Final Flashcards
(33 cards)
Qualities of an entrepreneur (6)
Finds a product or service that solves a problem or reduces a cost
Persistent
Laser focused on a goal
Willing to take risk for an unknown
Hard worker
Sacrifice personal life for their idea
Challenge statement
Consider a problem. Phrase it: how might I …
Example: takes too long to develop pictures
How might I make a camera that can create instantaneous pictures?
Three questions that you must know about your market
Who are my customers?
What is the industry like (what are the industry trends)?
Who’s my competition?
Direct competition
Someone who sells the same product or service (coca cola vs Pepsi)
Indirect competition
Offers the same product or service as part of a wider offering (gas station coffee vs Starbucks)
Primary research
Questionnaires, surveys, Focus groups, one on one. Research that you conduct.
Secondary research
Includes government reports, industry journal articles, census, etc. Research that is already done for you.
Prototype
Proof of concept. Physical representation of your business idea.
Three questions that building a prototype answers:
Is my idea economically viable?
is it technically viable?
is it really what my customers want?
Sole proprietorship
Easiest form of business to set up and operate.
Profits are taxed once.
Unlimited legal liabilities.
Business ends with death of owner.
Easy to liquidate.
Limited partnership
One or more partners who have a limited liability and no rights of management.
Easy to set up and operate.
Profits are taxed once.
Limited legal liability for limited partners.
Terminates upon death or withdrawal of partner.
Easy to liquidate.
General partnership
Easy to set up and operate.
Profits are taxed once.
Unlimited liability.
Terminates upon death or withdrawal of partner.
Easy to liquidate.
Limited liability company
Taxed once.
Limited liability.
Depending upon operating agreement, business may or may not terminate upon death or withdrawal of member.
Moderately easy to liquidate.
Moderately easy to set up and operate.
Corporation
Most complex form of business to set up and operate.
Profits may be subject to double taxation.
Limited legal liability.
Business continues after death of owner.
Difficult and expensive to liquidate.
Nonprofit corporation
Money is used to pay for reasonable salaries, expenses, and activities of the corporation.
Exempt from taxes if they operate for the benefit of the general public.
Example: churches, soup kitchens, charities, hospitals, etc.
Franchise
Business that can be duplicated
Will have to comply with the Federal Trade Commission’s disclosure rule that is given to a potential buyer of your franchise.
Example: McDonald’s, Subway
The six sections of a business plan
Executive summary
Business description and vision
Definition of the market
Description of product and services
Organization and management
Financial management
Variable costs
A cost that varies with the number of products your business produces. Example: citric acid, baking soda, etc.
Fixed costs
A caustic it’s not change with an increase or decrease in the amount of goods or services produced. Example: rent, utilities.
How to calculate margins?
Profit
Sales price
How to calculate breakeven?
Fixed costs
Margin
Stock
A type of security that gives you part ownership in a Corporation
IPO
Initial public offering
Investment bankers by all the shares that will be offered to the public. They then sell the stock to the general public in hopes of making a profit.
P/E Ratio
Provides a measure of a stock’s valuation. Can be compared to other similar stocks to see if a company is over or under valued.
Stock price/average dividend = P/E ratio
The lower the ratio, the better
26.5 P/E ratio means that you pay $26.50 for every one dollar of earnings
