Small Business Management

9/11/2020

Concept Questions

Concept Check Questions 2-1

1: Entrepreneurs identify opportunities for which marketable needs exist and assume the risk of creating
an organization to satisfy them. Other people involved in businesses don’t necessarily need that same
vision than entrepreneurs have; they don’t need to spot opportunities or create a business because the
business already exists for them.

2: If I went back to my high school to talk to them about entrepreneurship, I would tell them that in
order to be successful, they need to be creative, innovative and willing to accept the initial risk. They
should be driven and a high performer; they have to be passionate about what their new business is and
realistic in how much time, energy and resources that new business will take. I would also make them
aware of the real possibility of the business failing. I would make sure that they aren’t just living in a
fantasy of “creating some new fun business” but make sure they understood the work and time that
would go into it and how there is no guaranteed success.

Concept Check Questions 2-2

1: A triggering event is a specific event or occurrence that sparks the entrepreneur to proceed from
thinking to doing. When a triggering event occurs in the entrepreneur’s life, they begin bringing the
business to life. This could be the loss of a job, gathering enough resources to start the business, or
something else that “triggers” the change from thinking about starting a business to actually beginning
the process.

2: An entrepreneur needs the vision to spot opportunities and capitalize on them, while business
managers own and operate an existing business. An entrepreneur has a vision for an idea/business and
then assumes the risk of starting that business. Entrepreneurship focuses on the start-up process of the
business while small business management takes care of the day to day operations of an existing one.
When a person is managing a small business, most of the entrepreneurial part of the business was done
a while ago.

3: Harvesting a business is the stage when the owner removes him or himself from the business. An
entrepreneur should be concerned about harvesting a business that has not yet been started because
the harvest could be prompted by failure. Harvesting a business is part of the small business
management process and is that the end of the business cycle, not the beginning where it is the
entrepreneurship process.

Concept Check Questions 2-3

1: The text says that after 30 years of research, successful entrepreneurs cannot be predicted. It says
they come in every shape, size, color and from all backgrounds. Then it goes on to talk about how some
people have traits that make them successful in any position. It lists being passionate, determined,
trustworthy and having a vast amount of knowledge in the field you are working. It also said that
entrepreneurs generally have a higher need to achieve than non-entrepreneurs.
2: Although entrepreneurs can be seen as huge risk takers, it’s not all true. They need to be able to make
the initial financial risk when making the decision to start a company. But from there, they are actually
fairly cautious. Even with this initial risk, an entrepreneur should have tirelessly thought about the
decision and thought it was a smart decision, risk included. Entrepreneurs probably analyze every step
and decision they make in the business and they don’t just recklessly or impulsively make decisions.
They don’t engage in decisions they would consider risky because they are confident in their abilities
and the choices they are making regarding the company.

3. A small business may not enjoy pure independence because there are obstacles that come with
working for yourself. You rely on only you. There is so much invested in the success of the business that
the personal liability of the business failing is huge. Unless you are financially set, the inconsistent and
unsteady income, especially in the beginning, is most likely cause for worry. You also will probably be
working way more than if you worked a typical 9am-5pm job somewhere for someone else. Yes,
eventually, you may be able to have a more flexible work-life and set your hours, but in the beginning,
I’m sure most entrepreneurs work very, very long days/weeks.

4. They are important because there are qualities that were listed that make people successful in any
position, including entrepreneurship. The text describes being passionate, determined, trustworthy and
knowledgeable in the field you are working. It also said that entrepreneurs generally have a higher need
to achieve than non-entrepreneurs. I think that determination and the higher need to achieve are most
important. I think all of it makes a good employee or entrepreneur but I don’t think you can really make
someone have a good work ethic. From what I’ve seen so far, you either have it or you don’t. I’ve
worked with many people who don’t. Knowledge about a certain area or field can be taught.

5. Recently, I have been into fishing this past summer. My friend and I have spent a lot of time trying it,
buying supplies for it, watching videos on it, etc. However, we are not very good or knowledgeable at it
currently. I would have to figure out if there was a path I could take that could make this into a career –
either for the supplies side of it or the actual fishing itself such as training, videos, books, etc. In order to
be successful, you have to be knowledgeable in that area – more so than a lot of other people – and we
are not at that point. We would have SO much to learn before being able to turn anything into a
business. However, if I were to lose my job due to Covid for example and struggle to find another one,
that might be a triggering event that might make me consider other options into starting a business.

Concept Check Questions 2-4

1: This tells me that while less common, sole proprietorships that are incorporated are way more
lucrative than those that are not. A sole proprietorship is a business owned and operated by one person
with no legal requirements to establish one. This essentially means that anyone can have a sole
proprietorship which would explain why they account for such a high percentage but yet come in
generating way less revenue. The ease of creating one does not equal success. The established
corporations are the ones generating the large revenues.

2: I would consider joining a partnership in order to pool the managerial talent and so that the partners
can pool their money as well. This would allow for access to more capital to create a product or service
and also makes it easier to obtain credit from a creditor as well. There is more experience and expertise.
There are also tax advantages as well, in that the owners pay taxes as individuals. I would avoid
becoming a partner to avoid the burden of unlimited liability. This puts personal property at risk as well.
I would avoid this if I wasn’t completely confident in my partner as well since you can be held liable for
the negligence of your partners. There could be disagreements about business and financial decisions,
and continuity is a problem partners may face as well if one wishes to withdraw from the partnership.

3: A limited-liability company is a corporation that taxes the owners as partners yet provides a more
flexible structure than an S corporation. The owners are called members and unlike C and S
corporations, shares of stock do not represent ownership by the members. The rights and
responsibilities are in an operating agreement of the LLC. This would be advantageous if you need
flexibility in legal structure, desire limited liability and prefer to be taxed as a partnership rather than a
corporation.

Closing Case Questions

2-1: The partners won’t know for sure if their idea will be successful or not. However, they should start
by seeing how it stands up to competitors and similar rafts or tubes. They should conduct research to
ensure that other rafts/tubes aren’t using similar structure and if so, make sure they are able to still
differentiate themselves from other similar products. They can’t predict its success but they can look for
insight and predictions; it’s important to test out the waters and see what demand would be like on
something like this.

2-2: I think that the partners should start by protecting their idea, especially if the jigsaw connecting
shapes truly were unique. Then they should try and see what demand may be on something like this.
They could definitely put out feelers, even locally or among friends, to see what the demand may be and
what someone might be willing to pay. They would need to figure out their cost on the product, their
marketing, their sales price, their sales outlet, etc. There are a lot of logistics to figure out once they are
locked in on the product. I would also suggest they revisit the name of their product as well. Fluzzle
Tubes isn’t something that really sticks in my mind so maybe coming us with a different name for the
product, as well as the company also. The partners should also decide if this is going to be their only
product and they just go all in on this or if they would be selling similar items as well as the Fluzzle
Tubes.