Question 1

entrepreneurial opportunity

Accepted Answer

an economically attractive and timely opportunity that creates value both for prospective customers and for the firm\'s owners

Question 2

bootstrapping

Accepted Answer

entrepreneurs using others\' resources; having others fund the business

Question 3

qualities of entrepreneurs

Accepted Answer

1. commitment and determination (tenacious and decisive)  2. leadership (self-starters)  3. opportunity obsession (aware of market needs)  4. tolerance of risk  5. creativity, self-reliance, adaptability (flexible)  6. motivation to excel (goal-oriented)

Question 4

franchisees

Accepted Answer

function as limited entrepreneurs due to contractual arrangements with organizations

Question 5

social entrepreneurship

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entrepreneurial activity with an embedded purpose; comes up with innovative solutions to society\'s most pressing needs, problems, and opportunities

Question 6

entrepreneurs must realize that the customer is the ____

Accepted Answer

boss

Question 7

paradigm shift

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change how we fundamentally see a situation

Question 8

three types of paradigm personalities

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1. technician  2. manager  3. entrepreneur

Question 9

technician personality

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-steady worker, experienced at doing what they know best  -short-term oriented  -traditional marketing strategies  -paternalistic  -does not delegate authority  -relies on personal selling

Question 10

manager personality

Accepted Answer

-pragmatic, assuming responsibility for the planning, order, and predictability of the business  -avoids paternalism  -delegates authority  -uses different sales approach  -seeks multiple financial sources  -likes order & planning operations

Question 11

entrepreneur personality

Accepted Answer

-takes idea and turns into an opportunity  -asks how the business works  -sees business as a system  -visualizes the future  -first sees whole picture then develops strategies

Question 12

small businesses can ____

Accepted Answer

surpass the performance of larger firms

Question 13

quality is independent of firm size (t/f)

Accepted Answer

true

Question 14

entrepreneurial legacy

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Material assets and intangible qualities passed on to both heirs and society.

Question 15

integrity

Accepted Answer

-they do not behave in a way that is consistent with the noble values, beliefs, and principles they claim to hold  -refers to a general sense of honesty and reliability that is expressed in a strong commitment to doing the right thing, regardless of the circumstances

Question 16

stakeholders

Accepted Answer

described as those individuals or   groups who either can affect the performance of the company or are affected by it

Question 17

when small businesses have more than one owner, high standards of integrity -

Accepted Answer

require an honest attempt to promote the interests of all the owners, which include a commitment to financial performance and protection of the firm\'s reputation

Question 18

According to FBI statistics, employees who steal supplies, merchandise, tools,   or equipment from work cost employers as much as $150 billion each year,8 a figure that does not even include losses from embezzlement (that is, when an employee steals money from the firm)

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Question 19

social responsibilities

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A company\'s ethical obligations to the   community.

Question 20

Entrepreneurs must reconcile their social obligations with the need to earn profits.   Earning a profit is absolutely essential, and meeting the expectations of society can be expensive

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Question 21

One glaring example of unethical behavior by small firm management is fraudulent reporting of income and expenses for income tax purposes. This conduct includes skimming (that is, concealing some income), as well as improperly claiming personal   expenses to be business-related.

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Question 22

Research has shown that customers are less likely to decide to purchase if they have significant questions about the product or service that the new venture is offering, those who represent and/or run the business, and the organization itself.  (We call these features PRO   factorsâstanding for Products, Representatives, and the Organizationâto emphasize   that they can promote firm performance when customers are satisfied with them.)

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Question 23

intellectual property

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Original intellectual creations, including   inventions, literary creations, and works of art, that are protected by patents or copyrights

Question 24

ethical imperialism

Accepted Answer

The belief that the ethical standards of one\'s own   country can be applied universally

Question 25

ethical relativism

Accepted Answer

is troublesome, because it implies that anything goes if the local culture accepts it

Question 26

But integrity yields other important benefits as well. In his book Integrity Is All You\'ve Got, Karl Eller observes that through his long career as a successful entrepreneur, he has seen one constant: the crucial role of integrity to achievement in business. As he puts it, \"Those who have [integrity] usually succeed; those who don\'t have it   usually fail.

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Question 27

Though BBBs report relevant information to law enforcement agencies, they are not   government entities, and they cannot collect money or impose penalties on companies that engage in unethical business practices

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Question 28

The Ethical Decision-Making Process

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STEP 1: DEFINE THE PROBLEM  STEP 2: IDENTIFY ALTERNATIVE SOLUTIONS TO THE PROBLEM  STEP 3: EVALUATE THE IDENTIFIED ALTERNATIVES  STEP 4: MAKE THE DECISION  STEP 5: IMPLEMENT THE DECISION  STEP 6: EVALUATE THE DECISION

Question 29

We need to emphasize, however, that the sustainability news for small business is   not all good. For example, some firms are adversely affected by new laws passed to   protect the environment. Businesses such as fast lube and oil change centers, medical waste disposal operations, self-service car washes, and asbestos removal services have been especially hard hit by expanding environmental regulations

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Question 30

In any case, resources are available to help you avoid the potentially disastrous   consequences of noncompliance. The Small Business Administration is prepared to lead you through the sometimes-choppy waters of environmental law, and the U.S. Environmental Protection Agency (EPA) offers the Small Business Gateway, an Internet portal that will connect you to information, technical assistance, and solutions to challenges related to the environment

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Question 31

We   should emphasize that identifying imaginative new products or services that may lead to promising business ventures is so central to the entrepreneurial process that it has its own nameâopportunity recognition

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Question 32

Several studies have identified sources of ideas for small business startups. Exhibit 3.2 shows the results of one such study by the National Federation of Independent Business (NFIB), which found that prior work experience accounted for 45 percent of new ideas

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Question 33

One of the primary sources of startup ideas is personal experience. Often, knowledge gleaned from a present or former job allows a person to see possibilities for modifying an existing product, improving a service,   becoming a supplier that meets an employer\'s needs better than current vendors, or duplicating a business concept in a different location

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Question 34

Another source of new startup ideasâaccidental discoveryâinvolves something called serendipity

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Question 35

When It Comes to Ideas, Borrow Heavily from Existing Products and Services   Or Other Industries

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Question 36

To outline these dynamics, Michael Porter   lists five factors that determine the nature and degree of competition in an industry:

Accepted Answer

â¢ New competitors. How easy is it for new competitors to enter the industry?   â¢ Substitute products/services. Can customers turn to other products or services   to replace those that the industry offers?   â¢ Rivalry. How intense is the rivalry among existing competitors in the industry?   â¢ Suppliers. Are industry suppliers so powerful that they will demand high prices   for inputs, thereby increasing the company\'s costs and reducing its profits?   â¢ Buyers. Are industry customers so powerful that they will force companies to   charge low prices, thereby reducing profits?

Question 37

The search   for a startup opportunity can actually begin with an inside-out analysis, one that catalogues the startup\'s sources of potential strengths (including those that can reasonably be obtained or created) and the unique competencies that can be formed from them

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Question 38

a SWOT analysis

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(standing for Strengths, Weaknesses, Opportunities, Threats), which provides a simple overview of a venture\'s strategic situation

Question 39

To follow a cost-based strategy

Accepted Answer

a firm must hold down its costs so that it can compete by charging lower prices for its products or services and still make a profit

Question 40

differentiation-based strategy

Accepted Answer

an approach that emphasizes the uniqueness of a firm\'s product or service (in terms of some feature other than cost)

Question 41

feasibility plan before jumping into the business can avoid fatal flaw, which is:

Accepted Answer

a circumstance or development that, in and of itself, could render a new business   unsuccessful

Question 42

franchise

Accepted Answer

as a business model that involves one business owner licensing trademarks and methods to an independent entrepreneur

Question 43

franchisor

Accepted Answer

the owner of a trademark, service   mark, trade name, or advertising symbol

Question 44

franchisee

Accepted Answer

an individual or group wishing to use that identification in a business

Question 45

Area developers

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who are individuals or firms that obtain the legal right to open several outlets in a given area

Question 46

piggyback franchising

Accepted Answer

which refers to the operation of a retail franchise   within the physical facilities of another business. An example of this occurs when Subway operates a restaurant within a truck stop

Question 47

There have also been complaints of churning, which is:

Accepted Answer

actions by franchisors to void the contracts   of franchisees in order to sell the franchise to someone else and collect an additional fee

Question 48

The Costs of Being a Franchisee

Accepted Answer

1. Initial franchise fee: The total cost of a franchise begins with an initial fran-  chise fee, which may range from several hundred to many thousands of dol-  lars  2. Investment costs: Significant costs may be involved in renting or building   an outlet and stocking it with inventory and equipment (insurance as well)  3. Royalty payments: A royalty is a fee charged to the franchisee by the   franchisor. It is calculated as a percentage of the gross income that the   franchisee receives from customers for selling the franchised products and   services  4. Advertising costs: Many franchisors require that franchisees contribute to   an advertising fund to promote the franchise. These fees are generally 1 to   2 percent of sales, sometimes even more

Question 49

due diligence

Accepted Answer

Regardless of the source of the lead, a business opportunity requires careful evaluation

Question 50

If a seller cannot supply   the documents on this list, you may want to back away

Accepted Answer

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Question 51

FINDING OUT WHY THE BUSINESS IS FOR SALE

Accepted Answer

â¢ Retirement   â¢ Illness   â¢ Partnership or family disputes   â¢ Unprofitability or failure of the business   â¢ Burnout   â¢ Lack of capital for growth potential

Question 52

As both a legal and an ethical matter, the prospective buyer may expect to sign   a nondisclosure agreement:

Accepted Answer

the buyer promises the seller that he or she will not reveal confidential information or violate   the trust that the seller has offered in providing the information

Question 53

Although numerous techniques are used for valuing a company, they are typi-  cally derivations of three basic approaches:

Accepted Answer

(1) asset-based valuation  (2) market-comparable valuation, and   (3) cash flow-based valuation

Question 54

You should also consider a number of nonquantitative factors in evaluating an existing business:

Accepted Answer

Market, competition, future development, legal commitments, union contracts, buildings, product prices

Question 55

The purchase price of a business is determined by negotiation between:

Accepted Answer

a buyer and seller

Question 56

For family businesses, a key issue in the transfer of ownership and management is the retention or modification of the organizational culture:

Accepted Answer

a pattern of behaviors and beliefs that characterize a particular firm

Question 57

THE FEAR OF COMMITMENT

Accepted Answer

1. Fear of failure. If I really take ownership of my life, I might fail.  2. Fear of success. If I succeed, then others will expect more of me in the future.  3. Fear of commitment. If I never really try, then I will never really fail.arents. It would break my dad\'s heart if I worked for   another company instead of the family business.  5. Fear of disappointing others. If I don\'t go with all my friends to an internship in   Chicago, I might lose their friendship.

Question 58

Family unity and cohesion were found to be critical to family business suc-  cess, especially when family members identified unity as an important goal.   In particular, 87 percent of respondents said family members share the same   values

Accepted Answer

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Question 59

Considering business matters such as strategy, ownership, and management,   82.9 percent of the owners said that they were completely or very unified as an   ownership group

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Question 60

Unity of the ownership group is significantly associated with family com-  mitment to the business in each generation, predictions of sales growth, and demonstrations of past growth

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Question 61

Family unity affects other stakeholders as well. Unified families reported they   were more likely to share their values with customers and employees, with   85 percent sharing to a large extent with both groups

Accepted Answer

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Question 62

Another sibling dilemma has been labeled the predator/parasite conflict:

Accepted Answer

Family members working in the firm are sometimes seen by relatives who work outside the company as predatorsâextracting money from the business that the outsiders believe   is rightfully theirs. From the inside, family members external to the firm are seen, in   turn, to be parasites. That is, they have ownership rights, receive dividends, or make   other claims on the business without contributing to its success

Question 63

Those outside the family are sometimes caught in the crossfire between family   members who are competing with each other. It is difficult for outsiders to maintain strict neutrality in family feuds. If a nonfamily executive is perceived as siding with one of those involved in the feud, she or he may lose the support of other family members

Accepted Answer

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Question 64

Honest and candid discussion can be difficult, so it is standard for family leaders to invite an outside expert or facilitator to coordinate early sessions. The facilitator can help develop an agenda and set ground rules for discussion

Accepted Answer

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