Brittany Killins has a small retail and sale business and she grew her business into a big business. She has great ideas to grow a small business.

1. Brittany Killins
Starting and Growing Your
Business

2. Options for Organizing Small
and Large Businesses

3. Chapter Objectives
1. Distinguish between small and large businesses
and identify the industries in which most small
firms are established.
2. Discuss the economic and social contributions of
small business.
3. Compare the advantages and disadvantages of
small businesses.
4. Describe how the Small Business Administration
assists small-business owners.
5. Explain how franchising can provide
opportunities for both franchisors and
franchisees.
6. Summarize the three basic forms of business
ownership and the advantages and
disadvantages of each form.

4. Chapter Objectives
7. Identify the levels of corporate management.
8. Describe recent trends in mergers and
acquisitions.
9. Differentiate among private ownership, public
ownership, and collective ownership
(cooperatives).

6. Chapter Overview
 Variables affecting the organization of
your business include:
 How easily can you set up this type of
organization?
 How much financial liability can you afford
to accept?
 What financial resources do you have?
 What strengths and weaknesses do you see
in others?
 What are your own strengths and
weaknesses?

7. 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

8. Most Businesses Are Small
Businesses
 Most nonfarming small businesses have
been 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)

10. David vs. Goliath: Business Sectors Most
Dominated and Least Dominated by Small
Firms

11. Major Industries Dominated by Small
Businesses

12. Contributions or Small Business
to the Economy
 Creating New Jobs
 Creating New Industries
 Attracting New Industries

13. Advantages of a Small Business
 Small businesses differ greatly in:
 Forms of organization
 Market positions
 Staff capabilities
 Managerial styles
 Organizational structures
 Financial resources
 These differences usually seem like
advantages to small-business owners

14.  Advantages of Small-Business
Ownership

15. Advantages of a Small Business
 Innovation
 Example: Start-up business to offer
online bookstore shopping and delivery.
 Typically develop twice as many product
innovations per employee as larger firms
 Also obtain the more patents per sales
dollar than larger businesses
 Key innovations developed by small
businesses include the airplane, audio
tape recorder, double-knit fabrics,
optical scanner, PC, soft contact lenses,
and the zipper

16. Advantages of a Small Business
 Lower Costs
 Example: Small retailer who can prepare
sales flyers on a PC.
 Small firms may be able to provide
goods and services at prices that large
firms cannot match
 Overhead costs are usually minimized
 Typically, organizations are lean -- with
the smallest staffs and few support
personnel

17. Advantages of a Small Business
 Superior Customer Service
 Example: Free alterations on clothing
purchases from a small boutique.
 Small firms can operate with greater
flexibility
 This allows tailoring of product lines and
services to the needs of customers

18. Advantages of a Small Business
 Filling Isolated Niches
 Example: Retail store that specializes in
selling products designed for left-handed
consumers.
 Large businesses tend to focus on the large
segments of the overall market
 Growth prospects of market niches are too
limited, and expenses involved in serving
them to great, for large firms
 This creates opportunity for small firms

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

20. Disadvantages of a Small Business
 Management Shortcomings
 People often go into business with little, if any,
business training
 Owners often hesitate to turn to consultants
for advice in areas were they lack knowledge
or experience
 Frequently struggle with “rose-colored-glasses
syndrome”

21. Disadvantages of a Small Business
 Inadequate Financing
 Too often, new business owners assume a that
they will generate enough funds in the first few
weeks or months to finance continuing
operations
 Provisions must be made for uneven cash
flows
 Banks often very reluctant to make small
business loans

22.  Sources of Small-Business Financing

23. Disadvantages of a Small Business
 Government Regulation
 Small-business owners often complain bitterly
of excessive government regulation and red
tape
 Paperwork costs account for billions of small-
business dollars each year
 Taxes are another burdensome expense for
small businesses

24. Increasing the Likelihood of
Business Success
 Creating a Business Plan
 Business plan—written document that provides
an orderly statement of a company’s goals, the
methods by which it intends to achieve those
goals, and standards by which it will measure
achievements.
 Typically includes following components:
 Executive summary
 Introduction
 Marketing
 Financials
 Resumes of principles

25. Increasing the Likelihood of
Business Success
 Small Business Administration
 (SBA)—federal agency that assists small
businesses by providing management
training and consulting, financial advice,
and support in securing government
contracts.

26. Increasing the Likelihood of
Business Success
 Small Business Administration
 Financial Assistance
 Guarantees loans
 Other Specialized Assistance
 Government procurement set-aside programs
 Information and advice

27. Increasing the Likelihood of
Business Success
 Business Incubators
 Business incubator—organization that
provides low-cost, shared facilities on a
temporary basis to small start-up ventures.

28. Increasing the Likelihood of
Business Success
 Large Corporations Assisting Small
Businesses
 Corporations often devise special programs
aimed at solving small-business problems
 Recognition of the size of the small-
business market, its growth rate and buying
power, and the financial rewards of
supporting small businesses

29. Small-Business Opportunities for
Women 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

30. Small-Business Opportunities for
Women and Minorities
 Women-Owned Businesses
 Over 9 million women-owned firms
 Almost 40 percent of U.S. businesses
 Provide employment for almost 28 million
people
 1 of every 8 owned by minority women

31. Small-Business Opportunities for
Women and Minorities
 Minority-Owned Businesses
 Growth in number of businesses owned via a
African-Americans, Hispanics, and Asian
Americans has far out past the growth in
number of U.S. businesses overall recently

32.  Types of Businesses Owned by Racial
and Ethnic Minorities

33. 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

34. 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

35. The Franchising Alternative
 Benefits and Problems of Franchising
 Advantages include:
 A prior performance record
 Recognizable company name
 Business model that has proven successful
 Tested management program
 Business training

36. The Franchising Alternative
 Benefits and Problems of Franchising
 Disadvantages include:
 Expensive franchise fees and future payments
 The fact that the franchisee is linked to the
reputation and management of the franchise
 The potential unsuitability of the franchisee

37.  The Latest Trends in Franchising by
Industry

38. Small Business Goes Global
 Global Environment for Entrepreneurs
 Growth Strategies
 Global reach of the Internet allows
companies to reach international markets
quickly

39. Alternatives for Organizing a
Business
 Forms of Business Ownership

40.  Comparing the Three Major Forms of
Private Ownership

41. Alternatives for Organizing a
Business
 Sole Proprietorships
 Sole proprietor—form of business ownership
in which the company is owned and
operated by one person.

42. Alternatives for Organizing a
Business
 Partnerships
 Partnership—form of business ownership in
which the company is operated by two or
more people who are co-owners by
voluntary legal agreement.

43. Alternatives for Organizing a
Business
 Corporations
 Corporations—business that stands as a legal
entity with assets and liabilities separate from
those of its owner(s).
 S corporations

44.  Double Taxation: A Disadvantage of the
Corporate Form of Organization

45. Alternatives for Organizing a
Business
 Changing Legal Structures to Meet
Changing Needs
 Considerations of the appropriate legal
structure include:
 Personal financial situations and the need
for additional funds
 Management skills and limitations
 Management styles and capabilities for
working with others
 Concerns about exposure to personal
liability

46. Organizing and Operating a
Corporation
 Types of Corporations
 Domestic—A firm is considered a domestic
corporation in the state where it is
incorporated
 Foreign—When company does business in
a state other than the one where it has filed
incorporation papers, it is registered as a
foreign corporation in each of those states
 Alien—A firm incorporated in one nation
that operates in another is known as an
alien corporation where it operates

47. Organizing and Operating a
Corporation
 The Incorporation Process
 Where to Incorporate
 The Corporate Charter
 Articles of Incorporation

48.  Levels of Management in a
Corporation

49. 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

50. Organizing and Operating a
Corporation
 Corporate Management
 Stock Ownership and Stockholder Rights
 Preferred stock owners have limited voting
rights; receive dividends before others
 Common stock owners have voting rights but
only residual claims on assets and are the last to
receive any income distributions

51. 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

52. Organizing and Operating a
Corporation
 Employee-Owned Corporations
 Employee ownership: where workers buy
shares of stock in the company that
employees them
 Corporate organization stays the same
 Most stockholders are also employees

53. Organizing and Operating a
Corporation
 Not-for-Profit Corporations
 Organizations that pursue objectives other
than returning profits to owners
 Include:
 Museums
 Libraries
 Religious and human-service organizations
 Zoos
 Thousands of other groups

54. 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

55. When Businesses Join Forces
 Joint Ventures: Specialized
Partnerships
 Joint Venture: a partnership between
companies formed for a specific undertaking

56. Public and Collective Ownership
 Public Ownership
 When a unit or agency of government owns
and operates an organization
 Government-Owned Corporations
 Used When:
 Private investors are not willing to invest in high-
risk projects
 When private ownership has failed
 Operating public companies can be used to foster
competition

57. Public and Collective Ownership
 Customer-Owned Businesses:
Cooperatives
 Cooperative: an organization whose
owners join forces to collectively operate all
or part of the functions in their industry