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2 Read to Learn The four main ways to become a business owner and the advantages and disadvantages of each The different forms of legal business ownership.

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Presentation on theme: "2 Read to Learn The four main ways to become a business owner and the advantages and disadvantages of each The different forms of legal business ownership."— Presentation transcript:

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2 2 Read to Learn The four main ways to become a business owner and the advantages and disadvantages of each The different forms of legal business ownership

3 3 Read to Learn How to prepare to finance a new business Factors that can affect business success

4 4 Main Idea Knowing the factors that affect a business’s success will help you to launch a successful business.

5 5 Key Concepts Going into Business Owning a Business Operating Your Business

6 6 Key Term start-up costs lease goodwill market outlook franchise sole proprietorship partnership

7 7 Key Term corporation operating expenses income statement revenue gross profit net profit

8 8 Going into Business Four Main Ways to Go into Business Start a New Business Buy an Existing Business Buy a Franchise Join a Family Business

9 9 Starting a New Business Challenges Starting a new business requires more time and effort. Start-up costs can be high. Borrowing money may be difficult. Risk can be high. Rewards You do not inherit a previous owner’s mistakes. You can develop your own reputation. You can build the business your way. You get personal satisfaction.

10 10 Starting a New Business Examples of start-up costs include: start-up costs the expenses involved in going into business Renting or buying space Buying equipment and supplies Buying insurance

11 11 Buying an Existing Business Before buying an existing business, determine whether the problems of the business can be fixed, and at what costs.

12 12 Buying an Existing Business Advantages You can save on start-up costs by taking advantage of the previous owner’s business agreements. You may be able to purchase the existing equipment. If the business was successful, you can build on that success. You can benefit from existing positive reputation and a trained staff.

13 13 Buying an Existing Business Disadvantages The location might be poor. The competition might be taking business away. The potential for future sales may be poor. Expensive repairs might be necessary. The business may have a poor reputation.

14 14 Buying an Existing Business When buying an existing business, you may be able to keep the existing lease. lease a contract to use something for a specified period of time

15 15 Buying an Existing Business When buying an existing business, you may be able to take advantage of existing goodwill of existing customers. goodwill loyalty

16 16 Buying an Existing Business When buying an existing business, you should be aware of the market outlook. market outlook the potential for future sales

17 17 Buying a Franchise Buying a franchise offers specific advantages. franchise the legal right to sell a company’s goods and services in a particular area You must agree to pay a percentage of your profits to the parent company.

18 18 Buying a Franchise Advantages You get a recognized product name. You have established procedures and management systems. You benefit from a business reputation and customer goodwill. You receive training and support services. You benefit from the company’s advertising. Financing can be more easily obtained.

19 19 Buying a Franchise Disadvantages Profits are shared with the parent company. You must follow the parent company guidelines. There may be less personal satisfaction.

20 20 Joining a Family Business Advantages Relatives can help you finance the business. Family members are loyal and trust each other. Family members work as a team. Relatives can teach you the business. Customers are likely to give you the same trust and goodwill.

21 21 Joining a Family Business Disadvantages Not all families work well together. Difficulties at work can affect family relationships.

22 22 Owning a Business As a business owner, you will have to decide if you will run the business yourself, or if you will share the work and risks.

23 23 Forms of Legal Ownership Three Basic Forms of Legal Ownership Sole Proprietorship PartnershipCorporation

24 24 Forms of Legal Ownership Most businesses begin as a sole proprietorship. sole proprietorship when the business is completely owned by one person The owner is responsible for all the business’s assets and debts.

25 25 Forms of Legal Ownership In a partnership, all partners are liable for the debts of the business. partnership a legal arrangement in which two or more people share ownership

26 26 Forms of Legal Ownership In a corporation, shareholders earn a profit based on the number of shares they own. corporation a business chartered by a state that legally operates apart from the owner(s)

27 27 Operating Your Business Whatever type of business you launch, you will need money to finance it.

28 28 Financing A business plan gives specific information about your business. Information in a Business Plan  Product description  Business location  Number of employees  Salaries  Description of the competition  Marketing plan  Timetable

29 29 Financing A financial plan spells out your start-up costs, operating expenses, and other costs for the first few months. operating expenses the costs of doing business, such as the costs of manufacturing and selling the product

30 30 Ongoing Operations Financial records are needed for tax purposes and for seeking additional financing.

31 31 Ongoing Operations The income statement is an essential business record. income statement a summary of a business’s income and expenses during a specific period

32 32 Ongoing Operations The first item in an income statement is revenue. revenue the income from sales

33 33 Ongoing Operations Another item in the income statement is gross profit. gross profit the difference between the cost of goods and their selling price

34 34 Ongoing Operations The net profit is an important part of the income statement. net profit the amount left after operating expenses are subtracted from the gross profit

35 35 Ongoing Operations The balance sheet summarizes a business's assets, liabilities, and owner equity. Assets are anything of monetary value.

36 36 Ongoing Operations Liabilities are debts a business owes. Net worth is the difference between assets and liabilities.

37 37 Ongoing Operations A cash flow statement is a monthly plan that shows when you anticipate cash coming into the business and when you expect to pay out cash.

38 38 Succeeding in Business Factors of Succeeding in Business Financing Competition Location Management

39 39 Location Factors that contribute to a successful business location include: The type of businesses in the area The condition of the streets and buildings The cost of property The location of competition The location of your customers

40 40 Competition To compete successfully, you must be familiar with your competitor’s product or service. You must also produce a better product or service than your competitors.

41 41 Management Poor management is one of the main reasons for business failure. Skills Needed for Management  Reading  Writing  Listening  Speaking  Math

42 42 When the game is finished, close the Quick Quiz window and click here for the next slide >>

43 43 Section 4.2 After You Read 1.Name the four ways to become a business owner. Which one would you choose? Why? Buy an existing business, start your own business, buy a franchise, or take over a family business.

44 44 Section 4.2 After You Read 2.Explain the differences between a partnership and a corporation. A partnership is a legal arrangement in which two or more people share direct ownership, while a corporation is a business that legally operates apart from the owners.

45 45 Section 4.2 After You Read 3.Describe one of the documents you would need to prepare to apply for a business loan. You would need to provide a business plan and a financial plan.

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