ENTREPRENEURIAL MIND owner obtaining long-term

 Flexibility financing
PITFALLS IN SELECTING NEW  Relative freedom  Limited viewpoint &
VENTURES from government experience
1. Lack of objective evaluation control
2. No real insight into the market 2. PARTNERSHIP
3. Inadequate understanding of technical  An association of two or more
requirements persons who act as co-owners of a
4. Poor financial understanding business for profit (Revised Uniform
5. Lack of venture uniqueness Partnership Act)
6. Ignorance of legal issues  Each partner contributes money,
property, labor, or skills, and each
FORMS OF INTELLECTUAL shares in the profit/losses of the
PROPERTY business.
Advantages Disadvantages
Patent- a grant from the government that  Ease of formation  Unlimited liability of
gives an inventor exclusive rights to an  Direct rewards at least 1 partner
invention. Protection to the invention  Growth and reward  Lack of Continuity
Copyright- Intangible property right facilitated
 Flexibility
granted to authors and originators of a
 Relative freedom
literary work or artistic production that falls
from government
within specific categories control and
Trademark- any distinctive name, word, regulations
symbol, or device (image or appearance),  Possible tax
or combination thereof, than an entity advantage
uses to identify and distinguish its goods 3. CORPORATION
or services.  A separate legal entity apart from
Trade Secrets- any information (formula, individuals who own it.
patterns, programs, strategy, techniques,  Created by authority of state laws
process) that a business possess and that and usually is formed when a
gives the business an advantage over transfer of money or property by
competitors who do not know such prospective shareholders takes
information about them. place in exchange for capital stock
(ownership certificate).
LEGAL FORMS OF BUSINESS Advantages Disadvantages
ORGANIZATION  Limited liability  Activity restrictions
1. SOLE PROPRIETORSHIP  Transfer of  Lack of
 Business that is owned and operated ownership representation
 Unlimited life  Regulation
by one person. Owner and enterprise
has one identity.
Advantages Disadvantages PARTNERSHIP AND
 Ease of formation  Unlimited liability CORPORATION: SPECIFIC FORMS
 Sole ownership of  Lack of Continuity
profit  Less available 1. Limited Partnership
 Decision making capital resources  Are used in situations where a form
and control on one  Relative difficulty of organization is needed that
 permits capital investment without
responsibility for management and
without liability for loss beyond the
initial investment.
2. Limited Liability Partnership
 New form of partnership that allows
professionals the tax benefits of a
partnership while avoiding personal
liability for a malpractice of other
partners.
 If a professional group organizes as
an LLP, innocent partners are not
personally liable for the wrongdoing
of the other partners.
3. Limited Liability Partnership
 A hybrid form of business
enterprise that offers the limited
liability of a corporation but the tax
advantages of a partnership.
4. S Corporation
 Takes its name from Sub-chapter S
of the Internal Revenue Code,
under which a business can seek to
avoid the imposition of income
taxes at a corporate level, yet retain
some of the benefits of a corporate
form
5. B Corporation
 Certified B Corporations are a new
way for businesses to solve social
and environmental problems. B
Lab, a nonprofit organization,
certifies B corporations
6. L3C
 A Low-profit, Limited Liability
Company, known as the L3C, can
provide structure that facilitates
investments in socially beneficial.
 Has an explicit primary charitable
mission and only a secondary profit
concern.
PURPOSE OF BANKRUPTCY ACT
The Bankruptcy Act is a federal law that
provides for specific procedures to handle
insolvent debtors. The law was set up to
provide assistance to both debtors and
creditors.
Purposes of the Bankruptcy Act
1. To ensure that the property of the
debtor is distributed fairly to the creditors.
2. To protect creditors from having
debtors unreasonably diminish their
assets.
3. To protect debtors from extreme
demands by creditors.
APPROACHES TO CREATING NEW
IDEAS
1. Creating the New Venture
2. Acquiring an Existing Venture
3. Obtaining a Franchise
FRANCHISING
Franchising- any arrangement in which
the owner of a trademark, trade name, or
copyright has licensed others to use it in
selling goods or services.
Franchisee- purchaser of a franchise
Franchisor- seller of a franchise
Franchise Law
 Divided into 23 categories that
provides different segments of info
for prospective franchisees.
 Developed to provide guidance in
complying with the Franchise
Disclosure Rule
Advantages Disadvantages
 Training and  Franchise Fees
guidance  Franchisor control
 Brand-name appeal  Unfulfilled promises
 Proven track record of the franchisor
 Financial Assistance
KEY QUESTION TO ASK IN BUYING
EXISTING VENTURE
 Why is the business being sold?
 What is the current physical condition  Also known as ”debt-based
of the business? crowdfunding”
 What is the condition of the inventory?  P2P lenders are internet-based sites
 What is the state of the company’s  Interest ranging from 5.6 to 35.8
other asset?  Lending club, a well-known social
 How many of the employees will lending company.
remain?  KIVA.org example of micro-lending
 What type of competition does the site. Non-profit org that allows donor
business face? to make zero-interest loans to
 What does the firm’s financial picture specific causes around the globe.
look like?
Other Debt Financing Sources
SOURCE OF DEBT FINANCING
3. Trade Credit
DEBT FINANCING  Reflects as accounts payable
 Involves a payback of the fund plus a  Credit given by suppliers who sell
fee (interest) for the use of money goods in account
 Places a burden on the entrepreneur 4. Accounts Receivable Financing
of loan repayment with interest.  Short-term financing that involves
 Long-term (1-5 years or more) is either the pledge of receivables as
used to finance the purchase of collateral or the sale of receivables
property or equipment with the 5. Factoring
purchased asset serving as collateral  The sale of Receivables
for the loan.  Receivable are sold at a discount
 Short-term debt (less than a year) value
used to obtain working capital and is 6. Finance Companies
repaid out of proceeds from sale 7. Lending Companies
8. Insurance Companies
SOURCE OF DEBT FINANCING
MARKETING RESEARCH DATA
1. Commercial Banks
 Requires collateral Marketing research involves the gathering
 Aside from real estate mortgages and of information about a particular market,
loans guaranteed by the Small followed by analysis of that information.
Business Administration (SBA),
Knowledge and understanding of
Commercial Banks makes few loans
procedures involved in marketing
with maturities greater than 5 years.
research can help entrepreneur in
Questions to secure a bank loans:
gathering, processing, and interpreting
1. What do you plan to do with the
market information.
money?
2. How much do you need? COMMON SOCIAL MEDIA MARKETING
3. When do you need it? TOOLS
4. How long will you need it?
Twitter Pinterest
5. How will you repay the loan?
Blogs Instagram
2. Peer-to-Peer Lending (P2P) LinkedIn YouTube
 Practice of lending money to Facebook
unrelated individuals, or peers, w/out
going through a bank or other COMPONENTS OF EFFECTIVE
financial institutions MARKETING
1. Marketing Philosophy
 A production-driven philosophy—based
on the belief “produce efficiently and
worry about sales later.”
 A sales-driven philosophy—focuses on
personal selling and advertising to
persuade customers to buy the
company’s output.
 A consumer-driven philosophy—relies on
research to discover consumer
preferences, desires, and needs before
production actually begins
2. Market Segmentation
 The process of identifying a specific
set of characteristics that differentiate
one group of customers from the rest.
3. Consumer Behavior
 There are many types and patterns of
consumer characteristics.
PRICING
1. Skimming— deliberately setting a high
price to maximize short-term profits
2. Penetration— setting prices at such a
low level that products are sold at a loss
3. Consumer pricing— combining
penetration and competitive pricing to
gain market share
4. Demand-oriented pricing— a flexible
strategy that bases pricing decisions on
the demand level for the product
5. Loss leader pricing— pricing the
product below cost in an attempt to attract
customers to other products