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73 Cards in this Set
- Front
- Back
small business
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independent (that is, not part of a larger business) and has relatively little influence in its market.
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The Importance of Small Business in the U.S. Economy
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The contribution of small business can be measured through its impact on job creation, innovation, and importance to big business
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small business administration(sba)
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government agaency charged with assisting small business
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Popular Areas of Small-Business Enterprise
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services,retailing,construction,wholesaling,finance and insurance, manufacturing and transportation.
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. Services
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This is the fastest-growing segment of small business
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Retailing
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Retailers account for 13% of all firms with fewer than 20 employees; retail businesses let entrepreneurs focus limited resources on narrow market segments
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Construction
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About 13% of businesses with fewer than 20 employees are involved in construction.
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Wholesaling
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Wholesalers buy products from manufacturers and sell them to retailers; wholesalers are the middlemen
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Finance and Insurance
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These firms account for about 4% of all firms with fewer than 20 employees.
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Manufacturing
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More than any other industry, manufacturing lends itself to big business. Still, about 4% of firms with fewer than 20 employees are involved in manufacturing.
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Transportation
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About 3% of all companies with fewer than 20 employees are in transportation and related businesses
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Other
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The remaining 7% or so of small businesses with fewer than 20 employees are in other areas, including research and development laboratories and independent media companies
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Entrepreneurs
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are people who assume the risk of business ownership
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Entrepreneurship
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is the process of seeking business opportunities under conditions of risk.
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Entrepreneurial Characteristics
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resourcefulness, concern for customer relations, a desire for autonomy, the ability to handle ambiguity, a desire for risk taking, a need for personal freedom, and the opportunity for creative expression.
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business plan
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document in which the entrepreneur summarizes her or his business strategy for the proposed new venture and how that strategy will be implemented
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Starting and Operating a New Business
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Another integral part of starting a small business is a well-crafted business plan
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Crafting a Business Plan
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business plan summarizes business strategy for the new venture and shows how it will be implemented
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Setting Goals and Objectives
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A business plan should discuss the entrepreneur’s goals and objectives, the strategies used to obtain them, and how these strategies will be implemented.
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Sales Forecasting
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The sales forecast requires that the entrepreneur demonstrate an understanding of the market, the strengths and weaknesses of existing firms, and the means by which the new venture will compete
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Financial Planning
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This is the entrepreneur’s plan for turning all activities into dollars.
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Starting the Small Business
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choose the industry and market in which he o she plans to compete. small business owners must understand the nature of the enterprise in which they are engaged
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Buying an Existing Business
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Existing businesses have already proved their ability to attract consumers and to establish rapport with lenders, buyers and suppliers, and the community. Most consultants recommend that entrepreneurs buy existing businesses because the odds of success are greater
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Franchising
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franchise agreement involves two parties, a franchisee (the local owner) and a franchiser (the parent company).
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Starting from Scratch
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Risks with this approach are greater than with buying an existing business. Starting from scratch allows the entrepreneur to operate without the commitments, policies, errors, etc., of a predecessor
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Financing the Small Business
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Many sources for business financing are available. Personal resources account for more than two-thirds of all money invested; smaller portions of funding come from banks, independent investors, and government loans
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Venture capital companies
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groups of investors seeking to profit on companies with growth potential; money is invested in return for partial ownership
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Small business investment companies(sbic)
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government-regulated investment company that borrows money from the sba to invest in or lend to a small business
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SBA Financial Programs
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Under the SBA’s guaranteed loans program, small businesses may borrow from commercial lenders with the SBA guaranteeing to repay 75% to 85% of the loan, up to $750,000. Under the immediate participation loans program, the SBA and the bank contribute a share of the money.
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Small Business Development Center (SBDC)
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sba program designed to consolidate information from various discilines and make it available to small business
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Trends in Small-Business Start-Ups
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thousands of new business are started in the us every year
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Emergence of e-Commerce
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The rapid emergence of electronic commerce is the most significant recent trend.
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Crossovers from Big Business
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Many businesses are started by individuals who leave positions in large corporations to put their experience to work for themselves.
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Opportunities for Minorities and Women
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The number of businesses started by minorities and women is growing rapidly
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Global Opportunities
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Many entrepreneurs are finding business opportunities throughout the world.
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Better Survival Rates
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New businesses now have a better chance of survival than ever before; the SBA estimates that at least 40% of all new businesses can expect to survive for six years
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Reasons for Failure
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Four general factors contribute to small-business failure.1.Managerial Incompetence or Inexperience
2)Neglect 3. Weak Control Systems 4. Insufficient Capital |
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Reasons for Success
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Four general factors contribute to small-business success:
1. Hard Work, Drive, and Dedication 2. Market Demand 3. Managerial Competence 4. Luck |
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noncorporate business ownership
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all entrepreneurs must decide which form of legal ownership bes suits their goals
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sole proprietorship
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is owned and usually operated by one person; about 73% of all U.S. businesses are sole proprietorships
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Advantages of Sole Proprietorships
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Freedom, ease in forming, low start-up costs, and tax benefits are the advantages of this form of ownership
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Disadvantages of Sole Proprietorships
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Unlimited liability, lack of continuity, and a possible lack of resources of a single individual are the major drawbacks of this form of organization.
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Partnerships
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general partnership, the most common type, is a sole proprietorship multiplied by the number of partner-owners.
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Advantages of Partnerships
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The ability to grow with the addition of new talent and money, few legal requirements, and tax advantages are benefits of this form of ownership
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Disadvantages of Partnerships
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Unlimited liability in that each partner may be liable for the debts incurred in the name of the partnership, lack of continuity, difficulty of transferring ownership, and little or no guidance for conflict resolution are the major drawbacks of this form of ownership
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Cooperatives
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form of ownership in which a group of sole proprietorships and or partnerships agree to work together for common benefits
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corporation
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business that is legally considered an entity separate from its owners and is liable for its own debts;owners liability extends to the limits of their investments
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Advantages of Incorporation
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include limited liability, continuity, and the ability to raise money.
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Disadvantages of Incorporation
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Difficulty in ease of transferring ownership, control, and cost are drawbacks of incorporation. In addition, double taxation plagues a corporation since a regular corporation must pay income taxes on profits and stockholders must pay taxes on income returned by their investments.
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limited liability
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legal principle holding investors liable for a firms debts only to the limits of their personla investments in it
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tender offer
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offer to buy shares made by a prospective buyer directly to a target corporations shareholders,who then make individual decisions about whether to sell
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double taxation
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situation in which taxes may be payable both by a corporation on its profits and by shareholders on dividend incomes
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Types of Corporations
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classifies as either public or private
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closely held (or private) corporation
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Stock is held by only a few people and is not available for sale to the public
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publicly held (or public) corporation
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When shares are publicly issued,and available for sale to the general public
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S corporation
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is a hybrid of a private corporation and a partnership,organized and operated like a corporration but treated as a partnership for tax purposes
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limited liability corporation
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owners are taxed like partners with each paying personal taxes only,but enjoy the benefits of limited liability
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Professional corporations
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are most likely comprised of doctors, lawyers, accountants, or other professionals..allow them to take advantage of corporate benefits while granting them limited liability and unlimited professional liability
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multinational (or transnational) corporation
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form of corporation spanning national boundaries
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Managing a Corporation
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Once the corporate entity comes into existence, it must be managed by people who understand the principles of corporate governance.
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corporate governance
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roles of shareholders,directors,and other managers incorporate decision making and accountability
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Stockholders
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owner of shares of stock in a corporation
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board of directors
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is the governing body of the corporation that reports to its shareholders and delegates power to run its day to day operation while remaining responsible for sustaining its assets
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officers
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top management team of a corporation
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chief executive officer, or CEO,
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top manager who is responsible for the overall performance of a corporation
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strategic alliance
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two or more organizations collaborate on a project for mutual gain
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joint venture
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when partners share ownership of what is essentially a new enterprise,
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Employee Stock Ownership Plans (ESOP). ESOPs
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allow employees to own a significant share of the corporation through trusts established on their behalf
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Institutional investors
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arrangement in which a corporation holds its own stock in trust for its employees who gradually receive ownership of the stock and control its voting rights
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merger
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occurs when two firms combine to create a new company
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acquisition
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one firm buys another outright
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divestiture
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strategy whereb a firm sells one or more if its business units
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spin-off
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strategy of setting up one or more corporate units as new, independent coporations.
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