MOST BUSINESSES ARE SMALL BUSINESSES Almost half of all sales in the U.S. are made by small businesses. What Is a Small Business? Small Business Administration’s definition varies from industry to industry. Typical Small Business Ventures Major industries dominated by small firms: construction, agricultural services, wholesale trade, services, retail trade Just over half small businesses are home-based. Internet can increase competitiveness of small businesses.

CONTRIBUTIONS OF SMALL BUSINESS TO THE ECONOMY Creating New Jobs Three of every four new jobs are created by businesses with fewer than 500 employees. Creating New Industries Innovation Small firms develop twice as many innovations per employee as large firms.

WHY SMALL BUSINESSES FAIL Management Shortcomings Founders’ strengths in some areas are often offset by shortcomings in other areas. Inadequate Financing Start-up expenses, uneven cash flows, and inadequate or high-interest financing Government Regulation Paperwork and limited resources to handle tax and regulatory burdens

INCREASING THE LIKELIHOOD OF SMALL BUSINESS SUCCESS Creating a Business Plan States a company’s goals, methods, and standard by which it will measure achievements Small Business Administration Financial assistance from the SBA Other specialized assistance Business Incubators

SMALL BUSINESS OPPORTUNITIES FOR WOMEN AND MINORITIES Women-Owned Businesses Forty-eight percent of U.S. businesses owned by women; one in five of these is owned by minority women. Have rapidly established support networks Minority-Owned Businesses Strong growth Immigrants own nearly 15 percent of all small businesses. Minority business owners face considerable obstacles.

THE FRANCHISING ALTERNATIVE Franchising Contractual agreement specifies the methods by which a dealer can produce and market a supplier’s good or service. Franchising Agreements Franchisee receives materials, equipment, and services from the franchisor in exchange for payments. Benefits and Problems of Franchising Benefits: prior performance record, proven business model Problems: expensive franchise fees and future payments

ALTERNATIVES FOR ORGANIZING A SMALL BUSINESS Sole Proprietorship One owner, unlimited personal liability Partnership Two or more owners, personal assets at risk from business creditors Corporation Large number of shareholders, limited liability Changing Legal Structures Appropriate form of ownership depends on multiple factors

ORGANIZING AND OPERATING A CORPORATION Types of Corporations Three categories: Domestic corporation, foreign corporation, and alien corporation The Incorporation Process Where to incorporate The corporate charter

Corporate Management Stockholder Stock ownership and stockholder rights Board of Directors Corporate officers and managers Employee-Owned Corporations Workers buy shares of stock in the company that employs them. Not-for-Profit Corporations Firm pursuing objectives other than returning a profit Exempt from paying taxes

WHEN BUSINESSES JOIN FORCES Mergers and Acquisitions (M&A) Merger — Combination of two or more firms to form one company Acquisition — The purchase by one firm of the property and obligations of another firm Joint Ventures: Specialized Partnerships Partnership formed between companies for a specific undertaking

PUBLIC AND COLLECTIVE OWNERSHIP Public Ownership Government ownership and operation of an organization Government-Owned Corporations Customer-Owned Businesses: Cooperatives Collective ownership of a business