Term
| What is the most important thing founders of entrepreneurial firm can do? |
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Definition
| establish a strong ethical culture |
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Term
| How do you establish a strong ethical culture? |
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Definition
| Lead by example, establish a code of conduct, implement an ethics training program |
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Term
|
Definition
| describes the general value system, moral principles, and specific ethical rules that govern a firm |
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Term
|
Definition
| provides employees with instructions for how to deal with ethical dilemmas when they occur. |
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Term
| Why establish a strong ethical culture? |
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Definition
| Potential avoidance of fines, better access to capital, improved brand reputation, decreased vulnerability, improved customer loyalty, improved employee commitment. |
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Term
| How to select an attorney |
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Definition
- specialize in start-ups
- can assist in raising capital
- has track record
- Talk about fees
- understands the business
- Learn as much as you can
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Term
| Two most important issues to consider when leaving an employer to launch an entrepreneurial firm |
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Definition
| Behave in a profesional manner, honor all employment agreements |
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Term
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Definition
| promise made by employee or another party to not disclose a company's trade secrets. Prevents an individual from competing against a former employer for a specific period of time. |
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Term
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Definition
| written document that deals with issues such as the relative split of equity amongst founders of firm, how individual founders will be compensated for cash or "sweat equity" they put in firm, how long founders will have to stay with firm for their shares to fully vest |
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Term
| Items to include in partners agreement |
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Definition
| Nature of prospective business, identity and proposed titles of founders, legal form of business ownership, apportionment of stock, ownership share for each of the founders, Identification of any i.p. signed over to the business, Description of initial operating capital, buyback clause |
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Term
| Steps entrepreneur can take to avoid legal disputes |
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Definition
| Meet all contractual obligations, avoid undercapitalization, get everything in writing, promote business ethics in the firm (set standards) |
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Term
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Definition
| If a business is run out of the founder's home then a home occupation business license is often required. If a business is not a Sole Proprietorship, then it will need a state business license. |
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Term
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Definition
| narrow group of businesses, investment advising, drug manufacturing, and interstate trucking. The needs of obtaining business permits depend on the nature and location of the business |
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Term
|
Definition
food= city or country health permit
open to public= may need fire permit
some communities require business to obtain a license to put up a sign.
fictitious business name permit for business using fake name |
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Term
| Most common legal entities |
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Definition
| Sole proprietorship, partnership, corporation, LLC |
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Term
| Issues to consider in choosing a legal form of business ownership |
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Definition
| Cost of setting up and maintaing the legal form, extent to which personal assets can be shielded form liabilities of business, tax considerations, numbers and types of investors involved. |
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Term
|
Definition
simplest form of business entity, easy and inexpensive
involving one person, business and person are the same.
Responsible for all liabilities of business, significant drawback
Raising capital can be difficult
not subject to double taxation |
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Term
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Definition
2 or more people start a business, they must organize a partnership, corporation, or LLC. Either a general partnership or limited partnership
advantages: easy, inexpensive, easier to raise funs, losses can be deducted against partners other sources of income. Not subject to double taxation. |
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Term
|
Definition
| primary disadvantage is that all partners are liable for all the partnership's debts and obligations |
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Term
|
Definition
Limited partnership includes 2 classes of owners: general partners and limited partners. The general partners are liable for debts and obligations of partnership. Limited partners are only liable to amount of investment
disadvantages: liability on general partners unlimited, still difficult to raise capital, dissagreements can occur. low liquitidy |
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Term
|
Definition
| Separate legal entity organized uner authority of a state. C corp or S corp. C corp is what most people when they hear corporation, business startups are often S corps. |
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Term
|
Definition
| legal entity, separate from owners, shields shareholders from personal liability. Governed by board of directs, elected by shareholders. formed by filing articles of incorporation |
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Term
| advantages and disadvantages of c corp |
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Definition
advantages- owners only liable for amount up to investment, easier to raise capital, no restrictions exist on number of shareholders, stock is liquid if traded on exchange, ability to share stock for employee motivation
disadvantages- more difficult to set up, business losses cant be deducted against other sources of shareholders income, income is subject to double taxation, small shareholders have little voice. |
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Term
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Definition
| taxed at corporate and shareholder levels. meaning corporation is taxed onnet income, and when same income is distributed to shareholders in form of dividends, taxed again on personal income. |
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Term
|
Definition
| combines adv. and disadvantages of partnership and c corp, not subject to double taxation, owners not liable, Does not pay taxes as profits and losses are passed through tax returns of owners |
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Term
| how can business qualify to be a S corp |
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Definition
| cant be a subsidiary company of another corp, shareholders must be u.s. citizens, Partnerships and C corps cant own shares of s corp, one class of stock issued and outstanding, no more than 100 members, all shareholders must agree to form s corp |
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Term
|
Definition
popular for startups, advantages of corporation with tax adv. of partnership.
Advantages: LLC doesn't pay taxes, profits and losses are passed through tax returns of owners. Only liable for investment, unlimited shareholders, flexible taxes, no double taxation.
Disadvantages: More difficult and expensive to maintain. tax accounting complicated, some gov regulations, relatively new type so not much legal precedent, franchise tax on llcs in some states. |
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Term
| Why do most ventures need to raise money |
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Definition
| cash flow challenges, capital investments, lengthy product development cycles |
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Term
| Three reasons firms raise money |
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Definition
| cash flow challenges, capital investment needs, lengthy product development cycle |
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Term
|
Definition
| Personal funds, friends and family, bootstrapping |
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Term
|
Definition
| creative ways to cutdown costs |
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Term
| 3 steps to raise debt/equity |
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Definition
| determine amount of meny needed, determine type of financing or funding, develop a strategy for engagin potential investos |
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Term
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Definition
| brief, carefully constructed statement outlining business opportunitys merits. describe opportunity/problem, describe your product/solution, describe your qualifications, describe your market. |
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Term
|
Definition
| exchanging ownership for stock |
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Term
|
Definition
| individuals who invest personal capital directly in start up vesotrs. High net worth individuals. usually invest between 25k and 150k in a company |
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Term
|
Definition
| money invested by vc firm in startups with exceptional growth potential. fund very few entrepreneurial firms compared to business angels because they look for "homerun". Money is invested in stages. |
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Term
|
Definition
| milestone for 4 reasons: way to raise equity capital, raises a firms public profile, liquidity event, creates another form of currency that can be used to grow the company. |
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Term
|
Definition
| Small business administration loans, main program reffered to as 7(A) Loan guarantee program. Operates through private sector lenders providing loans guaranteed by SBA. Loans are for smalll business that are unable to secure financing on reasonable terms through normal lending channels. |
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Term
|
Definition
| written agreement which owner of peice of property allows another individual or business to use property for time in exchange for payments. main adv. is that companies can aquire assets with very little or no down payment. |
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Term
|
Definition
| not historically known for investing in startups, too risky. |
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Term
|
Definition
| business sells a/r to third party at discount for cash |
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Term
|
Definition
| form of raising money online through internet (kickstarter) from a group of individuals. |
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Term
| creative sources of funding |
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Definition
| lease, SBIR (small business innovation research) and Sttr (small business technology transfer) grant programs, other grants, strategic partners |
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Term
|
Definition
| are formed to share the costs of product or service development, to gain access to particular resources, or to facilitate speed to market |
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Term
|
Definition
| study industry in which firm intends to compete and determine the different potential target markets within that industry. Segmenting done by product type, geography, demographic variables. |
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Term
| How do firms approach selecting a market |
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Definition
| segmenting the market, selecting a target market, establishing a unique postion |
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Term
|
Definition
| what groups of customers in my market are similar enough that the same product or service will appeal to them |
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Term
| selecting a target market |
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Definition
| which specific group of customers have i decided to target. By focusing on a clearly defined market a firm can become an expert in the market and by doing so provide its customers high levels of value and service. |
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Term
| crafting a unique positioning strategy |
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Definition
| What position will my firm occupy in the minds of my customers and potential customers that will differentiate it from all of my competitors. Does this by drawing atention to two or three of the products attributes. Firms often develop taglines to reinforce position they have staked out or a phrase used consistantly in companys literature. |
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Term
| Common mistake entreprenurs make |
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Definition
| creating a strategy that focuses on the features of a product such as its technical merits. THis opprouch is less effective than focusing ont he benifits of owning the product. |
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Term
|
Definition
| set of attributes-positive or negative- that people associate with a company. A firm builds a brand by having it create meaning in customers' lives. Creating value. Brands are built through advertising, public relations, sponsorships, supporting social causes, good performance. |
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Term
|
Definition
| Some companies monitor the integrity of their brands through this program |
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Term
|
Definition
| 50% of consumers say that a known and trusted brand is a reason to buy a product. Brand allows company to charge a price for its products or services consistent with its image. Successful brand can increase market value of company by 50% to 75%. |
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Term
|
Definition
| set of controllable, tactical marketing tools that it uses to produce the response it wants in its taret market. product, price, promotion, place |
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Term
|
Definition
| the good or service a firm offers to its target market. |
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Term
|
Definition
| the product itself such as an antivirus software program |
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Term
|
Definition
| the product plus all the attributes that come with it such as quality level, features, design, packaging, and warranty |
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Term
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Definition
| amount of money consumers pay to buy a product. The price sends a message to the target market. |
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Term
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Definition
| the list price is determined by adding a markup percentage to a products cost |
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Term
|
Definition
| the list price is determined by estimating what consumers are willing to pay for a product |
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Term
|
Definition
| the activites the firm takes to commuciate the merits of its product to its target market |
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Term
|
Definition
making peopel aware of a product or service in hopes of persuading them to buy it.
positives: raise awareness, explains comparative features and benefits, creates associations between a product and certain lifestyle
bad: low credibiity, lack of interest, message clutter, realtive costliness compared to other forms of promotion, intrusiveness. |
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Term
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Definition
| identify purpose of the ad, determine the target audience, select a medium, create the ad, select a place and time for the ad to appear, fulfill expectations |
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Term
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Definition
| googles advertising program allowing advertisers to buy keywords on home page. triggers text based ads to side of and above search results when keyword is used. |
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Term
|
Definition
| allows advertisers to buy ads that will be shown on other websites. google selects sites of interest to the advertiers customers. pay per click or per thousand impression basis. web site owners benefit by using service to monetize their website. |
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Term
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Definition
| one of the most cost effective ways to increase awareness of products. maintaining a companys image with public. |
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Term
| public relation techniques |
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Definition
| press release, social media coverage, blogging, civic, social, and community involvement, traditional media coverage, articles in industry press and periodicals, monthly newsletter. |
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Term
|
Definition
| blogging and connecting with customers and others through social networking sites liekf acebook and twitter |
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Term
|
Definition
| facilitates and encourages peopel to pass along marketing message about a particular product or service |
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Term
|
Definition
| low budget approach to marketing relying on ingenuity, cleverness, and surprise |
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Term
|
Definition
| ecompasses all acivities that move a frims product form its place of origin to the consumer. first choice has to make regarding distribution is whether to sell its products directly to consumers or through intermediaries such as wholesalers and retailers. |
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Term
|
Definition
| maintaining control of distribution and sales process. disadvantage is that it ties up more capital in fixed assets. |
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Term
| selling through intermediaries |
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Definition
| other firms sell through intermediares and pass off their products to wholesalers who place them in retail outlets to be sold. disadvantage is that firm loses some control of its product no guarantee from retailers for push and talk up of product |
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Term
|
Definition
| depicts the steps a firm goes through to identify prospects and close sales. prospect for sales lead, make the initial contact, qualify the lead, make the sales presentation, meet objections and concerns, close the sale, follow up |
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Term
| How to improve companies performance? |
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Definition
| having a well thought out sales process, along with appropriate follow through. |
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Term
|
Definition
| any product of human intellect that is intangible but has value in the marketplace |
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Term
| What intelectual property to protect |
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Definition
| determine whether the IP is directly related to the firms competitive advantage, decide whether the ip has value in the marketplace |
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Term
| Common mistakes firms make in regard to IP |
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Definition
| not properly identifying all of their IP, not fully recognizing the value of their IP, not legally protecting the IP that needs protecting, not using their IP as part of their overall plan for success. |
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Term
|
Definition
| Patents, trademarks, copyrights, trade secrets |
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Term
|
Definition
| grant from federal government conferring the rights to exclude others from making, selling, or using an invention for the term of the patent. There is increasing interest in patents. Patents can be sold or licensed. |
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Term
| 3 requirements for obtaining a patent |
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Definition
| must have utility, must be different from what has come before, must be not obvious to a person of ordinary skill in the field. |
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Term
|
Definition
|
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Term
|
Definition
| new or useful process, machine, manufacturer, or composition of material or anu new and useful improvement therof. Last for 20 years |
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Term
|
Definition
| invention of new, original, and ornamental design for manufacture products. 14 year duration |
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Term
|
Definition
| any new varietites of plants that can be reproduced asexually. 20 years duration |
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Term
|
Definition
| protects invention that is or facilitates a method of doing business. |
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Term
|
Definition
| make sure invention is practical, document when invention was made, hire a patent attorney, conduct a patent search, file a patent application, obtain decision from patent and trademark office. |
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Term
|
Definition
| any word, name, symbol, or device used to identify the source or origin of products or services and to distinguish those product or services from others. Trademarks also provide consumers with useful information. renewable every 10 years |
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Term
|
Definition
| trademark, service mark, collective mark, certification mark |
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Term
|
Definition
| used to identify services or intangible activities of a business, rather than a business's physical products |
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Term
|
Definition
| trademarks or service marks used by members of a cooperative, association, or other collective group |
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Term
|
Definition
| marks, words, names, symbols, or devices used by a person other than the owner to certify a particular quality about a good or service. |
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Term
| What is protected under trademark law |
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Definition
| words, numbers and letters, designs and logos, sounds, fragrances, shapes, colors, trade dress |
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Term
| exlusions from trademark protection |
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Definition
| immoral or scandalous matter, deceptive matter, descriptive marks, surnames |
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Term
| process of obtaining trademark |
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Definition
| select an appropriate trademark, perform trademark search, create rights in the trademark. |
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Term
|
Definition
| form of IP, that grants owner of work of authorship legal right to determine how work is used and to obtain economic benefits of the work |
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Term
| What is protected by copyright |
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Definition
| literary works, musical compositions, computer software, dramatic works, pantomimes and choreographic works, pictorial, graphic, and sculptural works. |
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Term
| Exclusions from copyright protection |
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Definition
| idea-expression dichotomy. Copyrights can not protect ideas. But the expression of an idea is. |
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Term
|
Definition
| copyright law protects any work of authorship the moment it assumes tangible form. Technically it is not necessary to provide a copyright notice or register work witht he US copyright office. To enhance protection, attatch copyright notice or register work with copyright office. |
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Term
|
Definition
| formula, patter, physical device, idea, process, or other info that provides owner with competitive advantage. |
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Term
| federal economic espionage act |
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Definition
| criminalizes the theft of trade secrets |
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Term
| How do companies protect trade secrets |
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Definition
| physical measures and written documents. |
|
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Term
| what qualifies for Trade secret protection |
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Definition
| not known outside firm, only known on a need to know basis, safeguarded, valuable, provides firm with competitive adv. developed at great cost, time, and effort. cant beeasily duplicated. |
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Term
| Physical measures for protecting trade secrets |
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Definition
| restricted access, password protecting computer files, logbooks for access to sensitive materials, labeling documents, maintain logbooks for visitors, adequate overall security measues. |
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Term
|
Definition
| conducted to determine the ip a firm owns. Prudent for a company to periodically determine whether its ip is being properly protected. It is important for a firm to remain prepared to justify its valuation in the event of a merger or acquisition. |
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Term
| Process of conducting an IP audit |
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Definition
| develop inventory of IP, identify works in progress to ensure that they are being documented and protected in a systematic orderly manner. |
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Term
|
Definition
| growth in both revenues and profits over an extended period of time |
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Term
| Three things a business can do to prepare for growth |
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Definition
| appreciate the nature of business growth, stay committed to a core strategy, plan for growth |
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Term
| Potential downsides to growth |
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Definition
| can threaten stability of firms operations in every are, from human resources to finance. |
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Term
|
Definition
| economies of scale, economies of scope, market leadership; influence, power, and survivability; accomodate the growth of key customers, attract and retain talented employees. |
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Term
|
Definition
| scope or range of firms operations creates efficiencies |
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Term
|
Definition
| increasing production lowers the average cost of each unit produced. |
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Term
|
Definition
| increased revenues cost less to deliver than current revenues, profit margins increase as sales go up. |
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Term
|
Definition
| introduction, early growth, continuous growth, maturity, decline |
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Term
|
Definition
| start-up phase where business determines what its core strengths and capabiltiies are/ Main challenge is to make sure the intial product or service is right. Improtant to document what works and what doesnt work |
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Term
|
Definition
| increasing sales, heightened complexity. Founder must start working on the business rather than in the business. |
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Term
|
Definition
| need for structure and formalization increases, toughest decisions take place in this stage. |
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Term
|
Definition
| growth stalls, more focused on managing efficiently than developing new products. |
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Term
|
Definition
| firm can improve quality of an activity by identifying and copy methods of other firms that have been particularly successful in that area. |
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Term
|
Definition
| Managerial capacity problem, day to day challenges of growing a firm |
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Term
| managerial capacity problem |
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Definition
| firm growth is limited by personnel, expertise, and intellectual resources. IT does a firm little good to have exciting ideas about growth when it lacks the mangerial capcity to implement its ideas. |
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Term
| why cant firms quickly increase managerial services |
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Definition
| expensive to hire new employees, takes time for them to be socialized into culture, takes time to aquire specific skills and establish relationships with other members of the firm. |
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Term
|
Definition
| number of employees needs increase, difficult to find right employees and place hem in appropriate positions and provide adequate supervision. |
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Term
|
Definition
| as firm grows and adds personnel, the new hires typically do not have the same ownership incentives as original founders. New hires arent as motivated to put in long hours and try to avoid hard work. |
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Term
| The ability to increase managerial capacity is constrained by |
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Definition
| Socialization of new managers, managerial motivation, adverse selection, moral hazard |
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Term
| Day to day challenges of a firm |
|
Definition
| Cash flow management, price stability, quality control, capital constraints |
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Term
| Three most pervasive myths about growth |
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Definition
| growth companies are predominantly technology companies, rapid growth firms emerge only in rapid growth industries, to grow quickly firm must have a first mover advantage |
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Term
| Internal growth strategies |
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Definition
| new product development, other product related strategies, international expansion, and internet-driven strategies |
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Term
| external growth strategies |
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Definition
| mergers and acquisitions, licensing, strategic alliances and joint ventures, franchising |
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Term
|
Definition
| find a niche and fill it, develop products that add value, get quality right and pricing right, focus on a specific target market, conduct ongoing feasibility analysis |
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Term
| Other product related strategies |
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Definition
| improving an existing product or service, increasing market penetration, extending product lines, geographic expansion |
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Term
|
Definition
| business that seeks to derive significant competitive advantage by using their resources to sell products or services in multiple countries |
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Term
| Reasons new products fail |
|
Definition
| inadequate feasibility analysis, overestimation of market potential, bad timing, inadequate advertising and promotion, poor service. |
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Term
| marketing penetration strategy |
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Definition
| increase sales of a product through greater marketing efforts or through increaded production capacity and efficiency |
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Term
| Foreign market entry strategies |
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Definition
| exporting, licensing, joint ventures, franchising, turnkey project, wholly owned subsidiary |
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Term
| Advantages of external growth strategies |
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Definition
| reducing competition, gaining access to proprietary products or services, gaining accesst o new products and markets, obtaining access to techincal expertise, gaining access to an established brand name, economies of scale, diversificaiton of business risk. |
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|
Term
| disadvantages of external growth strategies |
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Definition
| incompatibility of top management, clash of corporate cultures, operational problems, increased business complexity, loss of organizational flexibility, antitrust implications. |
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Term
|
Definition
| outright purchase of one firm by another, pooling of interests to combine two or more firms into one. |
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Term
|
Definition
| expanding product line, gaining access to distribution channels, achieving competitive economies of scale. |
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Term
|
Definition
| granting of permission by one company to another to use a specific form of its IP under clearly defined conditions. |
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Term
|
Definition
| partnership between two or more firms developed to achieve a specific goal. Tend to be informal and do not involve creating of a new entity |
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Term
|
Definition
| feature cooperation in Research and development, engineering and manufacturing |
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Term
|
Definition
| typically match a company with excess distribution capacity with a company that has a product to sell |
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Term
|
Definition
| entity created when two or more firms pool a portion of their resources to create a separate, jointly owned organization. |
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Term
|
Definition
| partners collaborate at a single point in the value chain to gain economies of scale in production or distribution |
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Term
|
Definition
| positions of the partners are not symmetrical, partners help each other access adjacent links in the value chain. |
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Term
| advantages of strategic alliances and joint ventures |
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Definition
| gain access to a specific resource, economies of scale, risk and cost sharing, gain access to a foreign market, learning, speed to market, neutralizing or blocking competitors |
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|
Term
| disadvantages of strategic alliances and joint ventures |
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Definition
| loss of proprietary information, management complexities, financial and organizational risks, risk becoming dependent on a partner, partial loss of decision autonomy, partners' cultures may clash, loss of organizational flexibility. |
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Term
|
Definition
| agreement between a franchisor (parent company) and franchisee (individual or firm willing to pay the franchisor a fee for the right to sell its product or service) |
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Term
| product and trademark franchise |
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Definition
| arrangement under which franchisor grants the franchisee the right to buy its products and use its name. Connects a single manufacturer with a network of dealers or distributors |
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Term
| business format franchise |
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Definition
| arrangement under which the franchisor provides a formula for doing business to the franchisee along with training, advertising, and other forms of assistance. |
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Term
| individual franchise agreement |
|
Definition
| involves the sale of a specific franchise for a specific location |
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Term
|
Definition
| allows a franchisee to own and operate a specific number of franchisees in a particular geographic area |
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|
Term
| master franchise agreement |
|
Definition
| similar to area franchise agreement in addition to having the right to offer and sell the franchise to other people in the area |
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|
Term
| advantages of setting up franchise system |
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Definition
| rapid, low cost market expansion, income from franchise fees and royalties, franchisee motivation, access to ideas and suggestions, cost savings, increased buying power. |
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|
Term
| disadvantages of setting up franchise system |
|
Definition
| sharing profits with franchisees, loss of control, friction with franchisees, managing growth, differences in required business skills, legal expenses. |
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Term
|
Definition
| product or service should be unique, business consistently profitable, when a firm has a strong or potentially strong trademark, well designed business method, desire to grow |
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Term
| 9 steps in setting up a franchise |
|
Definition
| Develop a franchise business plan, professional advice, IP audit, develop franchise documents, prepare operating manuals, plan an advertising strategy and franchise training program, team for opening new units, stategy for solicitating prospective franchisees, help with site selection and grand opening of their franchise outlets |
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|
Term
| Qualities to look for in prospective franchisees |
|
Definition
| good work ethic, ability to follow instructions, ability to operate with minimal supervision, team oriented, experience in industry, adequate resources, ability to make suggestions, represents franchisor in positive manor |
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Term
|
Definition
Are you willing to take orders?
are you willing to be a part of the system?
how will you react if you make a suggestion to your franchisor and it is rejected?
what are you lookingg for in a business?
are you willing to put money at risk? |
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|
Term
| costs associated with buying a franchise |
|
Definition
| initial franchise fee, capital requirements (buying real estate, building, purchase of inventory, cost of obtaining a business license), continuing royalty payment (around 5% of monthly gross income), advertising fees, other fees. |
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|
Term
| advantages of buying a franchise |
|
Definition
| proven product, established trademark, franchisors training technical expertise and managerial expertise, established marketing network, ongoing support, availability of financing, potential for growth |
|
|
Term
| disadvantages of buying a franchise |
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Definition
| cost of franchise, restrictions on creativity, duration and nature of commitment, risk of fraud, misunderstanding, or lack of commitment, problems of termination or transfer, poor performance on the part of other franchisees, potential for failure. |
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Term
| 7 steps in purchasing a franchise |
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Definition
| visit several outlets, meet with franchise attorney, meet with franchisor and check references, review all franchise documents with attorney, sign, attend training, open business |
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Term
| Common misconceptions about franchising |
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Definition
| franchising is a safe investment, strong industry ensures success, "proven" business system, no need to hire attorney or accountant, best systems grow rapidly and its best ot be apart of them, i can operate it for less than franchisor predicts, franchisor is a nice person |
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Term
| Uniform Franchise Offering Circular |
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Definition
| document with 23 categories of info. provides a prospective franchisee a broad base of information about a franchisors background and financial health. UFOC must be provided by the franchisor to prospective franchisse at least 10 days before the contract can be signed or franchisee pays the franchisor any money |
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Term
| International franchising |
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Definition
| markets for certain franchised products in US have become saturated, consider the brand in a foreign country, good lawyer, determine if its sale-able in the foreign country, find out how much training and support you will receive. |
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