STARTING A SMALL BUSINESS.   Term Paper ID:17452 Click to get this paper

Essay Subject: Organization, structure, financing, partnerships, purchase, inventory, location, advertising. Annotated bib.... More...

11 Pages / 2475 Words 8 sources, 19 Citations, APA Format $44.00 Return to List of Papers

Paper Abstract: Organization, structure, financing, partnerships, purchase, inventory, location, advertising. Annotated bib. Paper Introduction: Nearly two and a half million small businesses are begun each year. The number of jobs created by small businesses is expanding, while employment generated by large corporations is shrinking (Comiskey, 1985, p. 17). This paper will examine issues faced within this increasingly vital sector of the U.S. economy, including organization, structure, financing, partnerships, purchase, inventory, location and advertising. Decisions of organization pertain to assignment of tasks to employees. The owner of a one-person operation need only allocate his/her own time effectively; as size grows, so does complexity of organization. Responsibilities are divided among individuals according to their abilities. For example, the owner of a market might hire a sales manager who would oversee several clerks working the cash register. A separate individual could be Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. This paper will examine issues faced within this increasingly vitalsector of the U.S. Advantages of a corporate legal structure include limited liabilityof stockholders, the ability to raise large amounts of investment capital,easy transfer of ownership through stock sales, and specialization of laborand the efficiency that brings. 331-334). Lowry also discusses reviving an ailing company, planningfor growth, and selling at a profit. Hediscusses how the family system, with its communication patterns andemotional pitfalls, seeps into the firm, and how it can be enhanced to helpthe business prosper. The company, not the storeowner, generally determines product merchandising and pricing, storelayout, and the product itself. Buyers are universally warned by experts in small businessownership: Do not buy a business without full disclosure, or ifmisrepresentation of any aspect of the business is suspected. New York:W.W. Encouraging satisfied customers to recommend the businessor give referrals can be effective. Several factors affect an entrepreneur's decisionregarding structure: his or her knowledge about the type of business; areasof the venture in which assistance is likely needed; amount of capitaldesired; predicted future cash flow; risk factor; desire to limit or carryliability should the business fail; and tax liabilities. Partners in a business may share capital and expertise, or justcapital. With a down payment at2 percent to 3 percent of the value of the firm, a buyer should expect topay 1 percent of fair market value. These examples are culled from Bork'sexperience as a consultant. This may be in part becausethe owner receives training (though minimal) and a formula for success.Clearly the buyer inherits a tangible reputation with the business, whichcould be anything from a printing store to a fast food restaurant.Disadvantages include lack of personal control. This is agood way to acquire a loyal customer base, avoid the pitfalls of startingup, and start out with an already successful operation. How may the community grow? There is also a danger of inheritingthe business' bad reputation or its obsolete equipment or merchandise. 254-266). More practical comments abound here, including taxand legal responsibilities, specific forms required and how to requestthem, and an introduction to the requirements of OSHA (Occupational Safety& Health Administration) and other agencies which govern handling ofemployees. People frequently start their business in their neighborhood, butthat may not be the most desirable spot. LIFO artificially assumesthat goods in inventory are the oldest ones, so in theory, the goods couldremain on the shelf forever. True to its focus on the small, small business,Kamoroff discusses the issues faced when deciding whether or not to hirethat first employee. How to raise needed capital? This is commonly the method used by a business for sale,because it appears to swell income, while increasing tax liability for thenew owner. Comprehensivecase studies and a detailed checklist for organizing and running a smallconcern round out the study. These processes of clarifying expectations are often neglected in thefamily-operated (better known as "mom and pop") business. Caution is advised in buying a firm: the differencebetween success and failure can be buying at a bargain, rather than aninflated, price. If the markup is 5 percent, thisrequires investment of $12,5 for goods alone. He profiles successful businesses and their owners and offersadvice on starting, building, and purchasing a business, finding customers,avoiding frequently made mistakes, and growing wealthy with or withoutgrowth in size. The ability to attracthigh-caliber employees is enhanced by the capacity to make them partners.This legal structure is frequently found in medical, law and accountingfirms. Decisions of organization pertain to assignment of tasks toemployees. Additionally, startupof a corporation is costly; the $1, or so required to incorporate iscompounded by the cost of adhering to the many regulatory requirements ofcorporations (Kishel, 1981, pp. Is this the right community to workand possibly live in? New York: Simon and Schuster. A corporation isgoverned by an elected board of directors, which in turn appoints the chiefexecutive officer, who runs the day-to-day operations of the company. 7th ed. Evaluating the neatness of correspondence, of the salesstaff's attire, and of the business itself may all add up to a morepositive image. Comiskey, James C. But the added"profits" of his approach are emotional growth and improved communication.This book is very practical, not only for family operations, but also forall companies, because of the importance of good interpersonal relations inthe success of any endeavor. For a more aggressive approach,one may spot a desirable business and contact the owner directly. A popular method of entrepreneurship today is the franchise. Three legalstructures used by small businesses are sole proprietorship, partnershipand corporation. New York:Charles Scribner's Sons. A subcategorywithin partnerships is the joint venture, which is a partnership for aspecified period of time or task only. Lowry's credentials areimpressive--he was an orphan who became a multimillionaire throughinvestments in real estate and businesses. Bork, David. And some successful entrepreneurs makea follow-up phone call after each sale to ask if the customer is pleasedwith the product. In general, the higher a percentage of cash paid for thebusiness, the lower a price that may be obtained. A manufacturing concern mightbe organized by product. References Baumback, Clifford M. Location is perceived to be a factor which can make or break a newcompany. Colemanincludes specific and easily implemented ideas for various needs of theentrepreneur. Comiskey's backgroundis primarily as the owner of a chain of retail stores, which he sold whenhe became a consultant. Advertising is a tool commonly used by small business to expand salesvolume. This is an extremely dense book,readable and full of practical ideas and anecdotes with sound theory behindthem. Broader topics covered include evaluatinglocations, obtaining financing, gaining perspective on the market, hiringemployees, inventory control, product pricing, and record keeping.Specifically, the Kishels discuss layout of the building which houses thecompany, the efficacy of direct mail, various types of insurance, and manymore details relevant to the small firm. (1981). He had a particular focuson "alternative enterprises," meaning solar energy, recycling, naturalfoods, and similar endeavors. The buyer must examine all the relevant information carefully anddetermine that the asking price is fair and, if not, what is a reasonablecounteroffer. 77-81). 45-49). A corporation is a third structure, in which the corporation isconsidered an independent entity and ownership is shared among stockholderswho may or may not participate in management of the firm. Facilitating functions includeaccounting and finance, and credit and collections. The intuitive explanation for this approachis that when money is flowing people are less likely to respond to adiscounted special, as they will during a recession, for instance (Coleman,1984, pp. Theadvantages of this form are control over the business, ease of startup anddiscontinuation, and relatively simple tax return preparation (the ownersimply pays personal income taxes on the profits). Morethan half a million franchise outlets exist today and account for 34percent of retail sales (Comiskey, 1985, pp. Lease information is alsoimportant. Organization may be delineated according to three basic functions:production, distribution, and facilitation. and Kishel, Patricia Gunter. From there, it becomes more costly. Nearly two and a half million small businesses are begun each year.The number of jobs created by small businesses is expanding, whileemployment generated by large corporations is shrinking (Comiskey, 1985, p.17). By contrast, FIFO, first-in, first-out, morecorrectly represents inventory flow, although the flow is not necessarilyuniform; some goods sell faster than others. Under the umbrella of bookkeeping the author discusseswhy bookkeeping is necessary, how to establish the books, cash accountingversus accrual method, inventory control, using computers in accounting,and many other aspects. 332-333). What are thedemographics, or age and lifestyle of the population? Because the owner hascomplete autonomy over the profits, he or she may choose to reinvest thisincome in the business or take the profits as income. (1985). This type of analysis isextremely helpful to predict the financing which will be needed to start abusiness, but it is a technical endeavor and best done with the help of anaccountant. Word of mouth isan excellent way of learning of availability, as well as the reputation, ofbusinesses. Selling goods,keeping sales records, replenishing stock, setting up product displays,staying informed of competitors' efforts, and calculating markups anddiscounts would fall under this heading. An inexpensive means of advertising might be the distribution offlyers in the area or signs in the window. Kishel, Gregory F. It falls under the umbrella of marketing, along with promotions.The difference is that advertising draws attention to a business orproduct, while promotions are monetary incentives to attract customers.The rules of thumb for these two tools are, when times are good, advertise,when times are tough, promote. The obvious choice is to locate a store on acorner or somewhere else which will receive a great deal of drop-intraffic, which will usually require paying higher rent. For example, a buyer might contact wholesalers and suppliersin the given field as a starting point. Some believe spending a day justobserving the area of a store is valuable--observe traffic patterns and thegeneral feeling of that area. economy, including organization, structure, financing,partnerships, purchase, inventory, location and advertising. A manufacturing business also will need asubstantial capital reserve to begin, but instead of merchandise, thesefunds will go toward machinery and raw materials. Coleman, Bob. It can be costly, although the conceptbehind franchising is that there is an instant customer base on opening thebusiness--not true for originals. 128). In such a case exchanging expectations up front and in writing,with each responsibility prioritized according to level of importance,becomes particularly fruitful (Bork, 1986, pp. How to start, expand and sell abusiness. A practical and comprehensive guide to starting a business orpurchasing one, it discusses such real-life issues as pricing andnegotiating, surviving escrow, licenses and permits, taking on a losingcompany, the role of automation, outlasting hard times, and when and how tosell. Security for financing the remainder of the price isusually the business itself, although it need not be. Distribution functions includesales, advertising and sales promotion, and pricing. Laytonville,Calif.: Bell Springs Publishing. With the skyrocketing ofreal estate values across the country, many take out a second mortgage ontheir home to raise $2 , -$4 , (Godlstein, 1982, p. Originally written in 1949, the book issometimes practical but primarily is a more theoretical approach to smallbusiness. This proprietor chose a more out-of-the-waylocation, distributed his business cards to stereo dealers, and was assuredof an informed customer who walked in, stereo under arm, ready to dobusiness (Kamoroff, 1984, pp. The type of business to a large extent determines the needfor capital: a service venture, which requires no inventory and may even beoperable from the entrepreneur's home, may be started with just a computerand some letterhead. Bank loans,partners, and stock and bond sales are other alternatives, as are the SmallBusiness Administration and Small Business Investment Companies, whichprovide low-cost financing. Family business, risky business. Enhancement of a company's image is sometimes accomplished in moresubtle ways. With a human approach which showspsychological insight, Bork is an advocate of family firms and believesthey can be just as profitable as any other business. How to organize and operate a smallbusiness. 16-18). New York: John Wiley & Sons. Regardless of the typeof business, most financial analysts suggest using operating ratio tomeasure a business' fiscal health (Lowry, 1981, p. (1986). The author's background is in real estate and his own seminarbusiness. He includes a useful appendix which gives an analysis of afictitious company's books in order to illustrate how a would-be buyer candetect misrepresentation of potential earnings from the firm. A would-be buyer must first find the best business for that buyer.This requires finding an operation which fits his or her background andexpertise, provides the owner with enough money to meet personal expenses,matches his or her personality, and has an acceptable risk factor. With FIFO, the net incomeappears higher, because the goods apparently sold are the first ones made,which are cheaper than goods made later, particularly in times ofinflation. This accessible book covers how to choose the best business, raisemoney, select a partner to work with, pick the best location, choose aworthy franchise, reduce risks, expand an existing company, identify whenit is best to sell a business, and negotiate a deal. 37). Ironically, thisis not always the best choice. In considering a community, the entrepreneur may ask the followingquestions: Is there a need for this product or service there? 1 1-1 2). A list of tradeassociations and trade journals is also included. The book appears to be a whimsical look at small business ownership,with a cartoon on the cover and a subtitle which says it will help thereader "stay out of trouble!" Despite that packaging, Kamoroff discussesadroitly various issues and technical aspects of small business. Want adsare another resource. Structure influences the owner's abilityto be competitive, make decisions and raise capital. Kamoroff, Bernard. Partnerships, the second legal structure, alleviate some problems ofthe sole proprietorship. Asin sole proprietorships, partners pay only income tax, and availablecapital is expanded with the number of partners. How is the competition? Norton & Company. In fact, thelong-range success of a family concern is often limited by members takingcommunication for granted, in patterns that follow the family systemitself. The next stage in the process is gathering information. The emphasis here is definitely onfinancial success as opposed to nonpecuniary benefits which are sometimesthe greater pull for the small business owner. Other factors to consider are adequacy of parking, quality of policeand fire protection, tax burden, conditions of neighboring buildings,transportation availability, and the owner's feelings about the area. Goldstein's perspective is unique in that he relinquished a positionas executive vice president of a large publishing firm to begin his ownpublication, In Business, thus experiencing entrepreneurship first-handwhile observing and documenting small business. In addition, theseller may help finance the purchase by "carrying paper," thus reducing theneed for capital. An adviser with the more common, profit-oriented andconservative philosophy once predicted the failure of Goldstein's ownmagazine unless he had access to a contingency sum of $4 million.Goldstein went on to build a successful (he doesn't say how successful, butit is solvent) publication. If he or she can pay 5 percent or6 percent of the sale price in cash, the buyer may pay substantially lessthan market value. Production, whether of goodsor services, is the backbone of the business. Job descriptions and organization charts are helpful in clarifyingthe delineations among various positions. Sole proprietorship has several disadvantages: unlimited liability ofthe owner, including possible loss of personal property to creditors incase of business failure; limited ability to raise investment capital; theneed to be versed in all aspects of the business; difficulty retainingcapable employees (larger firms frequently offer more competitive salaryand benefits packages); and limited life of the business. The small business survival guide. In starting up or buying a retail concern, the questions of inventorypurchase and control arise. Bookkeeping records must be examined carefully todetermine profitability and if, in fact, the profit is being representedaccurately on paper by the seller. For example, the owner of a market might hire a sales managerwho would oversee several clerks working the cash register. Alsodiscussed is how to develop a viable plan of succession. Lowry, Albert J. The proprietor of a retail concern must have inventory and space toput it, along with furniture, salaries of employees, and advertising.Planning and analysis are key here. Financing is another important consideration in starting a smallbusiness. (1985). Advantages of the franchise include a lower failure rate than that ofother small businesses--2 to 4 percent of businesses started, compared witha general failure rate of up to 5 percent. Includedare marketing, location, determining the amount of capital needed,"stalking the elusive business loan," fictitious business name statements,local permits and licenses and other regulatory requirements, even choosinga business name. Thebusiness may be on a downhill slide because of deterioration of thegeographical area or because of growing competition in that field(Comiskey, 1985, pp. The job description will preventmiscommunications or unmet expectations by both owner/manager and employee.Organization charts will spell out in visual form the responsibility ofvarious positions and/or departments, as well as making clear theaccountability of one person to another. The book contains many illustrative examples ofdilemmas encountered by various types of firms, and how they were resolvedto the benefit of the business. One means of saving on advertising costs is to join a collective adwith competing stores, or solicit advertising opportunities frommanufacturers of some products sold by a given store. The owner of a one-person operation need only allocate his/herown time effectively; as size grows, so does complexity of organization.Responsibilities are divided among individuals according to theirabilities. Helpful here are many sample ledgers to illustratethe author's approach. Choosing the best legal structure for a small business is anotherelement crucial to its success. Both the need and availability of capital must be examined earlyin the process. Disputes may be avoidedby careful selection of partners, planning of the business in thebeginning, and writing a thorough partnership agreement. A very insightful book addressing the needs of a family business,with typical clashes over values and expectations, in-law and siblingconflicts, and even how to deal with drug and alcohol abuse. His book is witty, althoughwritten in a spirit of the relentless drive for the bottom line.----------------------- 1 Many actual ledger sheets ofvarious types at the end of the volume make this a practical, one-stop typeworkbook. New Jersey: Prentice-Hall. Forexample, if annual sales volume is expected to be $1 , , and merchandisewill turn over four times per year, then initial inventory should lastthree months and be valued at $25, . How to become financially successful by owning yourown business. New York:American Management Association. Many aspects of starting up a business have been discussed, but anentrepreneur may also begin by purchasing an existing concern. What are therestrictions on this type of business (license requirements, zoning, localordinances)? How tostart, run, and stay in business. Will suppliers have access to the area? According to one survey, 6 percent ofsmall businesses financed their ventures with "friendly money," or fundsprovided by themselves, friends and relatives. 8 -87). Part of the reason forthis growing success is an increase in regulation of franchises, thuseliminating fraudulent operations which thrived in the 196 s and 197 s. Regarding taxes, the author covers federal, state and local taxrequirements and different means of filing. A separateindividual could be in charge of purchasing and in that capacity wouldcontrol inventory, possibly with the aid of one or two stock clerks. What is thecustomer base? (Kishel, 1981, pp. When the expectations held by amanager of employees are not made clear, or are changing withoutexplanation, low morale and high turnover may result. Newspaper and magazine advertisinggenerally is not effective when an ad is run just once-repeated exposure isimportant here, and that can run up expenses. And the individual store-owner'sreputation rides the crest with the corporation's, creating risks such asthose faced by owners of Exxon stations after the much-publicized 1989Valdez oil spill. Bork is aconsultant specializing in family businesses, from "mom and pop" size allthe way up to large corporations such as Hallmark and Hewlett-Packard. One method of estimating the initial inventoryneeded to start up a retail business is to compute anticipated sales volumefor one year and divide this figure by inventory turnover per year. As the single market describedabove expands to a chain of five stores, it may be organized by territoryor a combination of territory and function. San Jose: Venture Perspectives Press. Yellowpage advertisements are generally successful but can cost $1, per monthor more and have a long lead time. Small-time operator. It includes purchasing andstock control where inventory is present. Thisis known as functional departmentation (Baumback, 1985, pp. (1982). Maintaining income andexpenses, preparing tax returns, maintaining cash flow, approving creditapplications, and seeking payment of delinquent accounts all are includedwithin this category (Baumback, 1985, pp. More than most resources, this volume contains paragraphs ofquotations by business owners speaking about specific dilemmas or questionsfaced by the owners, and how those problems were resolved. Attendance at trade shows andconventions is also effective. They thus build goodwill and enhance the likelihood oflong-term success, goals every owner of a small business will want toattain. In business for yourself. General partners all assume unlimited liability in the businessventure, while limited partners are liable only for the amount of theirinvestment, and may not share in the management decisions. Is it a prosperous enough area tosupport the business? The owner of a stereo repair shop, forinstance, did not want the uncommitted fellow walking in after eating atthe restaurant next door. 15-24). 63-69). It istypically used in the smallest business. A disadvantage unique to this form is that partners may disagree,sometimes to the point of destroying the business. Television and radio time iswell known for being costly, unless late-night spots are chosen. 94). The comprehensive guide also discusses tough problems like terrorismin foreign travel, and arbitration in dispute to avoid litigation. While not ignoring the "bottom line" ofprofit margin, Goldstein's philosophy is one which recognizes what he terms"entrepreneurial ecology," or an inner logic or intuition which drives someentrepreneurs who are willing to disregard a more fiscally driven approachto small business. (1984). This is an excellent and comprehensive resource which will impartliteracy to the novice of business or expand on the knowledge of manyalready experienced in this topic. Thesediscussions add to the accessibility of the book and can be inspiring tothe reader. Partners may have complementary expertise, suchas one individual who knows marketing and the other who knows finance. On the down side, corporations are doublytaxed: corporate taxes and personal taxes are paid. In analyzing the income statements of an existing business, animportant factor is whether LIFO or FIFO accounting methods are used.LIFO, last-in, first-out, is a method which can mislead a would-be buyerbecause it shows an imaginary inventory profit. An interesting and folksy guide for theunconventional entrepreneur, who follows the heart, and head, but notnecessarily the Harvard Business School approved balance sheet. (1984). Theother aspect of "finding" the business is literally finding its location.Few businesses for sale post such a sign in the window. Goldstein, Jerome. It also contains information onadvertising, scheduling manufacturing activities, taxes, and a list ofsources on organizing and operating specific types of businesses.Sprinkled throughout are statistics and charts which help give the readeran overview of small business as a sector of the economy. This is a textbook which details the role of a small business in theeconomy, how to purchase a going concern or start up a new one, organizing,financing, and operating the business. A concisely organized book, which includes intelligent and readableapplication of theory to the down-to-earth questions raised in the mind ofthe would-be entrepreneur. The book is very readable and includes necessaryworksheets and even a sample business purchase agreement. The operating ratiois the proportion of expenses to revenues. A buyerwants to see the bookkeeping records of the business to ascertain salesdata, expenses, cost of goods sold, profit, and history of the company.Also relevant is what the purchase includes--inventory, fixtures, vehicles,accounts receivable and any other equipment. 38-49). The important point here is to be aware of the accountingmethod used and factor this into the value of the business (Lowry, 1981,pp. More than 75 percent of businesses are sole proprietorships, meaningthey are owned and managed by one person (Kishel, 1981, p. Conversely,the buyer will be expected to provide the seller with the following:personal financial information showing ability to purchase; a resume ofbackground, and a signed statement that the buyer will not share theinformation provided by the seller. Is the community'slabor force capable and affordable? Add estimated inventory costs to thecost of furniture and fixtures, legal and accounting fees, licenses,payroll, rent and a contingency reserve, and one can estimate startup costs(Kishel, 1981, pp. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.

Many of our Papers can be Downloaded From This Site!

PLEASE READ THIS, IT IS IMPORTANT!

Office hours are Monday through Friday, from 9 am to 5 pm (PST). You may place orders for custom research over the phone during office hours. E-mail requests can be made to our graduate and undergraduate department any time, and will be reviewed during office hours. You may also contact customer service any time through e-mail, and we will review your message during business hours. A great many papers can be downloaded right from this site, but not all of them. If you would like to know if a particular paper is downloadable, just look in the description for: "Available for Internet Download: Y" or "Available for Internet Download: N" If you wish to purchase a paper which is NOT available for immediate download, you will need to make other shipping arrangements. Also, please be aware that these orders are processed Monday through Friday from 9 am to 5 pm (PST). If you place your order after 4:45pm on Friday, it will not be processed until the following Monday morning. We charge $8 per page for all of our pre-written reports, plus shipping (and tax for California residents). However, the highest cost of any ONE report is $136, or 17 pages. Please, take a moment. Make sure you have chosen the report you want or need BEFORE you complete your order. If you are not sure, allow us to help you. We do not offer refunds or exchanges, so it is important for you to let us answer your questions during office hours. Reports which are e-mailed or downloaded are in Microsoft Word format. We are making more reports available for e-mail delivery faster than we can update our listings. Please call to check on the status of particular reports. There are many other shipping options which are listed on the Checkout page.