January 18, 2010 Objective: Students will compare and contrast the difference between starting a business, buying an existing business, and opening a franchise to determine the type of entrepreneurship that’s right for you.

Mod 2: Big Idea Essay This essay will be due next Monday, January 24 th. In 1 page maximum, type a paper describing an idea for a business that you have and are passionate about working hard at for a long period of time. Be succinct in your delivery, yet as short as possible to attract the reader’s attention. Submit using the LEARNING ACTIVITY link by the scheduled due date. Discuss: – What is the idea? How was the idea born? Why is it a good idea? – How can it satisfy a consumer need? – Who are the consumers that will buy? (Describe them demographically) – How will you personally make it successful? (Show your passion) – What support do you have and what do you need to be successful? Take your time! Even though this is only one page is your major assignment for Mod 2. Note: It is intended that the Big Idea described is then used as your real or hypothetical project theme for the course’s major project as described in the course syllabus. (which we will start working on next week). Be sure to keep it to 1 page single spaced. (double space between topics/paragraphs).

Starting a Business There are three ways to start a business: – Start up a Brand New Business – Buy an Existing Business a)This includes taking over a family business even if no money exchanges hands – Franchise

Buying an Existing Business You can save some of the time, work, and money that go into the start-up phase of business development. Many sellers will finance a large part of the sale for a lower interest rate than a lending institution would offer. An existing business already has an organizational plan and operational system in place. The customer base is already established. How to find a business for sale: – Trade associations and neighborhood business groups – Business brokers – Newspapers – “Business Opportunity” section – Bankers, the chamber of commerce, and other professional people You need to consider why a business is for sale. There may be serious problems such a new competition, relocation of the primary customer base, obsolescence of a product line, or cash flow problems that have prompted the sale. An experienced and independent accountant can help you analyze the seller’s financial statements and tax records in order to determine profitability and price.

What you Get? – Accounts payable and other liabilities – Accounts receivable – Building – Business name and domain name – Business clientele and customer lists – Consulting agreement with seller – Covenant not to compete – Credit relationships – Equipment – Furniture and fixtures – Inventory – Lease agreements – Liabilities and liens – Personnel – Trademark, copyright, and patent – Unpaid taxes When you buy an existing business, you purchase a number of tangible and intangible assets including:

Buying a Franchise Franchising is where an individually owned business is operated as part of a large chain. The products and services are standardized. The company (franchisor) gives the individual dealer (franchisee) the right to market the franchisor’s product or service and use the franchisor’s trade name, trademarks, reputation, and way of doing business. The agreement often gives the exclusive right to sell in a specified area. In return the franchisee agrees to pay the franchisor a fee, and/or a percentage of gross sales. Buying a franchise gives you a business name or trademark already accepted by the public, the access to training and management assistance, the possibility of financial assistance from the franchisor, savings for purchasing of products, equipment, supplies, and advertising materials, consulting services from the franchisor, and national/regional promotions by the franchisor. However, you cannot make all of the rules. You lose some freedom to be your own boss and make all of the rules. The royalty fees to the franchisor will come out of your profits, but the franchisor does not share in your losses. You may be restricted on selling prices, products, or services, including dropping unprofitable ones, which may limit your ability to be competitive.

Assignment Create a list of the advantages/disadvantages addressed for each of the 3 methods (bullets is fine). Brainstorm to see if you can additionally add an example(s) that we did not cover in our notes. Then, in a short closing essay (a few sentences) state which method appears most attractive to you and why. How will you exploit the advantages and mitigate/manage the disadvantages of the chosen method?