Entrepreneurship Chapter 7 Flashcards

Questions and Answers

What is the new-new approach?

A start-up approach to business in which the concept is a brand new idea to the marketplace.

What is the new-old approach?

A start-up approach to business in which the concept provides a new angle to something that already exists in the marketplace.

What is an upside gain and downside loss?

This is the best possible gain weighed against the worst loss possible within the financial capital domain.

What is risk vs reward?

Examine overall gains and losses to point out the importance of getting an adequate return on the amount of money risked. Signup and view all the answers

What are the things that must be understood when acquiring an established entrepreneurial venture?

Personal preferences, such as recognizing certain personal factors and limiting choices of ventures accordingly, as well as the examination of opportunities. Signup and view all the answers

What are the advantages of acquiring an ongoing venture?

<ol> <li>Successful future operation is likely because the enterprise is already in operation. 2) Time and effort associated with a new enterprise are eliminated. 3) It is sometimes possible to buy an ongoing business at a bargain price.</li> </ol> Signup and view all the answers

What are some considerations that must be thought about when evaluating a venture for sale?

Business environment, profits, sales, operating ratios, and business assets such as inventory, equipment, and trademarks. Signup and view all the answers

What are key questions to ask a potential new venture about to be bought?

Why is the business being sold? What is the current physical condition of the business? What is the condition of inventory? What is the state of the company's other assets? How many employees will remain? What type of competition does the business face? What does the firm's financial picture look like? Signup and view all the answers

What is a legal restraint of trade?

A legal document signed by the seller of a business that restricts them from operating in the same business for a reasonable amount of time and within a reasonable geographic jurisdiction. Signup and view all the answers

What are unscrupulous practices?

Business practices that are devoid of ethics and seek personal gain at any cost. Signup and view all the answers

What does a company's profitability mean?

The amount of net profit a company produces after expenses. Signup and view all the answers

What is a profit trend?

A venture's ability to generate a profit over a sustained period. Signup and view all the answers

What are the four critical elements that should be recognized when negotiating a deal?

Information, Time, Pressure, Alternatives. Signup and view all the answers

What is a franchise?

Any arrangement in which the owner of a trademark, trade name, or copyright has licensed others to use it to sell goods or services. Signup and view all the answers

What is a franchisee and a franchisor?

Franchisee: An individual who purchases and operates a franchise. Franchisor: Seller of a franchise. Signup and view all the answers

What does the franchisee do for the franchise and what does the franchise do for the franchisee?

Franchisee provides financial investment, obtains and maintains standardized inventory or equipment, and maintains specified quality of performance. Franchise provides company name, identifying logos, professional management training, sale of specific merchandise, financial assistance, and aid and guidance. Signup and view all the answers

What are the advantages of franchises?

Training and guidance, brand-name appeal, proven track record, financial assistance. Signup and view all the answers

What are the disadvantages of franchises?

Franchise fees, franchisor control, unfulfilled promises. Signup and view all the answers

Study Notes

Start-up Approaches

New-New Approach: Involves launching a completely original idea in the market.
New-Old Approach: Introduces a novel perspective or enhancement to an existing product or service.

Financial Concepts

Upside Gain vs Downside Loss: Evaluates the best potential profit against the worst possible financial loss in investments.
Risk vs Reward: Analyzes the balance between potential gains and losses to ensure adequate returns on invested capital.

Acquiring Ventures

Considerations for Acquiring Established Ventures:
- Personal preferences driven by background, skills, interests, and experience.
- Seek opportunities through business brokers and various advertising avenues like newspapers and trade sources.
Advantages of Ongoing Ventures:
- Established operations increase likelihood of future success.
- Reduces time and effort typically needed in starting a new business.
- Potential to acquire the business at a lower cost.
Evaluating Ventures for Sale:
- Assess the business environment and potential in its current location.
- Review financial metrics including profitability, sales, and operational ratios.
- Examine tangible and intangible assets, like inventory and trademarks.

Key Questions When Buying a Venture

Inquire about the reason for sale, condition of the business and inventory, competition, employee retention, and the financial status of the company.

Legal Aspects

Legal Restraint of Trade: A contractual agreement preventing the seller from entering the same business within a specified time and location after the sale.

Ethical Considerations

Unscrupulous Practices: Business activities lacking ethical standards, focusing solely on personal profit.

Profitability Indicators

Company's Profitability: The net profit remaining after all expenses are deducted.
Profit Trend: Indicator of a business's capability to sustain profits over time.

Negotiation Elements

Critical Negotiation Factors:
- Information: Gather data on company performance, competition, and market conditions.
- Time: A competitive edge exists if the buyer is the sole competitor; timing can affect the negotiation.
- Pressure: Sellers may not have full control over their sale decisions.
- Alternatives: Consideration of other options available to both parties during negotiation.

Franchise Basics

Franchise: A business model where trademark or trade name ownership allows others to sell goods or services under that brand.
Franchisee and Franchisor:
- Franchisee: Purchaser and operator of the franchise.
- Franchisor: Seller of the franchise rights.

Franchise Dynamics

Responsibilities of the Franchisee:
- Financial investment, maintenance of quality, and adherence to standards.
Benefits from the Franchisor:
- Access to brand identity, management training, merchandise sales, and ongoing support.

Franchising Considerations

Advantages: Benefit from established training, brand recognition, proven success, and financial support.
Disadvantages: Costs associated with franchise fees, possible franchisor control, and unmet expectations.

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Description

Test your understanding of key concepts from Chapter 7 of Entrepreneurship. This quiz covers important terms such as the new-new and new-old approaches, as well as upside gain and downside loss. Perfect for anyone looking to solidify their knowledge in entrepreneurial strategies.