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MGMT 3850 Final - Entrepreneurship With
Solution
Challenge - ANSWER Raising capital to launch or expand a business is a "Credit Crunch" - ANSWER Many entrepreneurs are caught in a most challenging - ANSWER Financing needs in the $100,000 to $3 million range may be the _____ to fill.
- Choosing the right sources of capital
- Knowing where to look for money (do your hw!)
- Raising money takes time and effort
- Creativity counts (use this in search of money)
- The Internet is useful
- Use social media
- Be prepared before approaching investors
- Making sure that the "chemistry" among themselves, their companies, and their funding sources is a good one.
- Plan an exit strategy
- When capital gets tight remember to bootstrap. - ANSWER What are the secrets to successful financing? (10 of them)
Layered financing - ANSWER Piecing together capital from multiple sources Capital - ANSWER Any form of wealth employed to produce more wealth. Equity and Debt - ANSWER Two types of capital Equity Capital - ANSWER Represents the personal investment of the owner(s) in the business. Equity Capital - ANSWER Also called risk capital because investors assume the risk of losing their money if the business fails. Equity Capital - ANSWER Does not have to be repaid with interest like a loan does. Debt Capital - ANSWER Must be repaid with interest. Debt Capital - ANSWER Is carried as a liability on the company's balance sheet. Debt Capital - ANSWER Can be expensive, especially for small companies, because of the risk/return tradeoff. Personal Financing - ANSWER The first place an entrepreneur should look for money Bootstrapping - ANSWER The most common source of equity capital for starting a business.
Angels - ANSWER Willing to invest in the early stages of a business. Venture capital companies - ANSWER Private, for-profit companies that purchase equity positions in young businesses that they believe have high-growth and high-profit potential. $5 million to $25 million - ANSWER Most venture capitalists seek investments in the ____ to ____ range. Venture capital companies - ANSWER Target companies with high-growth and high profit potential. Venture capital - ANSWER In ______ companies, business plans are subjected to an extremely rigorous review - less than 1% accepted. 300 - ANSWER About ____ large corporations across the globe invest in start-up companies. 17% - ANSWER More than ____ of all Venture capital deals involve corporate venture capital. Initial public offering (IPO) - ANSWER When a company raises capital by selling shares of its stock to the public for the first time. 120 - ANSWER Since 2001, the average number of
companies making IPOs each year is ____.
- Consistently high growth rates
- Consistently high growth rates
- 3 to 5 years of audited financial statements that meet or exceed SEC standards
- Solid position in a rapidly-growing industry (avg. company age is 10 yrs.)
- Sound management team with experience and a strong board of directors - ANSWER Characteristics of successful IPO candidates (5 of them)
- Choose the managing underwriter/investment banker
- Negotiate a letter of intent
- Outlines the details of the deal
- Prepare the registration statement
- File with the SEC
- Wait to "go effective"(Limited marketing during this time)
- Road show - gathering of potential syndicate members
- Sign underwriting agreement
- Meet all state requirements - ANSWER Steps to take a company public: ( of them) Debt financing - ANSWER is a popular tool used by
SBA loan guarantee programs - ANSWER Aimed at entrepreneurs who can't get conventional funding. 12 yrs. - ANSWER Average duration of an SBA loan is Merchant cash advance - ANSWER A provider pre-purchases credit and debit card receivables at a discount. peer to peer lending - ANSWER Web-based platforms that create an online community of lenders who provide funding to creditworthy small businesses. Loan Brokers - ANSWER Specialize in helping small companies find loans by tapping into a wide network of lenders. Capital - ANSWER this is KEY for entrepreneurs.
- The right region of the country
- The right state in the region
- The right city in the state
- The right site in the city - ANSWER Things to consider when choosing the right location for business. (4 of them)
1.Proximity to Markets
2.Proximity to Needed Raw Materials 3.Wage Rates 4.Labor Supply Needs 5.Business Climate 6.Tax Rates 7.Internet Access 8.Total Operating Costs - ANSWER Things to look at when choosing the state. (8 of them)
South Dakota - ANSWER the most small-business friendly state is
California - ANSWER The least small-business friendly state is
Texas - ANSWER Best state for doing business
California - ANSWER Worst state for doing business
1.Population Trends 2.Competition 3.Clustering
Central Business Districts (CBDs) Neighborhood Locations Shopping Centers and Malls Near Competitors Share Spaces Inside Large Retail Stores Nontraditional Locations At Home On the Road - ANSWER Retail and service location options
Is there a good fit with other products and brands sold in the mall or center? Who are the other tenants? Demographically, is it a good fit?
How much foot traffic does it generate? What is the average sales per square foot? How much vehicle traffic does it generate? What is the vacancy rate? How much is the rent, and how is it calculated? - ANSWER Things to consider when evaluating a location
Business incubators - ANSWER Organizations that combine low-cost, flexible rental space with a multitude of support services for their small business residents.
Layout - ANSWER The logical arrangement of the physical facilities of a business that contributes to efficient operations, increased productivity, and higher sales.
- Product
- Process
- Fixed position - ANSWER 3 basic product layouts
companies of all sizes.
Export Management Companies (EMCs) Export Trading Companies (ETCs) Manufacturer's Export Agents (MEAs) Export merchants Resident buying offices Foreign distributors - ANSWER Types of trade intermediaries
Joint venture - ANSWER Two or more U.S. companies form an alliance for the purpose of exporting their goods and services abroad.
Domestic joint venture - ANSWER A domestic firm forms an alliance with a company in the target nation.
Choose the right partner - ANSWER Most important ingredient for success in a joint venture is to:
Select a partner that shares the company's values
and standards of conduct. Define at the outset important issues. Understand your partner's reasons and objectives for forming the joint venture. Spell out in writing exactly how the venture will work and where decision making authority lies. Select a partner with different but compatible skills. Prepare a prenuptial agreement in case of divorce. - ANSWER Choosing a JV partner
Foreign leasing - ANSWER A relatively simple way for even the most inexperienced business owner to extend his reach into foreign markets. (Enter markets quickly and easily with virtually no capital investment. )
- Identify the country or countries that are best suited to the franchiser's business concept.
- Generate leads for potential franchisees.
- Select quality candidates.
- Structure the franchise deal. - ANSWER International Franchising Steps
Tariffs: Nontariff barriers: Quotas: Embargo: Dumping: - ANSWER International barriers to international trade
Rules, regulations and political risks. - ANSWER Political barriers to international trade
Different cost structures and business practices. - ANSWER business barriers to international trade
Differing languages, philosophies, traditions, and accepted practices. - ANSWER Cultural barriers to international trade
World Trade Organization (WTO) North American Free Trade Agreement (NAFTA) Dominican Republic - Central America Free Trade Agreement (CAFTA-DR) - ANSWER Major agreements reducing barriers to free
trade:
Leaders - ANSWER The process of influencing and inspiring others to work to achieve a common goal and then giving them the power and the freedom to achieve it.
Innovative Passionate Willing to take risks Adaptable - ANSWER Business leaders should be:
Create a set of values and beliefs for employees and passionately pursue them. Establish a culture of ethics. Define and then constantly reinforce the vision they have for the company. Develop a strategic plan that gives the company a competitive advantage. Respect and support their employees.
leader second.
- Add the right employees and constantly improve their skills.
- Create a culture for retaining employees.
- Plan for "passing the torch" to the next generation of leadership. - ANSWER 3 vital tasks for a leader
Job description - ANSWER A written statement of the duties, responsibilities, reporting relationships, working conditions, and materials and equipment used in a job.
Job specification - ANSWER Written statement of the qualifications and characteristics needed for a job, stated in terms such as education, skills, and experience.
Culture - ANSWER Distinctive, unwritten, informal code of conduct that governs the behavior,
attitudes, relationships, and style of an organization.
Job enrichment (vertical) - ANSWER Builds motivators into a job by increasing the planning, decision making, organizing and controlling functions (traditional managerial tasks)
Job enlargement (horizontal) - ANSWER Adds more tasks to a job to broaden its scope.
