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46 Cards in this Set
- Front
- Back
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What are Sole Proprietorships?
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- Unlimited Liability
- 1 Owner - NO Continuity of Ownership - Limited ability to raise money - Easy to Create/Very Inexpensive |
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What are Partnerships?
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2 TYPES:
- General: - All partners are Equal - Limited: - 1 General Partner, All other partners are Limited Partners. - The General Partner has UNLIMITED LIABILITY - The Limited Partners are Liable up to what they invest. |
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71.6% of all business entities are __________ and has 4.9% of total US Sales.
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Sole Proprietorships
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20.2% of all business entities are __________ and has 84.7% of total US Sales.
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C Corps
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5.4% of all business entities are __________ and has 8.8% of total US Sales.
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Partnerships
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2.9% of all business entities are __________ and has 1.7% of total US Sales.
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LLC's and Sub S
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What are LLC's?
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- Unlimited Number of Owners
- Multiple Classes of Stock - Foreigners and Corps can be owners - Can have as few as 1 owner |
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What are the key terms associated with a C Corp?
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Owner ---> Stockholder
Representative of Owners---> Board of Directors Rules & Regulations ---> By-Laws Document that creates the Company ---> Articles of Incorporation |
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What are the key terms associated with an LLC?
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Owner ---> Members
Representative of Owners---> Managers Rules & Regulations ---> Operating Agreement Document that creates the Company ---> Articles of Organization |
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Which is the best state to create an LLC? Which is the worst?
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The Best State --> Delaware
The Worst State --> Louisiana |
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How many Franchisors are there in the US?
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3,000
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How many franchise outlets/locations are there in the US?
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350,000
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_____% of all retail sales are from Franchises.
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44%
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What are some benefits of owning a Franchise?
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***- Name Recognition/Brand
***- Less Risk - 95% of franchises are still open after 5 years. - Buying Power - Financing Available - National advertising - Site Selection Assistance |
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What are some drawbacks to owning a franchise?
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***- Franchise Fee
- Royalty Fee (3%-7%) ***- Lack of Freedom ***- Possibility of Saturation - Length of contract (10+ Years) |
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What is a Franchise Disclosure Document (FDD)?
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- Also Known as a Uniform Franchise Offering Circular
- Given and signed at least 10 days prior to the sign of a contract (Buyer Awareness) - Includes the Fees, Total Investment estimate, expected losses, stats of other franchises, accurate financial records - ITEM 19 is always Stat Info on other franchises. |
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___% of franchisees own more than 1 outlet. (Usually 3-6)
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11%
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Every year, there are ______ existing businesses sold in the US.
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500,000 are sold.
- The Vast majority regretted buying the business 2-3 years later. |
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What are some advantages to buying an existing company?
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- Already profitable
- satisfied customers - strong/dedicated employees - Great Location - 6 months to acquire - Great Vendor relationships - Possibility of Owner Financing - Cooperative Owner |
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What are some disadvantages to buying an existing company?
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- Losing Money
- Dissatisfied Customers - Lazy Employees - Bad Location - 2-3 years to fully acquire - Bad Vendor Relationship |
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What is the process that a buyer goes through to acquire a business?
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Due-Diligence
- It Begins when the contract is signed and ends at the closing of the deal. |
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What should Due Diligence look at?
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- Financial Review:
- Balance Sheet, Income Statement, and Tax Returns. - Hire an INDEPENDENT Accountant to Audit - Complied vs. reviewed vs. Audit - Legal: - Liens, Contracts, Leases, Lawsuits - Condition of the Assets - Aging Report - Customer Analysis - Product/ Service Analysis |
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When you are buying an existing business, you are purchasing ___________ of the company or ____________
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Title/Stock, All of the Assets.
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When you want to Sell a company, it can be a ______ Sale, or an ________ Sale
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Stock, Asset
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What is a Stock Sale?
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- 90% of Sales are Stock Sales
- Nothing changes in a stock sale except the transfer of the name. |
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What is an Asset Sale?
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--- 10% of Sales are Asset Sales
- Buy selected Assets - Customers are the most important asset - Non Disclosure Agreement (NDA) --> Protects Seller - Non-Compete --> Protects Buyer, lasts 3-5 years |
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What are 3 Primary Valuation Methods?
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1. Balance Sheet
2. Market or PE (Price/Earnings) 3. Discounted Future Earnings or Present Values of Future cash flows |
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What are the present value factor (interest) for investments?
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3-5% --> Risk Free (Gov't Bonds)
6-10% --> Corporate Bond 12-13% -> Stocks 18-20% --> Venture Capital/Private Equity 20-33% --> Individual Small Company 34-50% --> Start-up |
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What is Marketing?
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The process of creating and delivering desired goods and services to customers.
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What is the main goal of Marketing?
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Winning and Keeping Customers
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What is Guerrilla Marketing?
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Doing the biggest thing for the smallest cost.
- Using Creative Techniques |
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What are the objectives of Guerrilla Marketing?
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1. Pinpoint Target Marketing
2. Determine Customer wants and needs 3. Analyse Competitive Advantage and Design Strategy 4. Create proper marketing mix - Making sure you get the most for your money |
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What are the stages in the Product Life Cycle?
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1. Intro
2. Growth 3. Maturity 4. Saturation 5. Decline |
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What is an Unique Selling Proposition?
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Short, condensed point of what makes your business unique.
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What is an Elevator Pitch?
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A short window of opportunity to explain the driving point of your business.
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What is Price and what does it measure?
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The Monetary value of a product or service in the marketplace
- A measure of what the customer must give up to obtain various goods and services - A signal of value to potential customers - MUST be high enough to cover costs and earn profit, but low enough to attract customers |
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What do you need to know in order to set prices?
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1. Know the Costs of the product
2. Market Factors -- Supply/Demand 3. Sales Volume 4. Competitor's Prices/Advantages |
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What are the 3 Potent Forces for setting Prices?
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In Settings Prices, you must balance:
1. Image --> High Price = Quality 2. Competition --> Direct and Indirect Competition 3. Value --> What need/value does it fill for the consumer? |
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Between ___% and ___% of customers actually look at price to determine whether they'll buy it.
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Between 15 - 35%
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How do you calculate a Markup?
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Markup = Retail Price - Costs
- Costs = Wholesale Price + Other Incurred Cost |
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Who could I sell my existing business to?
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1. Outsider
2. Employees --> ESOT 3. Corporation --> LBO 4. Family --> FLP 5. Public --> IPO |
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What is an Employee Stock Ownership Plan (ESOP)?
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A form of employee benefit plan in which a trust created for employees purchases their employer's stock
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What is a Leverage Buyout (LBO)?
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An arrangement in which managers and/or employees borrow money from a financial institution and pay the owner the total agreed-on price at closing.
- The employees then use the cash that is generated by the company to pay off the debt. |
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What is an Family Limited Partnership (FLP)?
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A strategy that allows business-owning parents to transfer their company to their children while still retaining control over it for themselves.
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What is a Franchisee Turnover Rate?
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The rate at which franchisees leave a franchise system. A good FTR is less than 5%
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What 5 questions should the Due-Diligence Process answer?
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1. Why does the owner want to sell?
2. What is the physical condition of the business? 3. What is the potential for the company's products or services? 4. What legal aspects should be considered? 5. Is the business financially sound? |
