Business Ownership Business Models

Basic Business Ownership 1. Sole Proprietorship 2. Partnerships 3. Corporations What are the upsides and downsides? Count off by 3’s If you are a 1, you will research the benefits and drawbacks of #1 SP. 10 minutes of research

You’re the expert! Explain to the class the benefits of: 1. Sole Proprietorship 2. Partnerships 3. Corporations Explain the drawbacks of each type

Sole Proprietorship Upsides Easy to start Need a permit Change quickly Customer wants Choice Products/services Management Hours Direction Receive all profits Only pay income tax Downsides Start-up capital/funding Expertise in business areas Finance Accounting Marketing Etc. Assume all risk Unlimited liability Loose more than just the business Limited life of business

Partnerships Upsides Two or more owners Shared responsibility Starting is easy Permit or license Expertise in multiple areas Easily acquire money Income taxed only once Contract of responsibilities Downsides Unlimited liability Shared (less risk) Any partner can make decisions (bad decisions) Disagreements Partner leaves Buy out agreements Expertise is gone Finding qualified person to replace (if needed)

Corporations Terms Stock – shares to the owners. Stockholders – owners of the company. Vote on company direction with the number of shares they have. 1 stock share = 1 vote. Corporate charter – license to operate from the state in which you operate. Board of directors – takes care of day-to-day operations as a manager or owner would do in a partnership or sole proprietorship.

Corporations Upsides Easily raise capital Limited liability Stock shares Transferable ownership Downsides Special taxes Owners taxed Corporation taxed Regulated by Gov’t Accounting is complex

Choosing a Business Model 1. Home-based 2. Brick-and-mortar 3. E-commerce 4. eBay 5. Franchising 6. Licensing your product 7. Multi-level-marketing

Home-based Upsides Less risk and lower start-up costs Easily scaleable Outsourcing Downsides Zoning ordinances Distractions Impression Credibility

Brick-and-Mortar Upsides Face-to-face Physical location Attract walk-in traffic Dedicated space Place of work Mentally/Physically ready for work Downsides Higher start-up costs Full-time commitment Requires merchandising and inventory

E-Commerce Upsides Lower risk Lower business cost Full or part time option Easily scaleable Tap into national or global markets Operate 24/7 Downsides One person show Shipping Inventory Credit card processing Challenge to get traffic to the website Customer confidence Release credit card information or personal info.

eBay-preneurship Upside Lower cost/risk Many tools in place PayPal Templates Established site Downside Stiff competition Shipping Inventory Mgmt.

Franchising Upsides Lower risk than independent brick- and-mortar. Business plan is done Establish brand Higher success rates Downsides Pay upfront fees Strict: guidelines limits your creativity Profits can be low because you must pay franchisor their cut

Licensing your Product Upsides Lower risk Part-time Lower cost Expense is the prototype Freedom Receive royalties long after you quit working Downsides Time Royalties You get a portion from each sale (volume) Licensing agreements are tough Only 3% of ideas make it to market

Multi-Level-Marketing Upsides Limited start-up costs Membership/ Inventory Pre-packaged tools Sales techniques Downsides Most lose money Can’t sell effectively Credibility Treating friends like customers

Additional Information For additional information on any of the topics discussed in the PowerPoint. Please click herehere