1. > > > > Options for Organizing Small and Large Businesses Chapter 5

2. Distinguish between small and large businesses and identify common industries for small firms. Discuss the economic and social contributions of small business. Explain why small businesses fail. Describe how the Small Business Administration assists small-business owners. Explain franchising benefits for franchisors and franchisees. Summarize the forms of business ownership and the advantages and disadvantages of each form. Identify the levels of corporate management. Describe recent trends in mergers and acquisitions. Differentiate among private, public, and collective ownership. 1 2 3 4 5 6 7 8 9 Learning Goals

3. Most Businesses are Small Businesses 90% of firms with employees have fewer than 20 people on staff. –98% have fewer than 100 employees. More than 20 million people in the United States earn business income without employees. –Almost ½ the sales in the United States are made by small business. Small businesses generate 60% - 80% of new jobs over the last decade. Launching pad for entrepreneurs and prevalence of minorities.

4. What is Small Business? The Small Business Administration defines a small business to be a firm that is independently owned and operated and is not dominant in the field. –Manufacturing business: fewer than 500 workers –Wholesalers: fewer than 100 workers –Retailers: less than $6 million in annual sales –Agricultural business: less than $750,000 Small Businesses size ranges from $500,000 to $25 million in sales and from 100 to 1,500 employees.Small Businesses size

5. Small Business Classified

6. Medium Sized Business Classified

7. SME in Bangladeshi context The amount of workers employed in a firm, and the monetary value of fixed assets can be relaxed for any readymade garments manufacturer who are members of Bangladesh Garments Manufacturer Association (BGMEA) and Bangladesh Knit Wear Manufacturers Association (BKMEA). This policy has been declared in the Bangladesh Bank Policy Circular, of their SME and Special Program Department (SMESPD), Circular Number: SMESPD Letter Number 02/2013, dated: 22nd Oct 2013.

9. Typical Small-Business Ventures

10. Major Industries Dominated by Small Business

11. Creating New Jobs Creating New Industries Innovation Contributions of Small Business

12. 1 in 3 businesses closes permanently within two years. 50% of businesses fail after four years. More than 60% of business fail within six years. By the 10-year mark, 82% of all small businesses have closed permanently. Small Business Failure

13. Management Shortcomings Inadequate Financing Government Regulation Reasons Why Small Businesses Fail

14. Sources of Small Business Financing

15. Increasing the Likelihood of Small Business Success Creating a Business Plan –Written documentation that provides orderly statement of goals, methods, and purpose. Small Business Administration –Government agency concerned with helping small business firms.

16. Contents of a Business Plan Executive Summary Company’s Vision & Mission; Example Toms Shoes Key differentiation of the company Target customers Competitive scenario Marketing and Financial Plan Assessments of risk

17. Financial Assistance –Loan Guarantees –Microloans Small Business Investment Companies (SBICs) Active Capital Small Business Administration

18. Set-aside Programs –Government Contracts (over 23%) 5% for women and minorities –Assistance in Financing Government Procurement Business Incubators –Local community initiatives to share resources for small start-ups The University of Tennessee Other Specialized Assistance

19. Venture Capital Financing Venture capital money- Invested in a business by another business firm or group of individuals in exchange for an ownership share

20. Opportunities for Women & Minorities More than 50% of U.S. businesses are owned by women The number of businesses owned by minorities outpaced the growth in the number of U.S. businesses overall Women and minorities still face challenges –Smaller scale operations –Challenges finding investors –Access to capital

21. Minority Owned Businesses

22. The Franchising Alternative A contractual business agreement between a manufacturer or another supplier and a dealer to produce and market the supplier’s good or service.

23. –50% of all retail sales –760,000 businesses –18 million jobs –$500 billion in payroll –1 out of 12 businesses is a franchise –Franchising overseas is a growing trend Franchising agreements exist between the franchisee and franchisor. The Franchising Agreement

24. Benefits and Problems of Franchising Advantages –Prior Performance Record –Recognizable Company Name –Prove Business Model –Tested Management program Disadvantages –Franchise Fees –Future Payments –Linked to Reputation and Management –Franchise Agreement Restrictions

25. Alternatives for Organizing A Business

26. Forms of Private Ownership

27. Legal Structures to Meet Changing Needs Financial Situation Management Skills and Limitations Management Styles and Capabilities Exposure to Liability

28. Types of Corporations S- Corporation Limited Liability Corporation (LLC) Employee-Owned Corporations Not-for-Profit Corporations

29. Corporate Management Stockholders – acquire stocks in exchange for ownership. –Preferred Stock –Common Stock Board of Directors – elected by stockholders to oversee corporation. Corporate Officers & Management – make major corporate decisions and handle ongoing operations.

30. Mergers and Acquisitions (M&A) –Merger - combination of two or more firms to form one company. Vertical Horizontal Conglomerate –Acquisition - procedure in which one firm purchases the property and assumes the obligations of another. Joint Ventures – partnership between companies for a specific purpose When Businesses Join Forces

31. Public and Collective Ownership Public Ownership – a unit or agency of government owns and operates an organization. Parking structures, water systems, turnpike authority Customer-Owned Businesses – collective ownership of a production, storage, transportation or marketing organization is a cooperative.