Prof. Bruno PierriProf. Bruno PierriLingua IngleseLingua Inglese

Business English:Business English:

Setting Up BusinessSetting Up Business

November 19th, 2009November 19th, 2009

Business Business Word commonly used in English and Word commonly used in English and

ItalianItalian Sometimes the Italian meaning is wrongSometimes the Italian meaning is wrong Real meanings:Real meanings:1)1) lavoro, occupazione: are you here on lavoro, occupazione: are you here on

business, or for pleasure?; he’s been business, or for pleasure?; he’s been talking business all day longtalking business all day long

2)2) Impresa, attività imprenditoriale in senso Impresa, attività imprenditoriale in senso astratto: business trends; business weekastratto: business trends; business week

3)3) Impresa, azienda: a small business, a Impresa, azienda: a small business, a family business, business riskfamily business, business risk

4)4) Settore economico (legale): business of Settore economico (legale): business of travel, e-businesstravel, e-business

5)5) Volume d’affari, fatturato: business yearVolume d’affari, fatturato: business year IT: il business della droga/EN: the drug IT: il business della droga/EN: the drug

racketracket

Start-UpStart-Up

Initial idea to set up a businessInitial idea to set up a business

A)A) Gap in the marketGap in the market

B)B) Similar but more competitive Similar but more competitive productproduct

Initial sources of financeInitial sources of finance

A)A) Self-fundingSelf-fundingB)B) BackersBackersC)C) Bank loan: house can be offered as collateralBank loan: house can be offered as collateralD)D) Venture capital (capitale a rischio) firm:Venture capital (capitale a rischio) firm: Financing for new businesses. Money provided by Financing for new businesses. Money provided by

investors (venture capital company) to start up firms investors (venture capital company) to start up firms and small businesses with perceived, long-and small businesses with perceived, long-term growth potential. This is a very important source term growth potential. This is a very important source of funding for startups that do not have access to of funding for startups that do not have access to capital markets. It typically entails high risk for the capital markets. It typically entails high risk for the investor, but it has the potential for above-average investor, but it has the potential for above-average returns returns

Venture capital can also include managerial and Venture capital can also include managerial and technical expertise. This form of raising capital is technical expertise. This form of raising capital is popular among new companies, or ventures, with popular among new companies, or ventures, with limited operating history, who cannot raise limited operating history, who cannot raise funds through a debt issue. The downside for funds through a debt issue. The downside for entrepreneurs is that venture capitalists usually get a entrepreneurs is that venture capitalists usually get a say in company decisions, in addition to a large say in company decisions, in addition to a large portion of the equityportion of the equity

Business Registration: Sole TraderBusiness Registration: Sole Trader Once financing is safe, business is registered as legal Once financing is safe, business is registered as legal

entity:entity:Sole trader (sole proprietorship) = ditta individualeSole trader (sole proprietorship) = ditta individuale The sole proprietor is a business with one owner who The sole proprietor is a business with one owner who

pays personal income tax on profits from the business. pays personal income tax on profits from the business. They are the simplest business to set up, making them They are the simplest business to set up, making them popular among individual self contractors or business popular among individual self contractors or business ownersowners

Sole proprietorship is also known as "proprietorship". Sole proprietorship is also known as "proprietorship". The debts of the sole proprietorship are also the debts The debts of the sole proprietorship are also the debts

of the owner. However, all profits flow directly to the of the owner. However, all profits flow directly to the owner of a sole proprietorshipowner of a sole proprietorship

The benefit of the sole proprietorship is the tax The benefit of the sole proprietorship is the tax advantage. The disadvantage of a sole proprietorship advantage. The disadvantage of a sole proprietorship is the difficulty to obtain capital funding, specifically is the difficulty to obtain capital funding, specifically through established channels, such as equity (selling through established channels, such as equity (selling shares) and obtaining bank loans or lines of credit. shares) and obtaining bank loans or lines of credit. 

Small-scale organization Small-scale organization

Business Registration: Business Registration: PartnershipPartnership

Società:Società: A business organization in which two A business organization in which two

or more individuals manage the or more individuals manage the business. Both owners are equally business. Both owners are equally and personally liable for the debts and personally liable for the debts from the business from the business

Partnership doesn't always mean Partnership doesn't always mean two people. There are many large two people. There are many large partnerships with thousands of partnerships with thousands of partners partners

Small-scale organization Small-scale organization

Business Registration: Limited Business Registration: Limited LiabilityLiability

Società a Responsabilità LimitataSocietà a Responsabilità Limitata

A type of liability that does not exceed the initial A type of liability that does not exceed the initial amount a person invested into a partnershipamount a person invested into a partnership

Limited liability refers to the terms of limited Limited liability refers to the terms of limited partnerships, which comprise at least one partnerships, which comprise at least one general partner, who takes on unlimited liability, general partner, who takes on unlimited liability, and one or more limited partners, who would and one or more limited partners, who would never lose more than their original initial never lose more than their original initial investment in fulfilling the partnership's investment in fulfilling the partnership's obligations. obligations.

Additionally, limited liability can refer to an Additionally, limited liability can refer to an investment with limited downside risk, with investment with limited downside risk, with which the investor can lose no more than his or which the investor can lose no more than his or her initial investment her initial investment

Small-scale organization Small-scale organization

Holding CompanyHolding Company A parent corporation that owns enough voting stock A parent corporation that owns enough voting stock

in another corporation to control its board of directors in another corporation to control its board of directors (and, therefore its policies and management) (and, therefore its policies and management)

Board Of Directors - B Of DBoard Of Directors - B Of D A group of individuals elected as, or elected to act as, A group of individuals elected as, or elected to act as,

representatives of the stockholders to establish representatives of the stockholders to establish corporate management related policies and to make corporate management related policies and to make decisions on major company issues decisions on major company issues

DividendsDividendsA distribution of a portion of a company's earnings, A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its decided by the board of directors, to a class of its shareholders shareholders

Dividends may be in the form of cash, stock or Dividends may be in the form of cash, stock or propertyproperty

High-growth companies rarely offer dividends High-growth companies rarely offer dividends because all of their profits are reinvested to help because all of their profits are reinvested to help sustain higher-than-average growthsustain higher-than-average growth

Large-scale organizationLarge-scale organization

CartelCartel A small group of producers of a good A small group of producers of a good

or service who agree to regulate or service who agree to regulate supply in an effort to control or supply in an effort to control or manipulate prices manipulate prices

The best known example of a cartel The best known example of a cartel is probably the Organization of is probably the Organization of Petroleum Exporting Countries Petroleum Exporting Countries (OPEC) (OPEC)

Large-scale organizationLarge-scale organization

TrustTrust A fiduciary relationship in which one party, known A fiduciary relationship in which one party, known

as a as a trustortrustor, gives another party, the , gives another party, the trusteetrustee, the , the right to hold title to property or assets for the right to hold title to property or assets for the benefit of a third party, the benefit of a third party, the beneficiarybeneficiary  

There are two types of trusts:There are two types of trusts:1. 1. Living TrustLiving Trust: A trust in effect during the trustor's : A trust in effect during the trustor's lifetime.lifetime.2. 2. Testamentary TrustTestamentary Trust: A trust created through the : A trust created through the will of a deceased person  will of a deceased person 

A trust can be used if a beneficiary is under age or A trust can be used if a beneficiary is under age or has a mental disability that impairs the has a mental disability that impairs the person's ability to maintain his or her own person's ability to maintain his or her own finances. Once the beneficiary is deemed able to finances. Once the beneficiary is deemed able to manage the funds or assets by the terms manage the funds or assets by the terms dictated under the trust, the beneficiary will dictated under the trust, the beneficiary will receive possession of the trust receive possession of the trust 

Large-scale organizationLarge-scale organization

Multinational CorporationMultinational Corporation A corporation with facilities and other A corporation with facilities and other

assets in at least one country other than its assets in at least one country other than its home country. Such companies have offices home country. Such companies have offices and/or factories in different countries and and/or factories in different countries and usually have a centralized head office usually have a centralized head office where they co-ordinate global where they co-ordinate global management. Very large multinationals management. Very large multinationals have budgets that exceed those of many have budgets that exceed those of many small countriessmall countries

Advocates of multinationals say they create Advocates of multinationals say they create jobs and wealth and improve technology in jobs and wealth and improve technology in countries in need of such development. countries in need of such development. Critics say multinationals can have undue Critics say multinationals can have undue political influence over governments, can political influence over governments, can exploit developing nations as well as create exploit developing nations as well as create job losses in their own home countriesjob losses in their own home countries

Large-scale organization Large-scale organization

Early lifeEarly life

Risk of failure in first two years is very Risk of failure in first two years is very high and mainly due to:high and mainly due to:

Cash flow: essential to solvency. Having Cash flow: essential to solvency. Having ample cash on hand will ensure that ample cash on hand will ensure that creditors, employees and others can be creditors, employees and others can be paid on time. If a business does not have paid on time. If a business does not have enough cash to support its operations, it enough cash to support its operations, it is said to be insolvent, and a likely is said to be insolvent, and a likely candidate for bankruptcy. The company candidate for bankruptcy. The company has to wait for invoices to be paid, while has to wait for invoices to be paid, while debt pile up and bank credit is extended debt pile up and bank credit is extended up to a certain point up to a certain point

Organic GrowthOrganic Growth

When critical mass of customers is When critical mass of customers is reached, business is well established reached, business is well established in the marketin the market

From now on, it enters growth phase: From now on, it enters growth phase: organic growthorganic growth

A)A) Turnover increaseTurnover increase

B)B) More staff employedMore staff employed

C)C) Supply network developmentSupply network development Most companies carry on like this, Most companies carry on like this,

growing and shrinking according to growing and shrinking according to managerial skills and market managerial skills and market conditionsconditions

Acquisition GrowthAcquisition Growth The founder can sell to:The founder can sell to:

A)A) A competitorA competitor

B)B) A company willing to expand into A company willing to expand into that marketthat market

In this case, the buyer pursues a In this case, the buyer pursues a strategy of strategy of acquisition growthacquisition growth (takeovers)(takeovers)

Going PublicGoing Public The process of selling shares The process of selling shares

formerly privately held to new formerly privately held to new investors for the first time. investors for the first time. Otherwise known as Otherwise known as initial public initial public offeringoffering (IPO) (IPO)

When a company "goes public," it is When a company "goes public," it is the first time the general public has the first time the general public has the ability to buy sharesthe ability to buy shares

Initial Public Offering - IPOInitial Public Offering - IPO The first sale of stock by a private company The first sale of stock by a private company

to the public. IPOs are often issued by to the public. IPOs are often issued by smaller, younger companies seeking smaller, younger companies seeking the capital to expand, but can also be done the capital to expand, but can also be done by large privately owned companies by large privately owned companies looking to become publicly tradedlooking to become publicly traded

IPOs can be a risky investment. For the IPOs can be a risky investment. For the individual investor it is tough to predict individual investor it is tough to predict what the stock will do in the near what the stock will do in the near future because there is often little future because there is often little historical data with which to analyze the historical data with which to analyze the companycompany

Most IPOs are of companies going through Most IPOs are of companies going through a transitory growth period, subject to a transitory growth period, subject to additional uncertainty regarding their additional uncertainty regarding their future valuesfuture values

IPOs bring huge amount of money, some IPOs bring huge amount of money, some going to owners, some to reinvestment going to owners, some to reinvestment

Business FailBusiness Fail Poor initial market researchPoor initial market research Cash flow problemsCash flow problems Failure to listen to customersFailure to listen to customers Bad business locationBad business location Ineffective marketingIneffective marketing OverexpansionOverexpansion OverspendingOverspending Poor customer servicePoor customer service Underestimating competitionUnderestimating competition Failure to changeFailure to change