Chapter 6 Starting a Small Business

Question 1

Affiliate Marketing:

Answer 1

Internet-marketing strategy where business rewards its customers or other business affiliates for each visitor/customer they send to the business website

Question 2

Angel Investors

Answer 2

Private people who invest their own private money in hot new companies before they go public

Question 3

Business Plan Explanation: Company Background

Answer 3

1. Company Operations to Date 2. Any legal issues 3. Risks/Opportunities 4. Financial Health 5. Balance Sheets/Cash Flow 6. Insurance coverage

Question 3

Business Plan Explanation: Capital Required

Answer 3

1. amount of capital needed to commence & continue

Question 3

Business Plan Explanation: Appendix

Answer 3

1. Marketing research on goods/services 2. References to research

Question 4

Business Plan Explanation: Executive Summary:

Answer 4

5 Minutes to Impress Major goals/objectives Business Summary

Question 5

Business Plan Explanation: Financial Plan

Answer 5

1. Five year projections for income/expenses/financial 2. Assumptions Based on Industry/Historcial Trends 3. Offer Scenarios: Best Case & Worst Case

Question 5

Business Plan Explanation: Location Plan

Answer 5

1. Most important: Location 2. Demographic of consumers 3. Traffic Patterns 4. Vehicle/Pedestrian Counts

Question 6

Business Plan Explanation: Management Team

Answer 6

1. List positions/job descriptions/resumes 2. Organization Chart 3. Outside Consultants & Their Qualifications (If used)

Question 7

Business Plan Explanation: Manufacturing Plan

Answer 7

1. Plant Size 2. Machinery Required 3. Inventory Methods/Quality Control 4. Production Capacity 5. Personnel Requirements

Question 7

CDFI (Community Development Financial Institutions)

Answer 7

Funding for lower-income businesses

Question 8

Entrepreneurial Risk Includes:

Answer 8

Opportunity, Profit, Independence, Challenge

Question 8

Good Reasons for Small Business to Go Global

Answer 8

1. Absorbs excess inventory 2. Softens downturns in domestic markets 3. Extends products lives

Question 9

Home-Based Business Challenges:

Answer 9

Getting New Customers, Managing Time, Keeping Work/Family Tasks Separate, Abiding By City Ordianances (Licensing, etc)

Question 10

Intrapreneurs

Answer 10

Creative people who work as Entrepreneurs within larger corporations

Question 11

List of Entrepreneurial Attributes:

Answer 11

Self Directed, Self Nurturing, Action-Oriented, Highly Energetic, Tolerant of Uncertainty

Question 12

Peer-to-Peer Lending (P2P)

Answer 12

Online Idea: Companies that match up people who want money with people who want to lend it via websites

Question 14

Reasons for Growth of Home-Based Businesses:

Answer 14

Technology Advancements, Corporate Downsizing, Social Attitudes Have Changed, New Laws Allow Expenses of Deductions for Home Offices

Question 14

Service Corps of Retired Executives (SCORE)

Answer 14

SBA office with volunteers from industry, trade associations & education who council small businesses at no cost

Question 15

Small Business Advantages Are:

Answer 15

1. Offer other advantages over large companies 2. More personal customer service 3. Ability to respond quickly to opportunities

Question 15

Several Advantages to Small Biz vs Big Biz Overseas

Answer 15

1. Global buyers like dealing with individuals instead of large companies 2. Small biz can start shipping much faster 3. Can provide a wide variety of suppliers 4. Can provide personal service

Question 16

Small Business Difficulties Getting Into the Global Market

Answer 16

1. Financing 2. Don’t Know how to get started 3. Don’t know cultural differences 4. Paperwork/Bureauracy

Question 17

Small Business Investment Company Program (SBIC)

Answer 17

Private investment companies licensed by the SBA to loan money

Question 19

Two Primary Concerns Starting Your Small Business:

Answer 19

1. Planning 2 Financing All functions are important, but these are the top two.

Question 20

Venture Capitalist

Answer 20

Individuals or companies that invest in new business in exchange for a part ownership (hefty portion) of the business usually 60% or more (ex: Shark Tank)

Question 22

What are an Entrepreneur's Sources of Capital?

Answer 22

1. Personal Savings 2. Relatives 3. Former Employers 4. Banks 5. Finance Companies 6. Venture Capitalists 7. Govt Agencies (SBA) 8. A Future Supplier (McDonalds Model)

Question 24

What Are Enterprise Zones?

Answer 24

Specific geographic areas to which governments attract private business investment by offering lower taxes & other govt support to encourage entrepreneurship

Question 25

What Defines a Small Business According to the SBA?

Answer 25

A business that is: 1. Independently Owned/Operated 2. Not dominant in its Field of Operation 3. Meets Certain Standards of Size in terms of Employees or Annual Receipts (Set by SBA)

Question 27

What Do Intrapreneurs Use For Resources?

Answer 27

They use the corporations resources (human/financial/physical) to launch new products & generate new profits (ex: 3M & Sticky Notes)

Question 29

What Do Investor Visas Allow?

Answer 29

\* Allows 10,000 people to come to the US each year if the invest $1million in an enterprise that creates or preserves 10 jobs (Arcadia Housing Boom) \* Part of the Immigration Act in 1990 to encourage entrepreneurs to come to the US

Question 30

What Do Small Biz & Global Firms Have In Common?

Answer 30

They both have similar principles of management

Question 31

What Does a Business Plan Do?

Answer 31

It's a writte/detailed statement that describes: 1. The nature of business 2. The Target market 3. The advantages in relation to competition 4. Lists resources/qualifications of the owner

Question 31

What Do You Need for Small Business Success?

Answer 31

1. Planning 2. Financing 3. Knowing You Customers (marketing) 4. Managing Your Employees (HR Dept) 5. Keeping Good Records (Accounting)

Question 32

What is a Market?

Answer 32

People with unsatisfied needs who have both the resources ($) and willingness to buy (demand)

Question 34

What Is Poor Management?

Answer 34

1. Poor Planning 2. Poor Record Keeping 3. Poor Inventory Control 4. Poor Promotion/Marketing 5. Poor Employee Relations

Question 36

What is the SBA?

Answer 36

A US Govt Agency that advises & assists small business by providing management training, financial advice & loans

Question 37

What's a Major Cause of Business Failures?

Answer 37

Poor Management

Question 38

Who Are Valuable Experts to Have In Your Business?

Answer 38

1. Lawyer 2. Commercial Loan Officer 3. Insurance Agent