1. Being a Business Owner
Section 4.2

2. Read to Learn
The four main ways to become a business owner and the advantages and disadvantages of each
The different forms of legal business ownership

3. Read to learn How to prepare to finance a new business
Factors that can affect business success

4. Main idea
Knowing the factors that affect a business’s success will help you to launch a successful business

5. Key Concepts Going into Business Owning a Business
Operating Your Business

6. Key Terms Start up costs Lease Goodwill Market outlook Franchise
Sole proprietorship
Partnership
corporation
Operating expenses
Income statement
Revenue
Gross Profit
Net Profit

7. Four Main Ways to Go into Business
Going into Business
Start a New Business
Buy an Existing Business
Buy a Franchise
Join a
Family Business
Four Main Ways to Go into Business

8. Starting a New Business
Rewards
You do not inherit a previous owner’s mistakes
You can develop your own reputation
You can build the business your way
You get personal satisfaction
Challenges
Starting a new business requires more time and effort
Start-up costs can be high
Borrowing money may be difficult
Risk can be high

9. Starting a new business
Examples of start up costs include:
Renting or buying space
Buying equipment and supplies
Buying insurance
Key Term:
Start-up Costs:
The expenses involved in going into business

10. Buying an existing business
Before buying an existing business, determine whether the problems of the business can be fixed, and at what costs

11. Buying an Existing business
Advantages
You can save on start-up costs by taking advantage of the previous owner’s business agreements
You may be able to purchase the existing equipment
If the business was successful, you can build on that success
You can benefit from existing positive reputation and a trained staff

12. Buying an existing business
Disadvantages
The location might be poor
The competition might be taking business away
The potential for future sales may be poor
Expensive repairs might be necessary
The business may have a poor reputation

13. Buying an existing business
When buying an existing business, you may be able to keep the existing lease.
Key Term:
Lease – a contract to use something for a specified period of time

14. Buying an existing business
When buying an existing business, you may be able to take advantage of existing goodwill of existing customers.
Key Term:
Goodwill - Loyalty

15. Buying an existing business
When buying an existing business, you should be aware of the market outlook
Key Term:
Market Outlook – The potential for future sales

16. Buying a franchise Buying a franchise offers specific advantages
You agree to pay a percentage of your profits to the parent company
Key Term:
Franchise –
The legal right to sell a company’s goods and services in a particular area

17. Buying a franchise Advantages You get a recognized product name
You have established procedures and management systems
You benefit from a business reputation and customer goodwill
You receive training and support services
You benefit from the company’s advertising
Financing can be more easily obtained

18. Buying a Franchise Disadvantages
Profits are shared with the parent company
You must follow the parent company guidelines
There may be less personal satisfaction

19. Joining a family business
Advantages
Relatives can help you finance the business
Family members are loyal and trust each other
Family members work as a team
Relatives can teach you the business
Customers are likely to give you the same trust and goodwill

20. Joining a family business
Disadvantages
Not all families work well together
Difficulties at work can affect family relationships

21. Owning a business
As a business owner, you will have to decide if you will run the business yourself, or if you will share the work and risks.

22. Forms of legal ownership
Sole Proprietorship
Three basic forms of legal ownership
Corporation
Partnership

23. Forms of legal ownership
Most businesses begin as a sole proprietorship.
The owner is responsible for all the business’s assets and debts
Key Term:
Sole Proprietorship- when the business is completely owned by one person

24. Forms of legal ownership
In a partnership, all partners are liable for the debts of the business
Key Term:
Partnership- a legal arrangement in which two or more people share ownership

25. Corporation
In a corporation, shareholders earn a profit based on the number of shares they own
Key Term:
Corporation – a business chartered by a state that legally operates apart from the owner(s)

26. Operating your business
Whatever type of business you launch, you will need money to finance …. Financing

27. Financing
A business plan gives specific information about your business
Information in a Business Plan
Product Description
Business location
Number of employees
Salaries
Description of the competition
Marketing plan
Timetable

28. financing
A financial plan spells out your start-up costs, operating expenses, and other costs for the first few months
Key Term:
Operating Expenses- the costs of doing business, such as the costs of manufacturing and selling the product

29. Ongoing operations
Financial records are needed for tax purposes and for seeding additional financing
The income statement is an essential business record
Key Term:
Income statement-
A summary of a business’s income and expenses during a specific period

30. Ongoing operations The first item in an income statement is revenue
Another item in the income statement is gross profit
The net profit is an important part of the income statement
Key Terms:
Revenue – The income from sales
Gross Profit – The difference between the cost of goods and their selling price
Net Profit – The amount left after operating expenses are subtracted from the gross profit

31. Ongoing operations
The balance sheet summarizes a business’s assets, liabilities, and owners equity
Assets are anything of monetary value
Liabilities are debts a business owes
Net worth is the difference between assets and liabilities
A cash flow statement is a monthly plan that shows when you anticipate cash coming into the business and when you expect to pay out cash

32. Succeeding in business
Financing
Location
Factors of Succeeding in Business
Management
Competition

33. Location
Factors that contribute to a successful business location include:
The type of businesses in the area
The condition of the streets and buildings
The cost of property
The location of competition
The location of your customers

34. Competition
To compete successfully, you must be familiar with your competitor’s product or service
You must also produce a better product than your competitors

35. Management
Poor management is one of the main reasons for business failure
Skills Needed for Management
Reading
Writing
Listening
Speaking
Math

36. Exit Ticket
1. Name the four ways to become a business owner. Which one would you choose? Why?
2. Explain the differences between a partnership and a corporation
3. Describe one of the documents you would need to prepare to apply for a business loan.