Types of Business Based on Management

• There are three types of business based on management:
  • Start-up business
  • Franchising
  • Acquire (Buy-out) business

Start-up Business

• This business is just starting or about to start.
• Usually initiated by one or more entrepreneurs.
• Aims to fulfill a perceived demand for a product or service.
• Usually focuses on a small or specific market.
• Independent businesses tend to be more profitable and survive longer because they concentrate on a smaller market and avoid excessive competition.
• Start-ups can generate more products or services as they operate.
• Start-ups are becoming more popular as a way to earn money or survive during tough times.
• Online selling is a common type of start-up, where entrepreneurs sell various in-demand products like food, clothes, and necessities.
• The main goal of start-ups is to sustain a need.
• Start-ups can be managed by partners or a corporation.

Types of Start-up Firms

• Salary-substitute firms:
  • Provide the same income as a conventional job without requiring a full day's work.
  • Focus on common products and services that are easily accessible.
  • May operate for specific hours or days but still match or exceed the salary of a traditional job.
  • Selling snacks or pastries for an hour or two a day and earning the equivalent of an 8-hour worker is an example.
• Lifestyle firms:
  • Established to pursue a specific lifestyle and generate income from it.
  • Examples include tour guiding, cooking, or baking.
  • The owner promotes their hobbies or interests.
• Entrepreneurial firms:
  • Aim to introduce new products or services that provide value and maximize available resources.
  • Utilize social media and online platforms for job hunting and business promotion.
  • Leverage partnerships to achieve their full potential and expand their operations.

Franchising Business

• Franchise means privilege or freedom.
• Involves an agreement between two individuals or partners.
• Franchisee pays the franchisor for the right to use their trademark to sell their products, services, or business.
• Attractive to those wanting to enter a competitive market and larger industry.
• Advantageous due to established brand recognition, reducing the time needed for product naming and marketing.
• Owning an established business requires significant investment of time and effort to market the product, service, or business.
• Franchising can be structured as a sole proprietorship, partnership, or corporation.
• Maine Mendoza, a Filipino actress and model, is an entrepreneur who started as the face of McDonald's and later became a franchiser.

Types of Franchise System

• Product and Trademark Franchise:
  • The franchisor allows the franchisee to buy its products and use its trade name.
  • A trademark guarantees exclusivity of a product, service, or business.
  • SMB Travel and Tours is an example, operating for six years as a top wholesaler of airline tickets and tour packages.
• Business Format Franchise:
  • The franchisor provides training and advertising support to help the franchisee grow their business.
  • Common in the tourism and hospitality industries.
  • Examples: commercial and residential services, lodging, quick service restaurants, real estate, retail food, retail products and services, and full-service restaurants.

Acquiring (Buy-Out) Business

• Involves acquiring controlling interest in a company, typically in larger corporations.
• Acquisition signifies the right to make significant decisions within the company.
• Established when an individual obtains the right to take over or make major decisions, often by owning more than 50% of the company.

Types of Buy-Outs

• Management buy-out:
  • A company acquires the largest part of another company from a private owner or parent company.
  • Happens when a private company owner decides to retire.
  • High-ranking individuals take advantage of the opportunity to become the owner.
• Leveraged buy-out:
  • The buyer or purchaser controls a company using their assets through bonds or loans.
  • Enables the buyer to acquire the company without a large capital investment.

Misconceptions About Business Ventures

• Business is a safe investment:
  • Incorrect, as business is a risk where one can win or lose.
  • Money, time, and effort can be wasted if the market does not respond well.
• The business ensures success:
  • Untrue, success requires continuous assessment and adjustments.
  • Success depends on constant monitoring and accountable actions for every possible change and development.
• Business grows rapidly:
  • A false idea, as business growth is a step-by-step process.
  • Entrepreneurs need to accept that there are no shortcuts to achieving desired growth.