Benefits and Drawbacks of Bus. Ownership

Small Business in the Economy
A small business is a business that is privately owned and operated, with a small number of
employees and relatively low volume of sales.
• The legal definition of ''small" often varies by country and industry.
• Other methods used to classify small companies include annual sales (turnover), value of
assets, and net profit (balance sheet), alone or in a mixed definition.
Difference Between Small Businesses and Entrepreneurial Ventures

1. Small businesses
These are independently owned, operated, and financed. It has fewer than 100 employees
and doesn't engage in any new or innovative practices and has little impact in the industry.
2. Entrepreneurial Venture
An organization is having profitability and growth as the main goals, which are achieved
through constant innovation, seeking new opportunities, and being a risk-taker.
Starting from Scratch or Joining an Existing Business

➢ Getting Started
• Identifying start-up ideas.

This is each entrepreneur's starting point. Sometimes, people think that when he/she has a
good idea, they can start their own business and get rich fast, but that's not the case. A good
idea may indeed start a business, but how you run that business is key to its success and
make it a great idea.
• Creating a new business from scratch.

Creating new businesses from scratch is hard work. One must establish the trustworthiness
of running the business and if the product or service can sell.
• Finding start-up ideas.

An idea can be anything, just make sure that you've studied it to make sure that the idea is
feasible before you make any actions.
• Analyses.
There are two ways of verifying if the idea is a good idea for a business:
a) Outside-in analysis –
Considers both the general environment (the big picture) and the industrial selling in
which the venture might do business.
b) Inside-out analysis –
identifying the opportunities from the outside is worth the effort but these can
make sense if it fits the innate potentials of the business such as:
▪ Resources and Capabilities - these are the resources, both tangible and intangible,
and capabilities, and
▪ Core Competencies -resources and capabilities that give the firm a competitive
advantage against their rivals.
• Integrating internal and external analyses.
In integrating both analyses, one can employ the SWOT analysis.
• Selecting strategies that capture opportunities.

It is a plan of action whereby coordinating resources and commitments of the
business to boost performance.
• Putting all together.

The entrepreneur has the idea, the analysis, and the strategies, so all he/she must do now is
implement what is written on paper and work hard to make it a success.
Franchising
o Franchising is an act whereby allowing one to practice and use another person's business
philosophy and methodology
o Franchise is an authorization to sell the company's goods or services in a particular place by
a particular person outside of the company.
PROS are as follows:
❖ The entrepreneur is buying a business system that is already working.

❖ The franchisor gives discounts. Products are bought in bulk and passed on to the franchisee
with certain discounts.
❖ The franchisor does advertise, so the entrepreneur would not worry about the business
presence.
❖ The entrepreneur has the support of the franchisor's management whenever a problem
about the franchise arises.
❖ Support programs are there in all phases of the franchise operation.
CONS are as follows:
❖ Franchise cost is much higher than starting up a business independently.

❖ The entrepreneur is obliged to pay royalties every year
❖ The contract is not guaranteed renewable.
❖ If the product or service of the franchise is not fully tested in a particular area or country. It
can become a risky venture.
Limitations of Franchising. Similar to the Cons

o Franchise Cost. As said, it is a way higher than starting the business up from scratch. Aside
from the franchise fee, the entrepreneur has to produce the finances for their own
investment cost.
• Operating restrictions.
The franchisee is obligated to follow the rules of engagement, policies and
procedures that are stipulated in the contract
• Loss of Entrepreneurial Independence.
By agreeing to conform to the policies and procedures or the franchisor,
the entrepreneur cannot introduce new ideas in their franchise.
o Franchising Options and the Structure of the Franchising History.
The term ''franchising” is derived from the French word "franc," meaning "free”
“freedom” or "exemption from duties."
• Options are as follows:

o Business Format franchise. The entrepreneurs buying the entire marketing and
manufacturing system of the franchise.
o Master Licensee A firm or individual who authorized by the franchisor to look
for new franchisees.
o Multiple-unit Ownership. These are individuals who own more than one unit of
the franchised business—sometimes referred to as Area Developers whereby
they are legally allowed to put up several franchises in a given area.
o Piggyback Franchising. Refers to an operation or a retail franchise within the
physical facilities of a host store.
• Structure
o Franchisors. They are the ones who give rights and privileges to entities who
wish to use or sell their merchandise and rights.
o Franchisees. Entities who wish to use the business concept of the franchisor and
bought the rights to use it.
o Facilitators. Third-party entities whereby assist the franchisors and franchisees
in their transactions.
Evaluating Franchise Opportunities.

o Market Trends. Check on where the industry you wish to franchise is heading. Talk to
industry associations to learn more about it.
o Executive Background. Who is running the company? Are they competent? Do the
executives have pending cases specifically while doing the business or franchise offerings?
The success of your business lies in the expertise and skills and franchise executives.
o Territory Coverage. Having a protected territory at least ensures your competitors to remain
outside or the franchise company.
o Company Support This should include employee training, marketing, management, access to
capital. how to run the daily operations, field support staff with frequent availability.
o Brand Name. Having a brand name can have an impact on the business’ profitability and
acceptability in the marketplace.
o Professional Advice. Seek help before paling the lire savings on the line. The entrepreneur
should have in his team an accountant. lawyer, and franchise consultant.
o Exit Strategy. Determine the terms and costs of ending the franchise contract. Explore the
possibilities of renewal in the future.
o Franchise Business Plan. A business plan is a way of studying your options, a roadmap that
will help you access the viability of the franchise concept in the market.

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Small Business in the Economy

• The legal definition of ''small" often varies by country and industry.

Difference Between Small Businesses and Entrepreneurial Ventures

Starting from Scratch or Joining an Existing Business

• Identifying start-up ideas.

• Creating a new business from scratch.

• Finding start-up ideas.

• Selecting strategies that capture opportunities.

• Putting all together.

PROS are as follows:

❖ The entrepreneur is buying a business system that is already working.

CONS are as follows:

❖ Franchise cost is much higher than starting up a business independently.

Limitations of Franchising. Similar to the Cons

• Options are as follows:

Evaluating Franchise Opportunities.

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