Entrepreneur characteristics

• resourcefulness

• concern for good public and customer relations

• strong desire to be their own bosses

• deal with uncertainty

• willing to take risks

Trends in small business start up

• emergence of E-commerce

  • the internet provides fundamentally new ways of doing business

  • the current trends

• crossovers from big business

  • people are leaving big businesses and starting small businesses

• opportunities for minorities and women

  • small business being started by minority groups

Reasons for success

• hard work, drive, and dedication

• market demand for the products or services being provided

• managerial competence

• luck

Reasons for failure

• managerial incompetency

  • Hiring the wrong people

  • not knowing how to manage

• neglect

  • lack of dedication

  • lack of time

• weak control systems

  • not looking at numbers

• insufficient capital

distinctive competencies- aspects that you(your company) Does better then everybody else. usually the first step in creating a business

established market- many firms compete according to well defined criteria

niche-a segment of the market that is not currently being exploited

identifying new markets- creating a new industry, or move your industry into an area that dosen’t have it.

first mover advantage- advantage that comes with being the first to do something

business plan-document in which the entrepreneur describes their business strategy for the new venture and how it will be implemented.

setting goals and objectives-strategies to obtain what you want and how it will be implemented

sales forecasting- demonstrate a understanding of the market and understanding the strengths and weaknesses of existing firms

financial planning-initial budgets to help owners understand how long they can go without making profit

Forms of business ownership

• sole proprietorship

  • responsible for all business debts

  • rely of resources of the owner

  • usually operated by owner

• general partnership

  • 2 or more owners

  • share responsibility and ownership

• advantages to sole proprietorships

  • freedom

  • simple to form

  • low start up costs

  • tax benefits

• disadvantages to sole propriorships

  • unlimited liability

  • limited sources

  • retirement

Partnerships

• limited partnerships

  • Formed to help compensate for some of the disadvantages to corporations

  • Liable only up to their percentage of investment in the company

  • Requires at least one general partner who has unlimited liability for debt

• Master limited partnership

  • Shares are sold to investors who are repaid from the firms profits and they retain at least 50% ownership and run the business

• silent partner

  • Someone who invests all or most of the money needed for the business but plays no role in management

alternatives to general partnership

• limited partnership

  • Allows for limited partners who invest money but are liable for debts only to the extent of their investments

  • General (or active) partners run the business

• Master Limited Partnership

  • Master partner has majority ownership and runs the business; minority partners have no management voice

• Advantages

  • Growing more talent and money

  • More fundraising capability

  • Relatively easy to form

  • Limited liability for limited partners

  • Tax benefits

• disadvantages

  • Unlimited liability for general partners

  • Disagreements among partners

  • Lack of continuity

Cooperatives

• Combine the freedom of sole proprietorships with the financial power of corporations

• Groups of sole proprietorships or partnerships agree to work together for their common benefit

• Provides greater production power, and marketing power but must serve the specific needs of their members

• The agriculture industry thrives on Cooperatives

Corporations

corporation-A 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

Cooperate governance-roles of shareholders, directors, and other managers in corporate decision making and accountability

• advantages

  • Limited liability

  • Continuity

  • Stronger fundraising capability

• disadvantages

  • Can be taken over against the will of its management

  • Double taxation of profits

  • Complicated and expensive to form

  • Legal requirements and regulations

Types of corporations

• Closely Held (or Private) Corporation

  • a corporation whose stock is held by only a few people and is not available for sale to the general public

• Publicly Held (or Public) Corporation

  • A corporation whose stock is widely held and available for sale to the general public

• S Corporation

  • a hybrid of a closely held corporation and a partnership, organized and operated like a corporation but treated as a partnership for tax purposes

• Limited Liability Corporation (LLC)

  • hybrid of a publicly held corporation and a partnership in which owners are taxed as partners but enjoy the benefits of limited liability

• Professional Corporation

  • form of ownership allowing professionals to take advantage of corporate benefits while granting them limited business liability and unlimited professional liability

• Multinational (or Transnational) Corporation

  • form of corporation spanning national boundaries

Corporate governance

• Stakeholder (shareholder)

  • owner of shares of stock in a corporation/owners of the company

  • get paid dividends from the company (distributed profits)

• Board of directors

  • governing body of a corporation that reports to its shareholders and delegates power to run its day-to-day operations while remaining responsible for sustaining its assets

• officers

  • top management team of a corporation

• Chief executive officer (CEO)

  • the top manager of an organization/oversees overall operations

  • Usually appointed by the board of directors

Special issues in corporate ownership

• strategic alliance

  • strategy in which two or more organizations collaborate on a project for mutual gain

• joint venture

  • strategic alliance in which the collaboration involves joint ownership of the new venture

• employee stock ownership plan (ESOP)

  • 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

• Institutional ownership

  • large investor, such as a mutual fund or a pension fund, that purchases large blocks of corporate stock

• Merger

  • the union of two corporations to form a new corporation

• Acquisition

  • the purchase of one company by another

  • Many deals that are called mergers are typically acquisitions

• Divestiture

  • strategy where a firm sells one or more of its business units

  • Doing this helps the company focus on its core business

• Spin-off

  • strategy of setting up one or more corporate units as new, independent corporations