Professional Documents
Culture Documents
Innovation
• Small firms develop twice as many innovations per employee
as large firms.
WHY SMALL BUSINESSES FAIL
• One new business in every three closes permanently within two years.
• By the 10year mark, 82 percent of all small businesses have closed permanently.
Management Shortcomings
• Founders’ strengths in areas such as marketing or interpersonal relations are often
offset by shortcomings in areas such as finance or order fulfillment.
Inadequate Financing
• Startup expenses, uneven cash flows, and inadequate or highinterest financing.
Government Regulation
• Paperwork and limited resources to handle tax and regulatory burdens.
INCREASING THE LIKELIHOOD OF
SMALL BUSINESS SUCCESS
Creating a Business Plan
Business plan A written document that
• Provides an orderly statement of a company’s
goals.
• The methods by which it intends to achieve
these goals.
• The standards by which it will measure
achievements.
Small Business Administration
Small Business Administration (SBA) The principle government agency
concerned with helping small U.S. firms and advocate for small businesses
within the U.S. government.
Financial Assistance from the SBA
• Provides guarantees for smallbusiness loans by private lenders.
• Licenses Small Business Investment Companies.
Other Specialized Assistance
• Manages setaside programs for federal contracts for small businesses and
manages the Small Business Training Network.
Business Incubators
Business incubator Organization that provides temporary lowcost, shared
facilities to small startup ventures.
SMALL BUSINESS OPPORTUNITIES
FOR WOMEN AND MINORITIES
Women-Owned Businesses
• More than 10.6 million womenowned firms in the U.S. employ almost
19.1 million people.
• Fortyeight percent of U.S. businesses owned by women; one in five of
these is owned by minority women.
• Fastest growth occurring in construction, transportation and communications,
and agricultural services.
• Have rapidly established support networks.
• Small Business Administration programs
• Nonprofit support organizations
Minority-Owned Businesses
• Growth in number of businesses owned by African Americans, Hispanics, and
Asian Americans has outpaced overall growth.
• Immigrants own nearly 15 percent of all small businesses and are more likely to
own small businesses than nativeborn citizens.
• Minority business owners face considerable obstacles:
• Tend to start businesses on smaller scale.
• Have more trouble attracting investors.
• Have harder time getting bank loans.
THE FRANCHISING ALTERNATIVE
Franchising Contractual agreement that specifies the methods by which a dealer
can produce and market a supplier’s good or service.
• Generate $1.53 million in sales and employ more than 18 million people in U.S.
Franchising Agreements
• Franchisee receives materials, equipment, and training from the franchisor.
• Franchisor provides building plans, site selection help, managerial and
accounting systems, and other services to assist the franchisee.
• Domestic corporation in the state in which it is incorporated.
• Foreign corporation in states in which it does business other than the one in
which it is incorporated.
• Alien corporation in countries in which it does business other than where it
is incorporated
• A single company can operate under all three of these designations.
The Incorporation Process
Where to Incorporate
• Can incorporate in any state.
• More than half of Forbes 500 companies are
incorporated in Delaware.
The Corporate Charter
• Most states requires three incorporators.
• Incorporators file articles of incorporation.
• State grants a corporate charter, a legal
document that formally establishes a
corporation.
Corporate Management
Stockholder Person or organization who owns shares of stock in a corporation.
Stock Ownership and Stockholder Rights
• Annual meetings, elections of company officers.
• Shares classified two ways
Board of Directors
Board of Directors Governing body of a corporation.
• Hires chief executive officer.
Corporate Officers and Managers
• CEO, chief operating officer, and chief financial officer make most major
corporate decisions; CEOs and CFOs personally certify the accuracy
of their firm’s financial statements.
Employee-Owned Corporations
• Workers buy shares of stock in the company that employs them.
• Growing popularity: 11,400 firms employing nearly 10 million people.
• Employees share in wealth the company generates.
• Managers want employees to care deeply about company’s success.
Not-for-Profit Corporations
• Notforprofit corporation Firm pursuing objectives other than returning a
profit.
• 1.5 million in the U.S.
• Includes charitable groups, socialwelfare and educational organizations,
religious congregations, political parties, and labor unions.
• Exempt from paying taxes.
WHEN BUSINESSES JOIN FORCES
Mergers and Acquisitions (M&A)
Merger Combination of two or more firms to form one company.
Acquisition Procedure in which one firm purchases the property and
assumes the obligations of another.
Government-Owned Corporations
• Can result when private investors are unwilling to invest in a highrisk but
socially important project.