Intro to Business Chapter 6 Study Guide

improvement

a designed change that increases the usefulness of a product or service

improvement

a designed change that increases the usefulness of a product, service, or process -improved design -more efficient procedures -higher quality

Small Business Administration

a government agency that helps entrepreneurs develop business plans and obtain financing

small business administration (SBA)

a government agency that helps small business owners develop business plans and obtain financing and other support for their companies

Personal characteristics of successful entrepreneurs include a. persistence b. recklessness c. greed d. pessimism

a. persistence

small business

an independent business with fewer than 500 employees

innovation

an invention or creation that is brand new

the Small Business Administration considers a business small if it employs fewer than ________ employees a. 5 b. 20 c. 100 d. 500

d. 500

New businesses are often discounted because of a. low sales b. competitive pressure c. higher than expected expenses d. all of the above

d. all of the above

a competitive advantage that small businesses have over large businesses is a. lower costs b. more consumer research c. lower prices d. attention to unique customer needs

d. attention to unique customer needs

characteristics of entrepreneurs

persistent, inquisitive, energetic, goal-oriented, independent, self-confident, creative, reliable, competitive

inventory

products or raw materials a business keeps on hand

______________________ is the money needed to open a new business

start-up financing

start-up financing

the amount of money needed to open the business

short-term financing

the money needed to pay for the current operating activities of a business

entrepreneurship

the process of starting, organizing, managing, and assuming the responsibility for a business

True or false. a large number of small businesses in the US are service businesses

true

True or false. many entrepreneurs own their first business while in their teens

true

Small Businesses

-about 13% of all americans (18-64 yrs old) involved in entrepreneurship -over 500,000 new businesses created each year -small businesses account for over 1/2 GDP in the US -according to SBA, 2/3 of new employers establishments survive at least 2 years and 44% survive at least 4 years -over a 10 year period more than half of new businesses fail

Venture Capital Vs. Angel Investor

-angels are individuals who invest their own money -range is 10k - 250k -not on board of directors -introduce you to venture capital -typically take 20-30% of company -looking for 10x-100x -join board, steer towards massive exit -super angels invest larger amounts (1 million) -benefits of angels w/o pressure of a VC

Advantages small businesses have over large businesses

-easier to meet specific needs - paying attention to unique requests -direct information rather than "market research" -personalized service -individual attention to detail

Small Business Employment

-employ 50% of US workers -responsible for creating about 80% of new jobs -many in service industries -specifically professional and technical -retail trade is most common (14.6%)

help for small businesses

-faculties of universities and colleges -local groups of business people -chamber of commerce -SBA (gov. owned) -provide information to help -provide counseling -help businesses obtain financing -SCORE (service corps of retired executives)

Service Corps of Retired Executives

a group of retired local businesspeople who volunteer their services to counsel and mentor new business owners

entrepreneur

a person who starts a business and is willing to risk loss in order to make money. one who organizes, manages, and assumes the risks of a business or enterprise

business plan

a written description of the business idea and how it will be carried out, including all major business activities

Business ideas can come from a. books and magazines b. business experiences c. hobbies and interests d. all of the above

d. all of the above

The business idea, ownership structure, and the business's long term goals are discussed in this section of the business plan a. financial plan b. marketing plan c. operations plan d. description of the business

d. description of the business

which one of the following is not one of the reasons small businesses fail? a. poor customer credit practices b. the owner does not have adequate experience c. a poor business location d. not enough employees to do the work

d. not enough employees to do the work

____________________ is the process of starting, organizing, managing, and assuming the responsibility for a business

entrepreneurship

True or false. Everyone who owns or manages a business is an entrepreneur.

false

True or false. it is not wise to start a business when demnad for the product or service you plan to sell is high, becuase already established companies will have a clear advantage over you

false

True or false. most successful entrepreneurs have a low tolerance for ambiguity

false

True or false. the american private enterprise system discourages risk taking and innovation

false

True or false. the most important step in starting a business is buildiung confidence

false

true or false. a business plan does not have to be written because the business owner is well aware of the information in the plan

false

true or false. most small business owners enjoys being part of a team

false

long-term financing

money needed for the important resources of a business (such as land, buildings, and equipment) that will last for many years

long-term financing

money needed for the main resources of a business that will last for many years

short-term financing

money needed to pay for the current operating activities of a business

venture capital

money provided by large investors to finance new products and new businesses

venture capital

money provided by large investors to finance new products and new businesses that have a good chance to be very profitable

What are the sources of financing that entrepreneurs use for their new businesses?

personal savings, family and friends, venture capital, bank loans

Professional, scientific, and ______________ services account for the largest percentage of small businesses in the United States

technical

customer analysis

the part of a business plan that discusses sales forecasts and the location and number of potential patrons

description of competition

the part of a business plan that discusses the industry characteristics and the condition of the economy

True or false. many small businesses fail because the owners don't keep adequate records

true

True or false. most Americans are employed by a small business

true

True or false. most of the money needed to start a business comes from the person and his or her family and friends

true

True or false. the first step in developing a business plan is to gather and review information

true

SBA

-headquartered in DC with regional offices -help businesses at any stage -3 C's - contracting, counseling, capital -government contracting is where government helps small businesses get gov. contracts -puts small businesses together -mentor programs -counseling - hands on training, online learning center, mentoring -capital - help obtain financing through SBA backed loans

why do new businesses fail?

-lack of adequate capital (not enough cash flow) -low sales revenue -high than anticipated expenses -competitive pressure -an owner is unprepared to manage a growing business -operations requiring more time than the owner is willing to commit

venture capital and angel investors

-large investors and investment "groups" -1990's = 100 billion -2009 = 16 billion -2014 = 48 billion (4300 agreements) -2,400 companies yearly

Description of a small business

-less than 500 employees -96% of all US businesses are "small" -owner is usually the manager -operates in 1 or very few locations -typically serves a very small market -is not dominant in its field -largest number of businesses in the US

common reasons for failure

-not keeping adequate records -not enough startup money -lack of management experience -not controlling operating expenses -lack of experience in the type of business they have started -poor location -failure to manage credit offered to customers

personal traits

-problem solving skills -high tolerance for ambiguity -strong integrity -personal initiative -ability to secure resources -learn from failure -willing to work hard

social entrepreneurs

-process of pursuing innovative solutions to social problems -adopt a mission to create and sustain social value (toms shoes)

Owner's personal financial resources

-savings, home equity, credit cards -family and friends may provide financing help

small business ownership

-women own >33% of all small businesses ->14% are minorities -most owners over the age of 50 -15.9% under age of 35 -most have high school diploma -half are home based

Factors impacting the success/failure of a new or small business

1. An idea plus experience -several yrs of working in field -develop responsibility -decision making -business operation 2. Right place, right time -location - customer traffic is good -ease of transporting goods -high demand -timing is key (and luck) 3. Team Approach -hiring A players -team work is crucial -help from bankers, lawyers, accountants, advisors 4. Preparation and Research -having enough quality info to make good decisions -info about: customers, competition, operations, gov regulation, small business assistance

Guy Kawasaki - The Art of the Start

1. Ask simple questions -therefore, what? -isn't this interesting? -is there a better way? 2. Make an MVVVP (minimum, viable, valuable, validating, product) 3. Get going -ship early, you learn from failing -do something cringeworthy -find complementary soulmate -make a mantra 4. Define a business model -be specific about how to make $ -keep it simple -ask women 5. Weave a MATT (milestone, assumption, tests, task) 6. Tell your story -Make it personal -Embrace the 10-20-30 window 7. Hire infected people -they must love the product -hire better than yourself 8. Socialize -use social media to market 9. See the Clouds (Sales) 10. Don't Let the Clowns Grind You Down

15 characteristics of successful entrepreneurs

1. You take action - invent as you go 2. You're insecure - those nervous on failing can become hyper-focused 3. You're crafty 4. Your obsessed with cash flow (liquidity) 5. You get into hot water (constantly changing things) 6. You're fearless 7. You can't sit still (high energy) 8. You're flexible 9. You enjoy navel gazing (self evaluation) 10. Motivated by challenges 11. Consider yourself an outsider 12. Recover quickly 13. Find things to fix 14. Surround yourself with smarter people 15. Work and play hard

SBA services and advice

1. create your business plan 2. choose your business structure 3. register your business correctly 4. obtain business licenses and permits 5. learn about important laws and regulations for industry 6. help obtain financing 7. explore loans, grants, and funding 8. filing and paying taxes correctly 9. help pick location to obtain equipment 10. hire and retain employees

10 mistakes new business owners make

1. thinking to big/small 2. losing your focus/drive 3. taking on too much by yourself 4. sacrificing your personality 5. not tracking your advertising 6. investing too much in one client 7. going against your gut instincts 8. not getting involved in the community 9. managing employees poorly 10. trusting that signed contracts will be honored

Guy Kawasaki - Make Meaning

3 motivations in creating successful entrepreneurial ventures 1. increase quality of life 2. right a wrong (fix something) 3. prevent the end of something good

Small businesses are responsible for almost _____ percent of the US gross domestic product each year

50

According to the Small Business Administration, a small business is an independent business with fewer than _____ employees a. 500 b. 100 c. 50 d. 10

a. 500

which of the following is not a characteristic of entrepreneurship in the United States? a. about 3% of people aged 18-64 are involved in entrepreneurship activity b. about 500,000 new businesses are created each year c. about 27% of job growth comes from businesses with less than 20 employees d. one in every ten Americans has invested in a business of someone who they know well

a. about 3% of people aged 18-64 are involved in entrepreneurship activity

Nearly ______ percent of all Americans aged 18-64 is involved in some type of entrepreneurial activity a. 5 b. 10 c. 25 d. 50

b. 10

Most business plans are updated a. every six months b. annually c. once a month d. never

b. annually

Small business a. must focus on products and services that meet the needs of as large a group of customers as possible b. have an advantage when customer want more individual attention c. are generally forced to sell products and services at lower prices than large businesses to compete effectively d. all of the above

b. have an advantage when customer want more individual attention

A written description of a business idea and how it will be carried out is called a(n) _______________________

business plan

A good example of an entrepreneur is a(n) a. police officer b. UPS delivery driver c. gift shop owner d. checkout clerk at Target

c. gift shop owner

every business begins with a(n) a. customer b. profit c. idea d. invention

c. idea

money needed for the important resources of a business (such as land, buildings, and equipment) that will last for many years is called a. start-up financing b. short-term financing c. long-term financing d. credit

c. long-term financing

What percentage of U.S. small businesses are owned by women? a. about 75 percent b. more than 50 percent c. more than 33 percent d. close to 10 percent

c. more than 33 percent

money provided by large investors to finance new products and new businesses that have a good chance to be very profitable is known as a. a loan b. credit c. venture capital d. start-up funding

c. venture capital