Business in Action Ch 6 BUSN100 Entrepreneurship and Small-Business Ownership

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1. Highlight the contributions small businesses make to the U.S. economy 2. Identify the common traights of successful entrepreneurs 3. Explain the importance of planning a new business and outline the key elements in a business plan 4. Identify the major causes of business failures, and identify sources of advice and support for struggling business owners 5. Discuss: the principal sources of small-business private financing 6. Explain the advantages and disadvantages of franchising

Behavioral patterns and activities involved in carrying out the functions of management; includes:
-interpersonal
-informational
-decisional roles

Managerial Roles

-They provide jobs
-They introduce new products
-They supply the needs of larger organizations
-They inject a considerable amount of money into the economy
-They take risks that larger companies sometimes avoid
-They provied specialized goods and services

Economic Roles of Small Businesses

The practice of engaging outside firms to handle either individual projects or entire business functions ( page 194) also creates numerous opportunities for small businesses and entrepreneurs. Some companies subcontract special projects and secondary business functions to experts outside the organization, while others turn to outsourcing as a way to permanently eliminate entire departments, and some laid- off employees even become entrepreneurs and sell services to their former employers.

Outsourcing

The positive, forward- thinking desire to create profitable, sustainable business enterprises

Entrepreneurial Spirit

-Managerial incompetence
-Lack of relevant experience
-Inadequate financing
-Poor cash management
-Lack of strategic planning
-Ineffective marketing
-Uncontrolled growth
-Poor location
-Poor inventory control
-Inability to make the transition fro corporate employee to entrepeneur

10 major reasons why new businesses fail

A team of people with subject- area expertise or vital contacts who help a business owner review plans and decisions

Advisory Board

Facilities that house small businesses and provide support services during the company's early growth phases

Business Incubators

The first infusion of capital used to get a business started

Seed Money

Organizations, often not- for- profit, that lend smaller amounts of money to business owners who might not qualify for conventional bank loans

Microlenders

Investors who provide money to finance new businesses or turnarounds in exchange for a portion of ownership, with the objective of reselling the business at a profit

Venture Capitalists ( VCs)

Private individuals who invest money in start- ups, usually earlier in a business's life and in smaller amounts than VCs are willing to invest or banks are willing to lend

Angel Investors

A corporation's first offering of shares to the public

Initial Public Offering

Business arrangement in which one company ( the franchisee) obtains the rights to sell the products and use various elements of a business system of another company ( the franchisor)

Franchise

Name the three basic types of franchises

-A product franchise gives you the right to sell trade-marked goods, which are purchased from the franchisor and resold. Car dealers and gasoline stations fall into this category.

-A manufacturing franchise, such as a soft- drink bottling plant, gives you the right to produce and distribute the manufacturer's prod-ucts, using supplies purchased from the franchisor.

-A business- format franchise gives you the right to open a business using a franchisor's name and format for doing business. This format includes many well- known chains, including Taco Bell, Pizza Hut, UPS Stores, and Curves fitness centers.

Doccument that summarizes a proposed business venture, goals, and plans for achieving those goals

Business Plan

Business owner who pays for the rights to sell the products and use the business system of a franchisor

Franchisee

Company that licenses elements of its business system to other companies (franchisees)

Franchisor

Company that is independently owned and operated, is not diminant in its field, and meets certain criteria for the number of employees or annual sales revene

Small Business

-Guides the company operations and outlines a strategy for turning an idea into a reality
-It helps persuade lenders and investors to finance your business if outside money is requred
-It can provide a reality check in case an idea just isn't feasible

Three essential functions of a business plan

A small business is defined as a company that ___________.
A. independently owned adn operated and has fewer than 1,000 employees
B. is not dominant in its field and has fewer than 100 shareholders
C. is dominant in its field and employes fewer than 1,500 employees
D. has revenew of less than $750,000 and fewer than 500 employees
E. independently owned and operated and not dominant in its field

E. independently owned and operated and not dominant in its field

It is estimated that small businesses employ aproximately ______ of the private-sector workforce in the United States.
A. 1/2 B. 3/4 C. 2/3 D. 1/3 E. 1/4

A. 1/2

"The fire that burns within" that a person has to create a profitable, sustainable business is called ____________.
A. marketing strategy
B. entrepreneurial spirit
C. optimism

B. Entrepreneurial Spirit

The method of going into business combines many of the benefits of independent business ownership with the support of being part of a larger organizationh.
A. franchise
B. intrapreneurship
C. high-growth venture

A. Franchise

Preparing a business plan serves two functions. First, it outlines the strategy for turning a business idea into reality. Second, it _________________.
A. identifies sources of potential employees for the business
B. fulfills the requirements set forth by the Small Business Administration
C. helps persuade lenders and investors to finance the business

C. helps persuade lenders and investors to finance the business

An effective business plan would include all of the following EXCEPT _________.
A. a company overview
B. the business's mission and objectives
C. loan documentation
D. financial projections and requirements
E. the business's management team

C. loan documentation

A formal plan, suitable for presentation to outside lenders or investors, should cover these points:

-Summary
-Mission and objectives
-Company overview
-Management
-Target market.
-Marketing strategy
-Design and development plans
-Operations plan
-Start-up schedule
-Major risk factors
-Financial projections and requirements
-Exit strategy

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