ch 5 Flashcards
small business
one that is independently owned and operated for profit and is not dominant in its field.
small bus:
represent 99% of all employer firms
The small business sector
out of the 28.8 million bus in the US, only 18,600 employ more than 500 workers (enough to be considered large.)
-During the last decade, the number of small bus in the U.S. has increased by 49%.
-about 80% of bus started in 2014 survived until 2015, the largest share since 2005
from 2004 to 2014:
Avg of 78% of new bus survived one year
Abt half of all firms survived 5 years or longer
Abt 1/3 of firms survived 10 yrs or longer
industries that require only a low initial investment and some special skills or knowledge tend to attract new businesses
Knowledge entrepreneurs choose areas with which they are familiar, and these are most often the more established industries
Industries that attract small bus
Ppl in small bus: Entrepenuers
personal factors to why people go into bus for themselves:
-Entrepreneurial spirit
-Independence
-Desire to determine one’s own destiny
-Willingness to find and accept a challenge
-Family background
-Age
-Motivation
Women as small bus owners
-Women own at least 36% of all small bus.
-Women own 66% of the home-based bus in this country
About 9.9 million women-owned bus in the US provide almost 8.8 million jobs and generate $1.4 trillion in sales.
More than 40% of a women-owned bus in the US have been in bus for 12 years or more
W-owned bus are financially sound and credit-worthy, and their risk of failure is lower than avg.
Compared to other working women, self-employed women are older, better educated, and have more managerial exp.
High-tech teen entrepreneurship is exploding & entrepreneurship among immigrants has been growing
teens and immigrants as small bus owners
Why entrepenuers and small bus fail
lack of capital and cash flow problems
Lack of management skills
over expansion
Importance of Small Bus in our economy Providing tech innovation
-Small firms produce 2-and-a-half times as many innovations as large firms relative to the number of persons employed.
-Small firms employ 43% of all high-tech workers such as scientists, engineers, and computer specialists
-More than half o the major technological advances of the 20th century originated with individual inventors and small companies.
Importance of Small Bus in our economy
Provides employment
Small bus represent 99.7 percent of all employers, employ more than 50% of the private workforce, and provide abt 2/3 of the net new jobs added to our econ.
Small bus cause larger, established firms to become more efficient and more responsive to consumer needs
provides competition
Small firms provide a variety of goods and serv to each other and too much larger firms
small bus fill the needs of society and other bus
Disadvantages of small bus
Risk of Failure
-Limited potential
-Limited ability to raise capital
-Only 2 sources of funding
Angel Investors- private individuals who invest $ in exchange for ownership in the company. Sam individuals hope to sell their ownership stake for a profit.
Crowdfunding - Entrepreneurs post descriptions of their project or bus online and then inv ppl to contribute; contributors typically get a reward based on their contribution level.
Disadvantages of small bus
Risk of Failure
-Limited potential
-Limited ability to raise capital
-Only 2 sources of funding
Angel Investors- private individuals who invest $ in exchange for ownership in the company. Sam individuals hope to sell their ownership stake for a profit.
Crowdfunding - Entrepreneurs post descriptions of their project or bus online and then inv ppl to contribute; contributors typically get a reward based on their contribution level.
Carefully constructed guide for the person starting a bus
-Communication - Bus plan serves as a concise document that potential investors examine to see if they would like to invest or assist in financing a new venture.
- Management - A bus plan helps track, monitor, and evaluate the prog. Serves to establish. timelines and milestones & allows comparison of growth projections against actual accomplishments
Planning - the bus plan guides a bus person through the various phases of bus.
Bus plan
Governmental Agency that assists counsels, and protects the int of small bus in the US.
Smal Bus Administration (SBA)
Group of bus ppl. who valunteer their services to small bus through the SBA
Score Association
Small Bus Institutes (SBIs)
groups of seniors and. graduate students in bus admin who provide management counseling to small bus
Small bus dev centers (SBDCs)
University-based groups that provide individual counseling and practical training to owners of small bus.
Money that is invested in small sometimes struggling firms that have the potential to become very successful
Venture capital
Small Bus inv companies (SBICs)
priv-owned firms that provide venture capital to small enterprises that meet their investment standards.
License to operate an individually owned bus as though it were part of a chain of outlets or stores
Franchise
Actual granting of a franchise
franchising
Individuals/organization granting a franchise
Provides the franchisee:
-A known and advertised bus name
-Management skills
-The required training and materials
-Method of doing bus
Franchisor
A person or org purchasing a franchise
-Supplies labor and capital
-Operates the franchised bus
-Agrees to abide by the provisions of the franchise agreement.
Franchisee
Used by sellers of passenger cars and trucks, farm equipment, and shoes
Manufacturer authorizes a number of retail stores to sell a certain brand-name item
Most commonly found in the soft drink industry
A Producer licenses distributors to sell a given prod to retailers.
used by travel-related companies(hotels) and fast-food restaurants.
A franchisor supplies brand names, techniques, or other services instead of a complete prod.
The success rate for businesses owned and operated by franchisees is significantly higher than the success rate for independently owned small bus
Are franchises succesful
Franchises aren’t guarantees of success for either franchisees or franchisors
Too rapid expansion, inadequate capital or management skills, and a host of other probs ca cause failure for both franchisee and franchisor
-Gains fast and well-controlled distribution of its prod w/o incurring the high cost of constructing and operating its own outlets
-Has more capital available to expand prod and to use for advertising
-Can ensure, thru the franchise agreement, that outlets are maintained and operated according to their own standards
-The franchisee is likely to be very motivated to succeed, which translates into more sales, and thus higher royalties for the franchisor
Advantages to franchisors
-Opportunity to start a bus w limited capital and to make use of the bus experience of others.
-Receives advice from the franchisor, often free of charge
-Receives materials to use in local advertising and can take part in national promotional campaigns sponsored by the franchisor
-May be able to minimize the cost of advertising, supplies, and various business necessities by purchasing them in cooperation with other franchisees
Advantages to the franchisee
