay close to their customers - Deregulation of the energy market and alternative fuels - Worldwide energy markets are valued in the hundreds of billions of dollars

What are successful traits of young entrepreneurs?

- Intuitive - Productive - Resourceful - Charismatic - Innovative - Risk-taker - Persistent - Friendly

What are the disadvantages of managerial inexperience or incompetence?

- Just because an entrepreneur has a brilliant vision, it does not mean he or she has the knowledge or experience

Continuing success and competitiveness of small businesses through rapidly changing conditions in the business world have led many large corporations to take a closer look at what makes their smaller rivals tick, like?

- Large firms emulate smaller ones to improve bottom line - Downsizing - Intrapreneurs

What are the disadvantages of a high stress level?

- Likely to provide a living for its owner, but not much more - Ongoing worries about competition, employee problems, new equipment, expanding inventory, rent increases, or changing market demand - Small-business person is often the owner, manager, sales force, shipping and receiving clerks, bookkeeper, and custodian - Multitasking can result in long hours for most owners

What are examples of organizations and programs that exist to help small-business managers?

- Nation publications such as Inc and Entrepreneur - Small Business Administration (SBA) - Small Business Development Centers (SBDCs) - Service Corps of Retired Executives (SCORE) - Active Corps of Executives (ACEs) - Small Business Institutions (SBIs) - US and local Departments of Commerce - Other small businesses

What are qualities of women-owned businesses?

- Responsible for employing millions of workers - Women own more than 9 million businesses nationwide

Small business are found in nearly every industry, but these are some of the most attractive:

- Retailing and wholesaling - Services - Manufacturing - High Technology (These fields are relatively easy to enter and require low initial financing)

The innovation of successful firms take many forms:

- Small firms produce more than half of all innovations - Small firms make up approximately 2% of franchises - Many of today's largest businesses started off as small firms that used innovation to achieve success - Entrepreneurs provide fresh ideas and usually have greater flexibility to change than large firms

What are the advantages of flexibility?

- Small size allows flexibility to adapt to changing market demands - Usually only one layer of management (the owner) so decisions can be made and executed quickly

What are the advantages of costs?

- Spend less money on wages/salaries, rent, utilities, etc - Use external firms to handle accounting, advertising, and legal counseling - Friends and family volunteer time to work on projects

What are the steps to starting a small business?

- Start with a concept or general idea - Create a business plan - Devise a strategy for planning and development - Make decisions - Form of ownership - Financing - Acquire existing business or start new? - Buy a franchise?

What are the disadvantages of undercapitalization?

- The lack of funds to operate a business normally - Too many entrepreneurs think that all they need is the money to get started

What are the advantages of independence?

- To o better for themselves than they could do by remaining with their current employer or by changing jobs - To choose whom they work with, the flexibility of where/when to work, and the option to work in a family setting

What are the advantages of franchises?

- Training and support - Brand-name appeal - Standardized quality of goods & services - National/local advertising - Financial assistance - Proven products/format - Centralized buying power - Site selection & territorial protection - Greater chance for success

What are the three major causes of small-business failure?

- Undercapitalization - Managerial inexperience or incompetence - Inability to cope with growth

What is the role of small business in the american economy?

-They represent 99.7% of all employer firms - They have generated 63% of net new jobs - They hire approximately 37% of high-tech workers (such as scientists, engineers, computer programmers, and others) - They produce 16 times more patents per employee than large patenting firms - They employ nearly half of all private-sector employees - They pay 42% of total US private payroll

What is collateral?

A financial interest in the property or fixtures of the business, to guarantee payment of the debt

A good business plan should act as what?

A guide and reference document - not a shackle that limits the business's flexibility and decision making ability

What is a franchise?

A license to sell another's products or to use another's name in business, or both

What is a business plan?

A precise statement of the rationale for the business and a step-by-step explanation of how it will achieve its goals. It should include an explanation of the business, an analysis of the competition, estimates of income and expenses, and other information

The entrepreneurship moment is what?

Accelerating, and many new small businesses are emerging

What is a line of credit?

An agreement by which a financial institution promises to lend a business a predetermined sum on demand. It permits an entrepreneur to take quick advantage of opportunities that require external funding

What is a sharing economy?

An economic model involving the sharing of underutilized resources

What is the small business administration (SBA)?

An independent agency of the federal government that offers managerial and financial assistance to small businesses

Small-business owners often use what?

Debt financing from banks or the Small Business Administration to start their own organization

How else can business owners using equity financing to obtain financing?

Finding investors for their operations and selling stock in the business to family members, friends, employees or other investors

Half of all small business fail within how many years?

Five

What is one of the leading reasons that entrepreneurs choose to go into business for themselves?

Independence

Why is the sharing economy often referred to as the "gig economy"?

Independent contractors earn income going from job to job

What are intrapreneurs?

Individuals in large firms who take responsibility for the development of innovations within the organizations

What are social entrepreneurs?

Individuals who use entrepreneurship to address social problems

Starting from scratch can be what?

It can be expensive and requires promotional efforts to familiarize customers with the business

What is the service sector?

It includes businesses that do not actually produce tangible goods. They account for 80 percent of US jobs, excluding farmworkers

What is high technology?

It is a broad term used to describe businesses that depend heavily on advanced scientific and engineering knowledge

What is a mortgage?

May have to provide personal property as collateral, if the business fails then they may eventually claim/sell the collateral

After developing a business plan, the entrepreneur has to decide what?

On an appropriate legal form of business ownership - whether it is best to operate as a sole proprietorship, partnership, or corporation - and to examine the many factors that affect that decision

What is uniKey?

One of the most significant strengths of small businesses is ability to innovate & bring significant benefits to customers

What are venture capitalists?

Persons or organizations that agree to provide some funds for a new business in exchange for an ownership interest or stock

What is vital to the american economy?

Small Businesses

What is trade credit?

Suppliers allow the business to take possession of the needed goods and searches and pay for them at a later date or in installments

What is a franchiser?

The company that sells a franchise

What is equity financing?

The owner uses real personal assets rather than borrowing funds from outside sources to get started in a new business

What is entrepreneurship?

The process of creating and managing a business to achieve desired objectives

What is a Franchisee?

The purchaser of a franchise

The franchisee acquires what?

The rights to a name, logo, methods of operation, national advertising, products, and other elements associated with the franchiser's business in return for a financial commitment and the agreement to conduct business in accordance with the franchiser's standard of operations

Although venture capitalists forms of equity financing have helped many small businesses, they require what?

The small-business owner share the profits of the business and sometimes control as well - with the investors

What are retailers?

They acquire goods from producers or wholesalers and sell them to consumers

Why do small businesses sometimes have an advantage over large firms?

They can customize products to meet specific customer needs and wants

What is manufacturing goods?

They can provide unique opportunities for small business

What are wholesalers?

They provide both goods and services to producers and retailers. They supply products to industrial, retail, and institutional users for resale or for use in making other products

What is downsizing?

To reduce management layers, corporate staff, and work tasks to make the firm more flexible, resourceful, and innovative

What is bartering?

Trading their own products for the goods and services offered by other businesses

What is the shortest path to failure to business?

Undercapitalization

What are small businesses?

We define this as any independently owned and operated business that is not dominant in its competitive area or industry group and employe less than five hundred

What are independent contractors?

Workers act as their own bosses and pay their own taxes and benefits, unlike employees of a firm