Small business Flashcards
Decision to start business:
Genius factor games
Out of necessity when lose of job
Fufilled a dream
Small Business
One that employs fewer than 100 ppl in a manufacturing industry and fewer than 50 employees in a non-manufacturing indutry
6 attributed of success found in small business
Staying close to the customer Autonomy of entrepreurship Productivity through ppl Hands on value driven Simple form-lean staff
Small Business can provide:
Jobs Innovation High productivity Flexibility Higher proportion of Canadian ownership Contribution to society
Advantages of small business ownership
More personal contact with people Independence Skill development Potential financial rewards Challenge Enjoyment
Disadvantages of small business
Risk Stress Need for many abilities Limited financial rewards People conflicts Time demands
Characteristics of successful entrepreneurs:
Achievement Orientation Risk taking Independence, self confidence, self assurance Innovative as Strong verbal and numerical skills Selling skills Problem- solving Abilities Strategic planning Perserverance
Small business successors:
Alertness to change
Ability to attract and hold competent employees
Staying close to customer
Thoroughness w/ operating details
Ability to obtain needed capital
Effectiveness handling of govt laws rules and regulations
Common failures for a small business
Poor or non- existing managment info system Poor controls on management expense Overrealiance on few customers Lack of finacial skill Company is over leveraged Poor cash flow management Company management doesn't ask or help
Entrepreneurs are:
Managers are:
Entrepreneurs are creative, independent and idea-oriented
Managers are problem solving, working with others and develop strategies
Non- quantities assessment of business oppurtunities:
Goals Content of work Lifestyle Capabilities Experience
Non quantative factors of small business:
Income
Fit with stem goal
Fit with strategy
Right aspect of the business
Natural advantages
Competitive advantages
Sales of operation
Advantages of starting a business from scratch:
Owner can choose the type of business and market
Owner can select the equipment
Owner can hire the staff and managers
Disadvantages of starting business from scratch:
Uncertainty of demand
Foreseen problems
Extra time required to establish business
Legal structures
Sole proprietorship:( business owned by single individual)
Advantages: simple inexpensive
Offer individual control over operations
Fewer forms and reports to fill out
Some tax advantage
Disadvantages of some propriotorship:
Unlimited liability
Often difficult to obtain financing
Personal tax rate higher than corp rates
Partnership(includes 2 or more partnership)
Advantages:
Simple and inexpensive to start
Pooling of financial and skill resources
Tax advantages
Disadvantages or partnership
Unlimited liability
Death of partner may terminate business
Greater possibility of disagreements
Advantages of corportion:
Continuity of business exist even if owner does
Easier to raise funds
Commercial credibility
Liability insurance may be less expensive
Disadvantages corp:
Cost more to establish
Greater reporting requirements
Less flexibility
Losses cannot be deducted from personal income
Lender of ten require personal guarantees
Advantages of purchasing a business:
Reduction of risk Reduction of time and set up expenses Reduction of competition Capitalization of business strengths Possible assistance from previous owner Easier planning
Disadvantages of purchasing business
Physical facilities(equipment may be old)
Personnel - (unmotivated employees)
Inventory (hard to sell)
Accounts receivable (accounts may be uncollectable)
Financial condition
Decision about price
Negotiating price
Conditions of the assets
Liquid assets Accounts receivable Inventory Building and equipment System and processes Real estate Goodwill
3 general approaches to valuing business
Use the asset value to determine the price
2:
Earning of the business
3:
Contribution of assets and earnings
Franchising:
A system for selectively distributing goods or service through outlets owned by franchise
Manufacturing franchise:
Producer of a product grants a dealer the right to sell the product
Wholesaler franchiser
Involves a company
Advantages of franchising:
Proven market for the product or service
Advantages of franchising con’t:
Services the franchisor may provide
Steps to become a franchisor
1: establish prototype
