Chapter # 05 the small business and franchising

Chapter # 05the small business and franchising Prepared by:Ms. Ghazala ShamimSmall businessA small business is a privately owned and operated business. A small business typically has a small number of employees.Small businesses are normally privately ownedcorporations,partnerships, orsole proprietorships.Small business in terms of government support and tax policy varies by country and by industry, ranging from fewer than 500 employees.Small Business Administration (SBA)SBA defines a small business concern as one that is independently owned and operated, is organized for profit, and is not dominant in its field. Depending on the industry, size standard eligibility is based on the average number of employees for the preceding 12 months or on sales volume averaged over a 3 year period.Starting a small business Legal requirement Factor to considerThe business plan

Legal requirement Zoning ordinances, which are city and country regulation defining the types of business activity that can be conducted at certain locations.Local government officials will also inspect a companys building to verify that it conforms to local fire and safety codes.the internal revenue service(IRS) has various reporting requirements that affect every type of business.

Factors to considerExperienceCapitalLocationLeaseCustomer demographicInventory managementCompetitionCondition of the business Financial records

Experience Familiarity with askillor field ofknowledgeacquired overmonthsor years of actualpracticeand which, presumably, has resulted in superior understanding.An aspiring business owner should get experience in the line of business.Experience doesnt have to come through ones main job.It is not necessary to start small to get the needed experience.Many small business owners learn the basics of sound management in a large firm, than apply them to a small company of their own.Some business owners have worked for low pay or even as volunteers to learn basic of an industry.Business owners can also exchange ideas with one another by participating in service clubs and trade associations.

CapitalIt is essential to start with sufficient capital.Cashorgoodsused to generateincomeeither byinvestingin abusinessor a different income property.Accountant and trade association can help potential business owners decide whether they have enough capital to make a sound beginning.

How much capital does a business need?It depends on such variables,LocationCredit terms given by suppliers Distance from marketsThe nature of the product and services.LocationThe business owner needs to pick a sound size for operationsA spot that favors the desired type of customer and the product or services that the firm will provide.Named geographical place (such as anairport, seaport,container freight stationorterminal) that provides permanent facilities for movement of goods (such as customs, storage and other services) or is designated for a stated purpose.

Lease If a business owner decides to rent a facility, a lawyer review the lease and explain what the landlord are responsible for. A writtenagreementunder which a property owner allows a tenant to use the property for a specified period of time and rent.

Customer demographicsBefore business owners can create effective advertising, sale promotion or personal selling appeals, they must know customers demographic.These are statistics an such subjects as age, income, martial status, recreational habits and ethnic customs for people who live with in a given geographic area.Inventory managementDemographic knowledge enables business owners to identify the most popular items to carry in inventory.Business people who stock excessive inventory use too much storage space and pay too much for record keeping.The business can loss sales, good will and customer loyalty. CompetitionThe existence within amarketfor some good orserviceof a sufficient number of buyers and sellers such that no single market participant has enough influence to determine the going price of the goods and services.Opposite of monopoly.

The business planThe business plan which is a comprehensive summary of the key factors that will affect the operation of the proposed business.Thebusiness planis a formal statement of a set ofbusinessgoals, the reasons they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.Areas of the business planMission statementMarketing Merchandize purchasingOrganizationFinancing

Source of financingPersonal savingCredit from suppliersManufacturer financing of equipmentCommercial banksThe small business administration Selling stock Venture capital firms Franchising A franchise is a license sold by one firm (the franchisor) to another firm (the franchisee) allowing it to produce and sell a product or services under specific terms and conditions.Form of franchisesA business form franchiseA product or trade name franchiseA business format franchiseA franchise in which the franchisor gives franchises a comprehensive, detailed plan for operating the business.Business format franchise are common place in fast food, restaurants shopping malls oil change businesses.

A product or trade name franchise A franchise in which the franchisor allows the franchisee to sell products bearing the franchisors trade mark or logo.Company sells its products through this type of franchise.a Toyota or other car dealer, petroleum distributor, or Pepsi Cola dealer or other soft drink bottler is a product or trade name franchise in which the product itself is all the franchisor is selling.