Cp3 Flashcards
Process of seeking businesses opportunities under conditions of risk
Entrepreneurship
Is independent (not part of a larger business) and has little influence it’s market
Small business
One who accepts risks and opportunities of creating and growing a new business
Entrepreneurship
Does not always have growth of the business as a primary entrepreneurial goal
Small Business Owner
The most significant recent trend in small business startup is
Rapid emergence of electronic commerce
According to SBA small business association
40% of all new business expect to survive for 6 years (60% do not)
A description of the business strategy for the new venture(risky journey and how it will be implemented
Crafting a Business
What should a business plan address?
Entrepreneurs goals and objectives
The strategies used to obtain (get) them
The implementation(putting the process in effect) of the chosen strategies
How to prepare a business plan
Setting goals and objectives
Sales forecasting
Financial planning
Cash budget
Company that allows a individual (franchisee) to run a location of their business Parent company=
Franchisor
marketing another company’s goods and services in a certain local area
Local owner=
Franchisee
Advantages of Franchising
Access to management expertise of franchisor
Less likely to fail then new businesses
Proven business opportunity for franchisee
Disadvantages of Franchising
Start up costs are usually high
Management rules
May be obligated to contribute a percentage of sales to Parent corporations
64 percent of business started in
Past decade
Examples of new business that have started in past decade
Wal-mart
Dell Computers
Microsoft
Disadvantage of starting from scratch/ a new business
Higher risk of business failure
Advantage of of starting from scratch/ new business
Avoides baggage of an existing business
Most experts recommend
Buying a existing business besides starting from scratch because odds of success is higher
Name at least three questions that need to be answered when starting a small business
Who and where are my customers?
How much will those customers pay for my product?
How much of my product can I expect to sell?
Who are my competitors?
Why will customers buy my product rather then the product of my competitors?
Most important source of money for a new business’s
Personal Resources
1 resource of funding new businesses
Personal resources
Ways of financing a small business
Loans from family and friends
Bank loans
Do not lend money
Invest for partial ownership
Venture Capital Companies
Reasons why a small business fails
Poor management due to poorly execute business plans
Neglect (uncared for)
Insufficient Capital (not enough money)
Reasons why a small business succeeds
Hard work, drive a dedication
Market demand
Managerial competence (mangers is successful in managing)
Owned and operated by one person
Sole proprietorship
Most common form of business organization
Corporation
Based on the entrepreneurs needs/desires for control, ownership participation, financing and appropriateness of the chosen form for the industry in which firm will compete
Choice of Ownership Form
Multiplied by the number of partner-owners
Partnership-sole proprietorship
Represents most businesses in US
Sole proprietorship
One person owns and legally operates and is responsible for the business debts
Sole Proprietorship
Advantages of Sole Proprietorships
Freedom Simple to Form Low start up costs Tax benefits Formation of cooperatives (shares profits and benfits)
Examples of Tax Benefits
Can treat profit as part of their personal financiers
Pay taxes based on their personal tax rate
Disadvantages of sole proprietorships
Unlimited liability
Limited resources
Limited fundraising capability
Lack of continuity( something that doesn’t stop)
Owners are responsible for all debts (due money) of a business
Unlimited liability
Advantages of a corporation
Limited liability
Continuity
Stronger fundraising capability
Disadvantages of a corporation
Double taxation of dividends (sum money paid regularly)
Fluid control
Complicated and expensive to form
The owners responsibility for debts of a business is limited to their investment in a business
Limited liability
Courts may seize a corporations assets(valuable things) but cannot touch the personal property of
Investors
Advantages of partnerships
More talent and money More fundraising Easy to form Limited liability for limited partners Tax benefits
Invests money but are liable for debts only to the extent of their investors
Limited partners
Most common type of partnership
General partnership
Two or more owners who share in the operation of the firm and are financially responsible for its debts
Unlimited liability for general partner
Disadvantages of partnerships
Unlimited liability for general partner
Disagreements among partners
Lack of continuity
An artificial being, invisible and existing only in contemplation(looking thoughtfully) of the law
Corporation
Account for 20 percent of US businesses but generate 90 percent of US sales revenues (income company makes)
Corporation
Corporations may
But hold and sell property
Make and sell products
Commit crimes and be punished for them
Be sued
Examples of private corporations
UPS/Calvin Klein is not available to the general public
Most common form of US corporation
Private corporation
Has stock that is widely held and available for sale to the general public
Public Corporation
Example of a Public Corporation
Ralph Lauren
Two firms combine to create a new company
Merger
One firm buys another
Acquisition
When company A purchases company B is a example of
Acquisition
A firm sells one or more of its business units
Divestiture
A firm sells part of itself to raise capital
Spin-off
Issues in corporate ownership
Merger
Acquisition
Divestiture
Spin-off
What are the three main decisions Amy had to make?
Location
How to raise money
How to structure her business
What kind of business did Amy had to make?
Corporation
