EEE Final Study Guide
guerilla marketing
a low budget approach to marketing that relies on ingenuity, cleverness, and surprise rather than traditional techniques
product attribute map
a map that illustrates a firm's positioning strategy relative to it's major rivals
equity financing
a means of raising money by exchanging partial ownership in a firm, usually in the form of stock, for funding
What is a brand?
a name, term, symbol, design, or combination thereof that identifies a seller's products and differentiates them from competitors' products
Provisional Patent Application
a part of patent law that grants "provisional rights" to an inventor for up to one year, pending the filing of a complete and final application
strategic alliance
a partnership between two or more firms that is developed to achieve a specific goal
business method patent
a patent that protects an invention that is or facilitates a method of doing business
Utility Patent
a patent that protects the functionality of the invention
inside directors
a person who is also an officer of the firm
intern
a person who works for a business as an apprentice or trainee for the purpose of obtaining practical experience
economies of scale
a phenomenon that occurs when mass producing a product results in lower average cost
niche market
a place within a large market segment that represents a narrow group of customers with similar interests
Moral Hazard
a problem a firm faces as it grows and adds personnel, the assumption is that new hire will not have the same
brand management
a program that protects the image and value of an organization's brand in consumers' minds
Target Market
a set of buyers sharing common needs or characteristics that the company decides to serve
Balance Sheet
a snapshot of a company's assets, liabilities, and owner's equity at a specific point in time
idea-expression dichotomy
the legal principle describing the concept that although an idea is not able to be copyrighted, the specific expression of an idea is
copyright bug
the letter c inside a circle with the first year of publication and the author copyright owner
Fair Use
the limited use of copyrighted material for purpose such as criticism, comment, news, reporting, teaching, or scholarship
viral marketing
a new marketing technique that facilitates and encourages people to pass along a marketing message about a particular product or service
advisory board
a panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis
board of directors
a panel of individuals who are elected by a corporation's shareholders to oversee the management of the firm
SBIR Program
Small Business Innovation Research (SBIR) competitive grant program that provides over $2.5 billion per year to small businesses for early stage and development projects
pro forma financial statements
financial statements projecting future years' operations
Bootstrapping
finding ways to avoid the need for external financing or funding through creativity, ingenuity, thriftiness, cost-cutting, or any means necessary
Copyright
form of intellectual property law that protects original works of authorship, including literary, dramatic, musical, and artistic works
dept financing
getting a loan
sustained growth
growth in both revenues and profits over a sustained period of time
Four types of trademarks
-trademark -service mark -collective mark -certification mark
Sources of Debt Financing
1. Commercial Banks 2. SBA Loans 3. Other Sources (Vendor Credit, Factoring, Merchant Cash Advance, and Peer to Peer Lending)
Difference between economies of scale and scope
-Scale relies on its scale of production while scope relies on its range of operations
Difference between advertising and PR
-advertising is creating paid announcements promoting something. -PR is a strategic communication process that builds mutually beneficial relationships
Exclusions from trademark protection
-immoral or scandalous matter -deceptive matter -descriptive marks -surnames
internal growth strategies
-new product development -other product related strategies -international expansion
Trade secret protection methods
-physical measures -written agreements
Three ways to segment a market
-segmentation of the market -selecting a target market -crafting a unique positioning strategy
Three steps to prepare for debt or equity financing
1. Determine precisely how much money you need 2.Determine the type of financing or funding that is most appropriate 3.Develop a strategy for engaging potential investor or bankers
Seven members of a new venture team
1. Founder or founders 2.Key Employees 3. Board of Directors 4. Other professionals 5. Lenders and investors 6. Board of advisors 7. Management team
Steps in putting an ad together
1. Identify the purpose of the ad 2. Determine the target audience 3. Select a medium 4. Create the ad 5. Select a place and time for the ad to appear 6. Fulfill expectations
Six-step process for obtaining a patent
1. Make sure the invention is practical 2. Determine the type of application to file 3. Hire a patent attorney 4. Conduct a patent search 5. File a patent application 6. Obtain decision from U.S. Patent and Trademark Office
Common mistakes firms make regarding intellectual property
1. Not properly Identifying all of intellectual property. 2. Not fully recognizing value of intellectual property 3. Not legally protecting intellectual property 4. Not using intellectual property as a part if overall plan
Sources of Personal Financing
1. Personal Funds 2. Friends and Family 3. Bootstrapping
Three reasons startups need funding
1. cash flow challenges 2. capital investments 3. lengthy product development cycles
Elevator Pitch
30 second/100 words or less action oriented description to create "hook"
Income Statement
A financial statement showing the revenue and expenses for a fiscal period.
constant radio method of forecasting
A forecasting approach using the percent of sales method in which expenses items on a firm's income statement are expected to grow at the same rate as sale
trade secret
A formula, device, idea, process, or other information used in a business that gives the owner a competitive advantage in the marketplace.
10-K
A report similar to the annual report except that it contains more detailed information about the company's business.
copyright infringement
A violation of the exclusive rights of a copyright holder, such as copying, distributing, or performing the copyright owner's work without permission unless the use is otherwise authorized by law.
Uniform Trade Secrets Act
An act drafted in 1979 by a special commission in an attempt to set nationwide standards for trade secret legislation; although the majority of states have adopted the act, most revised it, resulting in a wide disparity among states in regard to trade secret legislation and enforcement.
External Growth Strategy
An emphasis on acquiring vendors and suppliers or buying businesses that allow a company to expand into new markets.
relevant industry experience
An entrepreneur's ability to successfully launch and grow a firm has also been studied
SBA Guaranteed Loan Program
An important source of funding for small businesses in general in which approximately 50 percent of the 9,000 banks in the United States participate.
Plant Patent
Any new varieties of plants that can be reproduced asexually
Budgets
Are itemized forecasts of a company's income, expenses, and capital needs and are also an important tool for financial planning and control.
regression analysis
Statistical method used to determine whether a relationship exists between variables and the strength of the relationship.
Financing Activities
Cash flow activities that include (a) obtaining cash from issuing debt and repaying the amounts borrowed and (b) obtaining cash from stockholders, repurchasing shares, and paying dividends.
liability of newness
Companies often falter because the people who start them aren't able to adjust quickly enough to their new roles and because the firm lacks a "track record" with outside buyers and suppliers.
Preferred Attributes of the Founder(s) of an Entrepreneurial Venture
Higher Education Prior Entrepreneurial Experience Relevant Industry Experience Broad Social and Professional Network:
Design Patent
Invention of new, original, and ornamental designs for manufactured products
Advertising
Making people aware of a product or service in hopes of persuading them to buy
pro forma income statement
Merely a matter of plugging in the numbers
long-term liabilities
Obligations not due to be paid within one year or the operating cycle, whichever is longer.
consultant
One who gives professional or technical advice
Marketing 4 P's
Product, Price, Place, Promotion
Marketing Mix
Product, Price, Place, Promotion
Financial Ratios
Relationships between important financial data that is expressed as a fraction or a percentage.
Marketing Segmentation
The process of classifying people who form a given market into even smaller groups
Investing Activities
The purchase and sale of land, buildings, equipment, and securities.
Accounts Receivable
The total amount of money owed to a business.
link joint venture
a joint venture in which the position of the parties is not symmetrical and the objectives of the partners may diverge
core competencies
Things a company does extremely well, which sometimes give it an advantage over its competition
lease
a legal document that defines the conditions of the rental agreement between the tenant and the landlord
Lanham Act
a 1946 law that spells out what kinds of marks (including brand names) can be protected and the exact method of protecting them
Line of Credit (LOC)
a borrowing 'cap' is established, and borrowers can use the credit at their discretion.
peer-to-peer lenders
a category of financial transactions which occur directly between individuals or "peers"
skills profile
a chart that depicts the most important skills that are needed and where skills gaps exist
Liquidity
a company ability to meet its short-term financial obligations
Licensee
a company that purchases the right to use another company's intellectual property
inventory
a company's merchandise, raw material, and product waiting to be sold
preliminary prospectus
a document issued by an investment bank that describes the potential offering to the general public while the SEC is conducting an investigation of the offering (also red-herring)
assignment of invention agreement
a document signed by an employee as part of the employment agreement that assigns the employer the right to apply for the patent of an invention made by the employee during the course of his or her employment
Sarbanes-Oxley Act
a federal law that was passed in response to corporate accounting scandals involving prominent corporations, like Enron and WorldCom
investment bank
a financial institution that acts as an underwriter or agent for a firm issuing securities
Factoring
a financial transaction whereby a business sells its accounts receivable to a third party, called a factor, at a discount in exchange for cash
intellectual property audit
a firm's assessment of the intellectual property it owns
press kit
a folder typically distributed to journalists and made available online that contains background information about a company and includes a list of the company's most recent accomplishments
vendor credit
a form of credit in which a vendor extends credit to a business in order to allow the business to buy its products and/or services upfront but defer payment until later
virtual assistant
a freelancer who provides administrative, technical, or creative assistance to clients remotely from a home office
patent
a grant from the federal government conferring the right to exclude others from, selling, or using an invention for the term of the patent.
scale joint venture
a joint venture in which the partners collaborate at a single point in the value chain to gain economies of scale in production or distribution
market penetration strategy
a strategy designed to increase the sales of a product or service through greater marketing efforts or through increased production capacity and efficiency
product line extension strategy
a strategy that involves making additional versions of a product so they will appeal to different clientele
Trademark
a symbol, word, or words legally registered or established by use as representing a company or product.
founding team
a team of individuals chosen to start a new venture; has an advantage over firms started by an individual because a team brings more talent, resources, ideas, and professional contacts to a new venture than does a sole entrepreneur
spin-ins
a transaction that takes place when a large firm that has a small equity stake in a small firm, decided to acquire a 100% interest in the firm
corporate venture capital
a type of capital similar to traditional venture capital, except that the money comes from corporations that invest in new ventures related to their areas of interest
private placement
a variation of the IPO in which there is a direct sale of an issue of securities to a large institutional investor
road show
a whirlwind tour taken by the top management team of a firm wanting to go public; consists of meetings in key cities where the firm presents its business plan to groups of investors
intellectual property
a work or invention that is the result of creativity, such as a manuscript or a design, to which one has rights and for which one may apply for a patent, copyright, trademark, etc.
venture-leasing firms
act as brokers, bringing the parties involved in a lease together
promotion
activities planned by a company to communicate the merits of its products to its target market with the goal of persuading people to buy the product
Operating Activities
activities that effect the net income, depreciation, and changes in current assets and liabilities other than cash and short-term debt
Cost of sales
all of the direct costs associated with producing or delivering a product or service, including the material costs and direct labor costs
reward-based crowdfunding
allows entrepreneurs to raise money in exchange for some type of amenity or reward
intend-to-use trademark application
am application based on the applicants intention to register and use a trademarks
service
an activity or benefit that is intangibles and does not take on a physical form such as an airplane trip or advice from an attorney
exclusive distribution arrangements
an agreement that gives a retailer or other intermediary the exclusive rights to sell a company's products in a specific area for a specific period of time
buzz
an awareness and sense of anticipation about a company and its offerings
reference account
an early user of a firm's product who is willing to give a testimonial regarding his or her experience with the product
trade shows
an event at which goods or service in a specific industry are exhibited and demonstrated
assumption sheet
an explanation in a new firm's business plan of the sources of the numbers for its financial forecast and the assumptions used to generate them
Geographic Expansion
an internal growth strategy in which an entrepreneurial business grows by simply expanding from its original location to additional geographical sites
liquidity event
an occurrence such as a new venture going public, finding a buyer, or being acquired by another company that converts some or all of a company's stock into cash
secondary market offering
any later public issuance of shares
homogeneous
areas of expertise are very similar to one another
Fixed Assests
assets used over a long period of time. Ex buildings, real estate, equipment
Networking
building and maintaining relationships with people whose interests are similar or whose relationship could bring advantages to a firm
technological alliances
business alliances that cooperate in R&D, engineering, and manufacturing
international new ventures
businesses that, from inception, seek to derive significant competitive advantage by using their resources to sell products or services in multiple countries
fixed costs
cost that a company incurs in operating a business whether it sells something or not
variable costs
cost that are not fixed that a company incurs as it generates sales
Current Ratio
current assets divided by current liabilities
Working Capital
current assets minus current liabilities
promissory note
details the terms of a loan agreement
heterogeneous
diverse in terms of their ability and experience
Final Prospectus
documents issued by the investment bank after the Securities and Exchange Commission (SEC) has approved the offering that sets a date and issuing price for the offering
Public Relations (PR)
efforts made by a company to shape the way audiences perceive the company; how a brand is seen by the public (public image) can have an effect of the brand's actions
improving an existing product or service
enhancing a product or service's quality by making it larger or smaller, making it easier to use, or making it more up-to-date, thereby increasing its value and price potential
joint venture
entity created when two or more firm pool a portion of their resources to create separate jointly owned organization.
forecast
estimate of a firms future sales, income, expenses, and capital expediential
Internal Growth Strategy
growth strategy that rely on efforts generated within the firm itself, such as new product development, other product related strategies, or international expansion
equity-based crowdfunding
helps businesses raise money by tapping individuals who provide funding in exchange for equity in the business
Efficiency
how productively a firms utilizes it assets relative to it rate of return
Computer Software Copyright Act
in 1980, congress passed this act, which amended previous copyright acts; now, all forms of computer programs are protected
target
in an acquisition the firm that is acquired
Business Angels
individuals who invest their personal capital directly in start-ups
Organic growth
internally generated growth within a firm that does not rely on outside intervention
limited partners
investors who invest in venture capital funds
product
is the good or service a company offers to its target market, offer thought of as something having physical form
current assets
items that can or will be converted into cash within one year
Current Liabilities
liabilities due within a short time, usually within a year
merchandise and character licensing
licensing of a recognized trademark or brand that the licensor typically controls through a registered trademark or copyright
technology licensing
licensing of proprietary technology that the licensor typically controls by virtue of a utility patent
Price to Earnings Ratio (P/E)
market price per share divided by earnings per share
operating expenses
marketing, administrative costs, and other expenses not directly related to producing a product or service
certification marks
marks, words, names, symbols, or devices used by a person other than its owner to certify a particular quality about a product or service
percent of sales method
method for expressing each expense item as a percentage of sales
Other Assets
miscellaneous assets including accumulated goodwill
profit margin
net income divided by net sales
rounds
once a venture capitalist makes as investment in a firm, subsequent investments
prior entrepreneurial experience
one of the most consistent predictors of future entrepreneurial performance
Economic Espionage Act
passed in 1996, an act that makes the theft of trade secrets a crime
freelancer
person who is in business for themselves, works on their own time with their own tools and equipment, and performs services for a number of different clients
Accredited Investor
person who is permitted to invest in higher-risk investments such as business start-ups
value-based pricing
pricing method in which the list price is determined by estimating what consumers are willing to pay for a product and then backing off a but to provide a cushion
cost-based pricing
pricing method in which the list prices is determined by adding a makeup percentages to the product's cost
The four primary financial objectives of a startup
profitability, liquidity, efficiency, stability
sales forecast
projection of a firm's sales for a specified period
pro forma balance sheet
provides a firm a sense of how its activities will affect its ability to meet its short-term liabilities and how its finances will evolve over time
Financial Management
raising money and managing a company's finances in a way that achieves the highest rate of return
historical financial statements
reflect past performance and are usually prepared on a quarterly and annual basis
one year after first use deadline
requirement that a patent must be filed within one year of when a product or process was first offered for sale, put into public use, or was described in any printed publication. If this requirement is violated, the right to apply for a patent is forfeited
productive opportunity set
set of opportunities the firm feels it's capable of pursuing
service marks
similar to ordinary trademarks but used to identify the services or intangible activities of a business rather than a business's physical product
outside directors
someone who is not employed by the firm
employee
someone who works for a business
single-purpose loan
specific amount of money is borrowed that must be repaid in a fixed amount of time with interest
Statement of Cash Flows
summarizes the changes in a firms cash position for a specified period of time
profitability
the ability to earn a profit
Signaling
the act of a high-quality individual agreeing to serve on a company board of director, indicating that the individua believes that the company has the potential to be successful
Patent Infringement
the action of one party engaging in the unauthorized use of another's patent
economies of scope
the advantage a firm accrues through the scope (or range) of its operations rather than from the scale of its production
price-quality attribution
the assumption consumers naturally make that the higher priced product is also the better quality product
Adverse Selection
the challenge a firm must face as it grows such that as the number of employees a firm needs increases, it becomes more difficult to find the right employees, place them in appropriate positions, and provide adequate supervision
Licensor
the company that owns the intellectual property in a licensing agreement
New Product Development
the creation and sale of new products (or services) as a means of increasing a firm's revenues
Owner's Equity
the equity invested in the business by its owners plus the accumulated earning retained by the business after paying dividends
Initial Public Offering (IPO)
the first sale of stock by a firm to the public
licensing agreement
the formal contract between a licensor and licensee
Licensing
the granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions
new-venture team
the group of founders, key employees, and advisors that move a new venture from an idea to a fully functioning firm
7(A) Loan Guaranty Program
the main Small Business Administration (SBA) program available to small businesses operating through private sector lenders providing loans that are guaranteed by the SBA; loan guarantees reserved for small businesses that are unable to secure financing through normal lending channels
place
the marketing mix category that encompasses all of the activities that move a firm's product from its place of origin to the consumer( also know as distribution)
spin-out
the opposite of a spin-in that occurs when a larger company divests itself of one of its smaller divisions
acquisition
the outfight purchase of one firm by another
yield rate
the percentage of investment opportunities that are brought to the attention of angel investors that result in an investment
carry
the percentage of the profits the venture capitalists get
break-even point
the point at which the costs of producing a product equal the revenue made from selling the product
merger
the pooling of interests to combine two or more firms into one
Market leadership
the position of a firm when it is the number one or the number two firm in an industry or niche market in terms of sales volume
Crowdfunding
the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.
managerial capacity problem
the problem that arises when the growth of a firm is limited by the managerial capacity that a firm has available to investigate and implement new business ideas
Disintermediation
the process of eliminating layers of intermediaries, such as distributors and retailers, to sell directly to customers
due diligence
the process of investigating the merits of a potential venture and verifying the key claims made in the business plan
pro forma statement of cash flows
the projected flow of cash into and out of the company during a specified period
Burn Rate
the rate at which a company is spending its capital until it reaches profitability
pace of growth
the rate at which a firm is growing on an annual basis
distribution channel
the route a product takes from the place it is made to the customer who is the end user
managerial services
the routine functions of the firm that facilitate the profitable execution of new opportunities
brand equity
the set of assets and liabilities linked to a brand and enables it to raise a firm's valuation
brand
the set of attributes - positive or negative - that people associate with a company
stability
the strength and vigor of the firm's overall financial posture
acquirer
the surviving firm in an acquisition
sales process
the systematic process a business engages in to identify prospects and close sales
Sweat Equity
the value of the time and effort that a founder puts into a new firm
follow-on funding
the various stages in the venture capital process, from the seed stage to buyout financing
General Partner
the venture capitalist, who manage the funds
entrepreneurial services
those services that generate new market, product, and service ideas
social plug-ins
tools that websites can use to provide their users with personalized and social experiences
Debt to Equity Ratio
total liabilities/stockholders equity
net sales
total sales minus allowances for returned goods and discounts
collective marks
trademarks or service marks used by the members of a cooperative, association, or other collective group, including marks indicating membership in a union or similar organization
marketing alliances
typically matches a company with a distribution system with a company with a product to sell in order to increase sales of a product or service
STTR Program
variation of SBIR for collaborative research projects that involve small businesses and research organizations, such as universities or federal laboratories
sources of equity funding
venture capital, business angels, initial public offerings
secondary meaning
when consumers begin to associate a specific term or phrase with a specific trademarked item.
Outsourcing
work that is done for a company by the people other than the company's full-time employees
derivative works
works that are new renditions of something that is already copyrighted, which are also copyrightable
Finanical Statements
written reports that quantitively describe a firms financial health
