Small Business Management Exam I

1. Actively managed by the owners

2. Highly personalized

3.  Largely local in its area of operations

4. Largely dependent on internal sources of capital

5. Independently owned and operated and does not dominate the field of operation

Mining/Manufacturing - 500-1500

Wholesale - upto 500

Retail - 25-100

Service - 25-300

Business that makes finished goods from raw materials by hand or machinery.

Business that purchases finished goods for resale.

Business that provides a service instead of a product.

Small businesses are essential to enable a few large ones to concentrate on those economic activities where their efforts are more effective.

S.B. creates 52% of all private employment and 51% of the nations total output  of goods & services (as of 2002 data.

Economic developement of the U.S. has resulted from the efforts of small business

Individuals and small businesses provide the major source of new ideas, inventions, and innovations

Ability to attract customers

Ability to control costs

Ability to Make profit

They have a track record under actual market conditions

Neglect - 3.9%

Disaster - 4.6%

Fraud - 2.2%

Economic causes - 63.5%

Financial causes - 24.1%

Strategy causes - 1.0%

A physical asset that possesses genuine value

A/R, inventories, Pre-paid Exp., Building, Fixtures, Supplies, Etc.

A type of asset that is not able to be physically touched but is retained by a small business because of its genuine value appeal.

Goodwill

Franchisees or restricted representation

Leases and other contracts

Patents, copyrights, and trademarks

Written statements of actions and decisions that will lead the company to its goals or mission

over 10 years

2-9 years

1 year or less

Planning

Organizing

Motivating

Directing

Controlling

that function of determining in advance what needs to be accomplished in order to achieve a particular goal

To arrange or constitute in interdependent parts, each having a specific function or relation with respect to the whole

Thech work is arranged and distributed among members of the firm

Energizing, chenneling and sustaining people's behavior

Regulating the activities or course of activities of an organization

To guide and/or supervise the activities of an organization

Refers to those activities which encourage subordinates to work toward the achievement of the company's goals

 A management function which compares organizational and individual performance with predetermined standards or expected results

technical skills

Human skills

Conceptual skills

Abilities necessary to carry out a particular task

Ability to work with, motivate, and direct individuals toward a common goal

Ability to understand the degree of complexity in a given situation and to reduce that complexity to a level at which specific courses of action can be derived

Goals affect the way the organization relates to the environment, serving to clarify the connection between organizational activitiies and other organizations, groups, and individuals in the environment

Goals guide the internal activities of the organization, providing employees knowledge of task scope, decision guidelines, methods of motivations, performance criteria, and a retional for organizing

Old age, illness

Desire to relocate to a different part of the country

Desire to accept a position with another company

Owner about to lose a contract or franchise

Proposed changes in road routes or zoning

Principal government agency concerned with the financing, operation, and management of a small business

Established in 1953 to combat growing monopolies by the larger businesses

To encourage competition by small business as a basis of free enterprise

Valuation based upon sale of similar business

•      1. Depends upon similarity of business
•      2. recent sales of like businesses
•      3. Real estate appraisals rely extensively on this method

Asset-valuation that relies on replacement value of the business

•      1. Attempts to find replacement value of tangible assets being purchased
•      2. Starts with recent balance sheets
•      3. method usually ignores intangible assets
•      4. Difficutl if small business has poor records; need good accounting recourds

Asset based method that requires the salvage value of the business's assets

•     1. Provides a "minimum" value - worst case scenario
•     2. Worst method for the seller

Valuation based on the business's past earnings record

•     1. Centers on estimating the amount of potential income that may be produced by the business
•     2. Capitalization of the average earning of the company (usually 5 year average).
•     3. The average annual earnings are divided by expected rate of return
•     4. Funeral home POR is 12.9% before taxes

Private investors who are willing to supply financing to new and/or risky small venture startups

A person with primarily technical skiills and little business knowledge who starts a business

The emphasis placed on providing to customers products and services that are safe, reliable, and honestly advertised

Also, a social movement that seeks to strengthen the rights of consumers relative to sellers

The registered right of a creator to reproduce, publish, and sell the work which is the product of the intelligence and skill of that person

Offer best protection for books, periodicals, and orally presented materials

Those individuals who flee the bureaucratic environment of big business by going into business for themselves

Asuperior's act of granting to subordinates, on the basis of competence, the right to act or decide

One who organizes, manages, and assumes the risk of a business firm or venture

An entrepreneur who brings a new firm into existence

An intangible asset such as the name of a funeral home

Also, an intangible asset which enables a business to earn a profit in excess of the normal rate of profit earned by other businesses of the same kind

Abelief that one's sucess depends on one's own effort

The acceptance of the organization's activities by non-members of the organization

The art and science of motivating people toward the achievement of a goal

Path that organizations choose to achieve their purpose

A person with both sophisticated managerial skills and technical knowledge who starts a business

The registered right of an inventor to make, use, and sell an invention

Protect the product idea from unauthorized use or infringement for a limited time

Written statements of actions and decisions that will lead the company to its goals or mission

A person who becomes an entrepreneur to escape an undesirable situation

A person who becomes an entrepreneur as a result of some severe hardship

Chief function is to identify certain products and to create and maintain a demand for them

Provide protection against unfair competition in business

An intangible asset that is a distinct name, sign, or symbol that the federal government grants exclusive rights to use for a specified period of time