Exam 2 Flashcards
Franchise
Any arrangement in which the owner of a trademark, trade name, or copyright has licensed others to use it in selling goods or services
Debt financing
Secured financing of a new venture that involves a payback of the funds plus a fee
Equity financing
Involves the sale of some of the ownership interest in the venture in returned for an unsecured investment in the firm; gives investors a share of the ownership
Advantages of debt financing
No relinquishment of ownership, greater return on equity, low interest rates
Disadvantages of debt financing
Monthly interest payments required, inhibition of growth and development
Accounts receivable financing
Short-term financing that involves either the pledge of receivables as collateral for a loan or the sale of receivables at a discounted value
Venture capitalists
Valuable and powerful sources of equity funding for new ventures who provide capital for startups, market research, management consulting, contacts, assistance in negotiation
Regulation D
Private placement; Securities and Exchange Commission (SEC) regulations for reports and statements required when selling stock to private parties
Market
A group of consumers who have purchasing power and unsatisfied needs
Primary data
Information that is gathered specifically for the research at hand
Where to find primary data
Surveys, experimentations
Secondary data
Information that has already been compiled
Where to find secondary data
Internal and external sources
Market segmentation
The process of identifying a specific set of characteristics that differentiate one group of consumers from the rest
What role do demographic variables play in market segmentation?
Age, marital status, sex, occupation, income, and location
What role do benefit variables play in market segmentation?
Convenience, cost, style, trends
Five major consumer classifications
Convenience goods, shopping goods, specialty goods, unsought goods, new products
Five steps to developing a market plan
- Appraise marketing strengths and weaknesses
- Develop marketing objectives
- Develop product/service strategies
- Develop marketing strategies
- Determine a pricing structure
Benefits of a business plan for the entrepreneur
The time, effort, research, and discipline required to create a formal business plan forces the entrepreneur to view operating strategies and expected results critically and objectively
Benefits of a business plan for outside evaluators
The business plan provides a tool for use in communications with outside financial sources
Components to consider in packaging the business plan
Appearance, length, cover and title page, executive summary, table of contents
Guidelines for business plan
Keep plan respectably short, organize/package appropriately, orient plan toward future, avoid exaggeration, highlight critical risk, give evidence of effective team, do not over-diversify, ID target market, third person, capture attention
Segments of business plan
- Executive summary
- Business description
- Marketing
- Operations
- Management
- Financials
- Critical risks
- Harvest strategy
- Milestone schedule
- Appendix and bibliography
Milestone schedule
Timetable for the activities to be accomplished
Income statement
Profit and loss (P&L); provides results of the firm’s operations
Income statement categories
Revenues, expenses, net income
Cash flow statement
An analysis of the cash availability and cash needs of the firm that shows the effects of a firm’s operating, investing, and financing activities on its cash balance
Pro forma statement
Projection of a firm’s financial position over a future period or on a future date; educated guess
Fixed costs
Costs that do not fluctuate
