Running the Small business

Define small business and explain its importance in the U.S. economy.

     A small business is one that is independently owned and managed and does not dominate its market. Small businesses are crucial to the economy because they create new jobs, are responsible for many inventions and innovations, and supply goods and services needed by larger businesses.

Explain which types of enterprise best lend themselves to small business.

     Services are the easiest businesses for a small business person to start because they require a relatively low level of resources. Retailing and wholesaling are more difficult, but still attractive to many entrepreneurs. New technology and management techniques are making agriculture profitable for small farmers. Manufacturing is the most resource intensive and thus the area of the economy least dominated by small firms.

Identify key reasons for the success and failure of small businesses.

     Four key factors that contribute to the success of small business are hardwork and dedication, demand for the products or services being provided, managerial competence, and luck. Four key factors that contribute to the failure of a small business are managerial incompetence or inexperience, neglect, weak control systems, and lack of capital.

Describe the start&-up decisions of small businesses and identify sources of financial aid and management advice to such enterprises.

     In deciding to go into business, the entrepreneur must choose between buying an existing business and starting from scratch. Small business people generally draw heavily on their own resources to finance their firm, but they can get financial aid from venture capital firms, small&-business investment companies, foreign firms, and a variety of loans programs sponsored by the Small Business Administration (SBS). Management advice is available from boards of directors, management consultants, the SBA, and networking.

Identify the advantages and disadvantages of franchising.

     Franchising has become an extremely popular form of small&-business ownership because the parent company (the franchiser) supplies financial, managerial, and marketing assistance to the franchisee. Franchising enables small businesses to grow rapidly. The risks to franchisees are also lower than those of opening a business from scratch. However, the costs of purchasing a franchise can be quite high, and the franchisee sacrifices independence and creativity. In addition, franchises are not a guarantee of success.