adeyl khan, faculty, bba, nsu chapter 5. adeyl khan, faculty, bba, nsu most businesses are small...
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Adeyl Khan, Faculty, BBA, NSU
Options for Organizing Small and Large Businesses
Chapter 5
Adeyl Khan, Faculty, BBA, NSU
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.
Adeyl Khan, Faculty, BBA, NSU
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.
Adeyl Khan, Faculty, BBA, NSU
Typical Small-Business Ventures
Adeyl Khan, Faculty, BBA, NSU
Major Industries Dominated by Small Business
Adeyl Khan, Faculty, BBA, NSU
Contributions of Small Business
Creating New JobsCreating New IndustriesInnovation
Adeyl Khan, Faculty, BBA, NSU
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
Adeyl Khan, Faculty, BBA, NSU
Reasons Why Small Businesses Fail
Management ShortcomingsInadequate FinancingGovernment Regulation
Adeyl Khan, Faculty, BBA, NSU
Sources of Small Business Financing
Adeyl Khan, Faculty, BBA, NSU
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.
Adeyl Khan, Faculty, BBA, NSU
Small Business AdministrationFinancial Assistance
Loan Guarantees Microloans
Small Business Investment Companies (SBICs)
Active Capital
Adeyl Khan, Faculty, BBA, NSU
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
Adeyl Khan, Faculty, BBA, NSU
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
Adeyl Khan, Faculty, BBA, NSU
G-C5 Due Jun 22Create a business plan for your org.
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Adeyl Khan, Faculty, BBA, NSU
Minority Owned Businesses
Adeyl Khan, Faculty, BBA, NSU
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.
Adeyl Khan, Faculty, BBA, NSU
– 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
Adeyl Khan, Faculty, BBA, NSU
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
Adeyl Khan, Faculty, BBA, NSU
Alternatives for Organizing A Business
Adeyl Khan, Faculty, BBA, NSU
Forms of Private Ownership
Adeyl Khan, Faculty, BBA, NSU
Legal Structures to Meet Changing NeedsFinancial SituationManagement Skills and LimitationsManagement Styles and CapabilitiesExposure to Liability
Adeyl Khan, Faculty, BBA, NSU
Types of Corporations
Domestic CorporationForeign CorporationAlien CorporationEmployee-Owned CorporationsNot-for-Profit Corporations
Adeyl Khan, Faculty, BBA, NSU
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.
Adeyl Khan, Faculty, BBA, NSU
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
Adeyl Khan, Faculty, BBA, NSU
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
Adeyl Khan, Faculty, BBA, NSU
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.
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Learning
Goals