Adeyl Khan, Faculty, BBA, NSU Chapter 5. Adeyl Khan, Faculty, BBA, NSU Most Businesses are Small...

Adeyl Khan, Faculty, BBA, NSU

Options for Organizing Small and Large Businesses

Chapter 5


Most Businesses are Small Businesses

90% of firms with employees have fewer than 20 people on staff. 98% have fewer than 100 employees.

More than 20 million people in the United States earn business income without employees. Almost ½ the sales in the United States are made by small business.

Small businesses generate 60% - 80% of new jobs over the last decade.Launching pad for entrepreneurs and prevalence of minorities.


What is Small Business?

The Small Business Administration defines a small business to be a firm that is independently owned and operated and is not dominant in the field. Manufacturing business: fewer than 500 workers Wholesalers: fewer than 100 workers Retailers: less than $6 million in annual sales Agricultural business: less than $750,000

Small Businesses size ranges from $500,000 to $25 million in sales and from 100 to 1,500 employees.

http://www.sba.gov/


Typical Small-Business Ventures


Major Industries Dominated by Small Business


Contributions of Small Business

Creating New JobsCreating New IndustriesInnovation


1 in 3 businesses closes permanently within two years.

50% of businesses fail after four years.

More than 60% of business fail within six years.

By the 10-year mark, 82% of all small businesses have closed permanently.

Small Business Failure


Reasons Why Small Businesses Fail

Management ShortcomingsInadequate FinancingGovernment Regulation


Sources of Small Business Financing


Increasing the Likelihood of Small Business SuccessCreating a Business Plan

Written documentation that provides orderly statement of goals, methods, and purpose.

Small Business Administration Government agency concerned with helping

small business firms.


Small Business AdministrationFinancial Assistance

Loan Guarantees Microloans

Small Business Investment Companies (SBICs)

Active Capital

http://www.sba.gov/


Other Specialized Assistance

Set-aside Programs Government Contracts (over 23%)

5% for women and minorities Assistance in Financing Government Procurement

Business Incubators Local community initiatives to share resources for small start-ups

The University of Tennessee


Opportunities for Women & MinoritiesMore than 50% of U.S. businesses are

owned by womenThe number of businesses owned by

minorities outpaced the growth in the number of U.S. businesses overall

Women and minorities still face challenges Smaller scale operations Challenges finding investors Access to capital


G-C5 Due Jun 22Create a business plan for your org.

14


Minority Owned Businesses


The Franchising AlternativeA contractual business agreement between

a manufacturer or another supplier and a dealer to produce and market the supplier’s good or service.


– 50% of all retail sales

– 760,000 businesses

– 18 million jobs

– $500 billion in payroll

– 1 out of 12 businesses is a franchise

– Franchising overseas is a growing trend

• Franchising agreements exist between the franchisee and franchisor.

The Franchising Agreement


Benefits and Problems of FranchisingAdvantages

Prior Performance Record

Recognizable Company Name

Prove Business Model

Tested Management program

DisadvantagesFranchise FeesFuture PaymentsLinked to

Reputation and Management

Franchise Agreement Restrictions


Alternatives for Organizing A Business


Forms of Private Ownership


Legal Structures to Meet Changing NeedsFinancial SituationManagement Skills and LimitationsManagement Styles and CapabilitiesExposure to Liability


Types of Corporations

Domestic CorporationForeign CorporationAlien CorporationEmployee-Owned CorporationsNot-for-Profit Corporations


Corporate ManagementStockholders – acquire stocks

in exchange for ownership. Preferred Stock Common Stock

Board of Directors – elected by stockholders to oversee corporation.

Corporate Officers & Management – make major corporate decisions and handle ongoing operations.


When Businesses Join Forces

Mergers and Acquisitions (M&A) Merger - combination of two or more firms to form one company.

Vertical Horizontal Conglomerate

Acquisition - procedure in which one firm purchases the property and assumes the obligations of another.

Joint Ventures – partnership between companies for a specific purpose


Public Ownership – a unit or agency of governmentowns and operates an organization. Parking structures,

water systems, turnpike authority

Customer-Owned Businesses – collective ownership of aproduction, storage, transportation or marketing organization

is a cooperative.

Public and Collective Ownership

Adeyl Khan, Faculty, BBA, NSU26


Distinguish between small and large businesses and identify common industries for small firms.

Discuss the economic and social contributions of small business.

Explain why small businesses fail.

Describe how the Small Business Administration assists small-business owners.

Explain franchising benefits for franchisors and franchisees.

Summarize the forms of business ownership and the advantages and disadvantages of each form.

Identify the levels of corporate management.

Describe recent trends in mergers and acquisitions.

Differentiate among private, public, and collective ownership.

1

2

3

4

5

6

7

8

9

Learning

Goals

Adeyl Khan, Faculty, BBA, NSU Chapter 5. Adeyl Khan, Faculty, BBA, NSU Most Businesses are Small...

Documents

Transcript of Adeyl Khan, Faculty, BBA, NSU Chapter 5. Adeyl Khan, Faculty, BBA, NSU Most Businesses are Small...