Presentation on theme: "Introduction to Business Business Ownership & Operations."— Presentation transcript:
Introduction to Business Business Ownership & Operations
Why It’s Important You need to understand business ownerships and operations before starting a business.
Types of Business Ownership The different ways that you can own a business which we will discuss are: Sole proprietorship Partnership Corporation We will also talk about Franchising
Making a Business Decision 1.What are the advantages and disadvantages of “going solo” in a business venture? 2.How can having a partner help launch and grow a business? Are there any drawbacks?
Sole Proprietorship A sole proprietorship is a business owned by only one person.
The advantages to having your own business are: It’s easy to start (and stop) You get to be your own boss Control over business operations You get to keep all the profits Pride of Ownership The taxes are usually low
Sole Proprietorship The disadvantages to having your own business are: You have to pay for everything yourself You might have to use your personal savings or borrow money from the bank You might lack business skills continued
Sole Proprietorship A serious disadvantage to owning a sole proprietorship is that you have unlimited liability, or full responsibility for your company’s debts.
Partnership A partnership is a business owned by two or more persons who share the risks and rewards. To start a partnership you need to draw up a partnership agreement, which is a contract that outlines the rights and responsibilities of each partner.
Partnership The advantages to partnership are: You might need only a license to start and have to pay taxes only on your personal profits. Each of your partners can contribute money to start the business.
Partnership Banks are often more willing to lend money to partnerships than sole proprietorships. Your partners can bring different skills to the business.
Partnership The disadvantages to partnership are: You not only share the risks with your partners, you also share the profits. You might not get along with your partners. You share unlimited legal and financial liability with your partners.
Corporation A corporation is a business owned by many people but treated by law as one person. To form a corporation, you need to get a corporate charter from the state your headquarters is in.
Corporation To raise money, you can sell stock, or shares of ownership in your corporation. For each share of common stock, the stockholder gets a share of the profits and a vote on how the business is run. You also must have a board of directors who control the corporation.
Corporation A major advantage of a corporation is its limited liability. If your company loses money, the stockholders lose only what they invested. Another advantage is that the corporation doesn’t end if the owners sell their shares.
Corporation A disadvantage of a corporation is that you often have to pay more taxes. The government closely regulates corporations. It is more difficult to start a corporation than a sole proprietorship or a partnership and running a corporation can be much more complicated.
Franchise A business relationship between two parties which gives the franchisee: The right to sell a product or service using the trademark or trade name of the franchiser The right to market a product or service using the operating methods of the franchiser The obligation to pay the franchiser fees for these rights.
Franchise Product Distribution Franchises sell the franchisers products only (supplier-dealer) Business Format Franchises not only use a franchiser’s product, service, and trademark, but also the complete method for conducting the business (marketing plan)
Franchise Pros of Franchise Businesses Established Brand and Customer Base. By far, the biggest advantage of buying into an established franchise is the strength of the brand and loyalty of its customers. Marketing Support. Franchises often have the support of a national campaign, as well as prepared marketing materials for a local campaign. Reputable Suppliers. Franchisors often have established relationships with suppliers for all the materials franchisees need.
Franchise Pros of Franchise Businesses Business Support. There's a saying in franchising: "You're in business for yourself, but not by yourself" because you have a network of support. Training. Some of the better (and more expensive) franchise operations offer management and technical training. Financial Assistance. Some franchisors provide loans and other assistance to help franchisees. Access to Proprietary Methods. There's no need to reinvent the wheel as franchisees get access to all the trade secrets.
Franchise Pros of Franchise Businesses Ongoing Research and Development, New Products. Franchisees can stick to improving their operations and let the franchisor spend the time and money developing new products. The Boss is You. As with owning any business that you own, you are in control of your destiny. Reduced Risk. For all of these reasons, starting a franchise of an established brand often has less risk than starting a business from nothing.
Franchise Cons of Franchise Businesses Initial Payout (Franchise Fee and Start-up Costs). Some of the bigger franchise operations can involve some very large initial costs, often more than what it would cost to start your own business. Royalty Payments. For as long as you are a franchisee, you will have to pay some percentage of the monthly gross back to the franchisor, reducing your profit potential. Marketing/Advertising Fees. To receive the wonderful marketing support from the franchisor, franchisees must pay these fees, according to some contracts.
Franchise Cons of Franchise Businesses Limited Creativity/Flexibility. Most franchise contracts have very explicit standards, allowing little or no alterations or additions to the brand, stifling any creativity on the part of the franchisee. You must use their system, follow their rules. Sole Sourcing. Some franchise contracts stipulate that franchisors must buy supplies only from an approved list of suppliers, possibly at a higher cost. Locked into Operation by Long-Term Contract. If you don't do as much research as you should have and find yourself with the wrong franchise, you may be stuck for many years.
Franchise Cons of Franchise Businesses Dependent on Franchisor Success. The reputation of your franchise is only as good as that of the franchisor, so any difficulties that the franchisor encounters will have a direct impact on you. False Expectations. Opening a franchise rather than starting your own business offers no guarantees of success. You still need to be a sharp businessperson to make it work. Risk. There's always risk in starting any new business.
Which type is best? Depends on your situation! They all have strengths and weaknesses.
Fast Review 1.What are some of the advantages of a sole proprietorship? 2.What is the difference between a sole proprietorship and a partnership? continued
Fast Review 3.If a partner makes a bad business decision, what responsibility do the other partners have? 4.What are the disadvantages of a corporation?