Entrepreneurship Vocabulary 2015

Capital Buildings, equipment, tools & other goods needed to produce a product, or the money used to purchase these items. Return on Investment (ROI)

Monopoly A market that only has one producer, and has no competition. A company that has a monopoly is able to charge higher prices because consumers have nowhere else to go. Importing Buying goods from other countries to sell in your own country.

Profit The money left over after all the expenses of a business have been deducted from the income. Equilibrium Point at which supply equals demand, neither leaving a surplus or a shortage.

Scarcity When demand is higher than supply. It allows businesses to increase prices. Demand The quantity of goods or services that consumers are willing and able to buy.

Franchise Legal agreement to market a company’s products or services in a particular area. Entrepreneurship The process of getting into and operating one’s own business.

Exporting Making goods in your own country and sending them to other countries. Competition When several businesses strive for the same customer or market. Rivalry among Businesses.

Target Market The specific market segment where all of a business’s activities are directed. This is what a company must identify in order to sell goods or services. Demographics Statistical data that describes a given market by criteria such as age, gender, and income.

Psychographics Statistical data that describes a given market by criteria such as personality, opinions, and lifestyle. Geographics Study of the market based on where customers live by region, state, city, and/or area.

Mission Statement Expresses specific goals for the company Small Business Association (SBA) This association helps assist Americans in starting a business.

Increasing Prices This is how business’s respond to scarcity in the marketplace. Price Decreases This happens when new competitors enter a market and the supply of goods increases

Entrepreneur Individuals who undertake the creation, organization and ownership of a business. Profit Motive Primary reason people start a business.

Equilibrium Pricing Pricing that happens when consumers buy all products supplied leaving neither a surplus nor a shortage. Advertising & promotional activities are all considered this kind of expense. Operating Expenses

1 st Step in Market Research Identify Your Information Needs Buying Motives When people buy based on other’s opinions. 5 Steps of the Research Process: 1. Look at Your Information Needs Before you collect data on your market, find out what you need. 2. Start with Secondary Resources Secondary Data is information that has already been collected. It is easily obtained and inexpensive. A good place to start your research is the Internet. 3. Collect Primary Data Primary data is information obtained for the first time & used specifically for your study. 4. Organize Your Data 5. Analyze Your Data Is there a market for your product or service? How big is the market? Will the industry support a business like yours?

Bob is a manufacturer who exports 90% of his products overseas. When considering a location for his new site he needs to consider this Accessibility of distribution methods Business Plan Tool used to show potential lenders your business idea.

Markup This is the amount added to the cost of items to cover expenses and ensure a profit. Variable Expenses Expenses that change with each unit produced.

Character Of the 5 C’s of credit, this one refers to a business owner’s reputation for fair & ethical practices. $12,800 16% of $80,000

Balance Sheet Shows a company what they are worth at a given time. Jackie spent $130,000 on her goods & had net sales of $200,000 and expenses of $40,000. Her gross profit is ? $30,000 $200,000 - $130,000 - $40,000 = $30,000 Gross Profit

$60 If you sell designer handbags at $300 and you want to give the customer a 20% discount how much would you take off the price. Non-Profit Organization Legal entity that makes money for a reason other than the owner’s profit.

If you invest $20,000 and wanted a 25% return. $5,000 Market Segmentation Breaking down the market into smaller groups $20,000 x.25 = $5,000

Marking up a product from $5 to $8 is this percentage of markup. 60% Market Segmentation Breaking down the market into smaller groups

You borrow $50,000 at 8% interest for 5 years. What is your monthly payment. $1, Net Income The income a company has if it has more assets than liabilities. $50,000 x.08 = $4,000 interest per year $4,000 x 5 years = $20,000 $50,000 + $20,000 = $70,000 total to repay over 5 years 5 years = 60 months $70,000 / 60 = $1, monthly payment

PLACE The part of the marketing mix (4 P’s) that deals with getting the product to the consumer. All of the following give money to an entrepreneur BUT: A - Venture Capitalist B - Personal Savings C – Federal Reserve Bank D – Family & Friends

Sole Proprietorship Easiest form of business to create Liabilities Section If a company owes $100,000 on its building. This is the section of the balance sheet that you would find this.

Disadvantage of Owning Your Own Business You could lose your investment if the business fails. Indirect Competition A golf course and a movie theater compete for the same customers’ dollar.

Entrepreneurs DO NOT Collect taxes from the government Wholesale cost of shoes is $50. If you mark them up100% this is what they would cost. $100

Cabinet business selling to retailers should locate their business here. Industrial Park Government Does NOT determine supply & demand in the marketplace.

Sole Proprietorship Limited Liability Company (LLC) If a business owner wants to protect their personal assets this is the kind of business ownership should they have. The sole proprietorship is the simplest and least expensive option for business ownership. Because the owner and the business are one and the same, business income and costs are reported on the owner’s personal income tax return. In a sole proprietorship, only one individual is responsible for the business. The sole proprietor has unlimited liability for any business debts.

Identify an Income Statement Own your own business. Fixed costs are $50,000 a year. Selling price is $15 per unit with a variable cost of $5 per unit. How many do you sell to breakeven? 5,000

Partnership A legally defined type of business organization in which at least two individuals share the management, profit & liability. Corporation A legally defined type of business ownership in which the business is considered a type of “person” (or “entity”) under the law, and limited liability is granted to the business owner(s).

Business’s fixed costs Insurance premium, rent, salaries Business’s variable costs materials, commissions, Shipping & Handling

Major Components of a Business Plan Executive Summary Financial Plan, Analysis of Business Situation, Description of Marketing/Promotion Characteristics of Brick & Mortar Business Geographically limited, Immediate product availability, sample products before purchase

Characteristics of an Internet Business Increased market reach, lower startup costs, reduced overhead Click & Mortar Business Where they have an online store as well as a store you can go shopping in (example Walmart)

5 C’s of Credit – Which determines the ability to repay a loan Capacity Evaluating a competitors product selection, quality, promotional activities & pricing policies gives you information about their? A.Intent to sell B.Income Statement C.Strengths & Weaknesses D.Buying Characteristics

Easiest form of business to create: A. Limited Partnership B. Corporation C. Subchapter C D. Sole Proprietorship Non- Profit Organization Legal Entity that makes money for a reason other than the owners profit

Purpose of a Business Plan Present an outline for funding Identify a Balance Sheet

Own your own business. Fixed costs are $50,000 a year. Selling price is $15 per unit with a variable cost of $5 per unit. How many do you sell to breakeven? 10,000 3,333 25,000 5,000 Bootstrapping Entrepreneur starts a company using personal finances without external help or capital.

Equity Funding You have an idea for a new company & need money to start your business. You find an investor willing to give you money in exchange for a portion of your new company. This is the type of funding the investor is willing to give you. Sources for financing business Venture Capitalist, Angel investor, personal savings

Market All consumers who share similar needs/wants and who have the ability to purchase a product. 4 Ps of Marketing Product, Price, Place, Promotion

Start Up Expenses Equipment Supplies Business License Marketing/Promotion Entrepreneur Turns a creative idea into a profit

Location Critical factor in business especially in brick & mortar retail Crowdfunding New, relies on receiving small business contributions from many sources.

Patent & Copyright 2 legal ways to protect your ideas or intellectual property Disadvantage of owning your own business You could lose your investment

Opportunity Cost The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action.