Chapter 6: Entrepreneurship and Starting a Small Business

Question 1

entrepreneur

Answer 1

someone who accepts the risks of business and runs a business

Question 2

incentives to become entrepreneurs

Answer 2

-opportunity
-profit
-independence
-challenge: taking moderate, calculated risks

Question 3

skills required to become an entrepreneur

Answer 3

-self-directed, self-nurturing, action-oriented, highly energetic, tolerant of uncertainty

Question 4

A business idea=good opportunity

Answer 4

-fills consumer needs
-have skills and resources to start a business
-sells product at a price that consumers are willing to buy while making a profit
-get product to consumers before their tastes and
preferences change
-can keep business

Question 5

entrepreneurial team

Answer 5

group of experienced people from different areas of business who join to form a managerial team: have the potential to develop, make, and market a new product

Question 6

intrapreneurs

Answer 6

creative individuals who works as entrepreneurs within a company

Question 7

micropreneurs

Answer 7

normal balanced lifestyle while doing the work that they want to do at home
-nearly half are home-based
-have less than 5 employees

Question 8

Growth of home-based businesses

Answer 8

-computer technology: leveled the playing field
-corporate downsizing; outsourcing
-social attitudes have changed
new tax laws: less taxes on -home offices

Question 9

challenges to micro entrepreneurships

Answer 9

-gaining new customers
-managing time
-keeping work and family separate
-abiding by city ordinances
-managing risk
-homeowner’s insurance may not cover business related claims

Question 10

online businesses

Answer 10

offer unique products and services online
-D: easy to find copycats

Question 11

enterprise zones

Answer 11

geographical areas where governments attract private business investment by offering lower taxes and government support

Question 12

incubators

Answer 12

offer new business low-cost offices with basic services (accounting, legal advice, and secretarial help) in the beginning stages of their business

Question 13

Self Employment Assistance (SEA) program

Answer 13

few states offer this to qualified applicants that give self-employment payments instead of regular unemployment checks
-encourages unemployed people to start their own businesses through self-employment checks

Question 14

Small Business Administration (SBA)

Answer 14

U.S. government agency that aids and advises small businesses by providing management training and financial advice and loans
-started as a microloan program in 1991
-judges worthiness off of borrower’s integrity and soundness of their business idea

Question 15

Small Business Investment Company (SBIC)

Answer 15

program where private investment companies licensed by the SBA lend money to small businesses
-SBIC must have minimum of $5 million and can borrow up to $2 million for every $1 million of capital it has
-can identify business problems early and can reschedule loan payments accordingly

Question 16

Small Business Development Centers (SBDC)

Answer 16

funded jointly by the federal government and individual states
-evaluate feasibility of your idea, establish a business plan, complete your funding application for no charge

Question 17

Small business

Answer 17

independently owned and operated, not dominant in its field/operation/meets certain standards of size deemed by the SBA
-generate more than 43% of GDP
-usually someone’s first job
-over 30 million small businesses in the US
-must have fewer than 1500 employees

Question 18

Why are business failure rates inaccurate?

Answer 18

-closing a business to start a new one=failure
-changing forms of ownership=reported failure
-retirement=reported failure

Question 19

Major business functions

Answer 19

-planning
-financing
-knowing customers
-managing employees
-keeping records

Question 20

Business plan

Answer 20

detailed written statement explaining: target market, nature of the business, advantages in comparison to competition, and the resource/qualifications of owners
(2-3 pages long)

Question 21

cover letter

Answer 21

addressed to a specific person and summarizes companies goals and objectives

Question 22

executive summary

Answer 22

management summary of proposed venture: short description of the business, lists major goals and objectives
-catches the interest and tempts investors to read

Question 23

company background

Answer 23

company operations, potential legal considerations areas of risk. summarize a firm’s financial condition, include past and current balance sheets, income and cash flow statements, other financial records
-areas of risk
-financial condition

Question 24

management team

Answer 24

organizational chart, job descriptions of listed positions, detailed resumes of current executives
-workers at the place

Question 25

financial plan

Answer 25

provide 5-year income, expense, and funding sources (adjustments for economy/sale projections)

Question 26

capital required

Answer 26

amount of capital required to continue operations, describe how these funds are to be used indicate totals on cash flow statement

Question 27

manufacturing plan

Answer 27

describe minimum plant size, machinery required, production capacity, inventory/inventory control methods, quality control, plant personnel requirement, estimate production costs -details plant control, inventory, and other operational steps

Question 28

Location analysis

Answer 28

the geographic area that a company decides to target for customers and their traffic patterns

Question 29

Appendix

Answer 29

include all marketing research on product/service and other information about product concept of market size. provide a bibliography of all the reference materials used. Demonstrate that the market won't be entering a declining market -research of the product itself and its ability to interact in a market

Question 30

Sources of Capital (listed in most to least commonly used)

Answer 30

-personal savings -family -business associates -banks and finance institutions -government agencies -angel investors -venture capitalists: individuals or companies that invest money into a company and gain partial ownership in company profits in return (shark tank)

Question 31

Community development financial institutions

Answer 31

-CFI's are a major factor in economic recovery -1% of loans were not paid back in the last 30 years -provide business counseling as well as loans

Question 32

markets

Answer 32

people with unsatisfied wants and needs who demand limited goods/services

Question 33

Managing employees

Answer 33

-hiring, training, and motivating employees is critical -small business employees are more satisfied=feel challenged and respected -entrepreneurs best serve themselves if they recruit and train employees for management positions

Question 34

Who can assist a small business

Answer 34

accountants, competent lawyers, commercial loan officer, insurance agent

Question 35

What can a marketing research study help you determine

Answer 35

-where to locate -whom to select as your target market -what is an effective strategy for reaching the market

Question 36

Service Corps of Retired Executive (SCORE)

Answer 36

more than 11,000 volunteers from industry, trade association, and education who counsel small businesses at no cost **small and medium-sized businesses account for 99 percent of recent export growth

Question 37

Advantages of global trade for small businesses

Answer 37

-overseas buyers enjoy dealing with individuals (smaller companies) -can ship products faster -provide a wide variety of suppliers -give more personalized service and attention

Question 38

principles of management are similar for a small neighborhood business and a giant global firm

Answer 38

True or False

Question 39

all organization require what?

Answer 39

-planning -capital -information management

Question 40

inexpensive computer systems and free open-source software what what two things easier for a small business manager

Answer 40

-managing consumer records -follow daily sales and expenses

Question 41

How to get involved in the global market and surpass the hurdles that might prevent this?

Answer 41

financing is often difficult to find and exports don't always know how to get started