Entrepreneurial & Small Business Development Flashcards
the SBA defines small businesses in most industries as having ___ or fewer employees
500
small business serves as
employers - they create jobs
tax revenue generators - broaden the tax base
economic supporters - they buy and supply products and services
property owners and renters
providers of economic stability - owned and operated by people who have a stake in the community
the most common entrepreneurial support mechanism offered to small businesses is
technical assistance
assistance may be offered in the following areas
- how to structure
- understanding regulations and codes
- understand tax burden
- writing business plans
- accessing capital
- financial management techniques
- market and competition analysis
- workforce development
- commercialization and tech transfer
- exit strategies
growing consensus that supporting entrepreneurs is a great way to____ and____
grow jobs and the tax base
entrepreneurs should be surrounded by ___, informal or formal
networks
small business owners often learn best from ___
peers
economic gardening provides companies with information related to
markets, customers, and competitors that larger firms typically have
the firs step to understanding an economic gardening program is to
understand the different stages of business growth
start-up growth stage =
new business ventures where innovation drives a person or a group of people to formally start a business
second stage companies =
those that have grown past start-up but not to full maturity (Edward Lowe)
gazelles or high-impact companies =
experience a rapid stage of expansion, growing at least 20% over the previous four years
debt financing
typically delivered as a loans based on the borrower’s ability to repay and collateral.
debt financing is considered “non-dilutive” meaning
the owner does not lose any part of their ownership of the business
equity financing
capital infusion from a venture capital firm or angel investor often used to leverage debt
equity financing is considered “dilutive” because
the entrepreneur is required to give up a portion of ownership
what are some advantages of equity investment?
- provides greater funds to invest in rapid business growth and development
- may be an experienced management team and financial expertise to help the company grow once the VA or angel owns a stake
what are some disadvantages of equity investment
- the entrepreneur loses some control of the business
it is up to the ___ to build networks of angel investors and venture capital funds for the entrepreneur
economic development practitioner
the smallest business type is the _____, which typically employs __ or fewer people
microenterprise; five
the common characteristics of small business are
- innovation
- community ties
- flexibility
- limited capital
innovation =
often more innovative in terms of products and process; SBA says that more than half of the nation’s technological inventions come from small business
community ties =
less likely to relocate and more likely to hire local, also belong to chambers and support local charities and sponsor events
flexibility =
adapt more quickly to rapid changes in market demand
limited capital =
about half of small business owners start their companies with less than $20,000
the majority of small businesses fail within ____months
18
roughly ___% of start-ups survive the first ____, and only ____% a decade
40%; five years; 10%
majority of small firms offer employees ____ and fewer ___ than their corporate counterparts
lower wages; benefits
questions to ask someone who wants to start a business include
- do you know what kind of business you want to start? are you qualified
- can you make a profit?
- have you researched your market? is it a niche?
- do you have written business, financial, and marketing plans?
- do you know where you will locate?
do you know what materials you will need to start? - have you identified financing sources?
- do you know how to manage bookkeeping and financial statements?
- have you consulted regulatory and legal officials?
- have you thought about the pros and cons of being an entrepreneur?
- have you considered the hours?
- do you have a strong sense of self-reliance?
broadly, the stages of entrepreneurial business development are
- creating the idea
- formalizing the plan
- opening the business
- expanding operations
business incubators are mechanisms used to ___
encourage and support young companies until they become viable
incubators provide new firms with ____,
affordable space, technical assistance, managerial support, securing debt and equity financing, finding employees
name some typical incubator services
low rents
shared support services (admin, clean rooms, photo copiers)
networking opportunities
cities tend to back the establishment of incubators that fall into these three categories
- technology-based development
- local economic diversification
- revitalization
technology-based incubators =
generally affiliated with and supported by universities because of the financial, technological, and research resources available
local economic development diversification =
concerned with housing solid, job creating companies like manufacturers and service firms
revitalization =
located in areas with low economic activity like aging industrial districts, declining commercial spaces, or regions with closings or layoffs
one of the most common complaints from small business is about lack of access to ___
capital
to better understand if there are financing gaps, practitioners can ___- local banks and other financing institutions to determine where there is unmet need
survey
if the practioner finds that there is a funding gap for small biz they can
- leverage private investments
- establish private or public/private lending institutions
- package small biz financing options from resources like SBA
one simple financial consideration to make would be to compile a list of ___ from banks, finance companies, revolving loans, etc.
loan programs
an efficient way of closing a financial gap is to
help a small business understand why they can’t access funding
list some ways to expand small business finances
reduce overhead manage cash flow and assets dispose of non-productive inventory and equipment collecting deposits or progress payments using capital assets wisely negotiating low prices from suppliers leasing equipment and locations instead of purchasing establishing trade credit
cash flow refers to :
- how much money is generated
- how that money is spent
- how much cash is actually available based on inflow and outflow
balance sheets show
a business’s financial status for an entire fiscal year on one page
balance sheets can be structured in a ___ or ___ format
monthly or quarterly
_____, ______, and _____ are listed at the top of the balance sheet and _____ are listed at the bottomq
firm assets, credits, cash inflows; cash outflows
____ are positive items on the balance sheet
assets
asset categories on the balance sheet might include
- working capital
- cash from sales
- accounts receivable
- inventory
- fixed assets (machinery, fixtures, furniture)
_____ are negative items on the balance sheet
liabilities
examples of liabilities include
loans, mortgage, accounts payable
EDOs can stimulate and assist small business by
providing technical assistance and training helping with marketing facilitating technology transfer improving access to capital investing in basic infrastructure recognizing successful entrepreneurs assessing client potential for start-ups providing market research
when starting a business development program along-term strategy complete with a ______ should be created
business development plan
in a BD program an EDO could
provide small loans create one-stop shops establish an incubator set up a 504 CDC host networking events offer education and training provide one-on-one counseling
for a practitioner, knowing the territory means
knowing the progress or decline of firms in the market, , what sectors are represented, which companies do well, etc.
for the practitioner, knowing the problems means
having an inventory of successes and failure so that you can understand who is stagnant and won’t be able to survive
knowing the local business history
can help inform new owners about buying trends or sections of the market that will not not be good for success
business climate =
general health of the business community
list some ways to market small business programs to their targets
newspaper articles notices in public spaces periodic mailings from services providers announcements at association meetings websites word-of-mouth
business plans serve as __-
financial, development, and sales tools for entrepreneurs
_____ could be the most important part of starting a new business
development of a sound business plan
typically business plans take ___ to ____ to complete
200; 400
key elements of the business plan include
cover sheet executive summary table of contents business description marketing strategy placement profiles of management team description of staff positions overall schedule
what are the trhee types of financial statements used by creditors are
balance sheet
income statement
statement of cash flows
in preparing the financial section of the business planinclude
- estimated sales
- costs and expenses forecast
- cost of sales/manufacturing
- selling, general, and administrative expenses
estimates sales =
estimating future sales when there is no past track record takes explaining all assumptions and looking at best, worst, and most likely scenarios
costs and expenses forecast =
with research costs and expenses can be precisely estimated
cost of sales/manufacturing =
contact potential suppliers and determine a narrow product cost range
selling, general, and admin costs =
rent, phone, insurance, electric, gas, sewage
fixed costs =
gross margin x variable cost
capital equipment list =
provides an inventory of capital assets for insurance purposes, will help estimate utility and maintenance costs and provides bankers and investors with collateral assets
ratio analysis =
these indicate the financial health of a business and vary by industry
break-even analysis =
this states the exact sales level at which sales cover cost: the venture does not lose or make money
balance sheet =
shows the financial position of a company at a specific point in time
when is a balance sheet normally composed
at the end of the month
what are the three parts of a balance sheet?
assets, liability, equity
income statement are also known as
profit and loss statements
income statements ____ the balance sheet and provide a detailed account of business activity for the first year
compliment
different from balance sheets, income statements look at financial activity over a ___ of time
period
statement of cash flows
provides information about a company’s cash receipts (monetary inflows) into a business and cash payments (outflows)
in essence, statement of cash flows show the ____ of cash
sources and uses
cash flows should be constructed on a ___ basis
monthly
