1. Chapter 4 – Selecting a type of ownership
Mrs. Leonard
4.1 Run an Existing Business

2. Artistic Talents At Work (p.79)
Which type of business ownership do you think you would like?
Do your parents have hobbies and/or careers with which you would like to get involved?
Do you think you would be able to form a partnership with a family member? Why or why not?

3. Run an Existing Business
Starting a new business, purchasing an existing business, and entering a family business are ways to become an entrepreneur
Owners of businesses sell their businesses because:
Insufficient sales or profits,
Worry about new competition
Fear of economic conditions
Retirement
Dispute between partners
Owners desire to do something different

4. Run an Existing Business
Finding out what businesses are for sale
Advertisements in the classified section of the newspaper
Business broker – person who sells businesses for a living
People in industry who might know of businesses for sale
Landlords, Leasing agents, lawyers and bankers, management consultants, the SBA, Chamber of Commerce offices, and bankruptcy announcements

5. Advantages of Buying an Existing Business
The existing business already has customers, suppliers, and procedures
Could also have built up goodwill and customer loyalty
The seller of a business may train a new owner
Experienced employees may be available to help the new owner learn about the company
There are prior records of revenues, expenses, and profits
Financial planning will be easier and more reliable than it would be for a completely new business
Financial arrangements can be easier
Seller of business may accept an initial partial payment and allow the rest to be paid off in monthly installments
Reduces or eliminates the need for bank financing

6. Disadvantages of Buying an Existing Business
Many businesses are for sale because they are not making a profit
Owners frequently try to sell businesses that are not financially viable
Serious problems may be inherited
Businesses can have poor reputations with customers, have trouble with suppliers, or be poorly located
Capital is required
Many entrepreneurs just do not have the money to purchase an existing business – starting a small business of their own might be their only option

7. Steps to Purchase a Business
Write specific objectives about the kind of business you want to buy, and identify businesses for sale that meet your objectives
Meet with business sellers or brokers to investigate specific opportunities
Ask about history of business, reason for sale, financial performance, and price the owner is asking for the business
Visit during business hours to observe the company in action
Inspect the company to make sure it meets your needs

8. Steps to Purchase a Business
Ask the owner to provide you with a complete financial accounting of operations for at least the past three years
Analyzing these reports will help you see how much profit you will make and the expenses you will be paying out
Ask for important information in written form
List of assets to be transferred, statement about past or pending legal action against the business, copy of the business lease or mortgage, and a list of suppliers
Have an account and lawyer help you review the material
Determine how you would finance the business
Contact lending institutions, and ask the seller if he or she would be willing to finance part or all of the purchase

9. Steps to Purchase a Business
Get expert help to determine a price to offer for the business
Valuator – an expert on determining the value of a business
Present the offer in writing to the seller
If agreement is met, have a lawyer draw up a sales contract
Who is interested in purchasing an existing business?

10. Enter a Family Business
The U.S. economy is dominated by family businesses
90% of all businesses, including a vast majority of small- and medium-sized companies are owned by families
Example: Ford Motor Company is continually owned largely by people who are related to the company founder
Who is interested in entering or taking over a family business?

11. Advantages of Family Business
Entrepreneurs who work for their family business enjoy a pride and sense of mission that comes with being part of a family enterprise
Enjoy the fact their businesses remain in the family for at least one more generation
Enjoy working with relatives and knowing efforts are benefiting those they care about

12. Disadvantages of a Family Business
Senior management positions are often held by family members, regardless of their ability
Sometimes means that poor business decisions are made
Difficult to retain good employees who are not members of the family
Family politics often enter into business decision making
Distinction between business and private life is blurred in family owned businesses.
As a result business problems end up affecting family life as well
Entrepreneurs who join family businesses must be prepared to make compromises
Cannot make the decisions by themselves or set policies and procedures as they like
Challenge of what to do when there is no family member to take over the business

13. Assessment Thinking Critically (p.84)
Questions 1,2
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4.1 True/False & Multiple Choice worksheet
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