Ch 7. Starting a New Business – Flashcards
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necessary entrepreneurship
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people starting businesses when other job opportunities evaporate.
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Advantages of starting a business from scratch
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1.can mold your own creation 2. create your own competitive advantage 3. experience the challenge of a new enterprise 4. Pride in realizing your personal goals 5. No baggage resulting from others mistakes, location, employees, or products
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Disadvantages of Starting a business from scratch
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1. Facing a higher risk of failure 2. Trouble identifying market needs you can satisfy 3. Spreading the news of your existance 4. dealing with details you didn't foresee
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Types of New Businesses
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1. Labor Intensive (service) 2. Capital Intensive
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E-Business
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A business that shares information, maintains customer relationships and conducts transactions by means of telecommunications networks
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Labor Intensive
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A business that is more dependent on the services of people than on money and equipment
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Capital Intensive
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A business that depends greatly upon equipment and capital for its operations
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Advantages of E-Business
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1. Low start up and overhead costs 2. One-to-one connection 3. Global market reach
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Challenge of E-Business
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1. No one simple e-business model 2. Constantly changing technology
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Characteristics of Successful E-Businesses
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1. sound strategy w/ good business reasons to be online 2. Clear market analysis and create traffic coverage 3. Mastered the logistics of e-commerce 4. Use of Internet to save money and generate revenue 5.Use of Internet to build competitive advantage by increasing the speed of business, reducing cost, enhancing customer service, and improving business processes
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Home-based Business
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A popular type of business that operates from the owner's home rather than from a separate location.
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Facts about Home-based Businesses
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1. fastest-growing segment of business startups 2. Offers advantages of schedule flexibility and low overhead 3. Becoming a more accepted form of business 4. majority of owners work full-time 5. Made possible due to readily available technology
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Advantages of a Home-based business
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1.Control over work hours 2. Convenience 3. Ability to care for domestic responsibilities 4.Low overhead expenses 5. Lack of workplace distractions (co-workers, chatting around the coffee machine) 6. Decreased commute time 7. Tax Advantages
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Disadvantages of a home-based Business
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1. difficulty setting aside long blocks of time 2. Informal , cramped, insufficient workspace at home 3. Demands on family members to cooperate 4. Lack of respect- people may perceive as hobby 5. Domestic interruptions 6. Lack of workplace camaraderie( houses can be lonely 7. zoning issues
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Starting a Business on the side
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1. requires organizational skills and discipline 2. allows for testing market before fully investing 3. prepares you psychologically, experientially, and financially to leave your job
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Characteristics of Fast-Growth Startups
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1. Rely on team effort 2. Headed by people who know their line of work 3. headed by people who have started other businesses 4. Make big bucks for their owners 5. Use new technology for competitive advantage 6. Are better financed, not by much 7. Have exit startegies
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Evaluating a Business idea
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1. Does the idea add value for customers or others? 2. Has the idea's time come for success in the market?
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Evaluating a Business Opportunity
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1. Is it attractive, durable, and timely, and creates or adds value for its buyer or end user 2. Is matched to the right "window of opportunity" in the product's life-cycle
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Window of Opportunity
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A period of time in which an opportunity is available
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Product Life Cycle
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Stages that products in a a marketplace pass through over time
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The effect of Innovation
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1. sustains businesses 2. disrupts businesses
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Stages of the Product Life Cycle
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1. Introduction 2. Growth 3. Maturity 4. Decline
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Corridor Principle
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The idea that opportunities become available to an entrepreneur only after the entrepreneur has started a business
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Sources of Business Ideas
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1. Prior work experience 2. Hobbies and Avocations 3. Chance Happening- Serendipity
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Largest source of businesses ideas come from
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Customers 68%
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Prior work experience serves a business owner by
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1. Help avoid startup errors 2. Begins the building of a competitive advantage
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Serendipity is described as...
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finding something valuable that your are not looking for -- a business opportunity that comes to you unexpectedly.
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The ability to recognize the opportunity requires:
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1. An open mind 2. Flexibility 3. A sense of adventure 4. Good business sense
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The importance of a Comprehensive Business plan to a startup is
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1. provides direction 2. Is required to secure financing
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The importance of writing a business plan is
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1. Market analysis 2. Competitive analysis 3. Startup costs estimate 4. Capital equipment requirements 5. Legal form of business 6. Location of business 7. Marketing plan
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How will you compete?
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1. operational excellence (low prices) 2. Product Leadership (Quality) 3. Customer Intimacy (service)
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Getting Started: Licenses, Permits, and Regulations
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1. file business name with secretary of state 2. Obtain local, state, and federal licenses and permits 3. Obtain professional and specialized licenses 4. Check zoning ordinances 5. Apply for federal and state tax identification numbers
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Getting Started: Taxes
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1. Pay estimated federal and state taxes quarterly 2. Pay employees' Social Security, income, and unemployment taxes.
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Relying of Team efforts
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1. In contrast to low-growth firms, most fast-growth companies are started by partnerships.
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We know that research pays off because:
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Research shows that big ideas occur to small business owners almost twice as often after the business is open.
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Customer Intimacy
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Maintaining a long-term relationship with customer through superior service that results in a competitive advantage
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Thomas Edison
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1847, home schooled by his mother 1,093 patents remain a record Founded GE created the first motion picture made first sound recording
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Taxes for a Sole Proprietorship are filed on a
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Form 1040 Schedule C or C-EZ or F for farming
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Taxes: any payment in excess of $600 for rent, interest, or services from independent contractors....
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is shown on for 1096 and a copy of for 1099 in given to the people who received payment.
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Taxes and Payroll
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1. must withhold 7.51% from employee wages for SSC tax 2. must pay a matching 7.51% for employee SSC tax
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Independent Contractor
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A person who is not employed by a business and, unlike employees, is not eligible for a benefits package
