Entrepreneurial & Small Business Development Strategies Flashcards
Unlimited Tax G.O. Bonds
Tax-exempt bonds secured through taxes that are levied without rate or amount limitations in order to repay the principal and interest of the bond.
They are typically used to finance public works infrastructure and land acquisition for blight elimination.
What should you ask potential entrepreneurs to gauge where they are in the process?
Have you researched your target market?
Written business, financial, and marketing plans?
Identified potential financing solutions?
Made a list of materials needed to start business?
Public policy supports entrepreneurs at the local level for what reasons?
They add to the net-sum gain of jobs.
Homegrown businesses are more likely to remain loyal and stay in the area in the future.
With increased use of technology, more people are able to run businesses out of their home.
Small businesses respond quickly to market shifts, whereas larger manufacturing companies do not have the same flexibility.
Why is it hard for entrepreneurs to secure capital?
They are considered too risky because they often lack collateral, significant credit history, and a formal business plan.
They typically require smaller loans and conventional lenders prefer to provide large loans to help lower the transaction cost per loan.
Some of the most common reasons for small business failure include
Insufficient preparation, lack of understanding of government regulations, under-capitalization
What benefits do small businesses give to the community?
They affect local competitiveness, diversify the economic base and stimulate economic development.
More specifically:
Employee: create new jobs; hire individuals entering the job market
Tax Revenue Generators: broaden the tax base; property and income tax
Economic Supporters: buying and supplying local products and services.
Property Owners and Renters: lease space from local property owners; fill vacant storefronts downtown.
Providers of Economic Stability: Small homegrown firms are owned and operated by people who have a personal stake in the community and are more likely to remain there.
What kind technical assistance can be provided to small business?
Business plan development
Assistance with grant and loan applications
Advice regarding financing, marketing, and product development
Site selection and workforce development assistance.
What are the general four stages of development for a small business/entrepreneur?
- Creating the business idea
- Formalizing the business plan
- Opening the business
- Expansion and growth
What technical service does a SBDC provide?
A nationwide network of one-stop center that provides information, training, one-on-one consulting, and workshops.
What technical service does SCORE provide?
The Service Core of Retired Executives.
Nonprofit association supported by SBA. They match small businesses that need expert advice with mentors in the business community who volunteer to share their management and technical expertise.
Women’s Business Centers
Provide comprehensive training and counseling to assist women in starting and growing small businesses.
SBA Veterans Business Outreach Center Program
Business training, counseling, mentoring and referrals for eligible veterans owning and considering starting a business.
The SBA 7(j) Management and Technical Assistance Program
Provides training, executive education, and one-on-one consulting to eligible small businesses.
What is a business incubator and what are its benefits?
A business incubator encourages and supports young companies until they become viable. Incubators provide affordable space and technical and management support while helping new firms secure equity and long-term debt financing.
They offer low rent, shared support services like equipment, and offer network opportunities.
What steps can a practitioner take to assess the local financing situation?
First, determine why there is a problem accessing capital in the area; conservative banking community?
Second, determine what role the organization will play in solving the client’s financing problem? Will the practitioners leverage private sector investment?
What information should an EDO know about its community before being an asset to businesses?
The territory: know the types of businesses in the area, which business sectors are represented, how that representation is divided, which business typically flourish, and which do not.
Problems: a practitioner must be constantly aware of the issues and conditions that small business owners struggle with.
Local business history: by knowing local buying trends, a practitioner can discourage an entrepreneur from opening a business in a section of the City that traditionally has never housed successful businesses
Business Climate.
How to relate.
Sole Proprietorship
One person who has sole ownership, control, and responsibility.
General Partnership
Two or people are included in the business enterprise. The owners bear unlimited liability for all debts and liabilities.
Limited Partnership
Three or more people, and there can be no fewer than two general partners and one limited partner. The limited partner has limited liability and is not involved in the regular management of the organization (less responsibility and involvement).
Corporations
A separate legal body that is owned by shareholders. Shareholders are responsible for for electing a board of directors who operate and control the corporation.
Positive: accumulate income and pay taxes at a lower marginal rate than an individual, not affected by death of owner, credible.
Limited Liability Companies and partnerships
Provide the protection of a corporation with the flexibility of a partnership. Combine the limited liability that a corporation affords its shareholders with the tax status a partnership receives.
S Corporation
Elect to be treated under Subchapter S of the IRS code. Individual shareholders pay corporate net income personally, as though it were a partnership.
C Corporation
Standard state-formed corporation. No limit on number of shareholders.
How should an EDO prep to assist small businesses/entrepreneurs?
- Hire the right staff
- Market the program to reach entrepreneurs
- Screening process; pick only the ready entrepreneurs
What is Economic Gardening?
Gardening means growing jobs in the community through the provision of entrepreneurial support services instead of recruiting employers with attraction activities. Simply, gardening is considered an inside-out vs. outside-in strategy for economic development.
It works well when a small business owner who has a vested interest in the community, is ready to enter a growth stage.
What are the three stages of growth?
- Start-up companies: new business ventures.
- Second-stage companies: those that have grown past the start-up stage but have not grown to maturity. They have enough employees to exceed the comfortable control span of one owner/CEO and benefit from adding professional managers, but they do not yet have a full-scale professional management team.
- Gazelles or high-impact companies: Gazelles often emerge in business-to-business markets where they can capitalize on niche opportunities. Most importantly, gazelles experience a rapid stage of expansion, growing at least 20% per year over the previous four years. They are usually small-or medium-sized companies.
When working with start-ups and second stage companies, what are the main features of a gardening program?
Connectivity: there is an environment of teaching, mentoring, and networking.
Market Research: emphasis on high power tools for competitive intelligence, i.e. market databases, GIS.
Community and Workforce Development and Infrastructure: an environment rich in community assets including education, community amenities, meeting places, and incubators.
What is the role of the economic developer in an economic gardening program?
To act as a facilitator, leveraging public and private sector resources available in the region and beyond.
What makes for a successful economic gardening program?
Having first conducted a thorough assessment of the existing entrepreneurial climate in the area.
Have assess to market research/information.
The economic developer should leverage each community’s strengths when developing a program; tailor it community’s needs.
Economic gardening’s success relies on the creation and growth of external connections.
Economic gardening programs produce the best results when they are integrated with the existing development structure of a community.
Universities, community colleges and other institutions of higher learning have a unique knowledge-base that can assist gardening programs.
What benefits do businesses receive from economic gardening?
The program can help businesses strategically allocate limited resources to target new market segments and reach new consumers. They learn how to network.
Before writing a business plan what five points should a business address?
- Express: Why would customers use your service and not other competitors?
- Explain: why larger established companies won’t push you out?
- Project: financial returns and achievable financial needs
- Describe: why are you able to start this business? what’s your background knowledge and skills?
- Define: personal goals, current needs that will allow you to devote the next 5-10 years to this venture.
What is the suggested outline for a a business plan?
Cover Sheet Executive Summary Table of Contents The Business Financial Data Cash Flow Projection Supporting Documents
Market Segmentation/Identification
To identify a market, first classify the venture’s industry and the principal consumer groups within that industry.
Demographics: age, sex, income, education level, etc.
Psychographics: lifestyle, interests, personality, etc.
Geography: rural, suburban, urban, etc.
Behavior: cultural values, motives, social status, etc.
Industry/Competitive Analyses
Industry Analysis:
Are firms entering or exiting the industry? How do firms in the industry compete; on pricing? product quality? production capability?
How do firms deliver the product to consumers; direct mail? wholesalers?
What impact will political, environmental, social, and technological changes have on the industry?
Competitive Analysis
The strengths and weaknesses of competing firms must be realistically assessed, and the market share of each firm should be determined.
Entrepreneurs should read competitor financials, examine competing products and observe their marketing strategies to find out how they are doing.
Marketing Strategy
The four P’s of marketing: Product, Price, Placement, and Promotion.
What is the product?
What is the pricing strategy?
Where will the product be placed?
Where will the product be promoted?
What are the three pricing strategies?
Multiplied cost pricing: mark-up pricing
Expected share pricing: prices are set at competitive levels to maintain market share.
Perceived value pricing: prices are set at intuitive levels to reflect product scarcity or consumer value resulting from unique product features.
What are four basic promotional methods?
Advertising
Personal Sales
Public Relations
Social Media Networking
What is on a balance sheet?
Assets, liabilities, equity
What is on an income statement?
Net sales Revenues Cost of goods sold Gross profit Other income Sales and general administrative expenses Net income
What is on a statement of cash flows?
Estimated sales
Costs and expenses forecast
cost of sales/manufacturing
selling, general, and admin expenses
What is the equation for working capital?
Current Assets - Current Liabilities
What is the equation for current ratio?
Current Assets / Current Liabilities
Break-even point calculation
Fixed costs / (Gross margin x Variable costs)
Fixed costs
office overhead (rent, salaries, taxes), interest charges on loans/mortgages, and depreciation.
Gross Margin
Sales minus the final cost of goods sold
Variable costs
commission, variable labor, and other industry specific costs that fluctuate with the amount of sales
Pro-forma
An income statement that shows future activity
What are the four basic areas in which incubators assist their tenant businesses?
- The incubator organization/environment
- Multi-tenant Real Estate
- Business Consulting Services
- Shared Office Services
What are the three objectives incubators are used to meet?
Technology-based development: through incubator projects, colleges and universities commercialize technology, improve links with community business and industry, and create student employment opportunities.
Economic Diversification: incubators that serve to diversify the economic base should be strongly integrated into the community.
Community Revitalization: these incubators are located in areas with low economic activity like aging industrial districts, declining commercial areas, or areas experiencing plat closings or major layoffs. They focus on providing tenants with business basics.
What are the overall steps if you were to open a business incubator?
- Feasibility Study
- Site Selection
- Choose an Incubator
- Incubator Services
- Entrance & Graduation Policies
- Measuring Incubator Impact
- Funding Sources
What does a feasibility study entail?
Before establishing an incubator, a feasibility study must be done to reveal whether a community can support a small business incubator.
Factors to consider are the local economic base, potential incubator sites, the enterprise support network within the community, and state and federal assistance programs.
The study should begin by assessing the market niche of small businesses likely to seek space in a new incubator.
It should include an analysis of potential incubator sites. The size, cost and condition of the space can determine whether the new incubator can afford to purchase or lease a building.
A comparison of cash flow analyses should be conducted at various incubator sites to determine the minimum rental rates necessary to develop a financially independent program.
The study should identify establishments that might become part of the incubator management structure, and the different goals of these groups.
What community and economic base information should economic developers analyze when conducting a feasibility study?
The community’s business climate and network of organizations that affect economic development.
The number and type of new businesses registered annually.
New business registrations at the earliest stage.
Severe or sudden job loss data.
Size and skill-level of workforce.
What are the crucial features an EDO must investigate for incubator site selection?
condition fire sprinkler system environmental audit utilities shipping dock access access for employees parking security advantages and disadvantages restrooms elevator cranes
What are some potential problems and pitfalls an EDO can find during site selection?
liability (insurance costs) safety problems heating/cooling efficiency costs and taxes zoning location accessibility broadband internet access
For communities that have “done their homework” and determined that a small business incubator is both needed and feasible, what is the next step?
involve key stakeholders, including the EDO board of directors and management, in developing a mission statement.
It should specify the primary reason for the incubator’s existence, establish the scope of the incubator’s activities, provide overall direction for the incubator, and reflect the incubators unique strengths.
Building evaluation checklist includes
size and number of floors ceiling heights exterior appearances roof integrity etc.
Every incubator offers a set of services specifically tailored to help tenants grow and develop into successful, independent companies; what are the three types of services?
- Logistical or physical services: custodial services, conference rooms, lunch room, furniture rental.
- Shared office support services: receptionist, clerical services, word processing, bookkeeping.
- Management consulting services: marketing, accounting, preparation of business plans, legal services.
What are three special types of incubator programs?
Virtual incubators: effective in rural areas, primarily provide clients with networking opportunities and business expertise.
Retail incubators: typically smaller than regular incubators. They are market driven, dependent on shoppers so location is very important.
Co-working collaborative spaces: offers entrepreneurs small office facilities and conference rooms, but not much more than that.
What is the main gaol of a business incubator?
to graduate tenants into the community once they’re able to operate successfully independent of the incubator.
Entrance criteria into an incubator
Does the client have a written business plan?
Is the business a new start-up or an existing small business that hasn’t grown to its full potential?
Does the company have the potential to create net new jobs?
Is the business able to pay operating costs and attract the capital that’s necessary to survive?
Graduation policies for an incubator
- Graduated rent schedule: offer an incentive for tenants to move out.
- Lease terms: establish a tenant’s exit date as a part of the original lease agreement.
- Facility purposes: require tenant businesses to meet certain criteria to remain in the incubator.
What are the ten basic metrics for incubators to track annually to measure impact?
- number of current clients
- total number of graduates since program inception
- number of graduate firms still in business or merged or acquired
- number of people currently employed full-time by client and graduate firms
- number of people currently employed part-time.
- current monthly salaries and wages paid by client and graduate firms
- gross revenues for the most recent full year for client and graduate firms.
- dollar amount of debt capital raised in most recent full year by client and graduate firms
- dollar amount of equity capital raised in most recent full year by client and graduate firms
- dollar amount of grant funds raised in most recent full year by client and graduate firms
mentors
provide entrepreneurs and small business owners with real world experiences in arranging financing, managing staff, managing cash flow, selling products, etc.
common characteristics of small businesses
innovative, community ties (hire local), flexibility (ability to adapt quickly), limited capital to start
what are the basic business development stages
creating the business idea
formalizing the business plan
opening the business
expanding operations
