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Question: You are worried that someone else will


You are worried that someone else will buy a specific franchise in your area before you do. Would it be all right to sign the franchise agreement before talking to your lawyer or accountant if you intend to meet with them later? Explain.


> Give examples of efficiency and effectiveness in managing your everyday life.

> How would promotional mix decisions change for a small business that is expanding into a foreign market?

> Explain the ratchet effect on sales.

> Discuss the personality traits that a good salesperson should have. What traits would detract from the personal selling process?

> What factors should be considered when a small business owner decides to advertise?

> What advantages and disadvantages are involved for a small business offering sales on credit?

> Discuss the importance of remaining professional and friendly when trying to collect an unpaid bill.

> Explain the difference between cash and accrual accounting.

> As the owner of a small, hometown drugstore, how would you prepare for a Wal-Mart being built in your area?

> What strategies should be considered if a small business is setting prices for a product that is to be exported? How are these strategies different from those used in a domestic market?

> Of the pricing techniques described in this chapter, which one do you think is most commonly used by small business? Why?

> Should a small business owner’s judgment be used to determine prices if so many mathematical techniques have been developed for that purpose?

> What can happen if the price of a product does not fit with the three other Ps of the marketing mix?

> What do you think is the biggest limitation for small businesses conducting market research?

> What are some of the limitations of market research? What can the entrepreneur do to offset these limitations?

> Identify some valuable sources of information for the entrepreneur who is designing a market research plan to analyze competitive advantage.

> What types of data should be collected and analyzed in order to get a clear picture of the market for the good or service being produced?

> Explain the market research process from a small business owner’s perspective when he or she is trying to assess competitive advantage.

> What purpose do GAAP and FASB serve for a small business owner?

> What is the significance of market research to the small business owner? How is market research defined, and what degree of complexity is necessary in the research plan for it to be valid?

> Segmentation is the process of breaking a population down into smaller groups and marketing to them. Is it possible for a small business to oversegment its market? How would that be dangerous?

> We all assume several different roles (parent, student, sibling, athlete, business owner, and so on) at any given time, and those roles affect our behavior as consumers. Describe how your various roles affect your purchases.

> Why is segmenting a niche market so crucial for small business?

> What determines which type of sales forecast would be important to a small business? Describe how a specific small business would implement the build-up approach.

> What would happen to a business without a marketing strategy. Why?

> Marketing plays a key role in a small business’s success. Can a small business succeed without adopting the philosophy underlying the marketing concept. Why or why not?

> A mother believes that all the family’s children should have equal ownership of the family business regardless of their participation in the business. The father sees the situation completely differently. He believes that the children who are actively in

> What is meant by “thinning the assets”? Cite examples.

> How can a buyer determine the rate of return to use in evaluating the worth of a business?

> How can being close to your customers give you a competitive advantage?

> What is goodwill, and how may its value be determined?

> Discuss the ways in which the tangible assets of a business may be valued. What is the most realistic approach to determining a business’s true value? Why?

> Does competition help or hurt the valuation of a business? Explain.

> Which is more important in appraising a business—profitability or return on investment? Discuss.

> Which type of asset would be more difficult to value - tangible or intangible? Why?

> Does every business for sale have an intangible asset of goodwill? Explain.

> You are analyzing the financial records of the business you have been thinking about buying. You discover that, although the firm has excellent current and quick asset ratios by industry standards (current assets are higher than current liabilities), its

> What should a prospective buyer know about the seller’s inventory sources and other resource contacts? How is this information obtained?

> What factors warrant special attention in appraising a firm’s (a) inventory? (b) equipment? (c) accounts receivable?

> When buying an established business, what questions should you ask about it? From whom might you seek information about the business?

> Explain the term creative destruction.

> What are the positives and negatives of searching for a business for sale via an online site?

> Discuss the advantages of dealing through a business broker. What precautions should one take when dealing with a business broker?

> Should one ever consider purchasing a presently unsuccessful business (that is, a business with relatively low or no profits)? Explain.

> What are some arguments for buying an established business rather than starting one yourself?

> What do you think will be the growth areas (in products, services, and geographic areas) for franchises in the near future?

> What is the difference between a franchise, a franchisee, and a franchisor?

> Explain how a franchise could be considered a partnership. What makes a franchise agreement simpler than a partnership that you would start with another individual?

> If you are the franchisee of a bookstore and you are offered twice the business’s book value to sell it to a third party, should you or the franchisor collect the additional money? Take a position and justify it.

> What are the potential sources of conflict between franchisees and franchisors?

> After reading about the topics included in a franchise agreement, who do you think controls most of the power in a franchise: the franchisee or the franchisor? Explain.

> Why are small businesses more likely than large businesses to be innovative?

> Is the disclosure statement the only source of information you need to check out a potential franchise? Why or why not?

> What is a royalty fee?

> What do you expect to get in return for paying a franchise fee?

> What are the biggest advantage and the biggest disadvantage of franchising? Justify your answer.

> How would you explain the difference between franchises and other forms of business ownership?

> What is the difference between a pull system and a push system of inventory control?

> After you have read about entrepreneurship in Chapter 2, would you consider someone who buys a franchise to be an entrepreneur? Does franchising stifle entrepreneurship?

> What is the difference between product-distribution franchises and business-format franchises? Give an example for each that has not been cited in the text.

> Consider the make-or-buy decision. Give three examples of situations when a business should make rather than buy. Give three examples of situations when a business should buy rather than make.

> How would the computer industry be different today if there were no businesses under 500 employees? Would personal computers exist?

> Aside from reducing inventory levels, what does the just-in-time philosophy promote?

> What factors should be considered when purchasing for a small business?

> When would an ABC inventory system be appropriate?

> Assume that you are the owner of the sporting goods store used in the example of economic order quantity inventory control You typically sell 14,500 sweatshirts per year. Your ordering costs are $10 per order. Holding costs are $0.60 per sweatshirt per y

> How can shrinkage affect an inventory system?

> Explain how the Pareto rule is important to a small business owner.

> Purchasing products or materials is obviously an important part of running a small business. What are the pros and cons of developing a relationship with a single vendor from whom to purchase most of your products versus using multiple vendors and not de

> Many small businesses are built around one product. What risks does this approach impose? How can small business owners minimize those risks? How can a small business develop new products?

> What factors should be considered when purchasing for a small business?

> When would forming a limited-liability company be more advantageous than creating a C corporation or a partnership?

> The chapter discussed the evolution of small business in the American economy. On the heels of the rapid growth in the popularity of Internet businesses in the late 1990s and the ensuing bust in 2000, and now the trend away from online and toward mobile

> Under what conditions would you consider joining a partnership? Why would you avoid becoming a partner?

> Sole proprietorships make up 76 percent of all U.S. businesses and generate 6 percent of all business revenue. Only 18 percent of all sole proprietorships are incorporated, but they generate 90 percent of all revenue. What do these statistics tell you ab

> After startup, what is the single most important tool the small business owner has at his or her disposal for ensuring the success of the business? Why is it so crucial?

> Discuss the legal ramifications of starting your own business. Where should the new entrepreneur go to get information and advice regarding laws that govern the type of business that is being promoted?

> What are some of the tangible resources that the new entrepreneur might need in order to go into business initially? What are some options for obtaining capital for a business that is brand new and therefore has no financial history?

> Is a business plan really necessary even for a very small startup business? How much market analysis and competitive analysis should the new entrepreneur conduct prior to startup?

> Give some examples of things the new entrepreneur should immediately investigate in order to ensure to the maximum extent possible that the business will “get off the ground.”

> What criteria do you see as most critical when differentiating an idea from an opportunity?

> What are some examples of consumer preferences and values? What are some examples of things the new business owner can do to ensure capturing some of the market for the good or service being produced?

> Entrepreneurs get their ideas for business startups from various sources. Elaborate on these sources, and analyze which ones are the most reliable indicators for the new business owner with regard to future success.

> Is creative destruction just another economic theory for the foundation of capitalism? Build a case supporting your answer.

> Explain the concept “window of opportunity” as it relates to new startups from idea conception through the final decision about whether or not to turn the idea into a reality.

> Many entrepreneurs test the waters of a market by starting a sideline business. What are the advantages and disadvantages of selling items on Internet auctions like eBay? Is a person who regularly has 20 or 25 items for sale at any given time an entrepre

> Define “hypergrowth” companies, and evaluate the reasons for their phenomenal rate of growth. What are the most valid explanations for the rate of success found in these companies?

> Compare and contrast the advantages and disadvantages of starting a business from the ground up. Be sure to include the different types of businesses in your analysis.

> Think of an activity that you love to do; it could be a personal interest or a hobby. How could you turn your passion for this activity into a business? What questions would you have to answer for yourself before you took this step? What triggering event

> If personal characteristics or personality traits do not predict who will be a successful entrepreneur, why are they significant to the study of entrepreneurship or small business management? Which characteristics do you think are most important?

> Explain why people who own a small business may not enjoy pure independence.

> If a friend told you that entrepreneurs are high risk takers, how would you set the story straight?

> Why might personality characteristics may be good predictors of who will be a successful entrepreneur?

> Define “at-will” employment status.

> What financial risks would Mighty Leaf take by pursuing a supermarket strategy? 2. How could they moderate cash flow problems? 3. What would you recommend Mighty Leaf do? Be sure to justify your recommendation?

> Explain the four components of an effective disciplinary system.

> What factors influence the type and amount of employee benefits that a small business can offer?

> List the advantages of a flexible benefit package to employees and to the employer.

> Review the section on training new employees. Give examples of types of jobs that would best lend themselves to each training method.

> What are the advantages and disadvantages of giving content away? 2. What if the new strategy didn’t work and the content was now free? 3. What would you advise Skurman to do and still have a viable company?

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