GEB1101:M3-C5:Small Business, Entrepreneurship & Franchises – Flashcards

A small business is one that is independently owned and operated for profit and is not dominant in its field. There are about 27.9 million businesses in this country, and 99.7% of them are small businesses. Small businesses employ more than half the nation's workforce. About 69% of small businesses survive at least two years and about 50% survive at least five years. More than half of all small businesses are in retailing and services.

Such personal characteristics as independence, desire to create a new enterprise, and willingness to accept a challenge may encourage individuals to start small businesses. Various external circumstances, such as special expertise or even the loss of a job, also can supply the motivation to strike out on one's own. Poor planning and lack of capital and management experience are the major causes of small-business failures.

Small businesses have been responsible for a wide variety of inventions and innovations, some of which have given rise to new industries. Historically, small businesses have created the bulk of the nation's new jobs. Further, they have mounted effective competition to larger firms. They provide things that society needs, act as suppliers to larger firms, and serve as customers of other businesses, both large and small.

The advantages of smallness in business include the opportunity to establish personal relationships with customers and employees, the ability to adapt to changes quickly, independence, and simplified record keeping. The major disadvantages are the high risk of failure, the limited potential for growth, and the limited ability to raise capital.

The Small Business Administration (SBA) was created in 1953 to assist and counsel the nation's millions of small-business owners. The SBA offers management courses and workshops; managerial help, including one-to-one counseling through SCORE; various publications; and financial assistance through guaranteed loans and SBICs. It places special emphasis on aid to minority-owned businesses, including those owned by women.

A franchise is a license to operate an individually owned business as though it were part of a chain. The franchisor provides a known business name, management skills, a method of doing business, and the training and required materials. The franchisee contributes labor and capital, operates the franchised business, and agrees to abide by the provisions of the franchise agreement. There are three major categories of franchise agreements.

Franchising has grown tremendously since the mid-1970s. The franchisor's major advantage in franchising is fast and well-controlled distribution of products with minimal capital outlay. In return, the franchisee has the opportunity to open a business with limited capital, to make use of the business experience of others, and to sell to an existing clientele. For this, the franchisee usually must pay both an initial franchise fee and a continuing royalty based on sales. He or she also must follow the dictates of the franchise with regard to operation of the business. Worldwide business opportunities are expanding for small businesses. The SBA assists small-business owners in penetrating foreign markets. The next century will present unique challenges and opportunities for small-business owners.

b. False

a. True

a. True

b. False

a. True

a. True

a. True

c. 66

c. ten; twenty

a. communication, management, and planning.

d. online training network of SBA courses, workshops, and resources.

a carefully constructed guide for the person starting a business

a license to operate an individually owned business as though it were part of a chain of outlets or stores

a person or organization purchasing a franchise

the actual granting of a franchise

an individual or organization granting a franchise

a group of businesspeople who volunteer their services to small businesses through the SBA

one that is independently owned and operated for profit and is not dominant in its field. Small Business Administration (SBA) developed specific "smallness" guidelines for various industries

a governmental agency that assists, counsels, and protects the interests of small businesses in the United States

university-based groups that provide individual counseling and practical training to owners of small businesses

groups of senior and graduate students in business administration who provide management counseling to small businesses

privately owned firms that provide venture capital to small enterprises that meet their investment standards

money that is invested in small (and sometimes struggling) firms that have the potential to become very successful

Small businesses represent of all employer firms, and there is a good probability that you will work for a small business or perhaps even start your own business. 1-Represent 99.7% of all employer firms; 2-employ about half of all private sector employees; 3-pay 43% of total U.S. private payroll; 4-have generated 64% of net new jobs over the past 18 years; 5-create more than half of the non-farm private GDP; 6-hire 43% of high-tech workers (scientists, engineers, computer programmers, and others); 7-are 52% home-based and 2% franchises; 8-made up 97.5% of all identified exporters and produced 31% of export value; and 9-produced 16.5 times more patents per employee than large patenting firms

1-There are about 26.9 million businesses in the U.S. 2-Just over 17,000 employ more than 500 workers 3-In the last decade, the number of small businesses increased 49%. 4-Part-time entrepreneurs have increase five fold and account for one-third of all small businesses 5-70% of new businesses survive at least two years, about 50% survive at least 5 years, and 31% survive at least 7 years 6-The primary reason for these failures is due to poor management stemming from a lack of business know-how 7-Small businesses provide over 50% of the jobs in the U.S.

1. Distribution—retailing, wholesaling, transportation, and communications (about 33% of all small businesses) 2. Service—medical and dental care; watch, shoe, and TV repairs; hair cutting and styling; restaurant meals; dry cleaning; financial services (over 48% of all small businesses) 3. Production—construction, mining, and manufacturing (about 19% of all small businesses)

1-Low initial capital investment 2-Some specific skill requirement 3-High growth and profit potential

The Entrepreneurs

1-The "entrepreneurial spirit" 2-The desire for independence 3-The desire to determine one's own destiny 4-The willingness to find and accept a challenge 5-Personal background 6-Age

1-"Had enough" of working for someone else 2-High-tech opportunities, especially for teens 3-Losing a job and deciding to start a business 4-An idea for a new product 5-An opportunity presents itself

1-Owned at least 51 percent of small businesses in 2008 2-Own 66 percent of home-based businesses 3-7.8 million women-owned businesses in the U.S. provide almost 7.6 million jobs and generate $1.2 trillion in sales

1-High-tech entrepreneurship is exploding 2-Face unique pressures juggling schoolwork, social live, business workload 3-Need skills for planning, persistence, patience, people management, generate profit

1-Lack of capital and cash flow problems 2-Lack of Management skills 3-Overexpansion

1-Providing technological innovation 2-Providing Employment 3-Providing Competition 4-Filling needs of society and other businesses

1-Innovation among small-business workers is higher than among workers in large businesses 2-Small firms produce 2.5 times as many innovations as large firms relative to the number of persons employed 3-More than half of the major technological advances of the 20th century originated with individual inventors and small businesses 4-Inventions may spark new industries or contribute to established industries

1-Small firms hire a larger proportion of younger and older workers, women, and part-time workers 2-Small businesses provide 67 percent of workers with their first job and initial job skills 3-Small businesses represent 99.7 percent of all employers and employ over 50 percent of the private work force 4-Small businesses provide 2/3 of the net new jobs added to the economy

Small firms can compete with large firms, forcing the larger firm to become more efficient and responsive to customer needs

1-Small firms can meet the special needs of smaller groups of customers 2-Small firms can act as specialized suppliers of goods and services to larger businesses

1-Personal relationships with customers and employees 2-Ability to adapt to change 3-Simplified record keeping 4-Independence 5-Advantages of sole proprietorship ---Keeping all profits ---Ease and low cost of going into business ---Keeping business information secret

1-Risk of failure 2-Limited potential 3-Limited ability to raise capital

A carefully constructed guide for the person starting a business

1-Communication 2-Management 3-Planning

1-What is the nature and mission of new venture? 2-Why is it a good idea? 3-What are the goals? 4-How much will it cost?

1. Introduction. Basic information such as the name, address, and phone number of the business; the date the plan was issued; and a statement of confidentiality to keep important information away from potential competitors. 2. Executive Summary. A one- to two-page overview of the entire business plan, including a justification why the business will succeed. 3. Benefits to the Community. Information on how the business will have an impact on economic development, community development, and human development. 4. Company and Industry. The background of the company, choice of the legal business form, information on the products or services to be offered, and examination of the potential customers, current competitors, and the business's future. 5. Management Team. Discussion of skills, talents, and job descriptions of management team, managerial compensation, management training needs, and professional assistance requirements. 6. Manufacturing and Operations Plan. Discussion of facilities needed, space requirements, capital equipment, labor force, inventory control, and purchasing requirement. 7. Labor Force. Discussion of the quality of skilled workers available and the training, compensation, and motivation of workers. 8. Marketing Plan. Discussion of markets, market trends, competition, market share, pricing, promotion, distribution, and service policy. 9. Financial Plan. Summary of the investment needed, sales and cash flow forecasts, breakeven analysis, and sources of funding. 10. Exit Strategy. Discussion of a succession plan or going public. Who will take over the business? 11. Critical Risks and Assumptions. Evaluation of the weaknesses of the business and how the company plans to deal with these and other business problems. 12. Appendix. Supplementary information crucial to the plan, such as résumés of owners and principal managers, advertising samples, organization chart, and any related information.

1. Introduction 2. Executive Summary 3. Benefits of the Community 4. Company and Industry 5. Management Team 6. Manufacturing & Operations Plan 7. Labor Force

1-Management courses and workshops 2-Service Corps of Retired Executives (SCORE) 3-Help for minority-owned small businesses 4-Small-business institutes (SBIs) 5-Small-business development centers (SBDCs) 6-SBA publications

1-Regular business loans Loans are made by private banks but are partially guaranteed by the SBA 2-Small-business investment companies a)Venture capital: money invested in small firms that have the potential to become very successful b)Small business investment companies: privately owned firms that provide venture capital to small enterprises that meet their investment standards

1-Among the segments of society hardest hit -Layoffs -Closures 2-Government assistance to improve market conditions -American Recovery and Reinvestment Act -Affordable Care Act -New tax cuts and credits -SBA loans with favorable terms

1-A manufacturer authorizes retailers to sell a certain brand-name item 2-A producer licenses distributors to sell a product to retailers 3-A franchisor supplies brand names, techniques, or services instead of a complete product

1-Franchising has expanded with the growth of the fast-food industry 2-Franchising is attracting more women and minority business owners than ever before 3-Dual-branded franchises, in which two franchisors offer their products together, are a new trend

1-The success rate for franchises is significantly higher than that for other small businesses 2-The vast majority, 94%, of franchise owners report that they are successful 3-Too rapid expansion, inadequate capital or management skills, or other problems can cause franchises to fail

1-Fast and well controlled distribution of its products 2-No need to construct and operate its own outlets 3-More working capital available for expanded production and advertising 4-Franchising agreements maintain product and quality standards 5-Motivated work force of franchisees

1-Opportunity to start a proven business with limited capital 2-Guaranteed customers 3-Franchiser available for advice and guidance 4-Materials for local promotional campaigns and participation in national campaigns 5-Cost savings when purchasing in cooperation with other franchisees

1-Failure of the franchisee to operate franchise properly 2-Disputes with and lawsuits by franchisees over the terms of the franchise

1- Franchisor retains a large amount of control over the franchisee's activities 2-Franchisor opening competing franchises within the franchisee's market

1-Growing interdependence of national and international economies as trade barriers diminish 2-Instant communications shrinks distances and expands business opportunities 3-The Internet is the favored strategy for growth for small businesses. Technology provides leverage and power to reach markets previously limited to large corporations 4-The SBA offers counseling on how and where to market overseas 5-Small businesses must adapt to demographic and economic changes in the world marketplace

True

False

False

True

False

False

False

False

False

True

b-Mismanagement resulting from lack of business know-how

have a relatively low initial investment.

the entrepreneurial spirit.

They over-expand without proper planning.

technical innovation.

Personal relationships with customers

e-She should consider alternative sources of financing because banks provide only a portion of the total capital to small businesses.

retired and active businesspeople from different industries

franchisor.

Consider purchasing a franchise.

b. False

d. $600.

a. True

c. The obligation to attend monthly franchise meetings

b. False

a. Small Business Institute

b. construction.

c. increased 49 percent.

b. False

e. gender

b. False

a. True

b. A small business with a particular problem requests free counseling and a SCORE volunteer assists with this issue.

a. True

b. False

c. $300,000.00

b. As a concise document, the business plan communicates information to a potential investor or lender.