8.1-8.4 Flashcards
Managers and other key persons who give a company it’s general direction.
Management Team
- Individuals with supervisory responsibilities
- Nonsupervisory personnel who play key roles in the business.
A management Team Consists of:
The team arrangement does not have to be ______.
Permanent
Can make the best of a good business idea by securing the resources needed to make it work. Of course, even if this is highly competitent, it cannot rescue a firm that is based on a weak business concept or lacks adequate resources.
Strong management
- The attitudes of prospective investors, who consider the quality of a new venture’s management to be one of the most important factors in decisions to invest or to take a pass.
- Investors know that enterprises typically perform poory if they are guided by weak or incapable managers.
Importance of Strong Management to Startups is Evident in:
A team can bring a diversity of talent to meet various managerial needs. This can be especially helpful to startups built on new technologies that must manage a broad range of factors. In addition, a team can provide greater assurance of continuity, since the departure of one member of a team is less devastating to a business than the deparature of a single owner.
Management Teams can Bring Greater Strength of a Venture than an Individual Entrepreneur
Depends on the type of venture and the nature of its operations. A small firm needs managers with an appropriate combination of education, experience, and skills. The qualifications of an applicant for a key position should complement those of members already on the team.
The Competence Required on a Management Team
- Upside- the owner knows these people well and trusts them, they often work for less compensation (despite the elevated risk of joining a new venture) and they are more likely to make personal sacrifices to keep the business alive.
- The downside is that the team can quickly become very homogeneous, lack complementary strengths, entertain feelings of entitlement, and carry the baggage of family dysfunction into the enterprise.
Management Team with Family and Friends
A management team should comprise both competitent insiders and outside specialists.
- Commercial bank
- Law firms
- Accounting firms
- Active board of directors (the value of a good board is never overstated)
- You want some people with expertise in some areas, and some with expertise in other areas.
- It is helpful to pair the depth of knowledge of highly specialized experts with big-picture thinkers who are better able to “connect the dots.”
Achieving Balance
- Business support services available online for free or for a small monthly fee
- Hiring help from around the world can require nothing more than a few mouse clicks.
- Systemize everything you can- see what you can outsource and automate. Every business is a repetitive system and you need to automate it so that you can spend your time doing the things that really add value.
- Freedom to make own decisions
- Pursue a dream that you cannot fully share
- Not dependent on others to get things done
Solo Startup is Still an Option
It is not what you know, but ___ you know that matters.
Whom
An interconnected system of relationships with other people.
- Roommates or other acquaintances from college
- Former employees and business associates
- Contacts through community organiations
- Communicates legitimacy and jump-starts sales (Establishes a solid reputation).
- Social media tools- LinkedIn, Twitter, Facebook
Social Network
The advantage created by an individual’s connections in a social network.
- Does not happen overnight or by accident
- Building blocks that support it- being reliable as a friend, being fair in your dealings, being true to your word.
Social Capital
A powerful sense of obligation to repay in kind what another has done for or provided to us.
- People naturally feel that they should return favors.
- Be the first to lend a hand
- Take a genuine interest in the needs of friends and acquaintances.
- Social capital is sure to increase, binding friends and contracts to you and providing a solid foundation for building a business.
Reciprocation
Will determine who the actual owners of the busines are.
- Sole proprietorship
- Partnership
- C corporation
Legal forms of Organization
A business owned by one person, who bears unimited liability for the enterprise.
Sole proprietorship
Liability on the part of an owner that extends beyond the owner’s investment in the business.
- Personal assets can be taken by business creditors if the enterprise fails.
Unlimited Liability
- Title to all business aspects
- Subject to claims of creditors
- Recieves all of the profits
- Assumes all losses, bears all risks, pays all debts
- Simplest and cheapest way to start operation
- Most states do not require a license
- Free from interference from partners, shareholders and directors
- Unlimited liability
- Not employees of the business- cannot benefit from tax-free fringe benefits (insurance and hospitalization plans)
Characteristics of a Sole Proprietorship
The ____ of the owner terminates the legal existence of sole proprietorship. This possibility clouds relationships between a business and its creditors and employees. It is important to have a will, becuase the assets of the business minus the liabilities will belong to her or his heirs.
Death
- Give the executor the power to run the business for the heirs until they can take it over or it can be sold.
Will
If she or he were badly hurt in an accident and hospitilized for an extended period, the business could be ruined.
- Can guard against this by giving a competent person legal power of attorney to carry on such situations.
Possible Incapacity of the Sole Proprietor
A legal entity formed by two or more co-owners to operate a business for profit.
- Because of voluntary nature, owners can set it up quickly, aboviding many legal requirements involved in creating a corporation.
- Pools the managerial talents and capital of those joining together as business partners.
- Owners share unlimited liability.
Partnership
- Ability to share the worlkload and emotional and financial burdens
- Gain management talent that might otherwise break the budget
- Adds companionship to life in a small business.
Benefits of Partnership
- Personal conflicts
- Falling short of partner’s expectations
- Decision making is more complicated
- Share equity position in the business (naturally dilutes the control of each partner)
- Dishonesty of partner
- Differing priorities
Disadvantages of Partnerships
Should be formed only if it appears to be the best option after considering all features of the enterprise.
A Partnership
Honest, Healthy, Capable and Compatible
Qualifications of Partners
- Choose your partner carefully
- Be open, but cautious, about partnerships with friends
- Test-drive the relationship, if possible
- Create a combined vision for the business
- Prepare for the worst
Suggestions for Choosing Partners
- Finding someone- trade magazines, client contracts, professional associations, online matching services.
- Be sure that your- goals, values and work habits are compatible, skills are complementary
- A person you can trust above all (the actions of your partner legally bind you even if decisions are made without your knowledge or consent).
Choose your Partner Carefully
Valued relationships can take a quick turn fo rthe worse when a business deal gets rocky.
Be open, but cautious, about partnerships with friends
Observe the behavior, style, and work habits, access his or her strengths and weaknesses before committing to a long-term relationship.
Test-Drive the Relationship, if Possible