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