Starting and Growing Your Business Chapter 5 Options for Organizing Small and Large Businesses

1. Starting and Growing Your Business Chapter 5 Options for Organizing Small and Large Businesses

2. Most Businesses Are Small Businesses • What is a Small Business? • A firm that is independently owned and operated, not dominant in its field, and meets industry-specific size standards for income or number of employees. • 98 percent have fewer than 100 employees • Over 14 million people in the U.S. are earning business income without any employees • Almost half the sales in U.S. are made by small businesses

3. Most Businesses Are Small Businesses • Most non-farming small businesses concentrated in retailing in the service industries • Typical Small-Business Ventures • Dentists • Home Builders • Florists, etc • Almost half of small businesses in the U.S. are home based businesses (firms operated from the residence of the business owner)

4. Major Industries Dominated by Small Businesses

5. Advantages of Small-Business Ownership

6. Disadvantages of a Small Business • In addition to being vulnerable to economic downturns, primary disadvantages include: • Management Shortcomings • Inadequate Financing • Government Regulation

7. Sources of Small-Business Financing

8. Small Business Administration • Guarantees loans • Other Specialized Assistance • Government procurement set-aside programs • Information and advice

9. Small-Business Opportunities forWomen and Minorities • Women-Owned Businesses • Minority-Owned Businesses • Women-owned and minority-owned businesses are growing much faster than the overall growth in U.S. businesses

10. The Franchising Alternative • The Franchising Sector • Franchising—contractual agreement that specifies the methods by which a dealer can produce and market a supplier’s good or service. • Franchising growing rapidly • U.S. franchises generate $1 trillion in sales annually and employing over 8 million people • Franchising is also popular overseas

11. The Franchising Alternative • Franchising Agreements • Franchisee: small business owner who contracts to sell the goods or service of the franchisor in exchange for some payment • Franchisor: owner of the franchise • Franchisor typically provides name recognition, building plans, site selection help, accounting systems, and other services

12. The Franchising Alternative • Advantages include: • A prior performance record • Recognizable company name • Successful business model • Tested management program • Business training • Disadvantages include: • Expensive franchise fees and future payments • Franchisee is linked to the reputation and management of the franchise • The potential unsuitability of the franchisee

13. The Latest Trends in Franchising by Industry

14. Comparing the Three Major Forms of Private Ownership Double taxation

15. Organizing and Operating a Corporation • Levels of Management in a Corporation

16. Organizing and Operating a Corporation • Corporate Management • Stockholders—person or organization who has bought shares of stock in a corporation and is entitled to some of its profits. • Closed or Closely Held • Publicly Held

17. Organizing and Operating a Corporation • Corporate Management • Board or Directors—elected governing body of a corporation. • Sets policy, authorizes major transactions, and hires and supervises the CEO • Corporate Officers and Managers • Make most major corporate decisions

18. Organizing and Operating a Corporation • Employee-Owned Corporations • Customer-Owned Businesses: Cooperatives • Not-for-Profit Corporations • Include: museums, libraries, religious and human-service organizations, zoos

19. 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. • Vertical Merger • Horizontal Merger • Conglomerate Merger